13.A.1. Aliviado et al vs.

Procter & Gamble Phils

GR No. 160506, March 9, 2010

Facts:
Petitioners worked as merchandisers of P&G from various dates, allegedly starting as
early as 1982 or as late as June 1991, to either May 5, 1992 or March 11, 1993. They
all individually signed employment contracts with either Promm-Gem or SAPS for
periods of five months at a time.
They were assigned at different outlets, supermarkets and stores where they handled
all the products of P&G. They received their wages from Promm-Gem or SAPS. SAPS
and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons
such as habitual absenteeism, dishonesty or changing day-off without prior notice.
P&G is principally engaged in the manufacture and production of different consumer
and health products, which it sells on a wholesale basis to various supermarkets and
distributors. To enhance consumer awareness and acceptance of the products, P&G
entered into contracts with Promm-Gem and SAPS for the promotion and
merchandising of its products.
In December 1991, petitioners filed a complaint against P&G for regularization, service
incentive leave pay and other benefits with damages. The complaint was later amended
to include the matter of their subsequent dismissal.
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and
ruled that there was no employer-employee relationship between petitioners and P&G.
He found that the selection and engagement of the petitioners, the payment of their
wages, the power of dismissal and control with respect to the means and methods by
which their work was accomplished, were all done and exercised by Promm-
Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent
job contractors.
Appealing to the NLRC, petitioners disputed the Labor Arbiter’s findings. On July 27,
1998, the NLRC rendered a Decision dismissing their appeal. Petitioners then filed a
petition for certiorari with the CA, alleging grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However, said
petition was also denied by the CA.
Petitioners filed a motion for reconsideration, but the motion was also denied.

Issue:
Whether or not Promm-Gem and SAPS are labor-only contractors.

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Ruling:
Promm-Gem is an independent contractor; however, SAPS is a labor-only contractor.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended
by Department Order No. 18-02, provides:
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following
elements are present:
I) The contractor or subcontractor does not have substantial capital or investment
which relates to the job, work or service to be performed and the employees recruited,
supplied or placed by such contractor or subcontractor are performing activities which
are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the
work of the contractual employee. The foregoing provisions shall be without prejudice
to the application of Article 248 (c) of the Labor Code, as amended. "Substantial capital
or investment” refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the performance or completion of
the job, work or service contracted out. The “right to control” shall refer to the right
reserved to the person for whom the services of the contractual workers are performed,
to determine not only the end to be achieved, but also the manner and means to be
used in reaching that end.
Clearly, the law and its implementing rules allow contracting arrangements for the
performance of specific jobs, works or services. Indeed, it is management prerogative
to farm out any of its activities, regardless of whether such activity is peripheral or core
in nature. However, for such outsourcing to be valid, it must be made to an
independent contractor because the current labor rules expressly prohibit labor-only
contracting.
In the instant case, the financial statements of Promm-Gem show that it has authorized
capital stock of P1 million and a paid-in capital, or capital available for operations, of
P500,000.00 as of 1990.
It also has long term assets worth P432,895.28 and current assets of P719,042.32.
Promm-Gem has also proven that it maintained its own warehouse and office space
with a floor area of 870 square meters. It also had under its name three registered
vehicles which were used for its promotional/merchandising business. Promm-Gem
also has other clients aside from P&G.

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Under the circumstances, we find that Promm-Gem has substantial investment which
relates to the work to be performed. These factors negate the existence of the element
specified in Section 5(I) of DOLE Department Order No. 18-02.
The records also show that Promm-Gem supplied its complainant-workers with the
relevant materials, such as markers, tapes, liners and cutters, necessary for them to
perform their work. Promm-Gem also issued uniforms to them.
It is also relevant to mention that Promm-Gem already considered the complainants
working under it as its regular, not merely contractual or project, employees.
This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE
Department Order No. 18-02, which speaks of contractual employees. This,
furthermore, negates – on the part of Promm-Gem – bad faith and intent to circumvent
labor laws which factors have often been tipping points that lead the Court to strike
down the employment practice or agreement concerned as contrary to public policy,
morals, good customs or public order. Under the circumstances, Promm-Gem cannot
be considered as a labor-only contractor. We find that it is a legitimate independent
contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in
capital of only P31,250.00. There is no other evidence presented to show how much its
working capital and assets are. Furthermore, there is no showing of substantial
investment in tools, equipment or other assets.
In Vinova v. National Labor Relations Commission, the Court held that “with the current
economic atmosphere in the country, the paid-in capitalization of PMCI amounting to
P75,000.00 cannot be considered as substantial capital and, as such, PMCI cannot
qualify as an independent contractor." Applying the same rationale to the present case,
SAPS – having a paid-in capital of only P31,250 - has no substantial capital. SAPS’s
lack of substantial capital is underlined by the records which show that its payroll for its
merchandisers alone for one month would already total P44,561.00. It had 6-month
contracts with P&G.
Yet SAPS failed to show that it could complete the 6-month contracts using its own
capital and investment. Its capital is not even enough for one month’s payroll. SAPS
failed to show that its paid-in capital of P31,250.00 is enough for the period required for
it to generate its needed revenue to sustain its operations independently. Substantial
capital refers to capitalization used in the performance or completion of the job, work or
service contracted out.
In the present case, SAPS has failed to show substantial capital.

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 13.A.2. San Miguel Corp. vs. Semillano et al., GR No. 164257, July 5, 2010

Facts
Semillano et al were hired by AMPCO to work for San Miguel Corporation’s blotting
plant. After 6 months, they were refused entry to the plant’s premises, prompting him to
file a case for illegal dismissal against AMPCO and SMC.
The complainants claimed that they were fillers of SMC Bottling Plant, engaged in
activities necessary and desirable in the usual business of SMC. They assert, therefore,
that are regular employees of SMC. Also AMPCO and SMC failed to give them their
13th month pay, and that they were prevented from entering the premises of SMC.
SMC raised the defense that AMPCO is their employer because AMPCO is an
independent contractor because its service contract provides that AMPCO will provide
the materials, tools and equipment needed to carry out services contracted out by SMC;
and that AMPCO shall have exclusive discretion over its personnel, and that it also
determines their wages.
CA held that Semillano et al were regular employees of SMC since (1) SMC exercised
power of control and power of dismissal over Semillano et al; and (2) AMPCO was
engaged in labor-only contracting since its capital of nearly of one million pesos was
insufficient to qualify as an independent contractor.

Issue
Whether or not AMPCO is a legitimate job contractor

Ruling
NO. AMPCO is a legitimate job contractor, but a labor-only contractor.
The test to determine the existence of independent contractorship is whether or not the
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.
Although there are many signs that AMPCO is indeed an independent contractor, other
factors prove otherwise. AMPCO’s actual status and employment regarding
respondents’ employment belie their written contract. The facts show that:
AMPCO did not have substantial capital or investment. The NLRC stated that AMPCO’s
main business is trading, maintaining a store catering to members and the public – thus

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making its activity of job contracting with SMC only a sideline. Thus AMPCO’s
substantial capital is invested and used in its trading business.
AMPCO did not have substantial tools and equipment for use in segregation and piling
for SMC. It did not have fixed assets that it could have used in any way for the
completion of its contracted service with the petitioner. The tools and equipment used
by the respondents are owned by SMC, thus proving that AMPCO has no independent
business.
AMPCO did not exercise exclusive direction in the discharge of respondents, based on
Merlyn Polidario’s instructions to the respondents to “wait for further instructions from
SMC’s supervisor” after being prevented from entering SMC premises. SMC therefore
wielded the power of control.
The language of a contract is neither determinative nor conclusive of the relationship
between the parties—the principal and the contractor cannot dictate, by a declaration in
a contract, the character of the latter’s business, that is, whether as laboronly
contractor, or job contractor.
Neither can they rely on AMPCO’s Certificate of Registration as an Independent
Contractor issued by the proper Regional office of the DOLE. The certificate is not
conclusive evidence. The totality of facts and surrounding circumstances must also be
considered. Therefore, SMC (principal employer) is liable along with AMPCO (labor-only
contractor) for all the respondents’ rightful claims
In “labor-only” contracting, the law makes the principal responsible over the employees
of the “labor only” contractor as if the principal itself directly hired the employees
Dispositive: Petition Denied. CA Decision affirmed.

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 13.A.3 MANILA WATER CO., VS DALUMPINES, GR No. 175501, October 4, 2010

FACTS:

By virtue of Republic Act No. 8041, otherwise known as the "National Water Crisis Act
of 1995," the Metropolitan Waterworks and Sewerage System (MWSS) was given the
authority to enter into concession agreements allowing the private sector in its
operations. Petitioner Manila Water Company, Inc. (Manila Water) was one of two
private concessionaires contracted by the MWSS to manage the water distribution
system in the east zone of Metro Manila.

Under the concession agreement, Manila Water undertook to absorb the regular
employees of MWSS listed by the latter effective August 1, 1997. Individual
respondents, with the exception of Moises Zapatero (Zapatero) and Edgar Pamoraga
(Pamoraga), were among the one hundred twenty-one (121) employees not included in
the list of employees to be absorbed by Manila Water. Nevertheless, Manila Water
engaged their services without written contract from August 1, 1997 to August 31,
1997.

Before the expiration of the contract of services, the 121 bill collectors formed a
corporation duly registered with the Securities and Exchange Commission (SEC) as the
"Association Collector's Group, Inc." (ACGI). ACGI was one of the entities engaged by
Manila Water for its courier service.

In December 1997, Manila Water entered into a service agreement with respondent
First Classic Courier Services, Inc. (FCCSI) also for its courier needs.

