G.R. No. 194765, April 23, 2018 - MARSMAN & COMPANY, INC., Petitioner, v. RODIL C. STA.

RITA,
Respondent.

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Marsman & Company,
Inc. (Marsman), now Metro Alliance Holdings & Equities Corporation, seeking the annulment and reversal of the
Decision 1 dated June 25, 2010 and the Resolution2 dated December 9, 2010 of the Court of Appeals in CA-G.R. SP
No. 106516. The appellate court's issuances reversed the Decision 3 dated July 31, 2008 of the National Labor
Relations Commission (NLRC) in NLRC NCR Case No. 30-01-00362-00 (NLRC CA No. 032892-02) dismissing
respondent Rodil C. Sta. Rita's (Sta. Rita's) complaint and the Resolution 4 denying his motion for reconsideration. The
Court of Appeals instead found Marsman guilty of illegal dismissal and ordered the company to pay for backwages,
separation pay, moral damages, exemplary damages and attorney's fees.
Marsman, a domestic corporation, was formerly engaged in the business of distribution and sale of pharmaceutical
and consumer products for different manufacturers within the country. 5 Marsman purchased Metro Drug Distribution,
Inc. (Metro Drug), now Consumer Products Distribution Services, Inc. (CPDSI), which later became its business
successor-in-interest. The business transition from Marsman to CPDSI generated confusion as to the actual employer
of Sta. Rita at the time of his dismissal.
Marsman temporarily hired Sta. Rita on November 16, 1993 as a warehouse helper with a contract that was set to
expire on April 16, 1994, and paid him a monthly wage of P2,577.00. After the contract expired, Marsman rehired Sta.
Rita as a warehouseman and placed him on probationary status on April 18, 1994 with a monthly salary of
P3,166.00.6 Marsman then confirmed Sta. Rita's status as a regular employee on September 18, 1994 and adjusted
his monthly wage to P3,796.00. Later, Sta. Rita joined Marsman Employees Union (MEU), the recognized sole and
exclusive bargaining representative of Marsman's employees. 7
Marsman administered Sta. Rita's warehouse assignments. Initially, Marsman assigned Sta. Rita to work in its GMA
warehouse. Marsman then transferred Sta. Rita to Warehouses C and E of Kraft General Foods, Inc. on September 5,
1995. Thereafter, Marsman reassigned Sta. Rita to Marsman Consumer Product Division Warehouse D in ACSIE,
Parañaque.8
Sometime in July 1995, Marsman purchased Metro Drug, a company that was also engaged in the distribution and
sale of pharmaceutical and consumer products, from Metro Pacific, Inc. The similarity in Marsman's and Metro Drug's
business led to the integration of their employees which was formalized in a Memorandum of Agreement, 9 dated June
1996, which provides:
MARSMAN & COMPANY, INC.
City of Makati
MEMORANDUM OF AGREEMENT
MARSMAN AND CO., INC. hereinafter referred to as the MANAGEMENT, represented by MR. JOVEN D. REYES,
Group President and Chief Executive Officer and the MARSMAN EMPLOYEES UNION-PSMM/DFA as the Union,
represented hereinafter by MR. BONIFACIO M. PANALIGAN, PSMM President,
WITNESSETH, THAT:
WHEREAS, Marsman Employees Union-PSMM/DFA is the recognized sole and exclusive bargaining representative
of Marsman & Co., Inc. regular employees in the rank and file and non-managerial category except those excluded in
Article I, Section 2 of their existing CBA signed last June 1995;
WHEREAS, Marsman & Co. Inc. bought Metro Drug Distribution, Inc. from Metro Pacific Inc. last July, 1995;
WHEREAS, the Management of Marsman & Co., Inc. decided to limit Marsman & Co. Inc.'s, functions to those
of a holding company and run Metro Drug Distribution, Inc. as the main operating company;
WHEREAS, in view of this, Management decided to integrate the employees of Marsman & Co. Inc. and Metro
Drug Distribution, Inc. effective July 1, 1996 under the Metro Drug legal entity;
THEREFORE, Management and Marsman Employees Union PSMM/DFA agree: .
1. That, the Union acknowledges Management's decision to transfer all employees of Marsman, including
members of MEU-PSMM/DFA, to Metro Drug Distribution, Inc.
2. That, the Management recognizes the Marsman Employees Union-PSMM/DFA as the exclusive bargaining
representative of all the rank and file employees transferred from Marsman & Co. Inc. to Metro Drug Distribution, Inc.
and the other employees who may join the Union later.
3. That, the name of Marsman Employees Union-PSMM/DFA is retained.
4. That, the tenure or service years of all employees transferred shall be recognized and carried over and will be
included in the computation/consideration of their retirement and other benefits.
5. That, the provisions of the existing Collective Bargaining Agreement signed last June 1995 and the Memorandum
of Agreement signed also last June 1995 will be respected, honored and continue to be implemented until expiry or
until superseded as per item 8 below.
6. That, there will be no diminution of present salaries and benefits being enjoyed even after the transfer.
7. That, upon transfer of MCI employees to Metro Drug Distribution, Inc. all employees covered by the CBA or
otherwise shall enjoy the same terms and conditions of employment prior to transfer and shall continue to enjoy the
same including company practice until a new CBA is concluded.
8. That, all of the above rights and obligations of the parties pertaining to the recognition of the union as exclusive
bargaining representative, the effectivity, coverage and validity of the CBA and all other issues relative to the
representation of the former Marsman employees are subject to and be superseded by the result of a Certification
Election between Marsman Employees Union-PSMM/DFA and Metro Drug Corp. Employees Association-FFW in
1996 or at a date to be agreed upon by MEU and MDCEA as coordinated by the DOLE, and by any agreement that
may be entered into by management and the winner in said certification election.
9. That, upon transfer, the Management agrees to address all pending/unresolved grievances and issues lodged by
Marsman Employees Union-PSMM/DFA.
10. That, also upon transfer, the Management agrees to continue negotiation of Truckers and Forwarders issue as
stipulated in the MOA signed last June, 1995.
11. That, Management and Union may continue to negotiate/discuss other concerns/issues with regard to the transfer
and integration.
IN WITNESS WHEREOF, the parties have caused this document to be executed by their authorized representatives
this ______day of June, 1996 at Makati City. [Emphases supplied.]
MARSMAN & COMPANY, INC.
(signed)
JOVEN D. REYES
President & Chief Exec. Officer
MARSMAN EMPLOYEES UNION-PSSM/DFA
(signed)
BONIFACIO M. PANALIGAN
President
Witnessed by:
(signed)
LUISITO N. REYES
Vice-President
Finance & Administration JOSE MILO M. GILLESANIA
1st Vice-President
MEU-PSMM/DFA
Attested by:
(signed)
ABNER M. PADILLA
Conciliator-Mediator
NCMB, DOLE
Concomitant to the integration of employees is the transfer of all office, sales and warehouse personnel of Marsman
to Metro Drug and the latter's assumption of obligation with regard to the affected employees' labor contracts and
Collective Bargaining Agreement. The integration and transfer of employees ensued out of the transitions of Marsman
and CPDSI into, respectively, a holding company and an operating company. Thereafter, on November 7, 1997,
Metro Drug amended its Articles of Incorporation by changing its name to "Consumer Products Distribution Services,
Inc." (CPDSI) which was approved by the Securities and Exchange Commission. 10
In the meantime, on an unspecified date, CPDSI contracted its logistic services to EAC Distributors (EAC). CPDSI
and EAC agreed that CPDSI would provide warehousemen to EAC's tobacco business which operated in EAC-Libis
Warehouse. A letter issued by Marsman confirmed Sta. Rita's appointment as one of the warehousemen for EAC-
Libis Warehouse, effective October 13, 1997, which also stated that the assignment was a "transfer that is part of our
cross-training program."11
Parenthetically, EAC's use of the EAC-Libis Warehouse was dependent upon the lease contract between EAC and
Valiant Distribution (Valiant), owner of the EAC-Libis Warehouse. Hence, EAC's operations were affected when
Valiant decided to terminate their contract of lease on January 31, 2000. In response to the cessation of the contract
of lease, EAC transferred their stocks into their own warehouse and decided to operate the business by themselves,
thereby ending their logistic service agreement with CPDSI. 12
This sequence of events left CPDSI with no other option but to terminate the employment of those assigned to EAC-
Libis Warehouse, including Sta. Rita. A letter13 dated January 14, 2000, issued by Michael Leo T. Luna, CPDSI's Vice-
President and General Manager, notified Sta. Rita that his services would be terminated on February 28, 2000 due to
redundancy. CPDSI rationalised that they could no longer accommodate Sta. Rita to another work or position. CPDSI
however guaranteed Sta. Rita's separation pay and other employment benefits. The letter is reproduced in full as
follows:
a MARSMAN company
CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.
January 14, 2000
MR. RODIL STA. RITA
Warehouse Supervisor
EAC Libis Operation
Libis, Quezon City
Dear Rodil,
As we have earlier informed you, EAC Distributors, Inc. has advised us that their Lessor, Valiant Distribution has
terminated their lease contract effective January 31, 2000.
Accordingly, we were informed by EAC Distributors, Inc., that they will no longer need our services effective on the
same date. As a result thereof, your position as warehouseman will become redundant thereafter.
We have exerted efforts to find other work for you to do or other positions where you could be accommodated.
Unfortunately, our efforts proved futile.
In view thereof, we regret to inform you that your services will be terminated effective upon the close of business
hours on the 28th of February, 2000.
You will be paid separation pay and other employment benefits in accordance with the company policies and the law,
the details of which shall be discussed with you by your immediate superior.
In order to cushion the impact of your separation from the service and to give you ample time to look for other
employment elsewhere, you need not report for work from the 18th of January up the end of February, 2000, although
you will remain in the payroll of the company and will be paid the salary corresponding to this period.
We thank you for your contribution to this organization and we wish you well in your future endeavors.
Sincerely,
(signed)
 
MICHAEL LEO T. LUNA
Vice President & General Manager14
CPDSI thereafter reported the matter of redundancy to the Department of Labor and Employment in a letter 15 dated
January 17, 2000, conveying therein Sta. Rita's impending termination. The letter stated:
The Regional Director
Department of Labor & Employment
National Capital Region
Palacio De Gobernador
Intramuros, Manila
Dear Sir:
In compliance with the provisions of Article 283 of the Labor Code, as amended, Consumer Products Distribution
Services, Inc. (CPDSI) "Company" hereby gives notice that our company is implementing a comprehensive
streamlining program affecting levels of employment with the objective of further reducing operating expenses and to
cope with the current economic difficulties. The employment of the employees occupying such positions and whose
names are enumerated in the attachment list of (Annex "A") will be terminated.
In accordance with law, the above enumerated employees will be paid their separation pay in due course. Individual
notices of the termination of employment of said employees have already been served upon them.
Very truly yours,
CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.
BY:
(signed)

MICHAEL LEO T. LUNA

Vice President and General Manager
xxxx
LIST OF TERMINATED WORKERS
Names of Workers Terminated   Occupation/Skills Salary
RION L. V. RUZGAL x x x WHSE SUPERVISOR P16,000.00
GLENN V. VISTO x x x WHSE SUPERVISOR P15,600.00
CONRADO C. TIUSINGCO, JR. x x x SR. WHSEMAN P7,200.0016
LOLITA D. JAMERO x x x WHSE SUPERVISOR P14,500.00
ARTURO G. CASTRO, JR. x x x WHSEMAN P7,616.00
RODIL C. STA. RITA x x x WHSEMAN P7,746.00
EMILIO MADRIAGA x x x WHSEMAN P7,616.00
Aggrieved, Sta. Rita filed a complaint in the NLRC, National Capital Region-Quezon City against Marsman on January
25, 2000 for illegal dismissal with damages in the form of moral, exemplary, and actual damages and attorney's fees.
Sta. Rita alleged that his dismissal was without just or authorized cause and without compliance with procedural due
process. His affidavit-complaint reads:
RODIL C. STA RITA, of legal age, single, Filipino citizen, with residence and postal address at 1128 R. Papa Street,
Bo. Obrero, Tondo, Manila being under oath hereby deposes and says:
1. He was employed with Marsman on November 16, 1993, with offices and address at Manalac
Avenue, Taguig, Metro Manila, as warehouseman with a basic salary P3,790.00 more (sic);
2. As a regular employee, his salary was increased by P1,600.00 in 1995; in 1996 was increased by
P1,300.00; in 1997 was increased by P1,050.00, making a total of P7,740.00 up to his separation
from employment on January 18, 2000 x x x;
3. He cannot fathom to know why he was terminated from employment, save the better (sic) of Mr.
Michael Leo T. Luna, Vice President and General Manager of Marsman Company (Consumer
Products Distribution Services, Inc.) on January 14, 2000;
4. His termination from employment is in diametric opposition to Art VI. Sec. 3(d) of the CBA and to Art.
282 of the Labor Code, as amended, i.e., he was no[t] given the 30-day period prior to his
termination, making his dismissal as illegal per se;
5. In the absence of any derogatory record of Mr. Rodil Sta. Rita for six (6) years, he is entitled to moral
and exemplary damages, in addition to back wages and separation pay, short of reinstatement and
without loss of seniority rights.17
Marsman filed a Motion to Dismiss18 on March 16, 2000 on the premise that the Labor Arbiter had no jurisdiction over
the complaint for illegal dismissal because Marsman is not Sta. Rita's employer. Marsman averred that the
Memorandum of Agreement effectively transferred Sta. Rita's employment from Marsman and Company, Inc. to
CPDSI. Said transfer was further verified by Sta. Rita's: 1) continued work in CPDSI's premises; 2) adherence to
CPDSI's rules and regulations; and 3) receipt of salaries from CPDSI. Moreover, Marsman asserted that CPDSI
terminated Sta. Rita.
Labor Arbiter Gaudencio P. Demaisip, Jr. (Demaisip) rendered his Decision 19 on April 10, 2002 finding Marsman guilty
of illegal dismissal, thus:
This Office finds in favor of the complainant.
Article 167 of the Labor Code defines employer, to wit:
"Employer means any person, natural or juridical, employing the services of the employee."
Likewise, Article 212 of the Labor Code defines employer in this wise:
"Employer includes any person acting in the interest of an employer directly or indirectly."
Consumer did not perform any act, thru its responsible officer, to show that it had employed the complainant.
Nevertheless, Marsman acted in the interest of Consumer because "sometime in 1996, for purposes of efficiency and
economy Marsman integrated its distribution business with the business operations of Consumer Products
Distribution Services, Inc. xxx" and "in line with the integration of the distribution businesses of Marsman and CPDSI,
the employment of all Marsman office, sales, and warehouse personnel was transferred to CPDSI. x x x"
Thusly, Marsman qualifies as the employer of the complainant under the aforequoted provisions of the Labor Code.
The MOA was concluded between Marsman and. Co. Inc. and Marsman Employees Union-PSMM/DFA. A perusal of
its contents show that matters, concerning terms and conditions of employment, were contracted and concluded.
On the contrary, the MOA is a piece of evidence that Marsman is the employer of complainant because it is solely the
employer who can negotiate and conclude the terms and conditions of employment of the workers.
Ironically, the MOA does not establish the contention that Consumer is the employer of the complainant.
Rule XVI of Department Order No. 9, Series of 1997, which took effect on June 21, 1997, requires among others, the
ratification by the majority of all workers in the Collective Bargaining Unit of the Agreement. The non-compliance of
the requirement, under said Department Order, renders the MOA ineffective.
Further, it may be concluded that the Consumer is an agent of respondent Marsman, because the former does "[t]he
employment of all Marsman office sales, and warehouse personnel x x x."
Nevertheless, the employer of the complainant is Marsman and Company, Inc.
In illegal dismissal, the burden, to establish the just cause of termination, rest on the employer. The records of this
case [are] devoid of the existence of such cause. Indeed, the respondent Marsman and Company, Inc. failed to show
the cause of complainant's dismissal, warranting the twin remedies of reinstatement and backwages. However,
insofar as reinstatement is concerned, this remedy appears to be impractical because, as gleaned from the position
paper of [Sta. Rita], there is uncertainty in the availability of assignment for the complainant. Instead, the payment of
separation pay equivalent to one half month for every year or a fraction of at least six (6) months be considered as
one year, would be equitable.
The rest of the claims are dismissed for lack of merit.
WHEREFORE, premises considered, the complainant is herein declared to have been illegally dismissed. Marsman
and Company, Inc. is directed to pay the complainant backwages and separation pay on the total amount of
P152,757.55.20
Marsman appealed the foregoing Decision arguing that the Labor Arbiter had no jurisdiction over the complaint
because an employer-employee relationship did not exist between the party-litigants at the time of Sta. Rita's
termination. Furthermore, Marsman stated that the ratification requirement under Rule XVI of Department Order No.
9, Series of 199721 applied only to Collective Bargaining Agreements, and the Memorandum of Agreement was
certainly not a replacement for the Collective Bargaining Agreement which Marsman and MEU entered into in the
immediately succeeding year prior to the ratification of the Memorandum of Agreement. Marsman also maintained
that it had a personality that was separate and distinct from CPDSI thus it may not be made liable to answer for acts
or liabilities of CPDSI and vice-versa. Finally, Marsman claimed that Sta. Rita was validly declared redundant when
CPDSI's logistics agreement with EAC was not renewed.22
Sta. Rita filed his own appeal, contesting the failure of the Labor Arbiter to award him moral and exemplary damages,
and attorney's fees.
The NLRC in its Decision dated July 31, 2008, reversed Labor Arbiter Demaisip's Decision and found that there was
no employer-employee relationship between Marsman and Sta. Rita. The NLRC held:
Applying the four-fold test in determining the existence of employer-employee relationship fails to convince Us that
complainant is respondent Marsman's employee.
On selection and engagement, by complainant's transfer to CPDSI, he had become the employee of CPDSI. It should
be emphasized that respondent Marsman and CPDSI are corporate entities which are separate and distinct from one
another.
On payment of wages, it was CPDSI which paid complainant's salaries and benefits. Complainant never claimed that
it was still respondent Marsman which paid his salaries.
On the power of dismissal, after EAC's lease contract expired deciding to transfer its stock to its own warehouse and
handle its warehousing operations, complainant was left without any work. CPDSI decided to terminate his services
by issuing him a termination notice on January 14, 2000.
On the employer's power to control the employee with respect to the means and methods by which his work is to be
accomplished, complainant was under the control and supervision of CPDSI concomitant to the logistic services which
respondent Marsman had integrated to that of CPDSI. CPDSI saw to it that its obligation to provide logistic services to
its client EAC is carried out with complainant working as warehouseman in the warehouse rented by EAC. The power
of control is the most decisive factor in determining the existence of an employer-employee relationship. x x x.
Having determined that employer-employee relationship does not exist between complainant and respondent
Marsman, complainant has no cause of action for illegal dismissal against the latter. There is no necessity to resolve
the [other] issues.
WHEREFORE, premises considered, the Decision of the Labor Arbiter is VACATED and SET ASIDE. A NEW
decision is entered dismissing the complaint for lack of employer-employee relationship. 23
In a Resolution dated November 11, 2008, the NLRC denied Sta. Rita's motion for reconsideration because his
motion "raised no new matters of substance which would warrant reconsideration of the Decision of [the]
Commission."24
Sta. Rita filed before the Court of Appeals a Petition for Certiorari25 imputing grave abuse of discretion on the part of
the NLRC for 1) finding a lack of employer-employee relationship between the party-litigants; and 2) not awarding
backwages, separation pay, damages and attorney's fees.
The Court of Appeals promulgated its Decision on June 25, 2010, reversing the NLRC Decision. The Court of Appeals
held that Marsman was Sta. Rita's employer because Sta. Rita was allegedly not part of the integration of employees
between Marsman and CPDSI. The Court gave credence to Sta. Rita's contention that he purposely refused to sign
the Memorandum of Agreement because such indicated his willingness to be transferred to CPDSI. In addition, the
appellate court considered Sta. Rita's assignment to the EAC-Libis Warehouse as part of Marsman's cross-training
program, concluding that only Sta. Rita's work assignment was transferred and not his employment.
The appellate court also found no merit in the NLRC's contention that CPDSI paid Sta. Rita's salaries and that it
exercised control over the means and methods by which Sta. Rita performed his tasks. On the contrary, the Court of
Appeals observed that Sta. Rita filed his applications for leave of absence with Marsman. Finally, the Court of Appeals
adjudged that CPDSI, on the assumption that it had the authority to dismiss Sta. Rita, did not comply with the
requirements for the valid implementation of the redundancy program.
The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, the instant petition for certiorari is GRANTED. The assailed Decision and Resolution of the public
respondent National Labor Relations Commission are ANNULLED and SET ASIDE. Judgment is rendered declaring
petitioner Rodil C. [Sta. Rita's] dismissal from work as illegal and accordingly, private respondent Marsman and
Company, Inc. is ordered to pay said [respondent] the following:
1. backwages computed from 18 January 2000 up to the finality of this Decision;
 2. separation pay in lieu of reinstatement computed at the rate of one (1) month pay for every year of
service from 16 November 1993 up to the finality of this Decision;
3. the amount of P15,000.00 as moral damages;
4. the amount of P15,000.00 as exemplary damages; and
5. the amount equivalent to 10% of his total monetary award, as and for attorney's fees.
Let this case be REMANDED to the Labor Arbiter for the purpose of computing, with reasonable dispatch, petitioner's
monetary awards as above discussed.26
Hence, Marsman lodged the petition before us raising the lone issue:
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECIDING A
QUESTION OF SUBSTANCE IN A MANNER NOT IN ACCORD WITH THE LAW, APPLICABLE DECISIONS OF
THIS HONORABLE COURT AND EVIDENCE ON RECORD WHEN IT ANNULLED AND SET ASIDE THE NLRC'S
DECISION AND RESOLUTION EFFECTIVELY RULING THAT [STA. RITA] WAS ILLEGALLY DISMISSED FROM
SERVICE WHEN THE LATTER COULD NOT HAVE BEEN DISMISSED AT ALL ON ACCOUNT OF THE ABSENCE
OF EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN SAID [STA. RITA] AND THE COMPANY 27
Simply stated, the issue to be resolved is whether or not an employer-employee relationship existed between
Marsman and Sta. Rita at the time of Sta. Rita's dismissal.
This petition is impressed with merit.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact.
As a rule, this Court is not a trier of facts and this applies with greater force in labor cases. 28 This petition however falls
under the exception because of variance in the factual findings of the Labor Arbiter, the NLRC and the Court of
Appeals. Indeed, on occasion, the Court is constrained to wade into factual matters when there is insufficient or
insubstantial evidence on record to support those factual findings; or when too much is concluded, inferred or
deduced from the bare or incomplete facts appearing on record. 29 The Court in the case of South Cotabato
Communications Corporation v. Sto. Tomas30 held that:
The findings of fact should, however, be supported by substantial evidence from which the said tribunals can make
their own independent evaluation of the facts. 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. Although no particular form of evidence is required
to prove the existence of an employer-employee relationship, and any competent and relevant evidence to prove the
relationship may be admitted, a finding that the relationship exists must nonetheless rest on substantial evidence.
(Citations omitted)
Settled is the tenet that allegations in the complaint must be duly proven by competent evidence and the burden of
proof is on the party making the allegation.31 In an illegal dismissal case, the onus probandi rests on the employer to
prove that its dismissal of an employee was for a valid cause. However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first be established. 32 In this instance, it was incumbent upon Sta.
Rita as the complainant to prove the employer-employee relationship by substantial evidence. Unfortunately, Sta. Rita
failed to discharge the burden to prove his allegations.
To reiterate the facts, undisputed and relevant to the disposition of this case, Marsman hired Sta. Rita as a
warehouseman when it was still engaged in the business of distribution and sale of pharmaceutical and consumer
products. Marsman paid Sta. Rita's wages and controlled his warehouse assignments, acts which can only be
attributed to a bona fide employer. Marsman thereafter purchased Metro Drug, now CPDSI, which at that time, was
engaged in a similar business. Marsman then entered into a Memorandum of Agreement with MEU, its bargaining
representative, integrating its employees with CPDSI and transferring its employees, their respective employment
contracts and the attendant employment obligation to CPDSI. The planned integration was then carried out sometime
in 1996, as admitted by Sta. Rita in his pleading. 33
It is imperative to point out that the integration and transfer was a necessary consequence of the business transition
or corporate reorganization that Marsman and CPDSI had undertaken, which had the characteristics of a corporate
spin-off. To recall, a proviso in the Memorandum of Agreement limited Marsman's function into that of a holding
company and transformed CPDSI as its main operating company. In business parlance, a corporate spin-off occurs
when a department, division or portions of the corporate business enterprise is sold-off or assigned to a new
corporation that will arise by the process which may constitute it into a subsidiary of the original corporation. 34
The spin-off and the attendant transfer of employees are legitimate business interests of Marsman. The transfer of
employees through the Memorandum of Agreement was proper and did not violate any existing law or jurisprudence.
Jurisprudence has long recognized what are termed as "management prerogatives." In SCA Hygiene Products
Corporation Employees Association-FFW v. SCA Hygiene Products Corporation,35 we held that:
The hiring, firing, transfer, demotion, and promotion of employees have been traditionally identified as a management
prerogative subject to limitations found in the law, a collective bargaining agreement, or in general principles of fair
play and justice. This is a function associated with the employer's inherent right to control and manage effectively its
enterprise. Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs
to achieve its purpose cannot be denied. x x x.
Tinio v. Court of Appeals36 also acknowledged management's prerogative to transfer its employees within the same
business establishment, to wit:
This Court has consistently recognized and upheld the prerogative of management to transfer an employee from one
office to another within the business establishment, provided there is no demotion in rank or a diminution of salary,
benefits and other privileges. As a rule, the Court will not interfere with an employer's prerogative to regulate all
aspects of employment which include among others, work assignment, working methods and place and manner of
work. Labor laws discourage interference with an employer's judgment in the conduct of his business.
xxxx
But, like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised
without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should
not be confused with the manner in which the right is exercised. Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker. The employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of
his salaries, privileges, and other benefits. x x x. (Citations omitted.)
Analogously, the Court has upheld the transfer/absorption of employees from one company to another, as successor
employer, as long as the transferor was not in bad faith 37 and the employees absorbed by a successor-employer
enjoy the continuity of their employment status and their rights and privileges with their former employer. 38
Sta. Rita's contention that the absence of his signature on the Memorandum of Agreement meant that his employment
remained with Marsman is merely an allegation that is neither proof nor evidence. It cannot prevail over Marsman's
evident intention to transfer its employees.
To assert that Marsman remained as Sta. Rita's employer even after the corporate spin-off disregards the separate
personality of Marsman and CPDSI. It is a fundamental principle of law that a corporation has a personality that is
separate and distinct from that composing it as well as from that of any other legal entity to which it may be
related.39 Other than Sta. Rita's bare allegation that Michael Leo T. Luna was Marsman's and CPDSI's Vice-President
and General Manager, Sta. Rita failed to support his claim that both companies were managed and operated by the
same persons, or that Marsman still had complete control over CPDSI's operations. Moreover, the existence of
interlocking directors, corporate officers and shareholders without more, is not enough justification to pierce the veil of
corporate fiction in the absence of fraud or other public policy considerations. 40
Verily, the doctrine of piercing the corporate veil also finds no application in this case because bad faith cannot be
imputed to Marsman.41 On the contrary, the Memorandum of Agreement guaranteed the tenure of the employees, the
honoring of the Collective Bargaining Agreement signed in June 1995, the preservation of salaries and benefits, and
the enjoyment of the same terms and conditions of employment by the affected employees.
Sta. Rita also failed to satisfy the four-fold test which determines the existence of an employer-employee relationship.
The elements of the four-fold test are: 1) the selection and engagement of the employees; 2) the payment of wages;
3) the power of dismissal; and 4) the power to control the employee's conduct. 42 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. 43
The Memorandum of Agreement effectively transferred Marsman's employees to CPDSI. However, there was nothing
in the agreement to negate CPDSI's power to select its employees and to decide when to engage them. This is in line
with Article 1700 of the Civil Code which provides that:
Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws
on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.
A labor contract merely creates an action in personam and does not create any real right which should be respected
by third parties.44 This conclusion draws its force from the right of an employer to select his/her employees and
equally, the right of the employee to refuse or voluntarily terminate his/her employment with his/her new employer by
resigning or retiring. That CPDSI took Sta. Rita into its employ and assigned him to one of its clients signified the
former's acquiescence to the transfer.
Marsman's letter45 to Sta. Rita dated September 29, 1997 neither assumed nor disturbed CPDSI's power of selection.
The letter reads:
MARSMAN & COMPANY, INC.
TO: MR. RODIL STA. RITA
RE: TRANSFER OF ASSIGNMENT
This is to confirm in writing your appointment as warehouseman for EAC-Libis Warehouse and Mercury Drug effective
13 October 1997. This transfer is part of our cross-training program.
Prior to the effectivity of your appointment, you may be instructed to proceed to EAC-Libis Warehouse for work
familiarization and other operational matters related to the job.
You will directly report to Mr. Eusebio Paisaje, warehouse supervisor.
Good luck.
(signed)
Irene C. Nagrampa
cc: EDB/QRI
LRP/Noynoy Paisaje
HRG-201 file
file
It would be amiss to read this letter independent of the Memorandum of Agreement because the Memorandum of
Agreement clearly reflected Marsman's intention to transfer all employees to CPDSI. When read in isolation, the use
of "cross-training program" may be subject to a different interpretation but reading it together with the MOA indicates
that the "cross training program" was in relation to the transition phase that Marsman and CPDSI were then
undergoing. It is clear under the terms of the Memorandum of Agreement that Marsman may continue to negotiate
and address issues with the Union even after the signing and execution of said agreement in the course of fully
implementing the transfer to, and the integration of operations with, CPDSI.
To prove the element on the payment of wages, Sta. Rita submitted forms for leave application, with either Marsman's
logo or CPDSI's logo. Significantly, the earlier leave forms bore Marsman's logo but the latest leave application of Sta.
Rita already had CPDSI's logo. In any event, the forms for leave application did not sufficiently establish that Marsman
paid Sta. Rita's wages. Sta. Rita could have presented pay slips, salary vouchers, payrolls, certificates of withholding
tax on compensation income or testimonies of his witnesses. 46 The submission of his Social Security System (SSS)
identification card (ID) only proved his membership in the social insurance program. Sta. Rita should have instead
presented his SSS records which could have reflected his contributions, and the name and address of his
employer.47 Thus, Sta. Rita fell short in his claim that Marsman still had him in its payroll at the time of his dismissal.
As to the power of dismissal, the letter dated January 14, 2000 clearly indicated that CPDSI, and not Marsman,
terminated Sta. Rita's services by reason of redundancy.
Finally, Sta. Rita failed to prove that Marsman had the power of control over his employment at the time of his
dismissal. The power of an employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship. 48 Control in such relationships addresses the
details of day to day work like assigning the particular task that has to be done, monitoring the way tasks are done
and their results, and determining the time during which the employee must report for work or accomplish his/her
assigned task.49 The Court likewise takes notice of the company IDs attached in Sta. Rita's pleading. The "old" ID
bore Marsman's logo while the "new" ID carried Metro Drug's logo. The Court has held that in a business
establishment, an identification card is usually provided not only as a security measure but mainly to identify the
holder thereof as a bona fide employee of the firm that issues it.50 Thus the "new" ID confirmed that Sta. Rita was an
employee of Metro Drug, which, to reiterate, later changed its name to CPDSI.
Having established that an employer-employee relationship did not exist between Marsman and Sta. Rita at the time
of his dismissal, Sta. Rita's original complaint must be dismissed for want of jurisdiction on the part of the Labor
Arbiter to take cognizance of the case. For this reason, there is no need for the Court to pass upon the other issues
raised.
WHEREFORE, premises considered, the petition is GRANTED. The Court of Appeals' assailed Decision dated June
25, 2010 and Resolution dated December 9, 2010 in CA-G.R. SP No. 106516 are, accordingly, REVERSED and SET
ASIDE. The NLRC Decision dated July 31, 2008 in NLRC NCR Case No. 30-01-00362-00 (NLRC CA No. 032892-02)
is REINSTATED.