Earlier, in a memorandum dated November 28, 1997, FCCSI gave a deadline for the bill
collectors who were members of ACGI to submit applications and letters of intent to
transfer to FCCSI. The individual respondents in this case were among the bill
collectors who joined FCCSI and were hired effective
December 1, 1997.

On various dates between May and October 2002, individual respondents were
terminated from employment. Manila Water no longer renewed its contract with FCCSI
because it decided to implement a "collectorless" scheme whereby Manila Water
customers would instead remit payments through "Bayad Centers." The aggrieved bill
collectors individually filed complaints for illegal dismissal, unfair labor practice,
damages, and attorney's fees, with prayer for reinstatement and backwages against
petitioner Manila Water and respondent FCCSI.

Respondent bill collectors:

Manila Water attempted to make it appear that respondent bill collectors were not its
employees but independent contractors. Respondent bill collectors stressed that they
could not qualify as independent contractors because they did not have an independent
business of their own, tools, equipment, and capitalization, but were purely dependent

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on the wages they earned from Manila Water, which was termed as "commission”.
Respondent bill collectors alleged that Manila Water had complete supervision over
their work and their collections, which they had to remit daily to the former. Respondent
bill collectors insisted that they remained employees of Manila Water even after the
entry of FCCSI. The latter did not qualify as a legitimate labor contractor since it had no
substantial capital.

Respondent FCCSI:
FCCSI, on the other hand, claimed that it is an independent contractor engaged in the
business of providing messengerial or courier services. It was issued a certificate of
registration by the Department of Labor and Employment (DOLE) as an independent
contractor. It has sufficient capital in the form of tools, equipment, and machinery as
attested to by the Postal Regulation Committee of the DOTC after conducting an ocular
inspection. Under the terms and conditions of its service agreement with Manila Water,
FCCSI has the power to hire, assign, discipline, or dismiss its own employees, as well
as control the means and methods of accomplishing the assigned tasks, and it pays the
wages of the employees.

Petitioner Manila Water:

Manila Water, for its part, denied that there was an employer-employee relationship
between its company and respondent bill collectors. Based on the agreement between
FCCSI and Manila Water, respondent bill collectors are the employees of the former, as
it is the former that has the right to select/hire, discipline, supervise, and control. FCCSI
has a separate and distinct legal personality from Manila Water, and it was duly
registered as an independent contractor before the DOLE.

ISSUES:

1. Whether or not FCCSI is a bona fide independent contractor.

2. Whether or not an employer-employee relationship exists between respondent bill

collectors and petitioner Manila Water.

RULING:

1. NO, FCCSI is not a bona fide independent contractor.

FCCSI is labor-only contractor. As correctly ruled by the CA based on its factual
findings, FCCSI does not have substantial capital of investment to qualify as an
independent contractor.

FCCSI was incorporated on November 14, 1995, with an authorized

capital stock of P400,000.00 of which only P100,000.00 is actually paid-in. Going
by the pronouncement in Peña, such capitalization can hardly be considered
substantial.

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 FCCSI's capitalization may not be considered substantial considering that it had
close to a hundred collectors covering the east zone service area of Manila
Water customers. What is evident is that it was Manila Water that provided the
equipment and service vehicles needed in the performance of the contracted
service, even if the contract between FCCSI and Manila Water stated that it was
the Contractor which shall furnish at its own expense all materials, tools, and
equipment needed to perform the tasks of collectors.

2. YES, there is an employer-employee relationship between respondent bill

collectors and petitioner Manila Water.

Based on the four-fold test of employer-employee relationship, Manila Water

emerges as the employer of respondent collectors. First, Respondent bill
collectors were individually hired by the contractor, but were under the direct
control and supervision of the concessionaire. Second, they performed the same
function of courier and bill collection services. Third, the element of control is
manifested in the following circumstances, viz.: (a) respondent bill collectors
reported daily to the branch offices of Manila Water to remit their collections with
the specified monthly targets and comply with the collection reporting procedures
prescribed by the latter; (b) respondent bill collectors, except for Pamoraga and
Zapatero, were among the 121 collectors who incorporated ACGI; (c) Manila
Water continued to pay their wages in the form of commissions even after the
employees alleged transfer to FCCSI. Manila Water paid the respondent bill
collectors their individual commissions, and the lump sum paid by Manila Water
to FCCSI merely represented the agency fee; and (d) the certification or
individual clearances issued by Manila Water to respondent bill collectors upon
the termination of the service contract with FCCSI. The certification stated that
respondents were contract collectors of
Manila Water and not of FCCSI. Thus, this Court agrees with the findings of the
CA that if, indeed, FCCSI was the true employer of the bill collectors, it should
have been the one to issue the certification or individual clearances.

PRINCIPLE:

"Contracting" or "subcontracting" refers to an arrangement whereby a principal agrees

to put out or farm out with 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.

Job contracting is permissible only if the following conditions are met:

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

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

The Labor Code expressly prohibits “labor-only” contracting which is on where the
person supplying workers to an employer does not have substantial capital or
investment and the workers recruited and placed by such person are performing
activities which are directly related to the principal business of the employer.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization

in the case of corporations, tools, equipment, implements, machineries, and work
premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work, or service contracted out.

The "right to control" refers to the right reserved to the person for whom the services of
the contractual workers are performed, to determine not only the end to be achieved,
but also the manner and means to be used in reaching that end.

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 13.A.4 TENG VS. PAHAGAC,
GR No. 169704, November 17, 2010
FACTS:
Albert Teng Fish Trading is engaged in deep sea fishing and, for this purpose,
owns boats (basnig), equipment, and other fishing paraphernalia. As owner of the
business, Teng claims that he customarily enters into joint venture agreements with
master fishermen (maestros) who are skilled and are experts in deep sea fishing; they
take charge of the management of each fishing venture, including the hiring of the
members of its complement. He avers that the maestros hired the respondent workers
as checkers to determine the volume of the fish caught in every fishing voyage.
 On February 20, 2003, the respondent workers filed a complaint for illegal
dismissal against Albert Teng Fish Trading, Teng, and Chua before the NCMB, Region
Branch No. IX, Zamboanga City. They alleged that Teng hired them, without any written
employment contract, to serve as his eyes and ears aboard the fishing boats; to classify
the fish caught by baera; to report to Teng via radio communication the classes and
volume of each catch; to receive instructions from him as to where and when to unload
the catch; to prepare the list of the provisions requested by the maestro and the
mechanic for his approval; and, to procure the items as approved by him.  They also
claimed that they received regular monthly salaries, 13th month pay, Christmas bonus,
and incentives in the form of shares in the total volume of fish caught. They asserted
that sometime in September 2002, Teng expressed his doubts on the correct volume of
fish caught in every fishing voyage. In December 2002, Teng informed them that their
services had been terminated
In his defense, Teng maintained that he did not have any hand in hiring the
respondent workers; the maestros, rather than he, invited them to join the venture.
According to him, his role was clearly limited to the provision of the necessary capital,
tools and equipment, consisting of basnig, gears, fuel, food, and other supplies.
The Voluntary Arbitrator (VA) rendered its decision in favor of Teng, that there
was no employer-employee relationship between them. The respondent workers filed a
motion for reconsideration which was opposed by Teng because according to him, the
decision from the VA must be final and executory and therefore is not subject to motion
for reconsideration.
ISSUES:
1. Whether or not the VA's decision is not subject to a motion for reconsideration;

2. Whether there is an employer-employee relationship.

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RULING:
1. No.

Article 262-A deleted the word "unappealable" from Article 263. The deliberate selection
of the language in the amendatory act differing from that of the original act indicates that
the legislature intended a change in the law, and the court should endeavor to give
effect to such intent. Presumably, the decision may still be reconsidered by the
Voluntary Arbitrator on the basis of a motion for reconsideration duly filed during that
period. The seasonable filing of a motion for reconsideration is a mandatory
requirement to forestall the finality of such decision.
The requirement that administrative remedies be exhausted is based on the doctrine
that in providing for a remedy before an administrative agency, every opportunity must
be given to the agency to resolve the matter and to exhaust all opportunities for a
resolution under the given remedy before bringing an action in, or resorting to, the
courts of justice.

2. Yes

While Teng alleged that it was the maestros who hired the respondent workers, it was
his company that issued to the respondent workers identification cards (IDs) bearing
their names as employees and Tengs signature as the employer. Generally, in a
business establishment, IDs are issued to identify the holder as a bona fide employee of
the issuing entity. For the 13 years that the respondent workers worked for Teng, they
received wages on a regular basis, in addition to their shares in the fish caught.

The element of control is present in this case. Teng not only owned the tools and
equipment, he directed how the respondent workers were to perform their job as
checkers; they, in fact, acted as Tengs eyes and ears in every fishing expedition.

The dismissal of an employee, which the employer must validate, has a twofold
requirement: one is substantive, the other is procedural. Not only must the dismissal be
for a just or an authorized cause, as provided by law; the rudimentary requirements of
due process the opportunity to be heard and to defend oneself must be observed as
well. The employer has the burden of proving that the dismissal was for a just cause;
failure to show this, as in the present case, would necessarily mean that the dismissal
was unjustified and, therefore, illegal.