G.R. No. 227734, August 09, 2017 - ROMEO ALBA, Petitioner, v. CONRADO G. ESPINOSA, ET AL.,
Respondents. REYES, JR., J.:
This resolves the Petition for Review on Certiorari1 filed under Rule 45 of the Rules of Court by petitioner Romeo Alba
(Alba) to assail the Decision2 dated July 14, 2016 and Resolution3 dated October 17, 2016 of the Court of Appeals
(CA) in CA-G.R. SP No. 144043, wherein the CA affirmed the Decision 4 dated November 27, 2015 of the National
Labor Relations Commission (NLRC) in NLRC LAC No. 09-002460-15 that declared Alba guilty of illegal dismissal
and liable for monetary claims.
The Antecedents

The case stems from two complaints for illegal dismissal and monetary claims filed against Alba Construction and its
owner, Alba, by herein respondents with the Arbitration Branch of the NLRC. The first labor complaint, docketed as
NLRC NCR Case No. 06-07959-14,5 was filed by Conrado Gabe Espinosa (Conrado), Eusebio Mojica, Jaime
Ocfemia, Jr. (Jaime, Jr.), Remy Diama, Ross Florencio, Jr., Gerry U. Milo, Rodolfo Benoza, Rolando Benoza,
Marcelino Macindo, Nikko Benosa, Felix Taperla, Landirico Taperla, Arturo Nebrida, Jr. and Bongbong
Delumpines.6 The second complaint, docketed as NLRC NCR Case No. 06-07960-14, 7 was filed by Nilo Abrencillo
(Nilo), Freddie Abrencillo, Robert Manimtiin, Ronaldo Hernandez, Jr., William Janer, Ronie Tuparan, Samuel Nabas
(Samuel), Eufrecino B. Jemina, Ruben Caleza, Hermel Caringal, Phamer Mandeoya, Alexander Barbacena, Roily
Abrencillo, Rene Barbacena, Jr., Jolito Cabillo and Roger Nebrida. 8

It was alleged by the respondents that on various dates, Alba hired them as construction workers for his projects in
several residential villages within Metro Manila and nearby provinces. The respondents were Alba's regular
employees who were paid different wage rates that ranged from P350.00 to P500.00 a day, but were deprived of
some statutorily-mandated benefits such as their overtime pay, 13th month pay, holiday pay, and service incentive
leave (SIL) pay.9 On different dates in 2013, some of the respondents 10 confronted Alba regarding their benefits, but
such action eventually resulted in their dismissal.11

In 2014, the other respondents again questioned Alba for his non-payment of their benefits. Alba still took it against
them and began treating them harshly, as he would shout at them while at the job site, and would find scheming ways
to extend their working hours. The foregoing prompted these respondents to seek the assistance of media personality
Raffy Tulfo (Tulfo) in his Radyo Singko Program. As he addressed the respondents' dilemma, Tulfo personally called
Alba, who was reminded to pay the respondents their full benefits. The action, however, proved to create more harm
than good for the respondents because when they reported back for work the following day, they were informed of
their dismissal.12 Feeling aggrieved, all the respondents filed their complaints for illegal dismissal and monetary claims
with the NLRC. The two complaints were later consolidated before the Labor Arbiter (LA).

For his defense, Alba argued that the respondents could not be deemed his regular employees. He claimed to be a
mere taker of small-scale construction projects for house repairs and renovations. In the construction industry, he was
deemed a mere mamamakyaw, who would pool a team of skilled and semi-skilled carpenters and masons for specific
projects that usually lasted from one to two weeks. The respondents were paid daily wages ranging from P600.00 to
P1,000.00, depending on their skill, and could take on projects with their own clients after Alba's projects had
terminated.13 For succeeding projects, Alba would only take in construction workers who were still available for the
duration of the new work.14

As he denied any liability for the respondents' claims, Alba likewise presented certifications from clients indicating that
the latter directly paid the salaries of the workers provided by Alba for the projects. He also argued that the
respondents used their own tools at work, and received instructions from either the architect or foreman engaged by
the project owner.15

The respondents were displeased by Alba's explanations. To disprove Alba's claim that he was a
mere mamamakyaw, they presented gate passes, issued by the villages where Alba had construction projects, which
indicated that Alba was a "contractor."16
Ruling of the LA

The LA dismissed the complaints via a Decision17 dated July 31, 2015.

For the LA, no employer-employee relationship existed between Alba and the respondents. The LA referred to the
following circumstances affecting the parties' payment of wages and the element of control, and which negated the
claim that the respondents should be deemed employees of Alba: first, the wages of the respondents were paid
directly by the project owners; second, the respondents applied their own methodology and used their own tools and
equipment as they discharged their work; and third, the respondents obtained their work instructions from architects or
the foreman directly hired by the owners or clients.18 The supposed gate passes issued by village representatives did
not qualify as substantial evidence to show that Alba was indeed a contractor. 19

The LA's decision ended with the following dispositive portion:chanRoblesvirtualLawlibrary

WHEREFORE, this Labor Arbitration Branch resolves to DISMISS the complaint for lack of merit.

SO ORDERED.20
Dissatisfied, the respondents appealed to the NLRC.
Ruling of the NLRC

The respondents' appeal was partly granted by the NLRC. On November 27, 2015, the NLRC rendered its
Decision21 that ended with the following decretal portion:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, this instant Appeal is PARTLY GRANTED. The assailed Decision dated 31 July
2015 is AFFIRMED with respect to [respondents] CONRADO GABE ESPINOSA, and JAIME OCFEMIA, JR. The
same assailed Decision is REVERSED AND SET ASIDE with respect to the remaining [respondents]. [Alba and Alba
Construction] are hereby ordered to:
1. Reinstate the remaining [respondents] and pay full backwages computed from the time of their dismissal up to
the time of actual reinstatement. In case reinstatement is no longer possible due to strained relations between
the parties, [Alba and Alba Construction] shall be liable for separation pay in lieu of reinstatement equivalent
to one month salary for every year of service reckoned from the [respondents'] respective time of employment
to the finality of this decision;
2. Pay the remaining [respondents] moral and exemplary damages in the total amount of P200,000.00;
3. Pay the remaining [respondents] their 13th month pay computed from the last three years;
4. Pay the remaining [respondents], excluding Nilo Abrencillo, [SIL] benefits computed from their respective
date[s] of employment; and
5. Pay attorney's fees equivalent to 10 percent of the final judgment award.
The monetary awards are as follows:

xxxx

                                                          P 14,459,613.28
 
ADD: Moral and Exemplary Damages             200,000.00
TOTAL                                                1[4],659,613.28
PLUS: 10% ATTORNEY'S FEES                  1.465,961.33

 TOTAL AWARD                                P16,125,574.61

SO ORDERED.22
The NLRC justified the dismissal of Jaime, Jr.'s complaint by citing sufficient evidence that Alba engaged him as an
independent contractor, specifically as excavation contractor. 23 Conrado's complaint, on the other hand, was
dismissed given his admission that he was employed as a tanod in Barangay Almanza Dos, Las Piñas City.24

As to the remaining respondents, the NLRC rejected the LA's finding on the lack of employer-employee relationship.
The association between Alba and the respondents was established after Alba readily proclaimed that the
respondents were part of his pool of workers. Alba had the power to determine who would remain in or be terminated
from his projects. He also admitted that he paid the respondents their wages on a daily basis.

The claim that the respondents used their own methods and tools for the construction remained unsubstantiated by
convincing evidence. On the contrary, it was established that Alba exercised his authority at the respondents' job
sites. The four-fold test in determining the existence of an employer-employee relationship was duly satisfied,
particularly: (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.25 Their employment was deemed regular given that they had been continuously rehired for Alba's
projects for several years. More importantly, they performed tasks which were necessary and indispensable to the
usual business or trade of Alba.26

The NLRC also addressed the evidentiary weight of the documents that were considered by the LA. By the gate
passes that formed part of the respondents' evidence, it was shown that even the management of the villages that
issued them recognized Alba to be the employer of the respondents. On the other hand, the certifications presented
by Alba were either unsigned, defective or proven to contain false statements. 27

In the end, Alba was declared liable for illegal dismissal given his failure to allocate further work assignments to the
respondents. It did not appear that the termination was founded on any just or valid cause, and neither was it
established that Alba duly satisfied the demands of due process for an employee's termination. 28 The illegally
dismissed employees were declared entitled to reinstatement and backwages, plus moral damages, exemplary
damages and attorney's fees.29

As regards the other monetary claims, the NLRC ordered the payment of 13 th month pay and SIL pay, in view of
Alba's failure to prove that the said benefits had been paid to his employees. Nilo, however, was declared not entitled
to SIL pay because he worked as a personal driver who, pursuant to Article 82 of the Labor Code, was not entitled to
the benefit.30

Undaunted, Alba sought relief with the CA through a Petition for Certiorari,31 as he imputed grave abuse of discretion
upon the NLRC and reiterated the arguments that he presented during the proceedings with the LA.
Ruling of the CA

On July 14, 2016, the CA rendered its Decision32 dismissing Alba's petition. The CA reiterated the satisfaction of the
four-fold test that is considered in finding employer-employee relationship. The appellate court likewise assessed the
nature of work that the respondents were required to accomplish, vis-a-vis the type of Alba's business, which
prompted the CA to also affirm the finding that the illegally dismissed respondents were regular employees.

The dispositive portion of the CA decision provides:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the instant Petition for Certiorari is hereby DISMISSED.

SO ORDERED.33
Alba moved to reconsider, but his motion was denied by the CA in its Resolution 34 dated October 17, 2016. Hence,
this petition.
The Present Petition

Alba restates the same grounds cited in his petition for certiorari with the CA. Specifically assailed are the finding of
employer-employee relationship, and the ruling that the respondents were regular employees illegally dismissed by
Alba from employment. Alba likewise disputes the order upon him to pay the monetary claims totalling
P16,125,574.61.
Ruling of the Court

At the outset, the Court explains that it shall no longer delve on the correctness of the NLRC's and CA's ruling to, first,
dismiss the complaints of Conrado and Jaime, Jr. for illegal dismissal and monetary claims, and, second, deny Nilo of
his claim for SIL pay. The NLRC's pronouncements thereon did not appear to have been assailed by said parties,
making the pronouncements on the matter already final. Moreover, the Court's disposition in this case needs to be
confined to the issues that are assailed in the petition. Hence, the Court's further reference to, or use of, the term
"respondents" shall be limited by these qualifications.

Upon review, the Court finds no cogent reason to disturb the ruling of the CA that affirmed the decision of the NLRC.

The respondents were regular employees of Alba

Contrary to Alba's contention, the existence of an employer-employee relationship between him and the respondents
was sufficiently established. The Court reiterates its ruling in South East International Rattan, Inc., et al. v.
Coming35 on the established measure for such determination, particularly:chanRoblesvirtualLawlibrary
To ascertain the existence of an employer-employee relationship[,] jurisprudence has invariably adhered to the four-
fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's conduct, or the so-called "control test." In resolving the issue of
whether such relationship exists in a given case, substantial evidence - that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion - is sufficient. Although no particular form of
evidence is required to prove the existence of the relationship, and any competent and relevant evidence to prove the
relationship may be admitted, a finding that the relationship exists must nonetheless rest on substantial
evidence.36 (Citations omitted)
Alba's relationship with the respondents satisfies the four-fold test.

The presence of the first element is beyond dispute. Alba himself admitted that he was the one who selected and
engaged the workers that comprised his pool of semi-skilled and skilled workers, for placement in his several
construction projects obtained from various clients. It was equally significant that Alba determined to which projects
the respondents were to be assigned, or whether they would be assigned at all. As it established Alba's power to
select and engage, the circumstance likewise rendered concomitant the power of Alba to dismiss any of the
respondents. Notwithstanding the length of time that his workers had been working for his projects, he could opt to
simply drop them off any assignment, effectively dismissing them from employment, albeit with necessary
consequences if the dismissal was proved to be illegal.

Alba's payment of the respondents' wages was likewise established by his plain admission. As the LA cited in its
decision, "[Alba] would pay the [respondents] a daily fee ranging from [P]600.00 to [P]1,000.00. They were also given
bonuses from savings that [Alba and Alba Construction] made." 37 As against this statement from Alba and the
certifications that he later presented to dispute his direct payment of the wages, the latter deserves nil consideration.
The evidentiary weight of the supposed certifications on this issue even remained questionable. While the documents
appeared to have been subscribed before a Notary Public, the requirements for a valid notarization were not satisfied
because proof of each affiant's identity was not indicated in the jurat. Taken in light of Alba's declaration, it could be
reasonably deduced that the arrangement on his clients' direct payment of the workers' wages was by a mere
concession between Alba and the clients in order to facilitate payment, yet it was still Alba who ultimately bore liability
for the payment of the wages.