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 13.A.5 GSIS vs NLRC et al.,
GR No. 18004, November 17, 2010

Facts:
Respondents Dionisio Banlasan, Alfredo T. Tafalla, Telesforo D. Rubia, Rogelio
A. Alvarez, Dominador A. Escobal, and Rosauro Panis were employed as security
guards by DNL Security Agency (DNL Security). By virtue of the service contract
entered into by DNL Security and petitioner Government Service Insurance System on
May 1, 1978, respondents were assigned to petitioner’s Tacloban City office, each
receiving a monthly income ofP1,400.00. Sometime in July 1989, petitioner voluntarily
increased respondents’ monthly salary to P3,000.00.
In February 1993, DNL Security informed respondents that its service contract
with petitioner was terminated. This notwithstanding, DNL Security instructed
respondents to continue reporting for work to petitioner. Respondents worked as
instructed until April 20, 1993, but without receiving their wages; after which, they were
terminated from employment.
On June 15, 1995, respondents filed with the National Labor Relations
Commission (NLRC), Regional Arbitration Branch No. VIII, Tacloban City, a complaint
against DNL Security and petitioner for illegal dismissal, separation pay, salary
differential, 13th month pay, and payment of unpaid salary.

Issue:
WON GSIS is jointly and severally liable with DNL Security Agency for payment of the
unsubstantiated amounts of Salary Differentials and the 13th Month Pay to the private
respondent security guards.

Held:
The fact that there is no actual and direct employer-employee relationship between
petitioner and respondents does not absolve the former from liability for the latter’s
monetary claims. When petitioner contracted DNL Security’s services, petitioner
became an indirect employer of respondents, pursuant to Article 107 of the Labor Code,
which reads:
ART. 107. Indirect employer. – The provisions of the immediately preceding Article shall
likewise apply to any person, partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the performance of any work,
task, job or project.

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After DNL Security failed to pay respondents the correct wages and other monetary
benefits, petitioner, as principal, became jointly and severally liable, as provided in
Articles 106 and 109 of the Labor Code, which state:
ART. 106. Contractor or subcontractor. – 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. x x x.
xxxx
ART. 109. Solidary liability. – The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any provision of this Code. For purposes
of determining the extent of their civil liability under this Chapter, they shall be
considered as direct employers.
This statutory scheme is designed to give the workers ample protection, consonant with
labor and social justice provisions of the 1987 Constitution.
Petitioner’s liability covers the payment of respondents’ salary differential and 13th
month pay during the time they worked for petitioner. In addition, petitioner is solidarily
liable with DNL Security for respondents’ unpaid wages from February 1993 until April
20, 1993. While it is true that respondents continued working for petitioner after the
expiration of their contract, based on the instruction of DNL Security, petitioner did not
object to such assignment and allowed respondents to render service. Thus, petitioner
impliedly approved the extension of respondents’ services. Accordingly, petitioner is
bound by the provisions of the Labor Code on indirect employment. Petitioner cannot be
allowed to deny its obligation to respondents after it had benefited from their services.
So long as the work, task, job, or project has been performed for petitioner’s benefit or
on its behalf, the liability accrues for such services. The principal is made liable to its
indirect employees because, after all, it can protect itself from irresponsible contractors
by withholding payment of such sums that are due the employees and by paying the
employees directly, or by requiring a bond from the contractor or subcontractor for this
purpose.
Petitioner’s liability, however, cannot extend to the payment of separation pay. An order
to pay separation pay is invested with a punitive character, such that an indirect
employer should not be made liable without a finding that it had conspired in the illegal
dismissal of the employees.

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Lastly, we do not agree with petitioner that the enforcement of the decision is impossible
because its charter unequivocally exempts it from execution.
To be sure, petitioner’s charter should not be used to evade its liabilities to its
employees, even to its indirect employees, as mandated by the Labor Code.

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 13.A.6 Sy et al., vs. Fairland Knitcraft Co Inc.
G.R. No. 189658, December 12, 2011

Facts:
Fairland is a domestic corporation engaged in garments business, while Susan
de Leon  (Susan)  is the owner/proprietress of Weesan Garments (Weesan). 
On the other hand, the complaining workers, Marialy Sy and 33 others (the
workers) are sewers, trimmers, helpers, a guard and a secretary who were hired by
Weesan.
The workers filed separate complaints for underpayment and/or non-payment of
wages, overtime pay, premium pay, 13 th month pay and other monetary benefits against
Susan/Weesan. These complaints were then consolidated by the Arbitration Branch of
the NLRC in January 2003.
February 5, 2003, Weesan filed before the Department of Labor and
Employment-National Capital Region (DOLE-NCR) a report on its temporary closure for
a period of not less than six months.  On the same day, the workers were not anymore
allowed to work. So on February 18, 2003 they filed an Amended Complaint, and on
March 13, 2003, another pleading entitled Amended Complaints and Position Paper for
Complainants, to include the charge of illegal dismissal and impleaded Fairland and its
manager, Debbie Manduabas (Debbie), as additional respondents. 
At the Hearings set by the Labor Arbiter Ramon Valentin Reyes, Atty. Antonio
Geronimo represented both Susan/Weesan and Fairland. He submitted 2 position
papers for the two entities. The workers filed a Reply, to which Atty. Geronimo also
submitted a Consolidated Reply by Susan/Weesan and Fairland. Workers answered
back through a Rejoinder.
The Labor Arbiter dismissed the case for lack of merit, but ordered the
respondent companies to pay each complainant P5,000.00 by way of financial
assistance.
The NLRC granted the worker’s appeal and set aside the Labor Arbiter’s
decision. The Commission declared the dismissal of the workers as illegal and ordered
reinstatement, will full backwages from February 5, 2003 and payment all the unpaid
benefits to be paid solidarily by Susan/Weesan and Fairland.
Atty. Geronimo filed a Motion for Reconsideration. However, Fairland filed
another Motion for Reconsideration through Atty. Melina O. Tecson (Atty. Tecson)
assailing the jurisdiction of the Labor Arbiter and the NLRC over it, claiming that it was
never summoned to appear, attend or participate in all the proceedings conducted
therein.  It also denied that it engaged the services of Atty. Geronimo. These MRs were
denied by the NLRC.

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 Thus, Fairland and Susan/Weesan filed their petitions for certiorari before the
Court of Appeals.
CA’s decision on Fairland’s petition:
The CA denied Fairland’s petition and affirmed the NLRC ruling which held
Fairland solidarily liable with Susan.
On MR, Fairland moved also for the voluntary inhibition of Justices Leagogo and
Maambong. The CA granted the motion for voluntary inhibition and transferred the case
from the First Division to the Ninth Division. The Ninth Division reversed the earlier
denial of Fairland’s petition It held that the labor tribunals did not acquire jurisdiction
over the person of Fairland, and even assuming they did, Fairland is not liable to the
workers since Weesan is not a mere labor-only contractor but a bona fide independent
contractor.  The Special Ninth Division thus annulled and set aside the assailed NLRC
Decision and Resolution insofar as Fairland is concerned and excluded the latter
therefrom.
Workers appealed this decision to the Supreme Court.
CA’s decision on Susan’s petition:
Susan’s petition was denied due course and dismissed for lack of merit. The CA
affirmed the NLRC ruling with respect to Susan.
Her MR was denied by the CA.
Before the Supreme Court:
Susan filed a petition for review on certiorari with the SC, which was dismissed
by the Supreme Court on technicality and for failure to sufficiently show any reversible
error in the assailed judgment. Susan filed an appeal but before it could be resolved, the
Supreme Court consolidated Susan’s case with that the workers.
The Supreme Court granted Susan’s Motion for Reconsideration and reinstated her
petition for review on certiorari.

Issues:
1. Whether or not Susan/Weesan is a labor-only contracting agent acting as an agent of
Fairland?
2. Whether or not the individual private respondents (Sy, et al.) were illegal dismissed?

Held:
1. Susan is a mere labor-only contractor.

Page | 16
“There is labor-only contracting when the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal.  In labor-only
contracting, the following elements are present:
 (a) 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
 (b) The workers recruited and placed by such person are performing activities which
are directly related to the principal business of the employer.”
The workers, majority of whom are sewers, were recruited by Susan/Weesan and that
they performed activities which are directly related to Fairland’s principal business of
garments. Did Susan/Weesan have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others? The SC said that there
was nothing in the records that would show that Weesan has investment in the form of
tools, equipment or machineries. The records show that Fairland has to furnish Weesan
with sewing machines for it to be able to provide the sewing needs of the
former. Weesan was unable to show that apart from the borrowed sewing machines, it
owned and possessed any other tools, equipment, and machineries necessary to its
being a contractor or sub-contractor for garments.  Neither was Weesan able to prove
that it has substantial capital for its business.
Further, the work premises utilized by Weesan is owned by Fairland, which significantly,
was not in the business of renting properties.  They also advanced that there was no
showing that Susan/Weesan paid any rentals for the use of the premises.  Instead of
refuting the worker’s allegations, Susan instead claimed that Weesan rented the
premises from another entity, De Luxe.  To support this, she attached to her petition two
Contracts of Lease purportedly entered into by her and De Luxe for the lease of the
premises covering the periods August 1, 1997 to July 31, 2000 and January 1, 2001 to
December 31, 2004 as well as TCTs and Tax declarations in De Luxe’s name, but the
SC found it wanting. There were no rental receipts presented nor did the TCTs indicate
with certainty that the registered property is the same one used for Weesan’s work
premises. Weesan does not have its own workplace and is only utilizing the workplace
of Fairland to whom it supplied workers for its garment business. 
 Suffice it to say that “[t]he presumption is that a contractor is a labor-only contractor
unless such contractor overcomes the burden of proving that it has substantial capital,
investment, tools and the like.” As Susan/Weesan was not able to adduce evidence that
Weesan had any substantial capital, investment or assets to perform the work
contracted for, the presumption that Weesan is a labor-only contractor stands.