Specifically on the "control test," this power to control is oft-repeated in jurisprudence as the most important and
crucial among the four tests.38 The Court explained in Gapayao v. Fulo, et al.:39
In Legend Hotel Manila v. Realuyo, the Court held that "the power of the employer to control the work of the employee
is considered the most significant determinant of the existence of an employer-employee relationship. This is the so-
called control test and is premised on whether the person for whom the services are performed reserves the right to
control both the end achieved and the manner and means used to achieve that end." It should be remembered that
the control test merely calls for the existence of the right to control, and not necessarily the exercise thereof. It is not
essential that the employer actually supervises the performance of duties by the employee. It is enough that the
former has a right to wield the power.40 (Citations omitted)
From the records, it is clear that Alba possessed this power to control, and had in fact freely exercised it over the
respondents. Alba failed to satisfactorily rebut the respondents' direct assertions that Alba frequented the work sites,
and would reprimand his workers whom he believed were idle or sluggish. He even controlled the time when they had
to stay at work.41 The respondents relied upon instructions coming from Alba, as their work was for projects obtained
by the latter. He controlled the results of the work that the respondents had to perform, along with the means and
methods by which to accomplish them. His control was not negated by any instructions that came from a foreman or
an architect, as directives that came from them, if there were at all, were understandably limited. The respondents
worked for Alba who held the project, and the latter was the one who exercised authority over them.

Even Alba's allegation that the respondents were independent contractors was not amply substantiated. Time and
again, the Court has emphasized that "the test of independent contractorship is 'whether one claiming to be an
independent contractor has contracted to do the work according to his own methods and without being subject to the
control of the employer, except only as to the results of the work.'" 42 The Court has explained Alba's exercise of
control over the respondents. For a worker to be deemed an independent contractor, it is further necessary to
establish several indicators. In Television and Production Exponents, Inc. and/or Tuviera v. Servaña,43 the Court
explained:chanRoblesvirtualLawlibrary
Aside from possessing substantial capital or investment, a legitimate job contractor or subcontractor carries on a
distinct and independent business and undertakes to perform the job, work or service on its own account and under
its own responsibility according to its manner and method, and 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. x x x. 44 (Citation omitted)
"It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather
than a regular employee with or without a fixed term."45 Undeniably, Alba failed to discharge this burden.

As the Court affirms the finding of illegal dismissal, it underscores the fact that the respondents were regular
employees, and not project employees as Alba asserts. The mere fact that the respondents worked on projects that
were time-bound did not automatically characterize them as project employees. The nature of their work was
determinative, as the Court considers its ruling in DM. Consunji, Inc., et al. v. Jamin46 that "[o]nce a project or work
pool employee has been: (1) continuously, as opposed to intermittently, rehired by the same employer for the same
tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of
the employer, then the employee must be deemed a regular employee." 47

As construction workers, the respondents performed tasks that were crucial and necessary in Alba's business. Their
work was the core of his trade. His enterprise could not have thrived through the years without their service. The fact
that the respondents had been engaged to work for long periods of time, and across several construction projects,
further substantiate the finding that their work was vital in the business. Most respondents were separately employed
beginning way back to the 1990s to 2006.48 One employee, Samuel, even began working for Alba in 1982. 49 "[A]n
employment ceases to be co-terminus with specific projects when the employee is continuously rehired due to the
demands of the employer's business and re-engaged for many more projects without interruption." 50

Given the respondents' regular employment, their employment could not have been validly terminated by Alba without
just or valid cause, and without affording them their right to due process. In cases affecting an employee's dismissal,
the burden is on the employer to prove that the dismissal was legal, a matter that in this case, Alba miserably failed to
establish. There were no adequate explanations from Alba as to why the respondents had ceased obtaining
assignments in his construction projects. In view of the illegal dismissal, the respondents were rightfully entitled to the
ordered reinstatement and award of backwages, or separation pay in case of strained relations. 51

Alba is liable for the payment of the other monetary claims

The awards of 13th month pay, SIL pay, moral and exemplary damages, and attorney's fees are sustained.

Article 95 of the Labor Code provides that "[e]very employee who has rendered at least one year of service shall be
entitled to a yearly [SIL] of five days with pay." On the other hand, the respondents derive their right to the 13 th month
pay from Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, as amended.

After the respondents alleged non-payment of the 13 th month and SIL pays, it became incumbent upon Alba to prove
payment of the statutory monetary benefits when he opted to deny further liability therefor. Instead of doing so,
however, Alba could only harp on his argument that the respondents, in the first place, could not be considered as his
employees.

The award of P200,000.00 as total moral and exemplary damages for the respondents is reasonable under the
circumstances. When it declared such award, the NLRC aptly referred to the dismissal as a retaliatory action by Alba
after his employees had asked for their benefits as employees. The NLRC sufficiently
explained:chanRoblesvirtualLawlibrary
A dismissed employee is entitled to moral damages when the dismissal is attended by bad faith or fraud; or
constitutes an act oppressive to labor; or is done in a manner contrary to good morals, good customs or public policy.
Exemplary damages, on the other hand, may be awarded if the dismissal is effected in a wanton, oppressive or
malevolent manner. Dismissing the [respondents] as an act of retaliation and after they requested to be given their
rightful benefits as employees constitute an act oppressive to labor and displays x x x wanton exercise of authority. 52
Finally, attorney's fees in labor cases are sanctioned "when the employee is illegally dismissed in bad faith and is
compelled to litigate or incur expenses to protect his rights by reason of the unjustified acts of his employer." 53
WHEREFORE, the petition is DENIED. The Decision dated July 14, 2016 and Resolution dated October 17, 2016 of
the Court of Appeals in CA-G.R. SP No. 144043 are AFFIRMED.

G.R. No. 202015, July 13, 2016 - ANTONIO VALEROSO AND ALLAN LEGATONA, Petitioners, v. SKYCABLE
CORPORATION, Respondent.

By this Petition for Review on Certiorari,1 Antonio Valeroso and Allan Legatona (petitioners) assail the November 11,
2011 Decision2 and May 18, 2012 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116296, which
reversed the May 24, 2010 Decision4 of the National Labor Relations Commission (NLRC) and consequently
dismissed their Complaint for illegal dismissal and money claims against Skycable Corporation (respondent).

Antecedent Facts

This case arose from a Complaint5 for illegal dismissal, non-payment of 13th month pay, separation pay and illegal
deduction filed by petitioners against respondent on February 25, 2009 before the Labor Arbiter, docketed as NLRC
NCR Case No. 02-03439-09. The Complaint was subsequently amended to include regularization and payment of
moral and exemplary damages as additional causes of action. 6ChanRoblesVirtualawlibrary

Petitioners Valeroso and Legatona alleged that they started working on November 1, 1998 and July 13,1998,
respectively, as account executives tasked to solicit cable subscriptions for respondent, as evidenced by
Certifications7 issued by Michael T. De la Cuesta (De la Cuesta), respondent's Sales Territory Manager. As shown in
their payslips8 for the years 2001 to 2006, they received commissions ranging from P15,000.00 to 530,000.00 each
upon reaching a specific quota every month and an allowance of P6,500.00 to P7,000.00 per month. From being
direct hires of respondent, they were transferred on January 1, 2007 to Skill Plus Manpower Services sans any
agreement for their transfer. In February 2009, they were informed that their commissions would be reduced due to
the introduction of prepaid cards sold to cable subscribers resulting in lower monthly cable subscriptions. Dismayed,
they notified their manager, Marlon Pasta (Pasta), of their intention to file a labor case with the NLRC, which they did
on February 25, 2009. Pasta then informed them that they will be dropped from the roster of its account executives,
which act, petitioners claimed, constitutes unfair labor practice.

Further, petitioners claimed that they did not receive 13 th month pay for 2006 and were underpaid of such benefit for
the years 2007 and 2008; and that in January 2008, petitioner Legatona signed a Release and Quitclaim 9 in
consideration of the amount of P25,000.00 as loyalty bonus from respondent.

Respondent, on the other hand, claimed that it did not terminate the services of petitioners for there was never an
employer-employee relationship to begin with. It averred that in 1998, respondent (then Central CATV, Inc.) engaged
petitioners as independent contractors under a Sales Agency Agreement. 10 In 2007, respondents decided to
streamline its operations and instead of contracting with numerous independent account executives such as
petitioners, respondent engaged the services of an independent contractor, Armada Resources & Marketing
Solutions, Inc. (Armada, for brevity; formerly Skill Plus Manpower Services) under a Sales Agency Agreement. 11 As a
result, petitioners' contracts were terminated but they, together with other sales account executives, were referred for
transfer to Armada. Petitioners then became employees of Armada. In 2009, respondent and Armada again entered
into a Sales Agency Agreement,12 wherein petitioners were again tasked to solicit accounts/ generate sales for
respondent.
Respondent insisted that in hiring petitioners and Armada as independent contractors, it engaged in legitimate job
contracting where no employer-employee relation exists between them. In an affidavit, 13 De la Cuesta stated that the
certifications he issued are not employment certifications but are mere accommodations, requested by petitioners
themselves, for their credit card and loan applications. Moreover, Armada's President, Francisco Navasa (Navasa), in
his affidavit,14 verified that Armada is an independent contractor which selected and engaged the services of
petitioners, paid their compensation, exercised the power to control their conduct and discipline or dismiss them.
Therefore, when petitioners filed their Complaint in February 2009, they were employees of Armada and as such, had
no cause of action against respondent.

Petitioners, however, assailed the allegation that they were employees of Armada, claiming that they were directly
hired, paid and dismissed by respondent. They cited the following as indicators that they are under the direct control
and supervision of respondent: 1) respondent's officers supervise their area of work, monitor them daily, update them
of new promos and installations they need to work on, inform them of meetings and penalize them for non-
attendance, ask them to train new agents/account executives, and inform them of new prices and expiration dates of
product promos; 2) respondent's supervisors delegate to them authority to investigate, campaign against and legalize
unlawful cable connections; 3) respondent's supervisors monitor their quota production and impose guaranteed
charges as penalty for failing to meet their quota; and 4) respondent consistently gives trophies to award them of their
outstanding performance.

Ruling of the Labor Arbiter

In a Decision15 dated August 26, 2009, the Labor Arbiter dismissed the Complaint since petitioners failed to establish
by substantial evidence that respondent was their employer. The Labor Arbiter observed that petitioners failed to
identify and specify the person who allegedly hired them, paid their wages and exercised supervision and control over
the manner and means of performing their work. There was neither any evidence to prove that Pasta, who allegedly
dismissed them, is an officer of respondent with an authority to dismiss them. The dispositive portion of the Decision
reads:
WHEREFORE, premises considered, the complaint filed in the instant case is dismissed as discussed in the body
hereof.
SO ORDERED.16

Ruling of the National Labor Relations Commission

Petitioners filed an appeal with the NLRC attributing reversible error on the Labor Arbiter in dismissing their Complaint
on the ground of no employer-employee relationship.

In a Decision17 dated May 24, 2010, the NLRC reversed the Labor Arbiter's ruling. It found that petitioners are regular
employees of respondent having performed their job as account executives for more than one year, even if not
continuous and merely intermittent, and considering the indispensability and continuing need of petitioners' tasks to
the business. The NLRC observed that there was no evidence that petitioners have substantial capitalization or
investment to consider them as independent contractors. On the other hand, the certifications and the payslips
presented by petitioners constitute substantial evidence of employer-employee relationship. The NLRC held that upon
termination of the Sales Agency Agreement with Armada in 2009, petitioners were considered dismissed without just
cause and due process. The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the instant appeal is GRANTED and the assailed Decision of Labor Arbiter
Gaudencio P. Demaisip, Jr. dated August 26, 2009, is REVERSED and SET ASIDE, and a new one entered declaring
complainants to have been illegally dismissed. Accordingly, respondent Skycable Corporation/Central CATV Inc. is
hereby directed to immediately reinstate complainants to their former positionfs] and to pay each of the complainants
their full backwages reckoned from February 25,2009 up to the actual payroll reinstatement, (tentatively computed at
P607,200.00), in addition to the amount of P58,500.00 representing 13 th month pay differentials and pro-ratal
3th month pay for 2009.

SO ORDERED.18cralawred

With the NLRC s ruling in favor of petitioners, respondent filed a motion for reconsideration. This motion was,
however, denied by the NLRC in its Resolution19 of July 27, 2010.

Riding of the Court of Appeals

Respondent filed a Petition for Certiorari20 with the CA, attributing grave abuse of discretion on the part of the NLRC in
holding it liable for the alleged illegal dismissal of petitioners.

The CA rendered a Decision21 on November 11, 2011 granting respondent's Petition for Certiorari and reversing the
NLRC Decision. The CA sustained the Labor Arbiter's finding that there was no evidence to substantiate the bare
allegation of employer-employee relationship between the parties. The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, the instant petition is GRANTED and the Decision dated May 24, 2010 of the
National Labor Relations Commission in NLRC NCR Case No. 02-03439-09 is hereby REVERSED and SET ASIDE.

SO ORDERED.22cralawred

Petitioners moved for reconsideration which was denied by the CA in its Resolution 23 dated May 18, 2012.
Issues

Hence, this Petition raising the following issues:

I.

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RENDERING ITS DECISION DATED NOVEMBER
11, 2011.
II.

WHETHER THE PETITIONERS WERE RESPONDENT'S REGULAR EMPLOYEES, WHOSE DISMISSAL FROM
EMPLOYMENT WAS ILLEGAL.24cralawred

Petitioners maintain that respondent failed to discharge the burden of disproving the employer-employee relationship
through competent evidence of independent contractorship. They assert that the nature of their work and length of
service with respondent made them regular employees as defined in Article 280 25 of the Labor Code. Consequently,
the CA gravely erred in dismissing their Complaint for illegal dismissal against respondent.
Our Ruling

The Petition has no merit.

The pivotal issue to be resolved in this case is whether petitioners were employees of respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of
fact and that the findings thereon by the Labor Arbiter and NLRC shall be accorded not only respect but even finality
when supported by substantial evidence.26 However, considering the conflicting findings of fact by the Labor Arbiter,
the NLRC and the CA, the Court is impelled to re-examine the records and resolve this factual issue.

To prove the claim of an employer-employee relationship, the following should be established by competent evidence:
(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer's power to control the employee with respect to the means and methods by which the work is to be
accomplished.27 Among the four, the most determinative factor in ascertaining the existence of employer-employee
relationship is the "right of control test."28 Under this control test, the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the means by which such end is
reached.29ChanRoblesVirtualawlibrary

We rule that an employer-employee relationship is absent in this case. The evidence presented by petitioners did not
prove their claim that they were employees of respondent. The certifications issued by De la Cuesta are not
competent evidence of employer-employee relation as these merely certified that respondent had engaged the
services of petitioners without specifying the true nature of such engagement. These documents did not certify that
petitioners were employees but were only issued to accommodate petitioners' request for loan applications, which fact
was not refuted by petitioners. As for the payslips presented, it appears that only the payslips for the years 2001 to
2006 were submitted. No payslips for the years material to this case (2007 to 2009) were submitted. It is undisputed
that petitioners were transferred to Armada in 2007, thus, we cannot give much credence to the payslips issued
before this period.

We, further, find no merit in petitioners' assertion that respondent's control over them was demonstrated. "[Guidelines
indicative of labor law 'control' do not merely relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means and methods to be  employed in attaining the
result."30 Here, we find that respondent's act of regularly updating petitioners of new promos, new price listings,
meetings and trainings of new account executives; imposing quotas and penalties; and giving commendations for
meritorious performance do not pertain to the means and methods of how petitioners were to perform and accomplish
their task of soliciting cable subscriptions. At most, these indicate that respondent regularly monitors the result of
petitioners' work but in no way dictate upon them the manner in which they should perform their duties. Absent any
intrusion by respondent into the means and manner of conducting petitioners' tasks, bare assertion that petitioners'
work was supervised and monitored does not suffice to establish employer-employee relationship.

Reliance by petitioners on the case of Francisco v. National Labor Relations Commission 31 is misplaced. In that case,
the Court adopted a two-tiered test in order to determine the true relationship between the employer and employee.
This two-tiered test, which involves: "(1) the putative employer's power to control the employee with respect to the
means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity
or relationship," has been made especially appropriate in cases where there is no written agreement to base the
relationship on and where the various tasks performed by the worker brings complexity to the relationship with the
employer.32 Thus, in addition to the control test, the totality of the economic circumstances of the worker is taken into
light to determine the existence of employment relationship.

In the present case, there is a written contract, i.e., the Sales Agency Agreement, which served as the primary
evidence of the nature of the parties' relationship. In this duly executed and signed agreement, petitioners and
respondent unequivocally agreed that petitioners' services were to be engaged on an agency basis as sales account
executives and that no employer-employee relationship is created but an independent contractorship. It is therefore
clear that the intention at the time of the signing of the agreement is not to be bound by an employer-employee
relationship. At any rate, even if we are to apply the two-tiered test pronounced in the Francisco case, there can still
be no employer-employee relationship since, as discussed, the element of control is already absent.

Indeed, "[t]he presence of [the] power of control is indicative of an employment relationship while the absence thereof
is indicative of independent contractorship."33 Moreover, evidence on record reveal the existence of independent
contractorship between the parties. As mentioned, the Sales Agency Agreement provided the primary evidence of
such relationship. "While the existence of  employer-employee relationship is a matter of  law, the characterization
made by the parties in their contract as to the nature of their juridical relationship cannot be simply ignored,
particularly in this case where the parties' written contract unequivocally states their intention" 34 to be strictly bound by
independent contractorship. Petitioner Legatona, in fact, in his Release and Quitclaim, acknowledged that he was
performing sales activities as sales agent/independent contractor and not an employee of respondent. In the same
token, De la Cuesta and Navasa, made sworn testimonies that petitioners are employees of Armada which is an
independent contractor engaged to provide marketing services for respondent.

Neither can we subscribe to petitioners' contention that they are considered regular employees of respondent for they
perform functions necessary and desirable to the business operation of respondent in consonance with Article 280 of
the Labor Code. We have held that "Article 280 is not the yardstick for determining the existence of an employment
relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining [their rights] to certain benefits, [such as] to join or form a union, or to security
of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute," 35 as in this
case.

Evidently, the legal relation of petitioners as sales account executives to respondent can be that of an independent
contractor. There was no showing that respondent had control with respect to the details of how petitioners must
conduct their sales activity of soliciting cable subscriptions from the public. In the case of Abante, Jr. v. Lamadrid
Bearing & Parts Corporation,36 Empermaco Abante, Jr., a commission salesman who pursued his selling activities
without interference or supervision from respondent company and relied on his own resources to perform his
functions, was held to be an independent contractor. Similarly, in Sandigan Savings & Loan Bank, Inc. v. National
Labor Relations Commission,37 Anita Javier was also held to be an independent contractor as the Court found that
Sandigan Realty Development Corporation had no control over her conduct as a realty sales agent since its only
concern or interest was in the result of her work and not in how it was achieved.

All told, we sustain the CA's factual findings and conclusion and accordingly, find no cogent reason to overturn the
dismissal of petitioners' Complaint against respondent.
WHEREFORE, the Petition is DENIED. The November 11, 2011 Decision and May 18, 2012 Resolution of the Court
of Appeals in CA-G.R. SP No. 116296 are AFFIRMED.

G.R. No. 228671, December 14, 2017 - EXPEDITION CONSTRUCTION CORPORATION, SIMON LEE PAZ, AND
JORDAN JIMENEZ, Petitioners, v. ALEXANDER M. AFRICA, MARDY MALAPIT, JESUS ESER, JACOB
RONGCALES, JONAMEL CARO, ALFREDO RILES, REYNALDO GARCIA, FREDDIE DELA CRUZ, JUNIE
AQUIBAN, CRISINCIO GARCIA,* DINO AQUIBAN, SAMUEL PILLOS, JEFFREY A.VALENZUELA, ERWIN
VELASQUEZ HALLARE AND WILLIAM RAMOS DAGDAG, Respondents.

Before us is a Petition for Review on Certiorari with Application for Temporary Restraining Order and/or Writ of
Preliminary Injunction1 seeking to set aside the March 31, 2016 Decision2 of the Court of Appeals (CA) in CA G.R. SP
No. 142007, which dismissed the Petition for Certiorari3 filed therewith and affirmed with modification the April 30,
2015 Resolution4 of the National Labor Relations Commission (NLRC) by ordering the reinstatement and the payment
of full back wages of respondents Alexander M. Africa, Mardy Malapit, Jesus Eser, Jacob Rongcales, Jonamel Caro,
Alfredo Riles, Reynaldo Garcia, Freddie Dela Cruz, Junie Aquiban, Crisincio Garcia, Dino Aquiban, Samuel Pillos,
Jeffrey A. Valenzuela, Erwin Velasquez Hallare, and William Ramos Dagdag (respondents) for having been illegally
dismissed. Likewise assailed is the December 9, 2016 Resolution 5 of the CA denying petitioners' Motion for
Reconsideration.6
Factual Antecedents
Petitioner Expedition Construction Corporation (Expedition), with petitioners Simon Lee Paz and Jordan Jimenez as
its Chief Executive Officer and Operations Manager, respectively, is a domestic corporation engaged in garbage
collection/hauling. It engaged the services of respondents as garbage truck drivers to collect garbage from different
cities and transport the same to the designated dumping site.
Respondents filed separate cases7 (which were later on consolidated) against Expedition for illegal dismissal;
underpayment and non-payment of salaries/wages, holiday pay, holiday premium, rest day premium, service incentive
leave pay, 13th month pay, separation pay, and Emergency Cost of Living Allowance (ECOLA); illegal deduction;
moral and exemplary damages and attorney's fees. In their Position Paper, 8 respondents alleged that in August 2013,
they were illegally terminated from employment when they were prevented from entering the premises of Expedition
without cause or due process. They claimed that they were regular employees of Expedition; were required to work a
minimum of 12 hours a day, seven days a week, even on holidays, without rest or vacation; and, were not paid the
minimum wage, holiday or premium pay, overtime pay, service incentive leave pay and 13 th month pay. They also
averred that the costs of repair and maintenance of the garbage trucks were illegally deducted from their salaries.
Expedition, in its Position Paper,9 countered that respondents were not illegally dismissed. It averred that it entered
into separate contracts with the cities of Quezon, Mandaluyong, Caloocan, and Muntinlupa for the col1ection and
transport of their garbage to the dump site; that it engaged the services of respondents, as dump truck drivers, who
were oftentimes dispatched in Quezon City and Caloocan City; that the need for respondents' services significantly
decreased sometime in 2013 after its contracts with Quezon City and Caloocan City were not renewed; and, that it
nonetheless tried to accommodate respondents by giving them intermittent trips whenever the need arose.
Expedition denied that respondents were its employees. It claimed that respondents were not part of the company's
payroll but were being paid on a per trip basis. Respondents were not under Expedition's direct control and
supervision as they worked on their own, were not subjected to company rules nor were required to observe
regular/fixed working hours, and that respondents hired/paid their respective garbage collectors. As such,
respondents' money claims had no legal basis.
In their Reply,10 respondents insisted that they worked under Expedition's control and supervision considering that: (1)
Expedition owned the dump trucks; (2) Expedition expressly instructed that the trucks should be used exclusively to
collect garbage in their assigned areas and transport the garbage to the dump site; (3) Expedition directed them to
park the dump trucks in the garage located at Group 5 Area Payatas, Quezon, City after completion of each delivery;
and (4) Expedition determined how, where, and when they would perform their tasks.
Respondents also adverted to petitioners' counsel's manifestation during the mandatory conciliation
proceedings,11 regarding Expedition's willingness to accept them back to work, as proof of their status as Expedition's
regular employees. To further support their claim, respondents attached in their Rejoinder 12 affidavits of Eric
Rosales13 (Rosales) and Roger A. Godoy14 (Godoy), both claiming to be former employees of Dodge
Corporation/Expedition Construction Corporation and attesting that respondents were regular employees of
Expedition.
Ruling of the Labor Arbiter
In a Decision15 dated June 26, 2014, the LA dismissed respondents' complaints and held that there was no employer-
employee relationship between Expedition and respondents. The LA did not find any substantial proof that
respondents were regular employees of Expedition. First, respondents had no fixed salary and were compensated
based on the total number of trips made. Next, Expedition had no power to terminate respondents. More importantly,
respondents performed their work independent of Expedition's control. The LA ruled that respondents were
independent contractors, contracted to do a piece of work according to their own method and without being subjected
to the control of Expedition except as to the results of their work.
Respondents appealed to the NLRC where they insisted that they were under Expedition's control and supervision
and that they were regular employees who worked continuously and exclusively for an uninterrupted period ranging
from four to 15 years and whose tasks were necessary and desirable in the usual business of Expedition.
Ruling of the National Labor Relations Commission
In a Resolution16 dated September 30, 2014, the NLRC dismissed respondents' appeal and affirmed the ruling of the
LA. The NLRC similarly found no evidence of an employer-employee relationship between Expedition and
respondents. The NLRC did not consider as evidence the alleged admission of petitioners during the mandatory
conciliation conference since statements made in these proceedings are regarded as privileged communication.
Likewise, the affidavits of Rosales and Godoy did not help respondents' cause as the affiants were not employees of
Expedition but of some other company.
The NLRC opined that respondents were project employees hired for a specific undertaking of driving garbage trucks,
the completion and termination of which was coterminous with Expedition’s contracts with the Local Government Units
(LGUs). As project employees, respondents were not dismissed from work but their employment simultaneously
ended when Expedition's contracts with Quezon City and Caloocan City expired. There being no illegal dismissal, the
NLRC found no basis in awarding respondents their money claims.
Undaunted, respondents filed a Motion for Reconsideration 17 arguing that they were not project employees because
the nature of their work was necessary and desirable to Expedition's line of business and that their continuous and
uninterrupted employment reaffirmed their status as regular employees. They averred further that there was no written
contract evidencing project employment nor were they informed of their status as project employees. They stressed
that Expedition's right of control over the performance of their work was apparent when: (1) they were made to report
everyday at the premises owned by Expedition; (2) there was an express instruction to report from Monday to
Sunday; (3) they were not allowed to engage in any other project; (4) they. were mandated to return the hauling truck
and park the same at Expedition's premises after the garbage collection was completed; (5) Expedition determined
how, where, and when they would perform their tasks; and, (6) they were not allowed to collect garbage beyond the
area indicated by Expedition.
In a Resolution18 dated April 30, 2015, the NLRC partly granted respondents' motion for reconsideration and modified
its earlier Resolution of September 30, 2014. This time, the NLRC ruled that respondents were employees of
Expedition in view of Expedition's admission that it hired and paid respondents for their services. The NLRC was also
persuaded that Expedition exercised control on when and how respondents would collect garbage.
The NLRC, however, sustained its earlier finding that there was no illegal dismissal ratiocinating that respondents
were merely placed on a floating status when the contract with Quezon City and Caloocan City expired and thus were
merely waiting to be re-assigned to other similar work. As there was no dismissal to speak of, the NLRC ordered
respondents’ reinstatement but without the payment of back wages. However, due to lack of clients where
respondents could be re-assigned, the NLRC opted to award separation pay in lieu of reinstatement. The dispositive
portion of the Resolution reads:
WHEREFORE, complainants-appellants' Motion for Reconsideration is hereby PARTLY GRANTED. Our Resolution
dated 30 September 2014 is MODIFIED finding employer-employee relationship between complainants and the
respondents and concomitantly the latter is hereby ordered to pay complainants' separation pay at the rate of ½
month salary for every year of service a fraction of at least 6 months to be considered as one (1) whole year in the
following computed amounts:
1. Alexander M. Africa 426 x 13 x 12 = 66,456
2. Jesus Eser 426 x 13 x 10 = 55,380
3. Jonamel Caro 426 x 13 x 12 = 66,456
4. Reynaldo Garcia 426 x 13 x 15 = 83,070
5. Mardy Malapit 426 x 13 x 14 = 77,532
6. Jacob Rongcales 426 x 13 x 14 = 77,532
7. Alfredo Rilles 426 x 13 x 15 = 83,070
8. Freddie Dela Cruz 426 x 13 x 5 = 27,690
9. Junie Aquiban 426 x 13 x 5 = 27,690
10. Dino Aquiban 426 x 13 x 4 = 22,152
11. Samuel G. Pillos 426 x 13 x 5 = 27,690
12. William Dagdag 426 x 13 x 14 = 77,532
13. Crisincio Garcia 426 x 13 x 12 = 66,456
14. Jeffrey A. Valenzuela 426 x 13 x 5 = 27,690
15. Erwin V. Hallare 426 x 13 x 9 = 49,842
The rest of Our resolution is hereby AFFIRMED.
SO ORDERED.19
Expedition filed a Motion for Reconsideration20 attributing error on the NLRC in ruling that there was an employer-
employee relationship and in awarding separation pay despite the finding that there was no illegal dismissal.
Expedition also questioned the NLRC's computation of separation pay and sought the remand of the case to the LA
for proper determination of the correct amount. This motion, however, was denied by the NLRC in its Resolution 21 of
June 30, 2015.
Expedition sought recourse to the CA via a Petition for Certiorari.22
Ruling of the Court of Appeals
On March 31, 2016, the CA rendered a Decision23 dismissing Expeditions Petition for Certiorari and ruling in favor of
respondents. The CA affirmed the April 30, 2015 Resolution of the NLRC insofar as the existence of an employer-
employee relationship between the parties. The CA noted that respondents were hired and paid by Expedition.
Further, Expedition exercised the power to provide and withhold work from respondents. Most importantly, the power
of control was evident since Expedition determined how, where and when respondents would perform their tasks. The
CA held that the respondents needed Expedition's instruction and supervision in the performance of their duties. The
CA likewise ruled that respondents were regular employees entitled to security of tenure because they continuously
worked for several years for the company, an indication that their duties were necessary and desirable in the usual
business of Expedition.
The CA, however, did not agree with the NLRC that respondents were on floating status since petitioners did not
adduce proof of any dire exigency justifying failure to give respondents any further assignments. The CA observed
that the irregular dispatch of respondents due allegedly to the decrease in the need for drivers led to the eventual
discontinuance of respondents' services and ultimately, their illegal termination. Accordingly, the CA ruled that
respondents were illegally dismissed when Expedition prevented them from working, and consequently, ordered their
reinstatement with full back wages. The dispositive portion of the Decision reads:
FOR THESE REASONS, the petition is DISMISSED. The Decision of the National Labor Relations Commission dated
April 30, 2015 is hereby AFFIRMED with MODIFICATIONS. The respondents were illegally dismissed, and are thus
entitled to reinstatement with full backwages from the time of illegal dismissal up to the finality of this Decision and
attorney's fee equivalent to ten percent (10%) of the total monetary award. The monetary awards herein granted shall
earn legal interest at the rate of six percent (6%) per annum from the date of the finality of this Decision until fully paid.
The case is remanded to the Labor Arbiter for the computation of respondents' monetary awards.
SO ORDERED.24
Expedition filed a Motion for Reconsideration25 on the ground that the CA erred in finding that respondents were its
employees and that respondents were illegally dismissed. It impugned the award of reinstatement and back wages in
favor of respondents, submitting that an amount of financial assistance would be the more equitable remedy for
respondents' cause. It, then, manifested its willingness to offer financial assistance to respondents in the amounts
equivalent to the separation pay awarded to respondents in the April 30, 2015 NLRC Resolution.
Expedition's motion was, however, denied by the CA in its Resolution 26 dated December 9, 2016.
Issues
Hence, Expedition filed this instant Petition presenting the following grounds for review:
[1.] THE COURT OF APPEALS GRAVELY ERRED WHEN IT UPHELD THE NLRC'S FINDING THAT THERE WAS
AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONER CORPORATION AND RESPONDENTS.
[2.] EVEN ASSUMING ARGUENDO THAT THERE WAS EMPLOYER-EMPLOYEE RELATIONSHIP, THE COURT
OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENTS WERE REGULAR EMPLOYEES.
[3.] THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENTS WERE ILLEGALLY
DISMISSED.
[4.] AGAIN, EVEN ASSUMING THAT RESPONDENTS WERE REGULAR EMPLOYEES AND THAT THEY HAD
BEEN ILLEGALLY DISMISSED, THE COURT OF APPEALS GRAVELY ERRED WHEN IT AWARDED
REINSTATEMENT WITH FULL BACKWAGES INSTEAD OF SEPARATION PAY ONLY. 27
Expedition maintains that it did not exercise the power of selection or engagement, payment of wages, dismissal, and
control over respondents. The CA, thus, had no legal basis in finding that respondents were its employees, much less
had regular employment status with it. Expedition likewise insists that there was no illegal dismissal and that the CA
erred in awarding reinstatement and backwages instead of separation pay, which was prayed for by respondents.
Our Ruling
The Petition is partly granted.
Respondents were regular employees of Expedition.
At the outset, it bears emphasis that the question of whether or not respondents were employees of Expedition is a
factual issue. It is settled that only questions of law may be raised in a petition for review on certiorari filed under Rule
45.28 However, there are also recognized exceptions to this rule, one of which is when the factual findings of the labor
tribunals are contradictory to each other,29 such as obtaining in the case at bar.
Jurisprudence has adhered to the four-fold test in determining the existence of an employer-employee relationship, to
wit: "(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employee's conduct, or the so-called 'control test'". 30
In ruling that respondents were employees of Expedition, the CA found all the elements of employer-employee
relationship to be present. As shown in the records, Expedition hired respondents as dump truck drivers and paid
them the amount of P620.00 per trip. The CA held that Expedition wielded the power to dismiss respondents based
on Expedition's admission that when the dispatch of drivers became irregular, it tried to accommodate them by giving
trips when the need arose. The control test was likewise established because Expedition determined how, where, and
when respondents would perform their tasks.
Expedition, however, proffers that the actual findings of the CA on this matter had no legal basis. It claims that
respondents were never hired but were merely engaged as drivers; that they worked on their own and were not
subjected to its control and supervision; that they were compensated based on output or number of trips made in a
day; that they selected their own garbage collectors, chose their own route and determined the manner by which they
would collect the garbage; and, that they performed their work at their own pleasure without fear of being sanctioned if
they chose not to report for work.
The Court finds Expedition's position untenable. First, as clearly admitted, respondents were engaged/hired by
Expedition as garbage truck drivers. Second, it is undeniable that respondents received compensation from
Expedition for the services that they rendered to the latter. The fact that respondents were paid on a per trip basis is
irrelevant in determining the existence of an employer-employee relationship because this was merely the method of
computing the proper compensation due to respondents. 31 Third, Expedition's power to dismiss was apparent when
work was withheld from respondents as a result of the termination of the contracts with Quezon City and Caloocan
City. Finally, Expedition has the power of control over respondents in the performance of their work. It was held that
"the power of control refers merely to the existence of the power and not to the actual exercise thereof.” 32 As aptly
observed by the CA, the agreements for the collection of garbage were between Expedition and the various LGUs,
and respondents needed the instruction and supervision of Expedition to effectively perform their work in accordance
with the stipulations of the agreements.
Moreover, the trucks driven by respondents were owned by Expedition. There was an express instruction that these
trucks were to be exclusively used to collect and transport garbage. Respondents were mandated to return the trucks
to the premises of Expedition after the collection of garbage. Expedition determined the clients to be served, the
location where the garbage is to be collected and when it is to be collected. Indeed, Expedition determined how,
where, and when respondents would perform their tasks.
Respondents were neither independent contractors nor project employees. There was no showing that respondents
have substantial capital or investment and that they were performing activities which were not directly related to
Expedition's business to be qualified as independent contractors. 33 There was likewise no written contract that can
prove that respondents were project employees and that the duration and scope of such employment were specified
at the time respondents were engaged. Therefore, respondents should be accorded the presumption of regular
employment pursuant to Article 280 of the Labor Code which provides that "employees who have rendered at least
one year of service, whether such service is continuous or broken x x x shall be considered [as] regular employees
with respect to the activity in which they are employed and their employment shall continue while such activity
exists."34 Furthermore, the fact that respondents were performing activities which were directly related to the business
of Expedition confirms the conclusion that respondents were indeed regular employees. 35
Having gained regular status, respondents were entitled to security of tenure and could only be dismissed for just or
authorized cause after they had been accorded due process. Thus, the queries: Were respondents dismissed? Were
they dismissed in accordance with law?
There was no illegal dismissal.
In illegal dismissal cases, the employer has the burden of proving that the termination was for a valid or authorized
cause. However, it is likewise incumbent upon an employee to first establish by substantial evidence the fact of his
dismissal from employment36 by positive and overt acts of an employer indicating the intention to dismiss. 37 It must
also be stressed that the evidence must be clear, positive and convincing. 38 Mere allegation is not proof or evidence.39
In this case, there was no positive or direct evidence to substantiate respondents' claim that they were dismissed from
employment. Aside from mere assertions, the record is bereft of any indication that respondents were barred from
Expedition's premises. If at all, the evidence on record showed that Expedition intended to give respondents new
assignments as a result of the termination of the garbage hauling contracts with Quezon City and Caloocan City
where respondents were regularly dispatched. Despite the loss of some clients, Expedition tried to accommodate
respondents and offered to engage them in other garbage hauling projects with other LGUs, a fact which respondents
did not refute. However, instead of returning and waiting for their next assignments, respondents instituted an illegal
dismissal case against Expedition. Note that even during the mandatory conciliation and mediation conference
between the parties, Expedition manifested its willingness to accept respondents back to work. Unfortunately, it was
respondents who no longer wanted to return to work. In fact, in their complaints, respondents prayed for the payment
of separation pay instead of reinstatement.
Here, there was no sufficient proof that respondents were actually laid off from work. Thus, the CA had no basis in
ruling that respondents' employment was illegally terminated since the fact of dismissal was not adequately supported
by substantial evidence. There being no dismissal, the status quo between respondents and Expedition should be
maintained. However, it cannot be denied that their relationship has already been ruptured in that respondents are no
longer willing to be reinstated anymore. Under the circumstances, the Court finds that the grant of separation pay as a
form of financial assistance is deemed equitable.
As a measure of social justice, the award of separation pay/financial assistance has been upheld in some
cases40 even if there is no finding of illegal dismissal. The Court, in  Eastern Shipping Lines, Inc. v. Sedan,41 had this to
say:
x x x We are not unmindful of the rule that financial assistance is allowed only in instances where the employee is
validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Neither are we
unmindful of this Court's pronouncements in Arc-Men Food Industries Corporation v. NLRC, and Lemery Savings and
Loan Bank v. NLRC, where the Court ruled that when there is no dismissal to speak of, an award of financial
assistance is not in order.
But we must stress that this Court did allow, in several instances, the grant of financial assistance. In the words of
Justice Sabino de Leon, Jr., now deceased, financial assistance may be allowed as a measure of social justice
[under] exceptional circumstances, and as an equitable concession. The instant case equally calls for balancing the
interests of the employer with those of the worker, if only to approximate what Justice Laurel calls justice in its secular
sense.
In a Manifestation42 submitted before the CA, Expedition expressed willingness to extend gratuitous assistance to
respondents and to pay them the amounts equivalent to the separation pay awarded to each respondent in the April
30, 2015 NLRC Resolution. In view of this and taking into account respondents' long years of service ranging from
four to 15 years, the Court finds that the grant of separation pay at the rate of one-half (½) month's salary for every
year of service, as adjudged in the April 30, 2015 Resolution of the NLRC, is proper.
WHEREFORE, the Petition for Review on Certiorari is PARTLY GRANTED. The assailed Decision dated March 31,
2016 and Resolution dated December 9, 2016 of the Court of Appeals in CA-G.R. SP No. 142007
are AFFIRMED with MODIFICATION that the awards of reinstatement, back wages, attorney's fees and legal interest
are DELETED there being no illegal dismissal. The award of separation pay, as a form of financial assistance, in the
National Labor Relations Commission's Resolution dated April 30, 2015 is REINSTATED

G.R. No. 189255, June 17, 2015 - JESUS G. REYES, Petitioner, v. GLAUCOMA RESEARCH FOUNDATION, INC.,
EYE REFERRAL CENTER AND MANUEL B. AGULTO, Respondent.
Before the Court is a petition for review on certiorari seeking to reverse and set aside the Decision1 and Resolution2 of
the Court of Appeals (CA), dated April 20, 2009 and August 25, 2009, respectively, in CA-G.R. SP No. 104261. The
assailed CA Decision annulled the Decision of the National Labor Relations Commission (NLRC) in NLRC NCR Case
No. 05-0441-05 and reinstated the Decision of the Labor Arbiter (LA) in the same case, while the CA Resolution
denied petitioner's motion for reconsideration.

The instant petition arose from a complaint for illegal dismissal filed by petitioner against respondents with the NLRC,
National Capital Region, Quezon City. Petitioner alleged that: on August 1, 2003, he was hired by respondent
corporation as administrator of the latter's Eye Referral Center (ERC); he performed his duties as administrator and
continuously received his monthly salary of P20,000.00 until the end of January 2005; beginning February 2005,
respondent withheld petitioner's salary without notice but he still continued to report for work; on April 11, 2005,
petitioner wrote a letter to respondent Manuel Agulto (Agulto), who is the Executive Director of respondent
corporation, informing the latter that he has not been receiving his salaries since February 2005 as well as his
14th month pay for 2004; petitioner did not receive any response from Agulto; on April 21, 2005, petitioner was
informed by the Assistant to the Executive Director as well as the Assistant Administrative Officer, that he is no longer
the Administrator of the ERC; subsequently, petitioner's office was padlocked and closed without notice; he still
continued to report for work but on April 29, 2005 he was no longer allowed by the security guard on duty to enter the
premises of the ERC.

On their part, respondents contended that: upon petitioner's representation that he is an expert in corporate
organizational structure and management affairs, they engaged his services as a consultant or adviser in the
formulation of an updated organizational set-up and employees' manual which is compatible with their present
condition; based on his claim that there is a need for an administrator for the ERC, he later designated himself as
such on a trial basis; there is no employer-employee relationship between them because respondents had no control
over petitioner in terms of working hours as he reports for work at anytime of the day and leaves as he pleases;
respondents also had no control as to the manner in which he performs his alleged duties as consultant; he became
overbearing and his relationship with the employees and officers of the company soured leading to the filing of three
complaints against him; petitioner was not dismissed as he was the one who voluntarily severed his relations with
respondents.

On January 20, 2006, the LA assigned to the case rendered a Decision 3 dismissing petitioner's complaint. The LA
held, among others, that petitioner failed to establish that the elements of an employer-employee relationship existed
between him and respondents because he was unable to show that he was, in fact, appointed as administrator of the
ERC and received salaries as such; he also failed to deny that during his stint with respondents, he was, at the same
time, a consultant of various government agencies such as the Manila International Airport Authority, Manila
Intercontinental Port Authority, Anti-Terrorist Task Force for Aviation and Air Transportation Sector; his actions were
neither supervised nor controlled by the management of the ERC; petitioner, likewise, did not observe working hours
by reporting for work and leaving therefrom as he pleased; and, he was receiving allowances, not salaries, as a
consultant.

On appeal, the NLRC reversed and set aside the Decision of the LA. The NLRC declared petitioner as respondents'
employee, that he was illegally dismissed and ordered respondents to reinstate him to his former position without loss
of seniority rights and privileges with full backwages. The NLRC held that the basis upon which the conclusion of the
LA was drawn lacked support; that it was incumbent for respondents to discharge the burden of proving that
petitioner's dismissal was for cause and effected after due process was observed; and, that respondents failed to
discharge this burden.4

Respondents filed a motion for reconsideration, but it was denied by the NLRC in its Resolution 5 dated May 30, 2008.

Respondents then filed a Petition for Certiorari6 with the CA.

In its assailed Decision, the CA annulled and set aside the judgment of the NLRC and reinstated the Decision of the
LA. The CA held that the LA was correct in ruling that, under the control test and the economic reality test, no
employer-employee relationship existed between respondents and petitioner.

Petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated August 25, 2009.

Hence, the present petition for review on certiorari based on the following grounds:chanroblesvirtuallawlibrary
I

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN NOT DISMISSING
RESPONDENTS' PETITION FOR CERTIORARI ON THE GROUND THAT RESPONDENTS SUBMITTED A
VERIFICATION THAT FAILS TO COMPLY WITH THE 2004 RULES ON NOTARIAL PRACTICE.cralawlawlibrary
II

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN RULING THAT NO
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN RESPONDENTS AND
PETITIONER.7cralawlawlibrary
As to the first ground, petitioner contends that respondents' petition for certiorari filed with the CA should have been
dismissed on the ground that it was improperly verified because the jurat portion of the verification states only the
community tax certificate number of the affiant as evidence of her identity. Petitioner argues that under the 2004
Rules on Notarial Practice, as amended by a Resolution 8 of this Court, dated February 19, 2008, a community tax
certificate is not among those considered as competent evidence of identity.

The Court does not agree.

This Court has already ruled that competent evidence of identity is not required in cases where the affiant is
personally known to the notary public.9

Thus, in Jandoquile v. Revilla, Jr.,10 this Court held that:chanroblesvirtuallawlibrary

If the notary public knows the affiants personally, he need not require them to show their valid identification
cards. This rule is supported by the definition of a "jurat" under Section 6, Rule II of the 2004 Rules on Notarial
Practice. A "jurat" refers to an act in which an individual on a single occasion: (a) appears in person before the notary
public and presents an instrument or document; (b) is personally known to the notary public or identified by the notary
public through competent evidence of identity; (c) signs the instrument or document in the presence of the notary; and
(d) takes an oath or affirmation before the notary public as to such instrument or document. 11cralawlawlibrary
Also, Section 2(b), Rule IV of the 2004 Rules on Notarial Practice provides as follows:chanroblesvirtuallawlibrary
SEC. 2. Prohibitions -

(a) x x x

(b) A person shall not perform a notarial act if the person involved as signatory to the instrument or document -
(1) is not in the notary's presence personally at the time of the notarization; and

(2) is not personally known to the notary public or otherwise identified by the notary public through competent
evidence of identity as defined by these Rules.
Moreover, Rule II, Section 6 of the same Rules states that:

SEC 6. Jurat. - "Jurat" refers to an act in which an individual on a single occasion:chanroblesvirtuallawlibrary

(a) appears in person before the notary public and presents an instrument or document;

(b) is personally known to the notary public or identified by the notary public through competent evidence of identity
as defined by these Rules;

(c) signs the instrument or document in the presence of the notary; and

(d) takes an oath or affirmation before the notary public as to such instrument or document.
In legal hermeneutics, "or" is a disjunctive that expresses an alternative or gives a choice of one among two or more
things.12 The word signifies disassociation and independence of one thing from another thing in an enumeration. 13

Thus, as earlier stated, if the affiant is personally known to the notary public, the latter need not require the former to
show evidence of identity as required under the 2004 Rules on Notarial Practice, as amended.