 2. Yes, the workers were illegally dismissed.

Page | 17
Susan relies on Article 283 of the Labor Code which allows as a mode of termination of
employment the closure or termination of business, which is a management prerogative.
The exercise of which requires: a) that the closure/cessation of business is bona fide,
i.e., its purpose is to advance the interest of the employer and not to defeat or
circumvent the rights of employees under the law or a valid agreement; b) that written
notice was served on the employees and the DOLE at least one month before the
intended date of closure or cessation of business; and c) in case of closure/cessation of
business not due to financial losses, that the employees affected have been given
separation pay equivalent to ½ month pay for every year of service or one month pay,
whichever is higher.”
 The burden of proving that a temporary suspension is bona fide falls upon the
employer. Clearly here, Susan/Weesan was not able to discharge this burden.  The
documents Weesan submitted to support its claim of severe business losses cannot be
considered as proof of financial crisis to justify the temporary suspension of its
operations since they clearly appear to have not been duly filed with the BIR.   Weesan
failed to satisfactorily explain why the Income Tax Returns and financial statements it
submitted do not bear the signature of the receiving officers.  Also hard to ignore is the
absence of the mandatory 30-day prior notice to the workers.  
Hence, the Court finds that Susan failed to prove that the suspension of operations of
Weesan was bona fide and that it complied with the mandatory requirement of notice
under the law.  Susan likewise failed to discharge her burden of proving that the
termination of the workers was for a lawful cause. Therefore, the NLRC and the CA, in
CA-G.R. SP No. 93860, did not err in their findings that the workers were illegally
dismissed by Susan/Weesan.
 The court also ruled that Fairland’s claim of prescription does not deserve
consideration. Fairland says that they only engaged Weesan’s services 1996 to 1997,
but in January 31, 2003, Fairland wrote Weesan requesting for the sewing machines
back.

Page | 18
 13.A.7. Polyfoam-RGC International Corp., vs. Concepcion,
G.R. No. 172349, June 13, 2012

FACTS

Respondent claimed to be Polyfoam’s “all around” factory worker for almost 6 years.
Respondent filed a complaint for illegal dismissal, non-payment of wages, premium pay
for rest day, separation pay, service incentive leave, 13th month pay and attorney’s fees
when he was not allowed to work due to an alleged infraction of company rule.
Petitioner Polyfoam did not offer any explanation and claimed that petitioner Garamje
(P.A. Gramaje Employment Services or PAGES) is his real employer. Gramaje then
denied the dismissal and argued that respondent stopped reporting for work.

In their position papers, petitioner Polyfoam insisted NLRC’s lack of jurisdiction while
Gramaje claiming to be a legitimate job contractor, who was the one who hired
respondent as “packer” argued that respondent was not dismissed.

The Labor Arbiter found Gramaje as a “labor-only” contractor. LA held the two
petitioners as solidarily liable for the money claims considering that firstly, Gramaje was
not enrolled as private employment agency in DOLE’s regional registry and; secondly,
respondent performed a job directly related to Polyfoam’s main business.

On appeal, the NLRC dismissed the complaint against Polyfoam and found Gramaje to
be an independent contractor who contracted the packaging aspect of the finished foam
products. Gramaje paid respondent’s wages and benefits and reported him to SSS.

The case was elevated to CA which in turn upheld LA’s conclusion that Gramaje is a
“labor-only” contractor and held that respondent is Polyfoam’s employee who was
illegally dismissed.

ISSUES

1. Whether or not Gramaje is an independent contractor

2. Whether or not there exists an employer-employee relationship between

respondent and Polyfoam

3. Whether or not there was illegal dismissal

Page | 19
HELD

1. No, because the elements of labor-only contracting are present. The elements
are:

(a) the contractor or subcontractor does not have substantial capital or investment to
actually perform the job, work or service under its own account and responsibility; and

(b) the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal.

In the case at hand, the Court held that:

a. Gramaje has no substantial capital or investment since there was no evidence

that the it owns the equipment and machineries used in the job and that it has other
clients aside from Polyfoam

b. Gramaje did not carry and independent business or undertake the performance of
its service contract according to its own manner and method, free from control and
supervision of its principal; its role is MERELY TO RECRUIT PERSONS TO WORK
FOR POLYFOAM.

2. Yes there exists an employer-employee relationship. According to SC, finding

that a contractor is a “labor-only” contractor equates to declaring that there exists and
employer-employee relationship between the principal and the employees of the
contractor. In this case, since Gramaje is found “labor-only” contractor, Polyfoam is
deemed to be the direct employer of respondent. Gramaje and Polyfoam are solidarily
liable to respondent’s claims.

3. Yes because respondent was not afforded due process. He was not given
opportunity to contest the legality of his dismissal and there was no notice of termination
given. Petitioners failed to established compliance with requirements of termination of
employment under the Labor Code so the dismissal was illegal.

Page | 20
 8. Superior Packaging Corp., vs. Balagsay et al.,
G.R. No. 178909, October 10, 2012
FACTS:
The petitioner engaged the services of Lancer to provide reliever services to its
business, which involves the manufacture and sale of commercial and industrial
corrugated boxes. According to petitioner, the respondents were engaged for four (4)
months and their tasks included loading, unloading and segregation of the corrugated
boxes.
Pursuant to a complaint filed by respondents against petitioner for underpayment of
premium, overtime, and other unpaid money claims, the DOLE conducted an inspection
and found petitioner to have committed several violations. Petitioner was ordered,
among others, to pay respondents their claims in the amount of around P800,000
pesos.
Petitioner filed a motion on the ground that respondents are not their employees but of
Lancer and that they pay Lancer for the services rendered. The motion was denied by
DOLE and their appeal was likewise dismissed. They filed a petition for certiorari with
the CA and the decision of the SOLE was affirmed with modification.

ISSUES:
Whether or not Superior Packaging Corporation (petitioner) may be held solidarily liable
with Lancer Staffing & Services Network, Inc. (Lancer) for respondents’ unpaid money
claims

HELD:
Yes, petitioner Superior Packaging Corporation is solidarily liable with Lancer Inc. For
respondents’ money claims.
Lancer was engaged in “labor-only contracting” so the petitioner was considered an
indirect employer of respondents and liable to the latter for their unpaid money claims.
Labor-only contracting is 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.
Lancer’s authorized capital stock of P400,000.00 as against its subscribed and paid-up
capital stock of P25,000.00 shows the inadequacy of its capital investment necessary to
maintain its day-to-day operations.

Page | 21
The nature of respondents’ work was directly related to the petitioner’s business. The
marked disparity between the petitioner’s actual capitalization (P25,000.00) and the
resources needed to maintain its business supports the finding that Lancer a labor-only
contractor.
Therefore, petitioner (principal employer) and Lancer (labor-only contractor) are
solidarily liable for respondents’ money claims.

Page | 22
13.A.9. Digital Telecommunications Phils Inc. vs. Digitel Employees Union et al.,
G.R. No. 184903-04, October 10, 2012

FACTS:
DIGITEL Employees Union (DEU) became the exclusive bargaining agent of all rank
and file employees of DIGITEL Telecommunications Philippines, Inc. (DIGITEL).
Collective bargaining negotiations ensued which resulted in a bargaining deadlock.
Acting Secretary of Labor Laguesma assumed jurisdiction due to DEU’s threats to go on
strike and ordered for the execution of a Collective Bargaining Agreement (CBA).
However, DIGITEL was reluctant and thus no CBA was forged with DEU. So, DEU’s
officers filed a Preventive Mediation with the National Conciliation and Mediation Board
based on DIGITEL’s violation of the duty to bargain. DEU also filed a notice of strike.
The Secretary of Labor then assumed jurisdiction of the dispute.

During the proceedings, Digital Service, Inc. (DIGISERV), DIGITEL’s customer service,
filed a termination report stating they will cease operations. The closure affected at least
100 employees, 42 of whom are members of DEU thus DEU filed another Notice of
Strike. The second Notice of Strike was ordered subsumed to the Assumption Order by
the Secretary of Labor.

DIGITEL filed a petition before the Bureau of Labor Relations (BLR) for the cancellation
of DEU’s registration which the Regional Director dismissed. The Secretary of Labor
ordered DIGITEL to commence with the CBA negotiations with DEU. On appeal, the
Court of Appeals (CA) sustained that DIGISERV is engaged in labor-only contracting
and that its employees are actually employees of DIGITEL.

ISSUES
Whether or not Digiserv is a labor-only contractor

HELD
YES, Digiserv is a labor-only contractor.
Labor-only contracting is expressly prohibited by our labor laws. Art 106 of the Labor
Code says 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.

Page | 23
Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code
(Implementing Rules), as amended by DO No. 18-02, expounds on the prohibition
against labor-only contracting, thus:
Section 5. Prohibition against labor-only contracting. - Labor-only contracting is
hereby declared prohibited. For this purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a principal, and any of the
following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment

which relates to the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the
work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of
the Labor Code, as amended.