Applying the above rule to the instant case, it is undisputed that the attorney-in-fact of respondents who executed the
verification and certificate against forum shopping, which was attached to respondents' petition filed with the CA, is
personally known to the notary public before whom the documents were acknowledged. Both attorney-in-fact and the
notary public hold office at respondents' place of business and the latter is also the legal counsel of respondents.

In any event, this Court's disquisition in the fairly recent case of Heirs of Amada Zaulda v. Isaac Zaulda14 regarding
the import of procedural rules vis-a-vis the substantive rights of the parties, is instructive, to
wit:chanroblesvirtuallawlibrary
[G]ranting, arguendo, that there was non-compliance with the verification requirement, the rule is that courts should
not be so strict about procedural lapses which do not really impair the proper administration of justice. After all, the
higher objective of procedural rule is to ensure that the substantive rights of the parties are protected. Litigations
should, as much as possible, be decided on the merits and not on technicalities. Every party-litigant must be afforded
ample opportunity for the proper and just determination of his case, free from the unacceptable plea of technicalities.

In Coca-Cola Bottlers v. De la Cruz, where the verification was marred only by a glitch in the evidence of the identity
of the affiant, the Court was of the considered view that, in the interest of justice, the minor defect can be overlooked
and should not defeat the petition.

The reduction in the number of pending cases is laudable, but if it would be attained by precipitate, if not
preposterous, application of technicalities, justice would not be served. The law abhors technicalities that impede the
cause of justice. The court's primary duty is to render or dispense justice. "It is a more prudent course of action for the
court to excuse a technical lapse and afford the parties a review of the case on appeal rather than dispose of the case
on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while
actually resulting in more delay, if not miscarriage of justice."

What should guide judicial action is the principle that a party-litigant should be given the fullest opportunity to establish
the merits of his complaint or defense rather than for him to lose life, liberty, honor, or property on technicalities. The
rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid
application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must
always be eschewed. At this juncture, the Court reminds all members of the bench and bar of the admonition in the
often-cited case of Alonso v. Villamor:chanroblesvirtuallawlibrary
Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to
justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. There should be
no vested rights in technicalities.15cralawlawlibrary
Anent the second ground, petitioner insists that, based on evidence on record, an employer-employee relationship
exists between him and respondents.

The Court is not persuaded.

It is a basic rule of evidence that each party must prove his affirmative allegation. 16 If he claims a right granted by law,
he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the
weakness of that of his opponent.17 The test for determining on whom the burden of proof lies is found in the result of
an inquiry as to which party would be successful if no evidence of such matters were given. 18 In an illegal dismissal
case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid
cause.19 However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be
established.20 Thus, in filing a complaint before the LA for illegal dismissal, based on the premise that he was an
employee of respondents, it is incumbent upon petitioner to prove the employer-employee relationship by substantial
evidence.21

In regard to the above discussion, the issue of whether or not an employer-employee relationship existed between
petitioner and respondents is essentially a question of fact. 22 The factors that determine the issue include who has the
power to select the employee, who pays the employee's wages, who has the power to dismiss the employee, and who
exercises control of the methods and results by which the work of the employee is accomplished. 23 Although no
particular form of evidence is required to prove the existence of the relationship, and any competent and relevant
evidence to prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest on
substantial evidence, which is that amount of relevant evidence that a reasonable mind might accept as adequate to
justify a conclusion.24
Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts. 25 However,
where, like here, there is a conflict between the factual findings of the LA and the CA, on one hand, and those of the
NLRC, on the other, it becomes proper for the Court, in the exercise of its equity jurisdiction, to review and re-evaluate
the factual issues and to look into the records of the case and re-examine the questioned findings. 26

Etched in an unending stream of cases are four standards in determining the existence of an employer-employee
relationship, namely: (a) the manner of selection and engagement of the putative employee; (b) the mode of payment
of wages; (c) the presence or absence of power of dismissal; and, (d) the presence or absence of control of the
putative employee's conduct. Most determinative among these factors is the so-called "control test." 27

Indeed, the power of the employer to control the work of the employee is considered the most significant determinant
of the existence of an employer-employee relationship. 28 This test is premised on whether the person for whom the
services are performed reserves the right to control both the end achieved and the manner and means used to
achieve that end.29

In the present case, petitioner contends that, as evidence of respondents' supposed control over him, the
organizational plans he has drawn were subject to the approval of respondent corporation's Board of Trustees.
However, the Court agrees with the disquisition of the CA on this matter, to wit:chanroblesvirtuallawlibrary
[Respondents'] power to approve or reject the organizational plans drawn by [petitioner] cannot be the control
contemplated in the "control test." 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.

Well settled is the rule that 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. 30cralawlawlibrary
What was glaring in the present case is the undisputed fact that petitioner was never subject to definite working hours.
He never denied that he goes to work and leaves therefrom as he pleases. 31 In fact, on December 1-31, 2004, he
went on leave without seeking approval from the officers of respondent company. On the contrary, his letter 32 simply
informed respondents that he will be away for a month and even advised them that they have the option of appointing
his replacement during his absence. This Court has held that there is no employer-employee relationship where the
supposed employee is not subject to a set of rules and regulations governing the performance of his duties under the
agreement with the company and is not required to report for work at any time, nor to devote his time exclusively to
working for the company.33

In this regard, this Court also agrees with the ruling of the CA that:chanroblesvirtuallawlibrary
Aside from the control test, the Supreme Court has also used the economic reality test in determining whether an
employer-employee relationship exists between the parties. Under this 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. 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.

In the instant case, as shown by the resume of [petitioner], he concurrently held consultancy positions with the Manila
International Airport Authority (from 04 March 2001 to September 2003 and from 01 November 2004 up to the
present) and the Anti-Terrorist Task Force for Aviation and Air Transportation Sector (from 16 April 2004 to 30 June
2004) during his stint with the Eye Referral Center (from 01 August 2003 to 29 April 2005). Accordingly, it cannot be
said that the [petitioner] was wholly dependent on [respondent] company. 34cralawlawlibrary
In bolstering his contention that there was an employer-employee relationship, petitioner draws attention to the pay
slips he supposedly received from respondent corporation. However, he does not dispute the findings of the CA that
there are no deductions for SSS and withholding tax from his compensation, which are the usual deductions from
employees' salaries. Thus, the alleged pay slips may not be treated as competent evidence of petitioner's claim that
he is respondents' employee.

In addition, the designation of the payments to petitioner as salaries, is not determinative of the existence of an
employer-employee relationship.35 Salary is a general term defined as a remuneration for services given. 36 Evidence
of this fact, in the instant case, was the cash voucher issued in favor of petitioner where it was stated therein that the
amount of P20,000.00 was given as petitioner's allowance for the month of December 2004, although it appears from
the pay slip that the said amount was his salary for the same period.

Additional evidence of the fact that petitioner was hired as a consultant and not as an employee of respondent
corporation are affidavits to this effect which were executed by Roy Oliveres 37 and Aurea Luz Esteva,38 who are
Medical Records Custodian and Administrative Officer, respectively, of respondent corporation. Petitioner insists in its
objection of the use of these affidavits on the ground that they are, essentially, hearsay. However, this Court has ruled
that although the affiants had not been presented to affirm the contents of their affidavits and be cross-examined, their
affidavits may be given evidentiary value; the argument that such affidavits were hearsay was not
persuasive.39 Likewise, this Court ruled that it was not necessary for the affiants to appear and testify and be cross-
examined by counsel for the adverse party.40 To require otherwise would be to negate the rationale and purpose of
the summary nature of the proceedings mandated by the Rules and to make mandatory the application of the
technical rules of evidence.41

These affidavits are corroborated by evidence, as discussed above, showing that petitioner has no definite working
hours and is not subject to the control of respondents.

Lastly, the Court does not agree with petitioner's insistence that his being hired as respondent corporation's
administrator and his designation as such in intra-company correspondence proves that he is an employee of the
corporation. The fact alone that petitioner was designated as an administrator does not necessarily mean that he is an
employee of respondents. Mere title or designation in a corporation will not, by itself, determine the existence of an
employer-employee relationship.42 In this regard, even the identification card which was issued to petitioner is not an
adequate proof of petitioner's claim that he is respondents' employee. In addition, petitioner's designation as an
administrator neither disproves respondents' contention that he was engaged only as a consultant.

As a final point, it bears to reiterate that while the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every labor dispute will be automatically decided in
favor of labor.43 Management also has its rights which are entitled to respect and enforcement in the interest of simple
fair play.44 Out of its concern for the less privileged in life, the Court has inclined, more often than not, toward the
worker and upheld his cause in his conflicts with the employer. 45 Such favoritism, however, has not blinded the Court
to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the
applicable law and doctrine.46

WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of Appeals, dated April 20,
2009 and August 25, 2009, respectively, in CA-G.R. SPNo. 104261, are AFFIRMED.

G.R. No. 219435, January 17, 2018 - ALLIED BANKING CORPORATION, NOW MERGED WITH PHILIPPINE
NATIONAL BANK, Petitioner, v. REYNOLD CALUMPANG, Respondent.

The Case
Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Rules of Court for the reversal and
setting aside of the Decision1 dated September 12, 2014 and the Resolution2 dated June 9, 2015 of the Court of
Appeals (CA) - Cebu City in CA-G.R. CEB SP No. 02906, which affirmed the findings of the National Labor Relations
Commission (NLRC) and of the Labor Arbiter, declaring respondent to have been illegally dismissed by petitioner.
The Facts

Petitioner Allied Banking Corporation3 ("Bank") and Race Cleaners, Inc. ("RCI"), a corporation engaged in the
business of janitorial and manpower services, had entered into a Service Agreement whereby the latter provided the
former with messengerial, janitorial, communication, and maintenance services and the personnel therefor. 4

On September 28, 2003, respondent Reynold Calumpang was hired as a janitor by RCI and was assigned at the
Bank's Tanjay City Branch ("the Branch"). He was tasked to perform janitorial work and messengerial/errand services.
His job required him to be out of the Branch at times to run errands such as delivering statements and checks for
clearing, mailing letters, among others.5

Petitioner, however, observed that whenever respondent went out on errands, it takes a long time for him to return to
the Branch. It was eventually discovered that during these times, respondent was also plying his pedicab and ferrying
passengers. Petitioner also found out through several clients of the Branch who informed the Bank Manager, Mr.
Oscar Infante, that respondent had been borrowing money from them. Because of these acts, Mr. Infante informed
respondent that his services would no longer be required at the Branch. 6

Disgruntled, respondent thereafter filed a complaint for illegal dismissal and underpayment of wages against petitioner
before the NLRC,7 which was docketed as RAB VII-07-0094-2005-D.8

In his position paper, respondent asserted that the four-fold test of employer-employee relationship is present
between him and the Bank.9 First, he averred that he was a regular employee of the Bank assigned as a Janitor of the
Branch with a salary of P4,200 payable every 15 days each month, and assigned such other tasks essential and
necessary for the Bank's business.10

He alleged that petitioner engaged his services and exercised direct control and supervision over him through the
Branch Head, Oscar Infante, not only as to the results of his work but also as to the means and methods by which the
same was to be accomplished. According to respondent, Infante gives the direct orders on the work to be done and
accomplished during working days, such as "m[o]pping, cleaning the comfort room of the [B]ank, arrang[ing] furniture
and fixture, bank documents, throw[ing] garbage/waste disposal, cleaning the windows, tables and teller cage" as well
as directing him to "do messengerial/errand services such as mailing of letters, delivery of bank statements and
deliver[ing] checks for clearing."11

As regards the payment of salary, respondent claimed that it was the Branch that directly paid his salaries and wages
every "quincina."12 As for the power of dismissal, respondent further alleged that it was petitioner Bank, through its
Branch Head, who terminated his services.13

For its part, petitioner alleged that respondent was not its employee, but that of RCI, with which it had entered into a
Service Agreement to provide "messengerial, janitorial, communications and maintenance services and the personnel
therefor."14 It claimed that while respondent was required to be out of the Branch at times to accomplish his tasks, it
was observed that whenever he went out on these errands, he would take a long time to return to the Branch.
Petitioner eventually discovered that during these times, respondent was "also plying his pedicab and ferrying
passengers." Aside from this, petitioner averred that several clients of the Branch informed Infante that respondent
had been borrowing money from them "owing to his familiarity with said clients." Upon discovering these incidents,
petitioner "had no choice but to have complainant relieved and replaced." Accordingly, Infante informed respondent
that his services would no longer be required by the Branch. 15

Petitioner denied the existence of any employer-employee relationship between itself and respondent. It asserted that
respondent was clearly an employee of RCI by virtue of the Service Agreement which clearly indicated in Article XI
thereof that there would be no employer-employee relationship between RCI's employees and the Bank. 16 It further
averred that RCI is a qualified job contractor because of its capitalization and the fact that it exercised control and
supervision over its employees deployed at the branches of the petitioner in accordance with Rule VIII-A, Sec. 4, pars.
(d) and (e) of the Omnibus Rules Implementing the Labor Code. 17

Furthermore, petitioner argued that it was merely exercising its prerogative under the Service Agreement to seek the
replacement or relief of any personnel assigned by RCI when the Branch Head informed respondent that his services
would no longer be required at the Branch. According to petitioner, this decision to replace respondent was not
equivalent to termination of employment, especially since it was neither whimsical nor arbitrary. 18 Thus, petitioner
concludes that, in the absence of any employer-employee relationship between the parties, respondent had no cause
of action against petitioner for illegal dismissal, damages and other claims. 19
Ruling of the Labor Arbiter

In its Decision20 dated March 28, 2006, the Labor Arbiter ruled in favor of respondent, the dispositive portion of which
reads:
WHEREFORE, foregoing considered, complainant is hereby declared to be an employee of respondent Allied
Banking Corporation. It is declared further that complainant has been illegally dismissed. Respondent Allied Banking
Corporation is hereby ordered to reinstate complainant to his former position without loss of seniority rights or
privileges, with full backwages from the time his salary was withheld until his actual reinstatement, which is tentatively
computed in the amount of P37,800.00. Should reinstatement be unfeasible for valid reasons, respondent is ordered
to pay the complainant separation pay of one month salary per year of service, a fraction of six months is considered
as one year which is computed in the amount of P46,200.

SO ORDERED.21
The Labor Arbiter held that there was an employer-employee relationship between petitioner and respondent, based
on the following findings: (a) Respondent rendered services to petitioner for eleven (11) unbroken years; (b) There
was no evidence of a Service Agreement between petitioner and RCI; (c) There was no evidence of a request for
replacement of respondent made by petitioner with RCI; (d) Respondent was directly paid by petitioner and not
through RCI; (e) Respondent's work was directly controlled and supervised by petitioner; (f) It was petitioner who
terminated the services of respondent with no participation of RCI whatsoever; and (g) RCI disowned any employment
relationship with respondent.22

Considering its finding of the existence of an employer-employee relationship between petitioner and respondent, the
Labor Arbiter further ruled that the reason and manner by which respondent was terminated fell short of the
requirements of the law since due process was not observed. Accordingly, respondent was declared to have been
illegally dismissed and ordered to be reinstated without loss of seniority or privileges, with full backwages. 23

Aggrieved, petitioner immediately filed a Notice of Appeal and Memorandum of Appeal with the NLRC, which was
docketed as NLRC Case No. V-000628-2006.24
Ruling of the National Labor Relations Commission

The NLRC affirmed the decision of the Labor Arbiter in its Decision dated February 16,2007, to wit:
WHEREFORE, premises considered, the appeal of respondent Allied Banking Corporation is hereby DISMISSED for
lack of merit and the appealed Decision is AFFIRMED.

SO ORDERED.25
Agreeing with the Labor Arbiter's findings, the NLRC ruled that petitioner exercised all the elements of an employer-
employee relationship through the payment of wages, control and supervision over complainant's work and the power
of dismissal.26 The NLRC discredited petitioner's argument that it merely exercised its prerogative to seek for a
replacement or relief of any personnel assigned by RCI absent any evidence that it sought respondent's relief from
RCI.27

Petitioner moved for the reconsideration of the NLRC Decision, 28 but the same was denied in a Resolution dated May
17, 2007.29 Thus, petitioner elevated the matter to the CA in a petition which was docketed as CA-G.R. SP No.
02906.30
Ruling of the Court of Appeals

In the assailed Decision dated September 12, 2014, the CA denied the petition and upheld the rulings of the Labor
Arbiter and the NLRC. The dispositive portion of the assailed Decision reads:
WHEREFORE, premises considered, the petition is hereby DENIED. The NLRC Decision dated 16 February 2007
and the Resolution dated 17 May 2007, in RAB VII Case No. 07-0094-2005-D, is AFFIRMED.

The Labor Arbiter is hereby ordered to re-compute the award of backwages and separation pay in accordance with
the above disquisitions.

SO ORDERED.31
The CA ruled that RCI is a labor-only contractor. It applied the test of independent contractorship that "whether one
claiming to be an independent contractor has contracted to do work according to his own methods and without being
subject to the control of the employer, except only as to the results of the work" in determining that RCI merely served
as an agent of petitioner bank and that respondent was truly an employee of petitioner. 32
As to the issue of the propriety of respondent's dismissal, the CA affirmed the findings of the Labor Arbiter and the
NLRC that petitioner Bank failed to give respondent ample opportunity to contest the legality of his dismissal since no
notice of termination was given to him. Consequently, the CA affirmed the award of reinstatement without loss of
seniority rights and other privileges, and his full backwages inclusive of allowances and other benefits or their
monetary equivalent, computed from the time his compensation was withheld up to the time of his actual
reinstatement.

Nevertheless, finding that there were strained relations between petitioner bank and respondent, the CA ordered the
award of separation pay in lieu of reinstatement, equivalent to one (1) month salary for every year of service, with a
fraction of a year of at least six (6) months to be considered as one (1) whole year, to be computed from the date he
was hired until the finality of the decision, earning a legal interest at the rate of six percent (6%) per annum until full
satisfaction.

Petitioner filed a Motion for Reconsideration (of the Decision Dated 12 September 2014) with Entry of Appearance
and Motion for Substitution of Party dated October 16, 2014,33 but it was denied in the assailed Resolution dated June
9, 2015.

Hence, this petition.

The Petition

Petitioner asserts that the CA erred in declaring RCI as a labor-only contractor. It claims that RCI carried an
independent business as reflected in the Service Agreement that petitioner bank entered with RCI. Aside from the
substantial capitalization of RCI, petitioner bank avers that RCI exercises control and supervision over its personnel
deployed at its branches. Petitioner bank further argues that even assuming that respondent's work is related to its
business, such work is not necessary in the conduct of the bank's principal business. Finally, petitioner contends that
it does not have the power to dismiss respondent and control his work based on the Service Agreement with RCI.

Nevertheless, petitioner bank defends its right to ask for respondent's replacement under Article IV of the Service
Agreement. Petitioner reiterates that respondent's acts of borrowing money from the bank's clients and plying/ferrying
passengers for a fee during his hour of duty constitute conduct which is prejudicial to the interest of petitioner. Thus, in
accordance with the Service Agreement, petitioner bank merely exercised its right to change or have respondent
replaced instead of imposing disciplinary measures on him. According to petitioner, this act was erroneously
construed by the CA as an exercise of the power of control over or of dismissal of respondent.

In a Resolution34 dated September 28, 2015, We required respondent to comment on the petition within ten (10) days
from notice. However, respondent has failed to file any comment thereon to date. Accordingly, respondent is deemed
to have waived his right to comment on the petition and the Court shall now proceed to rule on its merits.
The Issues

Petitioner raises the following issues:

1. Whether or not the CA erred in declaring that RCI is a labor only contractor.
2. Whether or not the CA erred in declaring that there exists an employer-employee relationship between the
Bank and respondent.
3. Whether or not the CA erred in (i) declaring that respondent had been illegally dismissed, and (ii) granting his
monetary claims.
Essentially, the principal issue is whether the CA erred in affirming the NLRC Decision which declared that RCI is a
labor-only contractor, and in ordering the Labor Arbiter to re-compute the award of backwages and separation pay.
The Court's Ruling

The petition is partly meritorious.

RCI is a labor-only contractor

Article 106 of the Labor Code provides the relations which may arise between an employer, a contractor, and the
contractors' employees, thus:
ART. 106. Contractor or subcontracting. - Whenever an employer enters into a contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who
shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
Permissible job contracting or subcontracting has been distinguished from labor-only contracting such that permissible
job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out to a
contractor or subcontractor the performance or completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job, work or service is to be performed or completed within or
outside the premises of the principal, while labor-only contracting, on the other hand, pertains to an arrangement
where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for
a principal.35

These distinctions were laid out in the Omnibus Rules Implementing the Labor Code thus:
SECTION 8. Job Contracting. - There is job contracting permissible under the Code if the following conditions are
met:

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

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

SECTION 9. Labor-only contracting. - (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and
other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.

(c) For cases not falling under this Rule, the Secretary of Labor and Employment shall determine through appropriate
orders whether or not the contracting out of labor is permissible in the light of the circumstances of each case and
after considering the operating needs of the employer and the rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the protection and welfare of the workers.
As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes the
burden of proving that it has the substantial capital, investment, tools and the like. 36

In the present case, petitioner failed to establish that RCI is a legitimate labor contractor as contemplated under the
Labor Code. Except for the bare allegation of petitioner that RCI had substantial capitalization, it presented no
supporting evidence to show the same. Petitioner never submitted financial statements from RCI. Even the Service
Agreement allegedly entered into between petitioner and RCI, upon which petitioner relied to show that RCI was an
independent contractor, had lapsed in August 2005, as admitted by petitioner in its Position Paper. 37 Notably,
petitioner failed to allege when the Service Agreement was executed, thus, making its claim that respondent was
hired by RCI and assigned to petitioner in 2003 even more ambiguous.

Aside from this, petitioner's claim that RCI exercised control and supervision over respondent is belied by the fact that
petitioner admitted that its own Branch Manager had informed respondent that his services would no longer be
required at the Branch.38 This overt act shows that petitioner had direct control over respondent while he was
assigned at the Branch. Moreover, the CA is correct in finding that respondent's work is related to petitioner's
business and is characterized as part of or in pursuit of its banking operations.