The law and its implementing rules allow contracting arrangements for the performance
of specific jobs, works or services. Indeed, it is management prerogative to farm out any
of its activities, regardless of whether such activity is peripheral or core in nature.
However, in order for such outsourcing to be valid, it must be made to an independent
contractor because the current labor rules expressly prohibit labor-only contracting.

a) After an exhaustive review of the records, there is no showing that first,

DIGISERV has substantial investment in the form of capital, equipment or tools.
The NLRC, as echoed by the CA, did not find substantial DIGISERV’s authorized
capital stock of P1M. It pointed out that only P250k of the authorized capital stock
had been subscribed and only P62.5k had been paid up. There was no increase
in capitalization for the last 10 years.
b) In the Amended Articles of Incorporation, as well as in the General Information
Sheets for the years 1994, 2001 and 2005, the primary purpose of DIGISERV is
to provide manpower services.
In PCI Automation Center, Inc. v. NLRC, the SC made the following distinction:
“the legitimate job contractor provides services while the labor-only contractor
provides only manpower. The legitimate job contractor undertakes to perform a
specific job for the principal employer while the labor-only contractor merely
provides the personnel to work for the principal employer.” The services provided
by employees of DIGISERV are directly related to the business of DIGITEL, as
rationalized by the NLRC in this wise:
It is undisputed that as early as March 1994, the affected employees, except for
two, were already performing their job as Traffic Operator which was later

Page | 24
 renamed as Customer Service Representative (CSR). It is equally undisputed
that all throughout their employment, their function as CSR remains the same
until they were terminated effective May 30, 2005. Their long period of
employment as such is an indication that their job is directly related to the main
business of DIGITEL which is telecommunication[s]. Because, if it was not,
DIGITEL would not have allowed them to render services as Customer Service
Representative for such a long period of time.
c) DIGISERV does not exercise control over the affected employees. The NLRC
highlighted the fact that DIGISERV shared the same Human Resources,
Accounting, Audit and Legal Departments with DIGITEL which manifested that it
was DIGITEL who exercised control over the performance of the affected
employees. The NLRC also relied on the letters of commendation, plaques of
appreciation and certification issued by Digitel to the Customer Service
Representatives as evidence of control.

Considering that DIGISERV has been found to be engaged in labor-only contracting,

the dismissed employees are deemed employees of DIGITEL.
Section 7 of the Implementing Rules holds that labor-only contracting would give rise to:
(1) the creation of an employer-employee relationship between the principal and the
employees of the contractor or sub-contractor; and (2) the solidary liability of the
principal and the contractor to the employees in the event of any violation of the Labor
Code.

Page | 25
 13.A.10. Norkis Trading Corp., vs. Buenavista, et al.,
G.R. No. 182018, October 10, 2012

FACTS:
The respondents were hired by Norkis Trading between 1993 and 1994 for
various skilled jobs. They were not treated as regular employees by petitioner but were
regarded as members of PASAKA, a duly-organized cooperative. PASAKA was
deemed an independent contractor that merely deployed respondents to render
services for Norkis.
In their position paper, respondents cited circumstances to bolster their claim that they
are employees of Norkis:

a) The machines they used in their work are all owned by Norkis;
b) The materials and supplies they used in their work are supplied by Norkis;
c) Norkis, through its employees, gave instructions and supervised their work; and
d) Their salaries are paid through the employees of Norkis inside its premises

Against the foregoing, respondents filed on June 9, 1999 with the Department of
Labor and Employment (DOLE) a complaint against Norkis Trading and PASAKA for
labor-only contracting and non-payment of minimum wage and overtime pay. This was
docketed as LSED Case No. RO700-9906-CI-CS-168. This allegedly led to the
suspension of the respondents’ membership with PASAKA for 15 working days. The
suspension prompted the respondents to file with the NLRC the complaint for illegal
suspension against Norkis Trading and PASAKA. The 15-day suspension of the
respondents was extended for another period of 15 days.

Upon returning to work, respondents were informed that they are to be transferred to
Norkis Tradings’ sister company, Porta Coeli Industrial Corporation (Porta Coeli), as
washers of Multicab vehicles. This led them to amend their complaint for illegal
suspension, to include the charges of unfair labor practice, illegal dismissal, damages
and attorney’s fees.

The Labor Arbiter dismissed the illegal suspension complaint. Aggrieved,

respondents appealed to the NLRC.

In the meantime, Regional Director Balanag ruled that PASAKA was engaged in
labor-only contracting in LSED Case No. RO700-9906-CI-CS-168. Other significant
findings include:
1. PASAKA had failed to prove that it had substantial capital;

Page | 26
 2. the machineries, equipment and supplies used by the respondents in the
performance of their duties were all owned by Norkis Trading and not by
PASAKA;
3. The respondents’ membership with PASAKA as a cooperative was
inconsequential to their employment with Norkis Trading;
4. Norkis Trading and PASAKA failed to prove that their sub-contracting
arrangements were covered by any of the conditions set forth in Section 6 of
Department Order No. 10, Series of 1997;
5. Norkis Trading and PASAKA failed to dispute the respondents’ claim that their
work was supervised by leadmen and production supervisors of Norkis Trading;
and
6. Norkis Trading and PASAKA failed to dispute the respondents’ allegation that
their salaries were paid by employees of Norkis Trading.

Such Order by the DOLE RD was affirmed by the DOLE Secretary, the Court of
Appeals and, ultimately, the Supreme Court.

The NLRC affirmed the LA ruling, modifying that the LA had no jurisdiction because
the case at bar is not a labor dispute but an intra-corporate one.

The Court of Appeals reversed the rulings of the NLRC and LA ruling that PASAKA
is engaged in labor-only contracting and that Norkis is the employer of the respondents.

Aggrieved, petitioners come now to the Supreme Court.

ISSUE:
Whether or not the respondents are under the employ of PASAKA and not of
Norkis, since the former is an independent contractor which deployed respondents to
render services for the latter.

HELD:
NO. PASAKA is engaged in labor-only contracting and could not be considered
as an independent contractor. Consequently, respondents are employees of Norkis.

An employer-employee relationship existed between the petitioner and the

respondents. The issue of whether or not the respondents shall be regarded as
employees of the petitioner hinges mainly on the question of whether or not PASAKA is
a labor-only contractor.

Page | 27
 Labor-only contracting, a prohibited act, is an arrangement where the contractor or
subcontractor merely recruits, supplies, or places workers to perform a job, work, or
service for a principal. In labor-only contracting, the following elements are present:
a) the contractor or subcontractor does not have substantial capital or investment to
actually perform the job, work, or service under its own account and
responsibility; and
b) the employees recruited, supplied or placed by such contractor or subcontractor
perform activities which are directly related to the main business of the principal.

These differentiate it from permissible or legitimate job contracting or

subcontracting, which refers to an arrangement whereby a principal agrees to put out
or farm out with the 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. A person is considered engaged in legitimate job contracting
or subcontracting if the following conditions concur:

a) the contractor carries on a distinct and independent business and partakes the
contract work on his account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of his work except as to
the results thereof;
b) the contractor has substantial capital or investment; and
c) the agreement between the principal and the contractor or subcontractor assures
the contractual employees’ entitlement to all labor and occupational safety and
health standards, free exercise of the right to self-organization, security of tenure,
and social welfare benefits.

As already decided by the Regional Director in his Order which was ultimately
upheld by no less than the SC, [H]erein respondents [among them, herein petitioner]
failed to prove that their sub-contracting arrangements fall under any of the conditions
set forth in Sec. 6 of D.O. # 10 S. 1997. It is therefore evident that herein respondents
are engaged in “labor-only” contracting as defined by in Art. 106 of the Labor Code.
Furthermore, such contracting/sub-contracting arrangement not only falls under labor-
only contracting but also fails to qualify as legitimate subcontracting as defined under
Sec. 4 par. e of D.O. #10 S. 1997.

First. PASAKA failed to prove that it has substantial capitalization or investment in

the form of tools, equipment, machineries, work premises, among others, to qualify as
an independent contractor.
Second. PASAKA likewise did not carry out an independent business from NORKIS
TRADING.

Page | 28
 Third. Private respondents performed activities directly related to the principal
business of NORKIS TRADING.

All the foregoing considerations affirm by more than substantial evidence that
NORKIS TRADING and PASAKA engaged in labor-only contracting.

Where an entity is declared to be a labor-only contractor, the employees supplied by

said contractor to the principal employer become regular employees of the latter.
Having gained regular status, the employees are entitled to security of tenure and can
only be dismissed for just or authorized causes and after they had been afforded due
process. Termination of employment without just or authorized cause and without
observing procedural due process is illegal. Where labor-only contracting exists, the
Labor Code itself establishes an employer-employee relationship between the employer
and the employees of the labor-only contractor.

WHEREFORE, petition is hereby DENIED.

Page | 29
 13.A.11. GOYA INC. VS GOYA INC. EMPLOYEES UNION-FFW

FACTS:

Petitioner Goya, Inc. (Company), hired contractual employees from PESO Resources

Development Corporation (PESO) to perform temporary and occasional services in its
factory in Marikina. This prompted respondent Goya, Inc. Employees Union-FFW
(Union) to request for a grievance conference on the ground that the contractual
workers do not belong to the categories of employees stipulated in the existing CBA.
When the matter remained unresolved, the grievance was referred to the NCMB for
voluntary arbitration.

When the amicable settlement was no longer possible, they agreed to submit for
resolution by the Voluntary Arbitrator (VA) the solitary issue of “whether or not the
Company is guilty of unfair labor acts, under the existing CBA, laws and jurisprudence,
by engaging the services of PESO, a third party service provider."

Union asserted that the hiring of contractual employees from PESO is not a
management prerogative and in gross violation of the CBA tantamount to unfair labor
practice since the contractual workers engaged have been assigned to work in positions
previously handled by regular workers and Union members.

On the other hand, the Company argued that: (a) the law expressly allows contracting
and subcontracting arrangements through (DOLE) Order No. 18-02; (b) the
engagement of contractual employees did not, in any way, prejudice the Union, since
not a single employee was terminated; and (c) Section 4, Article I of the CBA on
definition of the categories of employees does not limit Company's right to engage the
services of job contractors or its management prerogative to address
temporary/occasional needs in its operation. 

ISSUE:
Whether or Not there was a valid labor contracting.

RULING:

This management prerogative of contracting out services, however, is not without

limitation. In contracting out services, the management must be motivated by good faith
and the contracting out should not be resorted to circumvent the law or must not have
been the result of... malicious arbitrary actions. In the case at bench, the CBA of the
parties has already provided for the categories of the employees in the Company's
establishment. These categories of employees particularly with respect to casual
Page | 30
employees serve as limitation to the Company's prerogative to outsource parts of its
operations especially when hiring contractual employees. As stated earlier, the work to
be performed by PESO was similar to that of the casual employees. With the provision
on casual employees, the hiring of PESO contractual employees, therefore, is not in
keeping with the spirit and intent of their CBA.
In general, the arbitrator is expected to decide those questions expressly stated and
limited in the submission agreement. However, since arbitration is the final resort for the
adjudication of disputes, the arbitrator can assume that he has the power to make a
final settlement.
Subject to judicial... review, the leeway of authority as well as adequate prerogative is
aimed at accomplishing the rationale of the law on voluntary arbitration speedy labor
justice.
A collective bargaining agreement is the law between the parties:
Generally, the arbitrator is expected to decide only those questions expressly delineated
by the submission agreement. Nevertheless, the arbitrator can assume that he has the
necessary power to make a final settlement since arbitration is the final resort for the...
adjudication of disputes.
A collective bargaining agreement or CBA refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining unit. As in all contracts, the
parties in a CBA... may establish such stipulations, clauses, terms and conditions as
they may deem convenient provided these are not contrary to law, morals, good
customs, public order or public policy. Thus, where the CBA is clear and unambiguous,
it becomes the law between the parties and... compliance therewith is mandated by the
express policy of the law.
To emphasize, declaring that a particular act falls within the concept of management
prerogative is significantly different from acknowledging that such act is a valid exercise
thereof
As repeatedly held, the exercise of management prerogative is not unlimited; it is
subject to the limitations found in law, collective bargaining agreement or the general
principles of fair play and justice.
A collective bargaining agreement or CBA refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining unit. As in all contracts, the
parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs,
public order or public policy. Thus, where the CBA is clear and unambiguous, it

Page | 31
becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of their stipulations shall control.
To reiterate, the CBA is the norm of conduct between the parties and compliance
therewith is mandated by the express policy of the law.

Page | 32
 13.A.12 VIGILLA ET AL., VS PHIL. COLLEGE OF CRIMINOLOGY INC.

FACTS:

PCCr is a non-stock educational institution, while the petitioners were janitors,

janitresses and supervisor in the Maintenance Department of PCCr under the
supervision and control of Atty. Florante A. Seril (Atty. Seril), PCCr’s Senior Vice
President for Administration. The petitioners, however, were made to understand, upon
application with respondent school, that they were Vigilla under MBMSI, a corporation
engaged in providing janitorial services to clients. Atty. Seril is also the President and
General Manager of MBMSI.

Sometime in 2008, PCCr discovered that the Certificate of Incorporation of MBMSI had
been revoked as of July 2, 2003. On March 16, 2009, PCCr, through its President,
respondent Gregory Alan F. Bautista (Bautista), citing the revocation, terminated the
school’s relationship with MBMSI, resulting in the dismissal of the employees or
maintenance personnel under MBMSI, except Alfonso Bongot (Bongot) who was
retired.

In September, 2009, the dismissed employees, led by their supervisor, BenignoVigilla

(Vigilla), filed their respective complaints for illegal dismissal, reinstatement, back
wages, separation pay (for Bongot), underpayment of salaries, overtime pay, holiday
pay, service incentive leave, and 13th month pay against MBMSI, Atty. Seril, PCCr, and
Bautista.

In their complaints, they alleged that it was the school, not MBMSI, which was their real
employer because (a) MBMSI’s certification had been revoked; (b) PCCr had direct
control over MBMSI’s operations; (c) there was no contract between MBMSI and PCCr;
and (d) the selection and hiring of employees were undertaken by PCCr.

On the other hand, PCCr and Bautista contended that (a) PCCr could not have illegally
dismissed the complainants because it was not their direct employer; (b) MBMSI was
the one who had complete and direct control over the complainants; and (c) PCCr had a
contractual agreement with MBMSI, thus, making the latter their direct employer.

On September 11, 2009, PCCr submitted several documents before LA Ronaldo

Hernandez, including releases, waivers and quitclaims in favor of MBMSI executed by
the complainants to prove that they were employees of MBMSI and not PCCr.

ISSUE:
Whether or Not the employer can be held solidarily liable with the contractor
Page | 33
RULING:

A Labor-only Contractor is Solidarily Liable with the Employer

The issue of whether there is solidary liability between the labor-only contractor and the
employer is crucial in this case. If a labor-only contractor is solidarily liable with the
employer, then the releases, waivers and quitclaims in favor of MBMSI will redound to
the benefit of PCCr. On the other hand, if a labor-only contractor is not solidarily liable
with the employer, the latter being directly liable, then the releases, waivers and
quitclaims in favor of MBMSI will not extinguish the liability of PCCr.Under the general
rule set out in the first and second paragraphs of Article 106, an employer who enters
into a contract with a contractor for the performance of work for the employer, does not
thereby create an employer-employees relationship between himself and the employees
of the contractor. Thus, the employees of the contractor remain the contractor's
employees and his alone. Nonetheless when a contractor fails to pay the wages of his
employees in accordance with the Labor Code, the employer who contracted out the job
to the contractor becomes jointly and severally liable with his contractor to the
employees of the latter "to the extent of the work performed under the contract" as such
employer were the employer of the contractor's employees.

A similar situation obtains where there is "labor only" contracting. The "labor-only"
contractor-i.e "the person or intermediary" - is considered "merely as an agent of the
employer." The employer is made by the statute responsible to the employees of the
"labor only" contractor as if such employees had been directly employed by the
employer. Thus, where "labor-only" contracting exists in a given case, the statute itself
implies or establishes an employer-employee relationship between the employer (the
owner of the project) and the employees of the "labor only" contractor, this time for a
comprehensive purpose: "employer for purposes of this Code, to prevent any violation
or circumvention of any provision of this Code." The law in effect holds both the
employer and the "laboronly" contractor responsible to the latter's employees for the
more effective safeguarding of the employees' rights under the Labor Code

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13.A.13. BPI Employees Union-Davao city-FUBU vs. Bank of the Phil Islands et al.,
G.R. No. 174912, July 24, 2013
FACTS
BPI Operations Management Corporation (BOMC) was created pursuant to Central
Bank Circular No. 1388, Series of 1993 (CBP Circular No. 1388, 1993), and is primarily
engaged in providing and/or handling support services for banks and other financial
institutions. It is a subsidiary of the Bank of Philippine Islands (BPI) operating and
functioning as an entirely separate and distinct entity.
A service agreement between BPI and BOMC was initially implemented in BPI’s Metro
Manila branches. In this agreement, BOMC undertook to provide services such as
check clearing, delivery of bank statements, fund transfers, card production, operations
accounting and control, and cash servicing, conformably with BSP Circular No. 1388.
Not a single BPI employee was displaced and those performing the functions, which
were transferred to BOMC, were given other assignments.
On January 1, 1996, the service agreement was likewise implemented in Davao City.
Later, a merger between BPI and Far East Bank and Trust Company (FEBTC) took
effect on April 10, 2000 with BPI as the surviving corporation. Thereafter, BPI’s
cashiering function and FEBTC’s cashiering, distribution and bookkeeping functions
were handled by BOMC. Consequently, twelve (12) former FEBTC employees were
transferred to BOMC to complete the latter’s service complement.
BPI Davao’s rank and file collective bargaining agent, BPI Employees Union-Davao
City-FUBU (Union), objected to the transfer of the functions and the twelve (12)
personnel to BOMC contending that the functions rightfully belonged to the BPI
employees and that the Union was deprived of membership of former FEBTC personnel
who, by virtue of the merger, would have formed part of the bargaining unit represented
by the Union pursuant to its union shop provision in the CBA.
ISSUES
Whether or not the act of BPI to outsource the cashiering, distribution and bookkeeping
functions to BOMC is in conformity with the law.
RULING
Yes. It is to be emphasized that contracting out of services is not illegal per se. It is an
exercise of business judgment or management prerogative. Absent proof that the
management acted in a malicious or arbitrary manner, the Court will not interfere with
the exercise of judgment by an employer. In this case, bad faith cannot be attributed to
BPI because its actions were authorized by CBP Circular No. 1388, Series of 1993
issued by the Monetary Board of the then Central Bank of the Philippines (now Bangko
Sentral ng Pilipinas).

Page | 35
In the case at bench, the Union submits that while the Central Bank regulates banking,
the Labor Code and its implementing rules regulate the employment relationship. To
this, the Court agrees. The fact that banks are of a specialized industry must, however,
be taken into account. The competence in determining which banking functions may or
may not be outsourced lies with the BSP. This does not mean that banks can simply
outsource banking functions allowed by the BSP through its circulars, without giving
regard to the guidelines set forth under D.O. No. 10 issued by the DOLE.
While D.O. No. 10, Series of 1997, enumerates the permissible contracting or
subcontracting activities, it is to be observed that, particularly in Sec. 6(d) invoked by
the Union, the provision is general in character – “x x x Works or services not directly
related or not integral to the main business or operation of the principal… x x x. ” This
does not limit or prohibit the appropriate government agency, such as the BSP, to issue
rules, regulations or circulars to further and specifically determine the permissible
services to be contracted out. CBP Circular No. 1388 enumerated functions which are
ancillary to the business of banks, hence, allowed to be outsourced. Thus, sanctioned
by said circular, BPI outsourced the cashiering (i.e., cash-delivery and deposit pick-up)
and accounting requirements of its Davao City branches. The Union even described the
extent of BPI’s actual and intended contracting out to BOMC as follows:
“As an initiatory move, the functions of the Cashiering Unit of the Processing Center of
BPI, handled by its regular rank and file employees who are members of the Union, xxx
[were] transferred to BOMC with the Accounting Department as next in line. The
Distributing, Clearing and Bookkeeping functions of the Processing Center of the former
FEBTC were likewise contracted out to BOMC.”
Thus, the subject functions appear to be not in any way directly related to the core
activities of banks. They are functions in a processing center of BPI which does not
handle or manage deposit transactions. Clearly, the functions outsourced are not
inherent banking functions, and, thus, are well within the permissible services under the
circular.