An employer-employee relationship exists between petitioner and respondent

A finding that a contractor is a labor-only contractor, as opposed to permissible job contracting, is equivalent to
declaring that there is an employer-employee relationship between the principal and the employees of the supposed
contractor, and the labor-only contractor is considered as a mere agent of the principal, the real employer. 39

In this case, petitioner bank is the principal employer and RCI is the labor-only contractor. Accordingly, petitioner and
RCI are solidarily liable for the rightful claims of respondent.

Petitioner had valid grounds to dismiss respondent

It is an established principle that the dismissal of an employee is justified where there was a just cause and the
employee was afforded due process prior to dismissal.40 The burden of proof to establish these twin requirements is
on the employer, who must present clear, accurate, consistent, and convincing evidence to that effect. 41

The Labor Arbiter haphazardly declared that respondent was illegal1y dismissed when it ruled that respondent's
misconduct was not established since due process was not observed. 42 The NLRC also ruled in a similar manner and
failed to address the grounds for termination raised by petitioner, specifically respondent's transgressions. 43 While the
CA addressed the aspect of substantive due process, it simply disregarded the grounds raised by petitioner and
concluded that petitioner failed to discharge the burden of proof that valid or authorized causes under the Labor Code
exist.44

We, however, find that petitioner's basis for terminating respondent rests on valid and legal grounds. At the very first
instance, petitioner had already stressed in its position paper that respondent was found committing conduct
prejudicial to the interests of the Branch when it was discovered that 1) respondent was plying his pedicab and
ferrying passengers during his work hours and 2) he had been borrowing money from several clients of the Branch.

Nowhere in the records was it shown that respondent denied these imputations against him. Absent any denial on the
part of respondent, the Court is constrained to believe that respondent's silence can be construed as an admission of
these accusations against him.

The very nature of the actions imputed against respondent is serious and detrimental to the Bank's operations and
reputation. Thus, petitioner's decision to relieve respondent from his employment is justified.

Respondent's right to procedural due process was violated

Nevertheless, We agree with the findings of the appellate court that there were procedural lapses in the dismissal of
respondent.

The importance of procedural due process was expounded by this Court in King of Kings Transport, Inc. v. Mamac,
thus:
(1) The first written notice to be served on the employees should contain the specific causes or grounds for
termination against them, and a directive that the employees are given the opportunity to submit their written
explanation within a reasonable period. Reasonable opportunity under the Omnibus Rules means every kind of
assistance that management must accord to the employees to enable them to prepare adequately for their defense.
This should be construed as a period of at least five calendar days from receipt of the notice x x x. Moreover, in order
to enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed
narration of the facts and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which company rules, if any,
are violated and/or which among the grounds under Art. 288 [of the Labor Code] is being charged against the
employees.

(2) After serving the first notice, the employees should schedule and conduct a hearing or conference wherein the
employees will be given the opportunity to (1) explain and clarify their defenses to the charge against them; (2)
present evidence in support of their defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their choice x x x.

(3) After determining that termination is justified, the employer shall serve the employees a written notice of
termination indicating that: (1) all the circumstances involving the charge against the employees have been
considered; and (2) grounds have been established to justify the severance of their employment. 45 (emphasis in the
original)
In the present case, it is uncontested that petitioner failed to give respondent ample opportunity to contest the legality
of his dismissal since he was neither given a notice to explain nor a notice of termination. The first and second notice
requirements have not been properly observed; thus, respondent's dismissal, albeit with valid grounds, is tainted with
illegality.

The award of backwages and separation pay is deleted but respondent is entitled to nominal damages

Considering that there were valid and substantive grounds to terminate respondent's employment, the award of
backwages and separation pay is deleted. However, petitioner's violation of respondent's right to statutory procedural
due process warrants the payment of indemnity in the form of nominal damages.

Nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the
purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him. Its
award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. 46

In fixing the amount of nominal damages whose determination is addressed to our sound discretion, the Court should
take into account several factors surrounding the case, such as: (1) the employer's financial, medical, and/or moral
assistance to the sick employee; (2) the flexibility and leeway that the employer allowed the sick employee in
performing his duties while attending to his medical needs; (3) the employer's grant of other termination benefits in
favor of the employee; and (4) whether there was a bona fide attempt on the part of the employer to comply with the
twin-notice requirement as opposed to giving no notice at all. 47

Based on the factual considerations of the present case, We deem it appropriate to award nominal damages in the
amount of Thirty Thousand Pesos (P30,000) in favor of respondent as a result of petitioner's act of violating his right
to procedural due process.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The Decision dated September 12, 2014 and the
Resolution dated June 9, 2015 of the Court of Appeals-Cebu City in CA-G.R. CEB SP No. 02906 are
hereby AFFIRMED with MODIFICATION. Since Race Cleaners Inc. is a labor-only contractor, petitioner Allied
Banking Corporation now merged with Philippine National Bank is declared to be the employer of respondent Reynold
Calumpang, whose dismissal is declared to be substantively valid for being based on sufficient and valid grounds.
However, he was denied his right to procedural due process for lack of the required twin notices to explain and of
dismissal.

Consequently, petitioner is ordered to pay respondent nominal damages in the amount of P30,000 for its non-
compliance with procedural due process.

SO ORDERED.

G.R. No. 195190 July 28, 2014 ROYALE HOMES MARKETING CORPORATION, Petitioner, vs. FIDEL P.
ALCANTARA [deceased], substituted by his heirs, Respondent.
DEL CASTILLO, J.:

Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer
relationship. Rules and regulations that merely serve as guidelines towards the achievement of a mutually desired
result without dictating the means and methods of accomplishing it do not establish employer-employee relationship.1

This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the Court of Appeals (CA) in CA-G.R.
SP No. 109998 which (i) reversed and set aside the February 23, 2009 Decision4 of the National Labor Relations
Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing Corporation (Royale Homes) to pay respondent
Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii) remanded the case to the Labor Arbiter for the
proper determination and computation of said monetary awards.

Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA denying Royale Homes’ Motion for
Reconsideration,6 as well as its Supplemental7 thereto.

Factual Antecedents

In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara asits Marketing
Director for a fixed period of one year. His work consisted mainly of marketing Royale Homes’ realestate inventories
on an exclusive basis. Royale Homes reappointed him for several consecutive years, the last of which covered the
period January 1 to December 31, 2003 where he held the position of Division 5 Vice-President-Sales.8

Proceedings before the Labor Arbiter

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal9 against Royale Homes and its President
Matilde Robles, Executive Vice-President for Administration and Finance Ma. Melinda Bernardino, and Executive
Vice- President for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of Royale Homes since he is
performing tasks that are necessary and desirable to its business; that in 2003 the company gave him ₱1.2 million for
the services he rendered to it; that in the first week of November 2003, however, the executive officers of Royale
Homes told him that they were wondering why he still had the gall to come to office and sit at his table;10 and that the
actsof the executive officers of Royale Homes amounted to his dismissal from work without any valid or just cause
and in gross disregard of the proper procedure for dismissing employees. Thus, he alsoimpleaded the corporate
officers who, he averred, effected his dismissal in bad faith and in an oppressive manner.

Alcantara prayed to be reinstated tohis former position without loss of seniority rights and other privileges, as well as
to be paid backwages, moral and exemplary damages, and attorney’s fees. He further sought that the ownership of
the Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.

Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment
paper of Alcantara isclear that it engaged his services as an independent sales contractorfor a fixed term of one year
only. He never received any salary, 13th month pay, overtime pay or holiday pay from Royale Homes as hewas paid
purely on commission basis. In addition, Royale Homes had no control on how Alcantara would accomplish his tasks
and responsibilities as he was free to solicit sales at any time and by any manner which he may deem appropriateand
necessary. He is even free to recruit his own sales personnel to assist him in pursuance of his sales target.

According to Royale Homes, Alcantara decided to leave the company after his wife, who was once connectedwith it
as a sales agent, had formed a brokerage company that directly competed with its business, and even recruited some
of its sales agents. Although this was against the exclusivity clause of the contract, Royale Homes still offered to
accept Alcantara’s wife back so she could continue to engage in real estate brokerage, albeit exclusively for Royale
Homes. In a special management committee meeting on October 8,2003, however, Alcantara announced publicly and
openly that he would leave the company by the end of October 2003 and that he would no longer finish the unexpired
term of his contract. He has decided to join his wifeand pursue their own brokerage business. Royale Homes
accepted Alcantara’s decision. It then threw a despedidaparty in his honor and, subsequently, appointed a new
independent contractor. Two months after herelinquished his post, however, Alcantara appeared in Royale Homes
and submitted a letter claiming that he was illegally dismissed.
Ruling of the Labor Arbiter

On September 7, 2005,the Labor Arbiter rendered a Decision11 holding that Alcantara is an employee of Royale
Homes with a fixed-term employment period from January 1 to December 31, 2003 and that the pre-termination of his
contract was against the law.Hence, Alcantara is entitled to an amount which he may have earned on the average for
the unexpired portion of the contract. With regard to the impleaded corporate officers, the Labor Arbiter absolved them
from any liability.

The dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale Homes Marketing
Corp. to pay the complainant the total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS
(₱277,000.00) representing his compensation/commission for the unexpired term of his contract.

All other claims are dismissed for lack of merit.

SO ORDERED.12

Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter
grievously erred inruling that there exists an employer-employee relationship between the parties. It insisted that the
contract between them expressly statesthat Alcantara is an independent contractor and not an ordinary employee.
Ithad no control over the means and methods by which he performed his work. RoyaleHomes likewise assailed the
award of ₱277,000.00 for lack of basis as it did not pre-terminate the contract. It was Alcantara who chose not to
finish the contract.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that
he is not entitled to backwages, reinstatement, unpaid commissions, and damages.

Ruling of the National LaborRelations Commission

On February 23, 2009, the NLRC rendered its Decision,13 ruling that Alcantara is not an employee but a mere
independent contractor of Royale Homes. It based its ruling mainly on the contract which does not require Alcantara
to observe regular working hours. He was also free to adopt the selling methods he deemed most effective and can
even recruit sales agents to assist him in marketing the inventories of Royale Homes. The NLRC also considered the
fact that Alcantara was not receiving monthly salary, but was being paid on commission basis as stipulated in the
contract. Being an independent contractor, the NLRC concluded that Alcantara’s Complaint iscognizable by the
regular courts.

The falloof the NLRC Decision reads:

WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated September 5, 2005 is
REVERSED and SET ASIDE and a NEW ONE rendered dismissing the complaint for lack of jurisdiction.

SO ORDERED.14

Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009, however, the NLRC denied his
motion.

Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave abuse of discretion on the partof the NLRC
in ruling that he is not an employee of Royale Homes and that it is the regular courts which have jurisdiction over the
issue of whether the pre-termination of the contract is valid.

Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision18 granting Alcantara’s Petition and reversing the NLRC’s
Decision. Applying the four-fold and economic reality tests, it held thatAlcantara is an employee of Royale Homes.
Royale Homes exercised some degree of control over Alcantara since his job, as observed by the CA, is subject to
company rules, regulations, and periodic evaluations. He was also bound by the company code of ethics. Moreover,
the exclusivity clause of the contract has made Alcantara economically dependent on Royale Homes, supporting the
theory that he is anemployee of said company.

The CA further held that Alcantara’s termination from employment was without any valid or just cause, and it was
carried out in violation of his right to procedural due process. Thus, the CA ruled that he isentitled to backwages and
separation pay, in lieu of reinstatement. Considering,however, that the CA was not satisfied with the proofadduced to
establish the amount of Alcantara’s annual salary, it remanded the caseto the Labor Arbiter to determine the same
and the monetary award he is entitled to. With regard to the corporate officers, the CA absolved them from any liability
for want of clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith orgross
negligence. Thus:

WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February
23, 2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE and a new one is entered ordering the
respondent company to pay petitioner backwages which shall be computed from the time of his illegal termination in
October 2003 up to the finality of this decision, plus separation pay equivalent to one month salary for every year of
service. This case is REMANDED to the Labor Arbiter for the proper determination and computation of back wages,
separation pay and other monetary benefits that petitioner is entitled to.

SO ORDERED.19

Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for Reconsideration.21 In a
Resolution22 dated January 18, 2011, however, the CA denied said motions.

Issues

Hence, this Petition where Royale Homes submits before this Court the following issues for resolution:

A.

WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW AND
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE RULING OF THE NLRC
DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND CONSEQUENTLY, IN
FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]

B.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE EN
BANCRULING OF THIS HONORABLE COURT IN THE CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING
ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]

C.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION
FOR RECONSIDERATION OF PETITIONER AND IN REFUSING TO CORRECT ITSELF[.]23

Royale Homes contends that its contract with Alcantara is clear and unambiguous −it engaged his services as an
independent contractor. This can be readily seen from the contract stating that no employer-employee relationship
exists between the parties; that Alcantara was free to solicit sales at any time and by any manner he may deem
appropriate; that he may recruit sales personnel to assist him in marketing Royale Homes’ inventories; and, thathis
remunerations are dependent on his sales performance.

Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara based on
a shallow ground that his performance is subject to company rules and regulations, code of ethics, periodic
evaluation, and exclusivity clause of contract. RoyaleHomes maintains that it is expected to exercise some degree of
control over its independent contractors,but that does not automatically result in the existence ofemployer-employee
relationship. For control to be consideredas a proof tending to establish employer-employee relationship, the same
mustpertain to the means and method of performing the work; not on the relationship of the independent contractors
among themselves or their persons or their source of living.

Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was Alcantara who
openly and publicly declared that he was pre-terminating his fixed-term contract.

The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or anemployee of
Royale Homes.

Our Ruling

The Petition is impressed with merit.

The determination of whether a party who renders services to another is an employee or an independent contractor
involves an evaluation of factual matters which, ordinarily, is not within the province of this Court. In view of the
conflicting findings of the tribunals below, however, this Court is constrained to go over the factual matters involved in
this case.24

The juridical relationship of the parties based on their written contract

The primary evidence of the nature of the parties’ relationship in this case is the written contract that they signed and
executed in pursuanceof their mutual agreement. While the existence of employer-employee relationship is a matter
of law, the characterization made by the parties in their contract as to the nature of their juridical relationship cannot
be simply ignored, particularly in this case where the parties’ written contractunequivocally states their intention at the
time they entered into it. In Tongko v. The Manufacturers LifeInsurance Co. (Phils.), Inc.,25 it was held that:

To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding
on the courts; x x x the characterization of the juridical relationship the Agreement embodied is a matter of law that is
for the courts to determine. At the same time, though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodiestheir intent at the time they entered the Agreement,
and they were governed by this understanding throughout their relationship. At the very least, the provision on the
absence of employer- employee relationship between the parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.26

In this case, the contract,27 duly signed and not disputed by the parties, conspicuously provides that "no employer-
employee relationship exists between" Royale Homes and Alcantara, as well as his sales agents. It is clear that they
did not want to be bound by employer-employee relationship atthe time ofthe signing of the contract. Thus:

January 24, 2003

MR. FIDEL P. ALCANTARA

13 Rancho I Marikina City

Dear Mr. Alcantara,

This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE HOMES MARKETING

CORPORATION effective January 1, 2003 to December 31, 2003.

Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such price, terms and
condition to be provided to you from time to time.

As such, you can solicit sales at any time and by any manner which you deem appropriate and necessary to market
our real estate inventories subject to rules, regulations and code of ethics promulgated by the company. Further, you
are free to recruit sales personnel/agents to assist you in marketing of our inventories provided that your
personnel/agents shall first attend the required seminars and briefing to be conducted by us from time to time for the
purpose of familiarizing them of terms and conditionsof sale, the natureof property sold, etc., attendance of which
shall be a condition precedent for their accreditation by us.

That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:

1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your sales agents.

2. Budget allocation depending on your division’s sale performance as per our budget guidelines.

3. Sales incentive and other forms of company support which may be granted from time to time. It is understood,
however, that no employer-employee relationship exists between us, that of your sales personnel/agents, and that
you shall hold our company x x x, its officers and directors, free and harmless from any and all claims of liability and
damages arising from and/or incident to the marketing of our real estate inventories.

We reserve, however, our right to terminate this agreement in case of violation of any company rules and regulations,
policies and code of ethics upon notice for justifiable reason.

Your performance shall be subject toperiodic evaluation based on factors which shall be determined by the
management.
If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing on the space
provided below and return [to] us a duplicate copy of this letter, duly accomplished, to constitute as our agreement on
the matter.(Emphasis ours)

Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of itsstipulations should control."28 No construction is even needed asthey already expressly state their
intention. Also, this Court adopts the observation of the NLRC that it is rather strange on the part of Alcantara, an
educated man and a veteran sales broker who claimed to be receiving ₱1.2 million as his annual salary, not to have
contested the portion of the contract expressly indicating that he is not an employee of Royale Homes if their true
intention were otherwise.

The juridical relationship of the parties based on Control Test

In determining the existence of an employer-employee relationship, this Court has generally relied on the four-fold
test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the employer’s power to control the employee with respect to the means and methods by which the work is to
be accomplished.29 Among the four, the most determinative factor in ascertaining the existence of employeremployee
relationship is the "right of control test".30 "It is deemed to be such an important factor that the other requisites may
even be disregarded."31 This holds true where the issues to be resolved iswhether a person who performs work for
another is the latter’s employee or is an independent contractor,32 as in this case. For where the person for whom the
services are performed reserves the right to control not only the end to beachieved, but also the means by which such
end is reached, employer-employee relationship is deemed to exist.33

In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated that since the performance of his
tasks is subject to company rules, regulations, code of ethics, and periodic evaluation, the element of control is
present.

The Court disagrees.

Not every form of control is indicative of employer-employee relationship.1âwphi1 A person who performs work for
another and is subjected to its rules, regulations, and code of ethics does not necessarily become an employee.34 As
long as the level of control does not interfere with the means and methods of accomplishing the assigned tasks, the
rules imposed by the hiring party on the hired party do not amount to the labor law concept of control that is indicative
of employer-employee relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations Commission35 it
was pronounced 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 employeremployee relationship unlike the second, which address both the result and the means
used to achieve it. x x x36

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic evaluation
alluded to byAlcantara do not involve control over the means and methods by which he was to performhis job.
Understandably, Royale Homes has to fix the price, impose requirements on prospective buyers, and lay down the
terms and conditionsof the sale, including the mode of payment, which the independent contractors must follow. It is
also necessary for Royale Homes to allocateits inventories among its independent contractors, determine who has
priority in selling the same, grant commission or allowance based on predetermined criteria, and regularly monitor the
result of their marketing and sales efforts. But tothe mind of this Court, these do not pertain to the means and
methods of how Alcantara was to perform and accomplish his task of soliciting sales. They do not dictate upon him
the details of how he would solicit sales or the manner as to how he would transact business with prospective clients.
In Tongko, this Court held that guidelines or rules and regulations that do notpertain to the means or methodsto be
employed in attaining the result are not indicative of control as understood inlabor law. Thus:

From jurisprudence, an important lesson that the first Insular Lifecase teaches us is that a commitment to abide by the
rules and regulations of an insurance company does not ipso factomake the insurance agent an employee. Neither do
guidelines somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this term is defined
in jurisprudence. Guidelines indicative of labor law "control," as the first Insular Lifecase tells us, should not merely
relate to the mutually desirable result intended by the contractual relationship; they must have the nature of dictating
the means or methods to beemployed in attaining the result, or of fixing the methodology and of binding or restricting
the party hired to the use of these means.In fact, results-wise, the principal can impose production quotas and can
determine how many agents, with specific territories, ought to be employed to achieve the company’s objectives.
These are management policy decisions that the labor law element of control cannot reach. Our ruling in these
respects in the first Insular Lifecase was practically reiterated in Carungcong. Thus, as will be shown more fully below,
Manulife’s codes of conduct, all of which do not intrude into the insurance agents’ means and manner of conducting
their sales and only control them as to the desired results and Insurance Code norms, cannot be used as basis for a
finding that the labor law concept of control existed between Manulife and Tongko.37 (Emphases in the original)

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove the
elements thereof, particularly Royale Homes’ power of control over the means and methods of accomplishing the
work.38 He, however, failed to cite specificrules, regulations or codes of ethics that supposedly imposed control on his
means and methods of soliciting sales and dealing with prospective clients. On the other hand, this case is replete
with instances that negate the element of control and the existence of employer-employee relationship. Notably,
Alcantara was not required to observe definite working hours.39 Except for soliciting sales, RoyaleHomes did not
assign other tasks to him. He had full control over the means and methods of accomplishing his tasks as he can
"solicit sales at any time and by any manner which [he may] deem appropriate and necessary." He performed his
tasks on his own account free from the control and direction of Royale Homes in all matters connected therewith,
except as to the results thereof.40

Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship.41 As discussed
above, the absence of control over the means and methodsdisproves employer-employee relationship. The
continuous rehiring of Alcantara simply signifies the renewal of his contract with Royale Homes, and highlights his
satisfactory services warranting the renewal of such contract. Nor does the exclusivity clause of contract establish the
existence of the labor law concept of control. In Consulta v. Court of Appeals,42 it was held that exclusivity of contract
does not necessarily result in employer-employee relationship, viz:

x x x However, the fact that the appointment required Consulta to solicit business exclusively for Pamana did not
mean that Pamana exercised control over the means and methods of Consulta’s work as the term control is
understood in labor jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did not prohibit
Consulta from engaging in any other business, or from being connected with any other company, for aslong as the
business [of the] company did not compete with Pamana’s business.43

The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as long as
he does not sell projects of Royale Homes’ competitors. He can engage in selling various other products or engage in
unrelated businesses.

Payment of Wages

The element of payment of wages is also absent in thiscase. As provided in the contract, Alcantara’s remunerations
consist only of commission override of 0.5%, budget allocation, sales incentive and other forms of company support.
There is no proof that he received fixed monthly salary. No payslip or payroll was ever presented and there is no proof
that Royale Homes deducted from his supposed salary withholding tax or that it registered him with the Social
Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely states a
ballpark figure of his alleged salary of ₱100,000.00, more or less. All of these indicate an independent contractual
relationship.44 Besides, if Alcantara indeed consideredhimself an employee of Royale Homes, then he, an
experienced and professional broker, would have complained that he was being denied statutorily mandated benefits.
But for nine consecutive years, he kept mum about it, signifying that he has agreed, consented, and accepted the fact
that he is not entitled tothose employee benefits because he is an independent contractor.

This Court is, therefore,convinced that Alcantara is not an employee of Royale Homes, but a mere independent
contractor. The NLRC is, therefore, correct in concluding that the Labor Arbiter has no jurisdiction over the case and
that the same is cognizable by the regular courts.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-
G.R. SP No. 109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor Relations
Commission is REINSTATED and AFFIRMED. SO ORDERED.