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 13.A.14. Alilin et al., vs. Petron Corp., GR No. 177592, June 9, 2014
FACTS
Petron is a domestic corporation engaged in the oil business. It owns several bulk
plants in the country for receiving, storing and distributing its petroleum products.
In 1968, Romualdo D. Gindang Contractor, which was owned and operated by
Romualdo D. Gindang (Romualdo), started recruiting laborers for elding to Petron's
Mandaue Bulk Plant. When Romualdo died in 1989, his son Romeo D. Gindang
(Romeo), through Romeo D. Gindang Services (RDG), took over the business and
continued to provide manpower services to Petron
On June 1, 2000, Petron and RDG entered into a Contract for Services 9 for the period
from June 1, 2000 to May 31, 2002, whereby RDG undertook to provide Petron with
janitorial, maintenance, tanker receiving, packaging and other utility services in its
Mandaue Bulk Plant.This contract was extended on July 31, 2002 and further extended
until September 30, 2002. Upon expiration thereof, no further renewal of the service
contract was done.
ISSUES
Whether or not RDG is a legitimate job contractor.
RULING
Petron failed to discharge the burden of proving that RDG is a legitimate contractor.
Hence, the presumption that RDG is a labor-only contractor stands.
Petitioners have rendered work for Petron for a long period of time even before the
service contract was executed in 2000. Petron even recognized that some of the
petitioners were initially fielded by Romualdo D. Gindang, RDG’s precursor. Petron was
able to establish that RDG was financially capable as a legitimate contractor at the time
of the execution of the service contract in 2000, it nevertheless failed to establish the
financial capability of RDG at the time when petitioners actually started to work for
Petronin 1968, 1979, 1981, 1987, 1990, 1992 and 1993. Petron having failed to show
that this condition was met by RDG, it can be concluded, on this score alone, that RDG
is a mere labor-only contractor.
Petron's power of control over petitioners exists in this case.
In relation to the “control test”, Of the four elements, it is the power to controlwhich is the
most crucial and most determinative factor, so important, in fact, that, the other
elements may even be disregarded.
the fact that petitioners were hired by Romeo or his father and that their salaries were
paid by them do not detract from the conclusion that there exists an employer-
employee relationship between the parties due to Petron's power of control over the
petitioners.

Page | 37
The power of control is the power to transfer employees from one work assignment to
another;
1. Petron could order petitioners to do work outside of their regular
"maintenance/utility" job, and
2. Petitioners were required to report for work everyday at the bulk plant, observe an
8:00 a.m. to 5:00 p.m. daily work schedule, and
3. Wear proper uniform and safety helmets as prescribed by the safety and security
measures being implemented within the bulk plant.
Petitioners already attained regular status as employees of Petron.
The Court finds, however, that while the jobs performed by petitioners may be menial
and mechanical, they are nevertheless necessary and related to Petron's business
operations. If not for these tasks, Petron's products will not reach the consumers in their
proper state. Indeed, petitioners' roles were vital in as much as they involve the
preparation of the products that Petron will distribute to its consumers.
In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered
merely as an agent of Petron. Consequently, the employer-employee relationship which
the Court finds to exist in this case is between petitioners as employees and Petron as
their employer

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 13.A.15 Ampeleloquio v. Jaka Distribution Inc., G.R. No. 196936, July 2, 2014

Facts:

Ampeloquio is a reinstated employee of respondent Jaka Distribution, Inc.

(JAKA), formerly RMI Marketing Corporation (RMI). Previously, Ampeloquio had filed a
complaint for illegal dismissal against RMI before the National Labor Relations
Commission (NLRC). Subsequently, the Labor Arbiter found RMI guilty of illegal
dismissal. Ampeloquio resumed work as merchandiser at JAKA and reported at JAKA’s
outlets within Metro Manila, Shopwise Makati and Alabang. He received a daily wage of
P252.00, without meal and transportation allowance. In 2005, Ampeloquio was
transferred outside of Metro Manila, to Lucena City and subsequently to San Pablo City.
At that time, he was receiving the same daily wage of P252.00, without meal and
transportation allowance. Ampeloquio was given a monthly cost of living allowance
(COLA) of P720.00.

Ampeloquio requested for salary adjustment and benefits retroactive to the date
of his reinstatement, 6 August 2004, and payment of salary differential in the total
amount of P42,196.00. In another letter, Ampeloquio wrote JAKA reiterating his request
for salary adjustment and payment of benefits retroactive to his reinstatement, and an
increase from his previous request of salary differential which amounted to a total of
P180,590.00. Ampeloquio based his request on what other merchandisers of JAKA
received.

Because of the discrepancy in wages, Ampeloquio filed anew before the NLRC,
a complaint for underpayment of wages, COLA, non-payment of meal and
transportation allowances. LA Hernandez granted Ampeloquio’s complaint for
underpayment of wages, basic and COLA and non-payment of allowances, meal and
transportation. On appeal by JAKA, the NLRC proper, in its Resolution modified the
amounts ordered by the Labor Arbiter to be paid by JAKA to Ampeloquio. Ampeloquiois
therefore entitled to a total salary differential of only P22,172.00. JAKA’s contention that
Ampeloquio is not entitled to reimbursement of transportation expenses from the latter’s
house to the outlet where he was assigned and back is impressed with merit as JAKA
submitted a copy of their policies and the pertinent portion, states:

"7. The only transportation expenses allowed to be reimbursed are those

incurred from the first outlet to succeeding outlets. The transportation
reimbursement shall not include house to first outlet and last outlet to house."

Aggrieved by the NLRC’s modification of what Ampeloquio obviously perceived

as an acceptable monetary award, the latter filed a petition for certiorari before the
Court of Appeals bewailing grave abuse of discretion in: (1) the reduction of his award
of salary differential to only 22,172.00; (2) the deletion of his entitlement to
transportation expenses; and (3) the deletion of the award of moral and exemplary
damages. The appellate court dismissed Ampeloquio’s petition for certiorari finding no

Page | 39
grave abuse of discretion in the NLRC’s ruling and finding that, in fact, it is supported by
substantial evidence.

Issues:

1. What is the scope vis-a-vis wages of reinstatement "without loss of seniority rights
and other privileges"?
2. What is the salary rate he is entitled to?

Ruling:

Seniority rights refer to the creditable years of service in the employment record
of the illegally dismissed employee as if he or she never ceased working for the
employer. In other words, the employee’s years of service is deemed continuous and
never interrupted. Such is likewise the rationale for reinstatement’s twin relief of full
back wages.

Ampeloquio is correct in asserting that he is a senior employee compared to the

other merchandisers whom he himself designates as casual or contractual
merchandisers. He is likewise senior to other regular employees subsequently hired by
JAKA, specifically two regular messenger employees which Ampeloquio claims receive
wages higher than what he is receiving from JAKA. Attached to the recognition of
seniority rights of a reinstated employee who had been illegally dismissed is the
entitlement to wages appurtenant thereto.

The case of Ampeloquio is outside the ordinary. His reinstatement was ordered
when merchandisers like him were no longer employed by JAKA. He is not entitled to
the same terms and conditions of employment as that which was offered to the other
regular employees (not merchandisers) subsequently hired by JAKA. JAKA’s decision
to grant or withhold certain benefits to other employees is part of its management
prerogative as a function of an employer’s constitutionally protected right to reasonable
return on investments.

Ampeloquio cannot likewise compare his wages to that received by "casual or

contractual merchandisers" or merchandisers who are admittedly outsourced from
manpower agencies or those who are considered seasonal employees hired only during
peak season when JAKA is in need of extra merchandisers.

To say the least, these merchandisers are not, strictly speaking, employees of
JAKA, but of a service provider company which has a service contract with JAKA. The
merchandisers in this case simply perform the work at JAKA’s outlets, wearing uniforms
approved by JAKA but provided by the service company who is actually their employer.
There is no employer-employee relationship between JAKA and these merchandisers.

Page | 40
 Receipt by these merchandisers of a benefit such as transportation or meal
allowance is part of the monies they receive from their employer and embedded in the
contract price of the service agreement the employer has with JAKA.

The phrase without loss of seniority rights applies with practical and real effect to
Ampeloquio upon his retirement because he will reach earlier than other regular
employees of JAKA the required number of years of service to qualify for retirement.

In all, the labor tribunals were right in using as guidepost the existing statutory
minimum wages and COLA during the three (3) year prescriptive period within which
Ampeloquio can make his money claims. We are not unaware that reinstatement is the
rule and such covers reinstatement to the same or substantially equivalent position
without loss of seniority rights and privileges. In this case, JAKA did not claim
exceptions to the rule of reinstatement, i.e., (1) strained relations, or (2) abolition of the
position; JAKA immediately complied with the Labor Arbiter’s order of reinstatement.

We note that, specifically, JAKA could have claimed that the position of
merchandiser no longer exists and has been abolished with the contracting of this job
function. However, it merely opted to reinstate Ampeloquio to the same position. There
is no quarrel that with his reinstatement, Ampeloquio is now the lone regular
merchandiser of JAKA.

The option of reinstatement to a substantially equivalent position does not apply

herein as reinstatement to a substantially equivalent position entails the same or similar
job functions and not just same wages or salary.