G.R. No. 169510 August 8, 2011 ATOK BIG WEDGE COMPANY, INC., Petitioner,
vs. JESUS P. GISON, Respondent. PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision1 dated May 31, 2005 of the
Court of Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution2 dated August 23, 2005 denying petitioner’s
motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on retainer basis by
petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President and Acting Resident Manager, Rutillo
A. Torres. As a consultant on retainer basis, respondent assisted petitioner's retained legal counsel with matters
pertaining to the prosecution of cases against illegal surface occupants within the area covered by the company's
mineral claims. Respondent was likewise tasked to perform liaison work with several government agencies, which he
said was his expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when occasionally requested by
the management to discuss matters needing his expertise as a consultant. As payment for his services, respondent
received a retainer fee of ₱3,000.00 a month,3 which was delivered to him either at his residence or in a local
restaurant. The parties executed a retainer agreement, but such agreement was misplaced and can no longer be
found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his registration with the
Social Security System (SSS), but petitioner did not accede to his request. He later reiterated his request but it was
ignored by respondent considering that he was only a retainer/consultant. On February 4, 2003, respondent filed a
Complaint4 with the SSS against petitioner for the latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a Memorandum5 advising
respondent that within 30 days from receipt thereof, petitioner is terminating his retainer contract with the company
since his services are no longer necessary.

On February 21, 2003, respondent filed a Complaint6 for illegal dismissal, unfair labor practice, underpayment of
wages, non-payment of 13th month pay, vacation pay, and sick leave pay with the National Labor Relations
Commission (NLRC), Regional Arbitration Branch (RAB), Cordillera Administrative Region, against petitioner, Mario
D. Cera, and Teofilo R. Asuncion, Jr. The case was docketed as NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok Big Wedge Co.,
Inc., or Atok for brevity, approached him and asked him if he can help the company’s problem involving the 700
million pesos crop damage claims of the residents living at the minesite of Atok. He participated in a series of
dialogues conducted with the residents. Mr. Torres offered to pay him ₱3,000.00 per month plus representation
expenses. It was also agreed upon by him and Torres that his participation in resolving the problem was temporary
and there will be no employer-employee relationship between him and Atok. It was also agreed upon that his
compensation, allowances and other expenses will be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants barricaded the only
passage to and from the minesite. In the early morning of February 1, 1992, a dialogue was made by Atok and the
crop damage claimants. Unfortunately, Atok’s representatives, including him, were virtually held hostage by the irate
claimants who demanded on the spot payment of their claims. He was able to convince the claimants to release the
company representatives pending referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the barricade. While Atok
was prosecuting its case with the claimants, another case erupted involving its partner, Benguet Corporation. After
Atok parted ways with Benguet Corporation, some properties acquired by the partnership and some receivables by
Benguet Corporation was the problem. He was again entangled with documentation, conferences, meetings,
planning, execution and clerical works. After two years, the controversy was resolved and Atok received its share of
the properties of the partnership, which is about 5 million pesos worth of equipment and condonation of Atok’s
accountabilities with Benguet Corporation in the amount of ₱900,000.00.

In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok was relieved of
the burden of paying 700 million pesos. In between attending the problems of the crop damage issue, he was also
assigned to do liaison works with the SEC, Bureau of Mines, municipal government of Itogon, Benguet, the Courts
and other government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned by Atok to take
charge of some liaison matters and public relations in Baguio and Benguet Province, and to report regularly to Atok’s
office in Manila to attend meetings and so he had to stay in Manila at least one week a month.

Because of his length of service, he invited the attention of the top officers of the company that he is already entitled
to the benefits due an employee under the law, but management ignored his requests. However, he continued to avail
of his representation expenses and reimbursement of company-related expenses. He also enjoyed the privilege of
securing interest free salary loans payable in one year through salary deduction.
In the succeeding years of his employment, he was designated as liaison officer, public relation officer and legal
assistant, and to assist in the ejection of illegal occupants in the mining claims of Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the company to cause his
registration with the SSS. His request was again ignored and so he filed a complaint with the SSS. After filing his
complaint with the SSS, respondents terminated his services.7

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter Rolando D.
Gambito rendered a Decision8 ruling in favor of the petitioner. Finding no employer-employee relationship between
petitioner and respondent, the Labor Arbiter dismissed the complaint for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution9 affirming the decision of the Labor Arbiter.
Respondent filed a Motion for Reconsideration, but it was denied in the Resolution10 dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA questioning the
decision and resolution of the NLRC, which was later docketed as CA-G.R. SP No. 87846. In support of his petition,
respondent raised the following issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions of the Honorable
Public Respondent affirming the same, are in harmony with the law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in Dismissing the Complaint of
Petitioner and whether or not the Honorable Public Respondent Committed a Grave Abuse of Discretion when it
affirmed the said Decision.11

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of the NLRC, the
decretal portion of which reads:

WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations Commission
dismissing petitioner's complaint for illegal dismissal is ANNULLED and SET ASIDE. Private respondent Atok Big
Wedge Company Incorporated is ORDERED to reinstate petitioner Jesus P. Gison to his former or equivalent position
without loss of seniority rights and to pay him full backwages, inclusive of allowances and other benefits or their
monetary equivalent computed from the time these were withheld from him up to the time of his actual and effective
reinstatement. This case is ordered REMANDED to the Labor Arbiter for the proper computation of backwages,
allowances and other benefits due to petitioner. Costs against private respondent Atok Big Wedge Company
Incorporated.

SO ORDERED.12

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter and the NLRC may
have overlooked Article 280 of the Labor Code,13 or the provision which distinguishes between two kinds of
employees, i.e., regular and casual employees. Applying the provision to the respondent's case, he is deemed a
regular employee of the petitioner after the lapse of one year from his employment. Considering also that respondent
had been performing services for the petitioner for eleven years, respondent is entitled to the rights and privileges of a
regular employee.

The CA added that although there was an agreement between the parties that respondent's employment would only
be temporary, it clearly appears that petitioner disregarded the same by repeatedly giving petitioner several tasks to
perform. Moreover, although respondent may have waived his right to attain a regular status of employment when he
agreed to perform these tasks on a temporary employment status, still, it was the law that recognized and considered
him a regular employee after his first year of rendering service to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW
AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT GAVE DUE COURSE TO THE PETITION
FOR CERTIORARI DESPITE THE FACT THAT THERE WAS NO SHOWING THAT THE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION.

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO THE
LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT BASED ITS FINDING THAT
RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A PROVISION OF LAW THAT THIS HONORABLE
COURT HAS DECLARED TO BE INAPPLICABLE IN CASE THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO
LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY FOUND THAT
RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO
LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY DIRECTED
RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT THE NATURE OF THE SERVICES HE
PROVIDED TO THE COMPANY WAS SENSITIVE AND CONFIDENTIAL.14

Petitioner argues that since the petition filed by the respondent before the CA was a petition for certiorari under Rule
65 of the Rules of Court, the CA should have limited the issue on whether or not there was grave abuse of discretion
on the part of the NLRC in rendering the resolution affirming the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining whether there was an
employer-employee relationship between the petitioner and the respondent. Petitioner contends that where the
existence of an employer-employee relationship is in dispute, Article 280 of the Labor Code is inapplicable. The said
article only set the distinction between a casual employee from a regular employee for purposes of determining the
rights of an employee to be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err in ruling in his
favor.

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of the NLRC. It bears
stressing that there is no appeal from the decision or resolution of the NLRC. As this Court enunciated in the case of
St. Martin Funeral Home v. NLRC,15 the special civil action of certiorari under Rule 65 of the Rules of Civil Procedure,
which is filed before the CA, is the proper vehicle for judicial review of decisions of the NLRC. The petition should be
initially filed before the Court of Appeals in strict observance of the doctrine on hierarchy of courts as the appropriate
forum for the relief desired.16 This Court not being a trier of facts, the resolution of unclear or ambiguous factual
findings should be left to the CA as it is procedurally equipped for that purpose. From the decision of the Court of
Appeals, an ordinary appeal under Rule 45 of the Rules of Civil Procedure before the Supreme Court may be resorted
to by the parties. Hence, respondent's resort to the CA was appropriate under the circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between petitioner and
respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of
fact and that the findings thereon by the Labor Arbiter and the NLRC shall be accorded not only respect but even
finality when supported by substantial evidence.17 Being a question of fact, the determination whether such a
relationship exists between petitioner and respondent was well within the province of the Labor Arbiter and the NLRC.
Being supported by substantial evidence, such determination should have been accorded great weight by the CA in
resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold
test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employee's conduct, or the so-called "control test."18 Of these four, the last one is the
most important.19 The so-called "control test" is commonly regarded as the most crucial and determinative indicator
of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to control not only the
end achieved, but also the manner and means to be used in reaching that end.20

Applying the aforementioned test, an employer-employee relationship is apparently absent in the case at bar. Among
other things, respondent was not required to report everyday during regular office hours of petitioner. Respondent's
monthly retainer fees were paid to him either at his residence or a local restaurant. More importantly, petitioner did not
prescribe the manner in which respondent would accomplish any of the tasks in which his expertise as a liaison officer
was needed; respondent was left alone and given the freedom to accomplish the tasks using his own means and
method. Respondent was assigned tasks to perform, but petitioner did not control the manner and methods by which
respondent performed these tasks. Verily, the absence of the element of control on the part of the petitioner
engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly admitted that
petitioner hired him in a limited capacity only and that there will be no employer-employee relationship between them.
As averred in respondent's Position Paper:21

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered him a pay in the
amount of Php3,000.00 per month plus representation expenses. It was also agreed by Mr. Torres and the
complainant that his participation on this particular problem of Atok will be temporary since the problem was then
contemplated to be limited in nature, hence, there will be no employer-employee relationship between him and Atok.
Complainant agreed on this arrangement. It was also agreed that complainant's compensations, allowances,
representation expenses and reimbursement of company- related expenses will be processed and paid through
disbursement vouchers;22

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of the petitioner and
he agreed to perform tasks for the petitioner on a temporary employment status only. However, respondent anchors
his claim that he became a regular employee of the petitioner based on his contention that the "temporary" aspect of
his job and its "limited" nature could not have lasted for eleven years unless some time during that period, he became
a regular employee of the petitioner by continually performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular employee of petitioner.
The appellate court's premise that regular employees are those who perform activities which are desirable and
necessary for the business of the employer is not determinative in this case. In fact, any agreement may provide that
one party shall render services for and in behalf of another, no matter how necessary for the latter's business, even
without being hired as an employee.23 Hence, respondent's length of service and petitioner's repeated act of
assigning respondent some tasks to be performed did not result to respondent's entitlement to the rights and
privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven years, he still cannot
be considered as a regular employee of petitioner. Article 280 of the Labor Code, in which the lower court used to
buttress its findings that respondent became a regular employee of the petitioner, is not applicable in the case at bar.
Indeed, the Court has ruled that said provision is not the yardstick for determining the existence of an employment
relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to
security of tenure; it does not apply where the existence of an employment relationship is in dispute.24 It is, therefore,
erroneous on the part of the Court of Appeals to rely on Article 280 in determining whether an employer-employee
relationship exists between respondent and the petitioner

Considering that there is no employer-employee relationship between the parties, the termination of respondent's
services by the petitioner after due notice did not constitute illegal dismissal warranting his reinstatement and the
payment of full backwages, allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of the Court of
Appeals in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions dated July 30, 2004 and
September 30, 2004 of the National Labor Relations Commission are REINSTATED.

G.R. No. 221241, September 14, 2016 - MARIO N. FELICILDA, Petitioner, v. MANCHESTEVE H. UY,
Respondent.
PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated July 10, 2015 and the Resolution3 dated
October 21, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 129784, which set aside the Decision 4 dated
November 16, 2012 and the Resolution5 dated February 28, 2013 of the National Labor Relations Commission
(NLRC) in NLRC LAC No. 08-002277-12 / NLRC NCR Case No. 12-18409-11 and, instead, dismissed Mario N.
Felicilda's (petitioner) complaint for illegal dismissal with money claims for lack of merit.

The Facts

Petitioner alleged that on October 29, 2010, respondent Manchesteve H. Uy (respondent) hired him as a truck driver
for the latter's trucking service under the business name "Gold Pillars Trucking" 6 (GPT). In connection, therewith,
petitioner was issued a company identification card (ID), assigned in one of GPT's branches in Manila, and paid on a
percentage basis.7 On December 9, 2011, petitioner took a nap at the work station while waiting for his truck to be
loaded with cargoes, all of which were delivered to respondent's clients on schedule. The next day, or on December
10, 2011, respondent's helper told petitioner that his employment was already terminated due to his act of sleeping
while on the job.8 Claiming that he was dismissed without just cause and due process, and that his act of taking a nap
did not prejudice respondent's business, petitioner filed a complaint 9 for illegal dismissal with money claims against
respondent, before the NLRC, docketed as NLRC NCR Case No. 12-18409-11. 10chanrobleslaw

In his defense,11 respondent denied the existence of an employer-employee relationship between him and petitioner,
considering that petitioner was: (a) paid merely on a per trip "percentage" basis and was not required to regularly
report for work; (b) free to offer his services to other companies; and (c) not under respondent's control with respect to
the means and methods by which he performed his job as a truck driver. Respondent added that petitioner's company
ID did not indicate that the latter was his employee, but only served the purpose of informing the GPT's clients that
petitioner was one of respondent's authorized drivers. Finally, respondent averred that it no longer engaged
petitioner's services due to the latter's "serious transgressions and misconduct." 12chanrobleslaw

The Labor Arbiter's Ruling

In a Decision13 dated June 29, 2012, the Labor Arbiter (LA) ruled in petitioner's favor and, accordingly, ordered
respondent to pay the aggregate sum of P80,145.52 representing his backwages and separation pay. 14chanrobleslaw

Finding that petitioner's service as truck driver was indispensable to respondent's business operations, the LA
concluded that petitioner was respondent's regular employee and, thus, may only be dismissed for just or authorized
cause and with due process. Absent any showing of a clear and valid cause to terminate petitioner's employment,
respondent was, therefore, guilty of illegal dismissal.15chanrobleslaw

Aggrieved, respondent appealed16 to the NLRC, docketed as NLRC LAC No. 08-002277-12.

The NLRC Ruling

In a Decision17 dated November 16, 2012, the NLRC affirmed the LA ruling. It ruled that an employer-employee
relationship existed between the parties, considering that: (a) respondent engaged petitioner's services without the aid
of a third party or a manpower agency; (b) the payment of wages on a percentage basis did not negate such
existence; (c) respondent's power to dismiss petitioner was inherent in his selection and engagement of the latter as
truck driver; and (d) respondent exercised control and supervision over petitioner's work as shown in the former's
determination of the latter's delivery areas and schedules. 18 Considering that respondent failed to show a lawful cause
for petitioner's dismissal, the NLRC sustained the order of payment of monetary awards in petitioner's
favor.19chanrobleslaw

Respondent moved for reconsideration,20 but was denied in a Resolution21 dated February 28, 2013. Undaunted,
respondent filed a petition for certiorari22 before the CA.

The CA Ruling

In a Decision23 dated July 10, 2015, the CA set aside the NLRC ruling and, instead, dismissed petitioner's complaint
for illegal dismissal with money claims for lack of merit.24 Contrary to the findings of the LA and the NLRC, the CA held
that the elements of payment of wages and control in determining an employer-employee relationship were absent,
considering that petitioner was not paid wages, but commissions only, which amounts varied depending on the kind of
cargo, length of trip, and fuel consumption. The CA observed that there was no evidence to show that respondent
exercised control over the means and methods by which petitioner was to perform his duties. Further, petitioner failed
to refute the claims that: (a) the payment of his commission was dependent on his efficiency, discipline, and industry,
which factors were beyond respondent's control; (b) he was not required to regularly report for work and may make
himself available to other companies; and (c) the company ID was merely issued to him for the purpose of apprising
respondent's clients that he was the authorized driver.25cralawredchanrobleslaw

Petitioner moved for reconsideration,26 but was denied in a Resolution27 dated October 21, 2015; hence, this petition.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA correctly ascribed grave abuse of discretion on the
part of the NLRC in ruling that no employer-employee relationship existed between petitioner and respondent and,
thus, the latter could not have illegally dismissed the former.

The Court's Ruling

The petition is impressed with merit.

At the outset, it should be mentioned that the jurisdiction of the Supreme Court in cases brought before it from the
CA via Rule 45 of the Rules of Court is generally limited to reviewing errors of law and does not extend to a re-
evaluation of the sufficiency of evidence upon which the courts a quo had based its determination. This rule, however,
is not ironclad and a departure therefrom may be warranted where the findings of fact of the LA and the NLRC, on the
one hand, and the CA, on the other, are contradictory, as in this case. There is therefore a need to review the records
to determine whether the CA, in the exercise of its certiorari jurisdiction, erred in finding grave abuse of discretion on
the part of the NLRC in ruling that respondent was not illegally dismissed. 28chanrobleslaw

To justify the grant of the extraordinary remedy of certiorari, petitioner must satisfactorily show that the court or quasi-
judicial authority gravely abused the discretion conferred upon it. Grave abuse of discretion connotes a capricious and
whimsical exercise of judgment, done in a despotic manner by reason of passion or personal hostility, the character of
which being so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty
enjoined by or to act at all in contemplation of law. 29chanrobleslaw
In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings and conclusions
are not supported by substantial evidence, or that amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion.30chanrobleslaw

Guided by the foregoing considerations, the Court finds that the CA committed reversible error in granting
respondent's certiorari petition since the NLRC did not gravely abuse its discretion in ruling that petitioner was
respondent's regular employee and, hence, was illegally dismissed by the latter. In this case, respondent disclaims
any liability for illegal dismissal, considering that, in the first place, no employer-employee relationship existed
between him and petitioner.

To ascertain the existence of an employer-employee relationship, jurisprudence has invariably adhered to the four-
fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's conduct, or the so-called "control test." 31 Verily, the power of
the employer to control the work of the employee is considered the most significant determinant of the existence of an
employer-employee relationship. This is the so-called "control test," and is premised on whether the person for whom
the services are performed reserves the right to control both the end achieved and the manner and means used to
achieve that end.32 It must, however, be stressed that the "control test" merely calls for the existence of the right to
control, and not necessarily the exercise thereof. To be clear, the test does not require that the employer actually
supervises the performance of duties by the employee.33chanrobleslaw

Contrary to respondent's submission, which was upheld by the CA, the Court agrees with the labor tribunals that all
the four (4) elements are present in this case:

chanRoblesvirtualLawlibraryFirst. It is undisputed that respondent hired petitioner to work as a truck driver for his
private enterprise, GPT.

Second. Petitioner received compensation from respondent for the services he rendered. Contrary to the findings of
the CA, while the wages paid was determined on a "per trip" or commission basis, it has been constantly ruled that
such does not negate employment relationship.34 Article 97 (f) of the Labor Code broadly defines the term "wage" as
"the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by
an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered x x x."35 That petitioner was paid on a "per trip" or commission basis is
insignificant as this is merely a method of computing compensation and not a basis for determining the existence or
absence of an employer-employee relationship.36chanrobleslaw

Third. Respondent's power to dismiss was inherent in the selection and engagement of petitioner as truck driver.

Fourth. The presence of the element of control, which is the most important element to determine the existence or
absence of employment relationship, can be safely deduced from the fact that: (a) respondent owned the trucks that
were assigned to petitioner; (b) the cargoes loaded in the said trucks were exclusively for respondent's clients; and (c)
the schedule and route to be followed by petitioner were exclusively determined by respondent. The latter's claim that
petitioner was permitted to render service to other companies was not substantiated and there was no showing that
he indeed worked as truck driver for other companies. Given all these considerations, while petitioner was free to
carry out his duties as truck driver, it cannot be pretended that respondent, nonetheless, exercised control over the
means and methods by which the former was to accomplish his work. To reiterate, the power of control refers merely
to the existence of the power. It is not essential for the employer to actually supervise the performance of duties of the
employee, as it is sufficient that the former has a right to wield the power, 37 as in this case.

Having established that an employer-employee relationship exists between the parties, it is now incumbent for the
Court to determine whether or not respondent validly terminated petitioner's employment.

For a dismissal to be valid, the rule is that the employer must comply with both the substantive and procedural due
process requirements. Substantive due process requires that the dismissal must be pursuant to either a just or an
authorized cause under Articles 297, 298, and 299 (formerly Articles 282, 283 or 284) 38 of the Labor Code, as
amended.39chanrobleslaw

Procedural due process, on the other hand, mandates that the employer must observe the twin requirements of notice
and hearing before a dismissal can be effected.40chanrobleslaw

In this case, suffice it to say that aside from respondent's averment that petitioner committed "serious transgressions
and misconduct" resulting in the former's loss of trust and confidence, no other evidence was shown to substantiate
the same. Such averment should be properly deemed as a self serving assertion that deserves no weight in
law.41 Neither was petitioner accorded procedural due process as he was merely informed by respondent's helper that
he was already terminated from his job. Clearly, respondent illegally dismissed petitioner, and as such, the latter is
entitled to backwages and separation pay in lieu of reinstatement, as correctly ruled by the labor tribunals.

WHEREFORE, the petition is GRANTED. The Decision dated July 10, 2015 and the Resolution dated October 21,
2015 of the Court of Appeals in CA-G.R. SP No. 129784 are hereby REVERSED and SET ASIDE. The Decision
dated November 16, 2012 and the Resolution dated February 28, 2013 of the National Labor Relations Commission
in NLRC LAC No. 08-002277-12 / NLRC NCR Case No. 12-18409-11 are REINSTATED.
G.R. No. 167622 - GREGORIO V. TONGKO v. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC., ET
AL.
The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March 29, 2005 Decision 1 of the Court
of Appeals (CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life Insurance Co. (Phils.), Inc. v. National
Labor Relations Commission and Gregorio V. Tongko.     The assailed decision set aside the Decision dated
September 27, 2004 and Resolution dated December 16, 2004 rendered by the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 040220-04.
The Facts

Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life insurance
business.   Renato A. Vergel De Dios was, during the period material, its President and Chief Executive Officer.
Gregorio V. Tongko started his professional relationship with Manulife on July 1, 1977 by virtue of a Career Agent's
Agreement2 (Agreement) he executed with Manulife.

In the Agreement, it is provided that:

It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee relationship between the Company and the Agent.

xxxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by
the Company, and collect, in exchange for provisional receipts issued by the Agent, money due or to become due to
the Company in respect of applications or policies obtained by or through the Agent or from policyholders allotted by
the Company to the Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company as
evidenced by an Official Receipt issued by the Company directly to the policyholder.

xxxx

The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent
by giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company
shall be construed for any previous failure to exercise its right under any provision of this Agreement.

Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other
party fifteen (15) days notice in writing. x x x
In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization.   In 1990, he became a
Branch Manager. As the CA found, Tongko's gross earnings from his work at Manulife, consisting of commissions,
persistency income, and management overrides, may be summarized as follows:
January to December 10, 2002 - P 865,096.07
2001 - 6,214,737.11
2000 - 8,003,180.38
1999 - 6,797,814.05
1998 - 4,805,166.34
1997 - 2,822,620.003
The problem started sometime in 2001, when Manulife instituted manpower development programs in the regional
sales management level. Relative thereto, De Dios addressed a letter dated November 6, 2001 4 to Tongko regarding
an October 18, 2001 Metro North Sales Managers Meeting.   In the letter, De Dios stated:
The first step to transforming Manulife into a big league player has been very clear - to increase the number of agents
to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first
joined the organization. Since then, however, substantial changes have taken place in the organization, as these have
been influenced by developments both from within and without the company.

xxxx

The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers'
meeting earlier last month when Kevin O'Connor, SVP - Agency, took to the floor to determine from our senior agency
leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had presented
information where evidently, your Region was the lowest performer (on a per Manager basis) in terms of recruiting in
2000 and, as of today, continues to remain one of the laggards in this area.

While discussions, in general, were positive other than for certain comments from your end which were perceived to
be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and
management, were on the same plane. As gleaned from some of your previous comments in prior meetings (both in
group and one-on-one), it was not clear that we were proceeding in the same direction.

Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent
meetings you reiterated certain views, the validity of which we challenged and subsequently found as having no basis.

With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit
confused as to the directions the company was taking. For this reason, I sought a meeting with everyone in your
management team, including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Region's Sales Managers
meeting held at the 7/F Conference room last 18 October.

xxxx

Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."

This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the
table before the rest of your Region's Sales Managers to verify its validity. As you must have noted, no Sales Manager
came forward on their own to confirm your statement and it took you to name Malou Samson as a source of the same,
an allegation that Malou herself denied at our meeting and in your very presence.

This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all
along, that these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet
its agency development objectives!

Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."

xxxx

All the above notwithstanding, we had your own records checked and we found that you made a lot more money in
the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you
probably will make more money in the Year 2001 compared to Year 2000. Obviously, your above statement about
making "less money" did not refer to you but the way you argued this point had us almost believing that you were
spouting the gospel of truth when you were not. x x x

xxxx

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new
direction that we have been discussing these past few weeks, i.e., Manulife's goal to become a major agency-led
distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have
never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it
comes to agency growth.

xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the
following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which
can be easily delegated. This assistant should be so chosen as to complement your skills and help you in the
areas where you feel "may not be your cup of tea".

You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your
health. The above could solve this problem.

xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB)
in autonomous fashion. x x x

I have decided to make this change so as to reduce your span of control and allow you to concentrate more
fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales
Managers in Metro North. I will hold you solely responsible for meeting the objectives of these remaining
groups.
xxxx

The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon
you. But you have to understand that meeting corporate objectives by everyone is primary and will not be
compromised. We are meeting tough challenges next year and I would want everybody on board. Any resistance or
holding back by anyone will be dealt with accordingly.
Subsequently, De Dios wrote Tongko another letter dated December 18, 2001, 5 terminating Tongko's services, thus:
It would appear, however, that despite the series of meetings and communications, both one-on-one meetings
between yourself and SVP Kevin O'Connor, some of them with me, as well as group meetings with your Sales
Managers, all these efforts have failed in helping you align your directions with Management's avowed agency growth
policy.

xxxx

On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are
now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this
letter.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife for illegal dismissal.  
The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter Marita V. Padolina.

In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios gave him
specific directives on how to manage his area of responsibility in the latter's letter dated November 6, 2001. He further
claimed that Manulife exercised control over him as follows:
Such control was certainly exercised by respondents over the herein complainant. It was Manulife who hired,
promoted and gave various assignments to him. It was the company who set objectives as regards productions,
recruitment, training programs and all activities pertaining to its business. Manulife prescribed a Code of Conduct
which would govern in minute detail all aspects of the work to be undertaken by employees, including the sales
process, the underwriting process, signatures, handling of money, policyholder service, confidentiality, legal and
regulatory requirements and grounds for termination of employment. The letter of Mr. De Dios dated 06 November
2001 left no doubt as to who was in control. The subsequent termination letter dated 18 December 2001 again
established in no uncertain terms the authority of the herein respondents to control the employees of Manulife. Plainly,
the respondents wielded control not only as to the ends to be achieved but the ways and means of attaining such
ends.6
Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4th  Division)7 and Great Pacific Life
Assurance Corporation v. NLRC,8 which Tongko claimed to be similar to the instant case.

Tongko further claimed that his dismissal was without basis and that he was not afforded due process.   He also cited
the Manulife Code of Conduct by which his actions were controlled by the company.

Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003, 9 in which it alleged that Tongko
is not its employee, and that it did not exercise "control" over him.   Thus, Manulife claimed that the NLRC has no
jurisdiction over the case.

In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of an employer-
employee relationship. Padolina found that applying the four-fold test in determining the existence of an employer-
employee relationship, none was found in the instant case.   The dispositive portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for lack of
jurisdiction, there being no employer-employee relationship between the parties.

SO ORDERED.
Tongko appealed the arbiter's Decision to the NLRC which reversed the same and rendered a Decision dated
September 27, 2004 finding Tongko to have been illegally dismissed.

The NLRC's First Division, while finding an employer-employee relationship between Manulife and Tongko applying
the four-fold test, held Manulife liable for illegal dismissal. It further stated that Manulife exercised control over Tongko
as evidenced by the letter dated November 6, 2001 of De Dios and wrote:
The above-mentioned letter shows the extent to which respondents controlled complainant's manner and means of
doing his work and achieving the goals set by respondents. The letter shows how respondents concerned themselves
with the manner complainant managed the Metro North Region as Regional Sales Manager, to the point that
respondents even had a say on how complainant interacted with other individuals in the Metro North Region. The
letter is in fact replete with comments and criticisms on how complainant carried out his functions as Regional Sales
Manager.

More importantly, the letter contains an abundance of directives or orders that are intended to directly affect
complainant's authority and manner of carrying out his functions as Regional Sales Manager. 10 x x x
Additionally, the First Division also ruled that:
Further evidence of [respondents'] control over complainant can be found in the records of the case. [These] are the
different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the
Manulife Financial Code of Conduct Agreement, which serve as the foundations of the power of control wielded by
respondents over complainant that is further manifested in the different administrative and other tasks that he is
required to perform. These codes of conduct corroborate and reinforce the display of respondents' power of control in
their 06 November 2001 Letter to complainant.11
The fallo of the September 27, 2004 Decision reads:
WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside.   We find complainant
to be a regular employee of respondent Manulife and that he was illegally dismissed from employment by
respondents.

In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant separation pay as above set forth.
Respondent Manulife is further ordered to pay complainant backwages from the time he was dismissed on 02 January
2002 up to the finality of this decision also as indicated above.

xxxx

All other claims are hereby dismissed for utter lack of merit.
From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First Division in a
Resolution dated December 16, 2004.12

Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA issued the
assailed Decision dated March 29, 2005, finding the absence of an employer-employee relationship between the
parties and deeming the NLRC with no jurisdiction over the case.   The CA arrived at this conclusion while again
applying the four-fold test. The CA found that Manulife did not exercise control over Tongko that would render the
latter an employee of Manulife. The dispositive portion reads:
WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for accordingly
GRANTED.   The assailed Decision dated September 27, 2004 and Resolution dated December 16, 2004 of the
National Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04)
are hereby ANNULLED and SET ASIDE.   The Decision dated April 15, 2004 of Labor Arbiter Marita V. Padolina is
hereby REINSTATED.
Hence, Tongko filed this petition and presented the following issues:
A

The Court of Appeals committed grave abuse of discretion in granting respondents' petition for certiorari.
B

The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision dated
September 27, 2004 and Resolution dated December 16, 2004 in finding that there is no employer-employee
relationship between petitioner and respondent.

The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision dated
September 27, 2004 and Resolution dated December 16, 2004 which found petitioner to have been illegally dismissed
and ordered his reinstatement with payment of backwages. 13
Restated, the issues are: (1) Was there an employer-employee relationship between Manulife and Tongko? and (2) If
yes, was Manulife guilty of illegal dismissal?

The Court's Ruling

This petition is meritorious.

Tongko Was An Employee of Manulife

The basic issue of whether or not the NLRC has jurisdiction over the case resolves itself into the question of whether
an employer-employee relationship existed between Manulife and Tongko. If no employer-employee relationship
existed between the two parties, then jurisdiction over the case properly lies with the Regional Trial Court.

In the determination of whether an employer-employee relationship exists between two parties, this Court applies the
four-fold test to determine the existence of the elements of such relationship. In Pacific Consultants International Asia,
Inc. v. Schonfeld, the Court set out the elements of an employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements
constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee's conduct. It is the so-called "control test"
which constitutes the most important index of the existence of the employer-employee relationship that is, whether the
employer controls or has reserved the right to control the employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished. Stated otherwise, an employer-
employee relationship exists where the person for whom the services are performed reserves the right to control not
only the end to be achieved but also the means to be used in reaching such end. 14
The NLRC, for its part, applied the four-fold test and found the existence of all the elements and declared Tongko an
employee of Manulife. The CA, on the other hand, found that the element of control as an indicator of the existence of
an employer-employee relationship was lacking in this case. The NLRC and the CA based their rulings on the same
findings of fact but differed in their interpretations.

The NLRC arrived at its conclusion, first, on the basis of the letter dated November 6, 2001 addressed by De Dios to
Tongko. According to the NLRC, the letter contained "an abundance of directives or orders that are intended to
directly affect complainant's authority and manner of carrying out his functions as Regional Sales Manager." It
enumerated these "directives" or "orders" as follows:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which
can be easily delegated. x x x

xxxx

This assistant should be hired immediately.

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB)
in autonomous fashion x x x.

xxxx

I have decided to make this change so as to reduce your span of control and allow you to concentrate more
fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales
Managers in Metro North. x x x
3. Any resistance or holding back by anyone will be dealt with accordingly.
4. I have been straightforward in this my letter and I know that we can continue to work together... but it will have
to be on my terms. Anything else is unacceptable!
The NLRC further ruled that the different codes of conduct that were applicable to Tongko served as the foundations
of the power of control wielded by Manulife over Tongko that is further manifested in the different administrative and
other tasks that he was required to perform.

The NLRC also found that Tongko was required to render exclusive service to Manulife, further bolstering the
existence of an employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure over which Manulife exercised
control, including the actions of its officers. The NLRC held that such integration added to the fact that Tongko did not
have his own agency belied Manulife's claim that Tongko was an independent contractor.

The CA, however, considered the finding of the existence of an employer-employee relationship by the NLRC as far
too sweeping having as its only basis the letter dated November 6, 2001 of De Dios. The CA did not concur with the
NLRC's ruling that the elements of control as pointed out by the NLRC are "sufficient indicia of control that negates
independent contractorship and conclusively establish an employer-employee relationship between" 15 Tongko and
Manulife.   The CA ruled that there is no employer-employee relationship between Tongko and Manulife.

An impasse appears to have been reached between the CA and the NLRC on the sole issue of control over an
employee's conduct.   It bears clarifying that such control not only applies to the work or goal to be done but also to
the means and methods to accomplish it.16   In Sonza v. ABS-CBN Broasting Corporation, we explained that not all
forms of control would establish an employer-employee relationship, to wit:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee relationship.   The facts of
this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. 17 (Emphasis supplied.)
We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular)  that:
It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission
agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a
character are the rules which prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to the Company the determination of the
premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative
to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be
said to establish an employer-employee relationship between him and the company. 18
Hence, we ruled in Insular that no employer-employee relationship existed therein. However, such ruling was
tempered with the qualification that had there been evidence that the company promulgated rules or regulations that
effectively controlled or restricted an insurance agent's choice of methods or the methods themselves in selling
insurance, an employer-employee relationship would have existed. In other words, the Court in Insular in no way
definitively held that insurance agents are not employees of insurance companies, but rather made the same a case-
to-case basis. We held:
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and
conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made
that any such rules or regulations were in fact promulgated, much less that any rules existed or were issued
which effectively controlled or restricted his choice of methods or the methods themselves of selling
insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were
imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to
the time, place and means of soliciting insurance."19 (Emphasis supplied.)
There is no conflict between our rulings in Insular and in Great Pacific Life Assurance Corporation. We said in the
latter case:
[I]t cannot be gainsaid that Grepalife had control over private respondents' performance as well as the result of their
efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that the
company practically dictates the manner by which their jobs are to be carried out. For instance, the District
Manager must properly account, record and document the company's funds spot-check and audit the work of the
zone supervisors, conserve the company's business in the district through `reinstatements', follow up the submission
of weekly remittance reports of the debit agents and zone supervisors, preserve company property in good condition,
train understudies for the position of district manager, and maintain his quota of sales (the failure of which is a ground
for termination). On the other hand, a zone supervisor must direct and supervise the sales activities of the debit
agents under him, conserve company property through "reinstatements", undertake and discharge the functions of
absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and
collections by the debit agents.20 (Emphasis supplied.)
Based on the foregoing cases, if the specific rules and regulations that are enforced against insurance agents or
managers are such that would directly affect the means and methods by which such agents or managers would
achieve the objectives set by the insurance company, they are employees of the insurance company.

In the instant case, Manulife had the power of control over Tongko that would make him its employee. Several factors
contribute to this conclusion.

In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:
The Agent hereby agrees to comply with all regulations and requirements of the Company as herein provided as well
as maintain a standard of knowledge and competency in the sale of the Company's products which satisfies those set
by the Company and sufficiently meets the volume of new business required of Production Club membership. 21
Under this provision, an agent of Manulife must comply with three (3) requirements: (1) compliance with the
regulations and requirements of the company; (2) maintenance of a level of knowledge of the company's products that
is satisfactory to the company; and (3) compliance with a quota of new businesses.

Among the company regulations of Manulife are the different codes of conduct such as the Agent Code of Conduct,
Manulife Financial Code of Conduct, and Manulife Financial Code of Conduct Agreement, which demonstrate the
power of control exercised by the company over Tongko.   The fact that Tongko was obliged to obey and comply with
the codes of conduct was not disowned by respondents.

Thus, with the company regulations and requirements alone, the fact that Tongko was an employee of Manulife may
already be established. Certainly, these requirements controlled the means and methods by which Tongko was to
achieve the company's goals.

More importantly, Manulife's evidence establishes the fact that Tongko was tasked to perform administrative duties
that establishes his employment with Manulife.

In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife attached affidavits of its
agents purportedly to support its claim that Tongko, as a Regional Sales Manager, did not perform any administrative
functions. An examination of these affidavits would, however, prove the opposite.

In an Affidavit dated April 28, 2003,22 John D. Chua, a Regional Sales Manager of Manulife, stated:
4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager
("RSM") for Metro South Region pursuant to an Agency Contract. As such RSM, I have the following
functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents affiliated to my region.
While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 2003 23 that:
3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate activites of other
commission agents;
d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and
recruitment goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28, 2003 24 that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star Branch, Metro North
Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed, trained and contracted to sell Manulife
products and who will be part of my Unit;
b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling
activities, making sure that their respective sales targets are met;
c. To conduct periodic training sessions for my agents to further enhance their sales skills.
d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on-one
evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting promos to increase sales
activities and encouraging them to be involved in company and industry activities.
f. To provide opportunities for professional growth to my agents by encouraging them to be a member
of the LUCAP (Life Underwriters Association of the Philippines).
A comparison of the above functions and those contained in the Agreement with those cited in Great Pacific Life
Assurance Corporation25 reveals a striking similarity that would more than support a similar finding as in that case.
Thus, there was an employer-employee relationship between the parties.

Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a certain number of agents, in
addition to his other administrative functions, leads to no other conclusion that he was an employee of Manulife.

In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of becoming a major agency-led
distribution company whereby greater agency recruitment is required of the managers, including Tongko. De Dios
made it clear that agent recruitment has become the primary means by which Manulife intends to sell more policies.
More importantly, it is Tongko's alleged failure to follow this principle of recruitment that led to the termination of his
employment with Manulife. With this, it is inescapable that Tongko was an employee of Manulife.

Tongko Was Illegally Dismissed

In its Petition for Certiorari dated January 7, 200526 filed before the CA, Manulife argued that even if Tongko is
considered as its employee, his employment was validly terminated on the ground of gross and habitual neglect of
duties, inefficiency, as well as willful disobedience of the lawful orders of Manulife. Manulife stated:
In the instant case, private respondent, despite the written reminder from Mr. De Dios refused to shape up and
altogether disregarded the latter's advice resulting in his laggard performance clearly indicative of his willful
disobedience of the lawful orders of his superior. x x x

xxxx

As private respondent has patently failed to perform a very fundamental duty, and that is to yield obedience to all
reasonable rules, orders and instructions of the Company, as well as gross failure to reach at least minimum quota,
the termination of his engagement from Manulife is highly warranted and therefore, there is no illegal dismissal to
speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it failed to cite a single iota of evidence
to support its claims. Manulife did not even point out which order or rule that Tongko disobeyed. More importantly,
Manulife did not point out the specific acts that Tongko was guilty of that would constitute gross and habitual neglect
of duty or disobedience. Manulife merely cited Tongko's alleged "laggard performance," without substantiating such
claim, and equated the same to disobedience and neglect of duty.

We cannot, therefore, accept Manulife's position.

In Quebec, Sr. v. National Labor Relations Commission, we ruled that:

When there is no showing of a clear, valid and legal cause for the termination of employment, the law considers the
matter a case of illegal dismissal and the burden is on the employer to prove that the termination was for a valid or
authorized cause. This burden of proof appropriately lies on the shoulders of the employer and not on the employee
because a worker's job has some of the characteristics of property rights and is therefore withinthe constitutional
mantle of protection. No person shall be deprived of life, liberty or property without due process of law, nor shall any
person be denied the equal protection of the laws.

Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms that the burden of proving the validity
of the termination of employment rests on the employer. Failure to discharge this evidentialburden would necessarily
mean that the dismissal was not justified, and, therefore, illegal. 27
We again ruled in Times Transportation Co., Inc. v. National Labor Relations Commission that:
The law mandates that the burden of proving the validity of the termination of employment rests with the employer.
Failure to discharge this evidentiary burden would necessarily mean that the dismissal was not justified, and,
therefore, illegal. Unsubstantiated suspicions, accusations and conclusions of employers do not provide for legal
justification for dismissing employees. In case of doubt, such cases should be resolved in favor of labor, pursuant to
the social justice policy of our labor laws and Constitution. 28
This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc. v. Paez to mean substantial
evidence, to wit:
The Labor Code provides that an employer may terminate the services of an employee for just cause and this must be
supported by substantial evidence. The settled rule in administrative and quasi-judicial proceedings is that proof
beyond reasonable doubt is not required in determining the legality of an employer's dismissal of an employee, and
not even a preponderance of evidence is necessary as substantial evidence is considered sufficient. Substantial
evidence is more than a mere scintilla of evidence or relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise. 29
Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife even failed to identify the
specific acts by which Tongko's employment was terminated much less support the same with substantial evidence.  
To repeat, mere conjectures cannot work to deprive employees of their means of livelihood. Thus, it must be
concluded that Tongko was illegally dismissed.

Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that Tongko not being its employee is
not entitled to such notices. Since we have ruled that Tongko is its employee, however, Manulife clearly failed to
afford Tongko said notices. Thus, on this ground too, Manulife is guilty of illegal dismissal. In Quebec, Sr., we also
stated:
Furthermore, not only does our legal system dictate that the reasons for dismissing a worker must be pertinently
substantiated, it also mandates that the manner of dismissal must be properly done,otherwise, the termination itself is
gravely defective and may be declared unlawful.30
For breach of the due process requirements, Manulife is liable to Tongko in the amount of PhP 30,000 as indemnity in
the form of nominal damages.31

Finally, Manulife raises the issue of the correctness of the computation of the award to Tongko made by the NLRC by
claiming that Songco v. National Labor Relations Commission 32 is inapplicable to the instant case, considering that
Songco was dismissed on the ground of retrenchment.

An examination of Songco reveals that it may be applied to the present case. In that case, Jose Songco was a
salesman of F.E. Zuellig (M), Inc. which terminated the services of Songco on the ground of retrenchment due to
financial losses. The issue raised to the Court, however, was whether commissions are considered as part of wages
in order to determine separation pay. Thus, the fact that Songco was dismissed due to retrenchment does not hamper
the application thereof to the instant case. What is pivotal is that we ruled in Songco that commissions are part of
wages for the determination of separation pay.

Article 279 of the Labor Code on security of tenure pertinently provides that:
In cases of regular employment the employer shall not terminate the services of an employee except for a just cause
or when authorized by this Title.   An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement.
In Triad Security & Allied Services, Inc. v. Ortega, Jr.  (Triad), we thus stated that an illegally dismissed employee shall
be entitled to backwages and separation pay, if reinstatement is no longer viable:
As the law now stands, an illegally dismissed employee is entitled to two reliefs, namely: backwages and
reinstatement.   These are separate and distinct from each other. However, separation pay is granted where
reinstatement is no longer feasible because of strained relations between the employee and the employer. In effect,
an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no
longer viable and backwages.33
Taking into consideration the cases of Songco and Triad, we find correct the computation of the NLRC that the
monthly gross wage of Tongko in 2001 was PhP 518,144.76.   For having been illegally dismissed, Tongko is entitled
to reinstatement with full backwages under Art. 279 of the Labor Code.   Due to the strained relationship between
Manulife and Tongko, reinstatement, however, is no longer advisable.   Thus, Tongko will be entitled to backwages
from January 2, 2002 (date of dismissal) up to the finality of this decision.   Moreover, Manulife will pay Tongko
separation pay of one (1) month salary for every year of service that is from 1977 to 2001 amounting to PhP
12,435,474.24, considering that reinstatement is not feasible. Tongko shall also be entitled to an award of attorney's
fees in the amount of ten percent (10%) of the aggregate amount of the above awards.

WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA in CA-G.R. SP No.
88253 is REVERSED and SET ASIDE.   The Decision dated September 27, 2004 of the NLRC is REINSTATED with
the following modifications:

Manulife shall pay Tongko the following:

(1) Full backwages, inclusive of allowances and other benefits or their monetary equivalent from January 2, 2002 up
to the finality of this Decision;

(2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001 amounting to PhP
12,435,474.24;

(3) Nominal damages of PhP 30,000 as indemnity for violation of the due process requirements; and

(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages and separation pay.

Costs against respondent Manulife.