As applied to this case, Ampeloquio cannot be reinstated to a messengerial

position although such is a regular employment enjoying the same employment benefits
and privileges. His employment cannot likewise be converted into a contractual
employment as such is actually a downgrade from his regular employment enjoying
security of tenure with JAKA. As the sole regular merchandiser of JAKA, Ampeloquio’s
reinstatement entitles him, at the minimum, to the standard minimum wage at the time
of his employment and to the wages he would have received from JAKA had he not
been illegally dismissed, as if there was no cessation of employment. Ampeloquio is
likewise entitled to any increase which JAKA may have given across the board to all its
regular employees. To repeat, Ampeloquio is not entitled to all benefits or privileges
received by other employees subsequently hired by JAKA just by the fact of his seniority
in the service with JAKA.

Page | 41
 13.A.16 FVR Skills & Services Exponents Inc. v. Seva, et al., GR No. 200857,
October 22, 2014

Facts:

Jovert R. Seva and 27 others were employed by petitioner FVR Skills and
Services Exponents, Inc., an independent contractor engaged in the business of
providing janitorial and other manpower services to clients. As early as 1998 some of
the respondents had already been under the petitioners employ.

On April 21, 2008, the petitioner entered into a contract of janitorial service with
Robinsons Land Corporation (Robinsons). Both agreed that the petitioner shall supply
janitorial, manpower and sanitation services to Robinsons Place Ermita Mall for a period
of one year from January 1, 2008 to December 31, 2008. Pursuant to this, the
respondents were deployed to Robinsons. Halfway through the service contract, the
petitioner asked the respondents to execute individual contracts which stipulated that
their respective employments shall end on December 31, 2008, unless earlier
terminated. The petitioner and Robinsons no longer extended their contract of janitorial
services. Consequently, the petitioner dismissed the respondents as they were project
employees whose duration of employment was dependent on the petitioner’s service
contract with Robinsons.

Respondents filed a complaint for illegal dismissal arguing that they were not
project but regular employees who may only be dismissed for just or authorized causes.

Issue:

Whether or not the respondents’ complaint has merit

Ruling:

Yes. The primary standard in determining regular employment is the reasonable

connection between the particular activity performed by the employee and the
employer’s business or trade. This connection can be ascertained by considering the
nature of the work performed and its relation to the scheme of the particular business,
or the trade in its entirety. Guided by this test, we conclude that the respondents’ work
as janitors, service crews and sanitation aides, are necessary or desirable to the
petitioner’s business of providing janitorial and manpower services to its clients as an
independent contractor. Also, the respondents had already been working for the
petitioner as early as 1998.

Even before the service contract with Robinsons, the respondents were already
under the petitioner’s employ. They had been doing the same type of work and
occupying the same positions from the time they were hired and until they were
dismissed in January 2009.

Page | 42
The petitioner did not present any evidence to refute the respondents claim that from
the time of their hiring until the time of their dismissal, there was no gap in between the
projects where they were assigned to. The petitioner continuously availed of their
services by constantly deploying them to its clients. Lastly, under Department Order
(DO) 18-02, the applicable labor issuance to the petitioner’s case, the contractor or
subcontractor is considered as the employer of the contractual employee for purposes
of enforcing the provisions of the Labor Code and other social legislation.

DO 18-02 grants contractual employees all the rights and privileges due a regular
employee, including the following:
(a) safe and healthful working conditions;
(b) labor standards such as service incentive leave, rest days, overtime pay,
holiday pay, 13th month pay and separation pay;
(c) social security and welfare benefits;
(d) self-organization, collective bargaining and peaceful concerted action; and
(e) security of tenure.

In this light, we thus conclude that although the respondents were assigned as
contractual employees to the petitioners various clients, under the law, they remain to
be the petitioners regular employees, who are entitled to all the rights and benefits of
regular employment.

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 13.A.17. Fonterra Brand Phils vs. Largado et al., GR No. 205300, March 18, 2015

Doctrine:

Independent Contratorship; Refusing to renew work contracts is tantamount to a

voluntary resignation, such resignation cannot be held as a ground for illegal dismissal.
Project employees are limited by the amount of time in their contracts, nonrenewal of
such is considered as management prerogative of the employer.

Facts:

Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron
Marketing and Promotions Corp. (Zytron) for the marketing and promotion of its milk
and dairy products. Pursuant to the contract, Zytron provided Fonterra with trade
merchandising representatives (TMRs), including respondents Leonardo Largado
(Largado) and Teotimo Estrellado

(Estrellado). The engagement of their services began on September 15, 2003 and May
27, 2002, respectively, and ended on June 6, 2006.

On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract,
effective June 5, 2006. Fonterra then entered into an agreement for manpower supply
with A.C. Sicat Marketing and Promotional Services (A.C. Sicat). Desirous of continuing
their work as TMRs, respondents submitted their job applications with A.C. Sicat, which
hired them for a term of five (5) months, beginning June 7, 2006 up to November 6,
2006.

When respondents' 5-month contracts with A.C. Sicat were about to expire, they
allegedly sought renewal thereof, but were allegedly refused. This prompted
respondents to file complaints for illegal dismissal, regularization, non-payment of
service incentive leave and 13th month pay, and actual and moral damages, against
petitioner, Zytron, and A.C. Sicat.

Issues:

1. Whether or not Zytron and A.C.Sicat are labor-only contractors, making Fonterra the
employer of herein respondents; and

2. Whether or not respondents were illegally dismissed.

Ruling:

1. No, neither Zytron nor A.C. Sicat are labor-only contractors.

Page | 44
The termination of respondents' employment with Zytron was brought about by the
cessation of their contracts with the latter. By refusing to renew their contracts with
Zytron, respondents effectively resigned from the latter. Resignation is the voluntary act
of employees who are compelled by personal reasons to dissociate themselves from
their employment, done with the intention of relinquishing an office, accompanied by the
act of abandonment.

Respondents voluntarily terminated their employment with Zytron by refusing to renew

their employment contracts with the latter, applying with A.C. Sicat, and working as the
latter's employees, thereby abandoning their previous employment with Zytron. Too, it is
well to mention that for obvious reasons, resignation is inconsistent with illegal
dismissal. This being the case, Zytron cannot be said to have illegally dismissed
respondents.

As regards respondents' employment with A.C. Sicat and its termination via nonrenewal
of their contracts, it is proper to dispose of the issue on A.C. Sicat's status as a job
contractor first before resolving the issue on the legality of the cessation of respondents'
employment.

The evidence presented in the instant case sufficiently show that A.C. Sicat carries out
its merchandising and promotions business, independent of Fonterra's business. As
such, A.C. Sicat is engaged in legitimate job contracting.

2. No, the respondents were not illegally dismissed. The termination of respondents'
employment with the latter was simply brought about by the expiration of their
employment contracts.

Foremost, respondents were fixed-term employees. As previously held by this Court,

fixed-term employment contracts are not limited, as they are under the present Labor
Code, to those by nature seasonal or for specific projects with predetermined dates of
completion; they also include those to which the parties by free choice have assigned a
specific date of termination. The determining factor of such contracts is not the duty of
the employee but the day certain agreed upon by the parties for the commencement
and termination of the employment relationship.

In the case at bar, it is clear that the respondents were employed by A.C. Sicat as
project employees. Respondents, by accepting the conditions of the contract with A.C.
Sicat, were well aware of and even acceded to the condition that their employment
thereat will end on said pre-determined date of termination. They cannot now argue that
they were illegally dismissed by the latter when it refused to renew their contracts after
its expiration. This is so since the non-renewal of their contracts by A.C. Sicat is a
management prerogative, and failure of respondents to prove that such was done in
bad faith militates against their contention that they were illegally dismissed.

Page | 45
Page | 46
 13.A.18. W.M Manufacturing Inc. vs. Dalag, GR No. 209418, December 7, 2015

Facts:
On January 3, 2010, petitioner, as client, and respondent Golden Rock, as contractor,
executed a contract denominated as "Service Agreement". In relation to the Service
Agreement, Golden Rock, on April 26, 2010, engaged the services of respondent Dalag
as a factory worker to be assigned at petitioner's factory. For this purpose, respondents
inked a five-month Employment Contract for Contractual Employees (Employment
Contract).
Notwithstanding the five-month duration stipulated in the contract, respondent Dalag
alleged in his complaint for illegal dismissal that on August 7, 2010, one of WM MFG's
security guards prevented him from going to his work station and, instead, escorted him
to the locker room and limited his activity to withdrawing his belongings therefrom.
Dalag further claimed that his assignment at WM MFG as side seal machine operator
was necessary and desirable for the company's plastic manufacturing business, making
him a regular employee entitled to benefits under such classification. He likewise
alleged that WM MFG and Golden Rock engaged in the illegal act of labor-only
contracting based on the following circumstances: that all the equipment, machine and
tools that he needed to perform his job were furnished by WM MFG; that the jobs are to
be performed at WM MFG's workplace; and that he was under the supervision of WM
MFG's team leaders and supervisors.
In their joint position paper, therein respondents argued that Dalag was not dismissed
and that, on the contrary, it was he who abandoned his work. They offered as proof WM
MFG's memos addressed to Dalag, which ordered him to answer within 24-hours the
accusations relating to the following alleged infractions: gross negligence, qualified
theft, malicious mischief, incompetence, grave misbehaviour, insubordination,
dishonesty, and machine sabotage.
Dalag, however, allegedly refused to receive the memos, and instead turned his back
on his superiors, informing them that he will no longer return, and then walked away.

Issue:
Whether WM MFG and Golden Rock engaged in labor-only Contracting?

Ruling:
On the first issue, the Supreme Court held that WM MFG and Golden Rock engaged in
labor-only contracting.
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

Page | 47
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.
The essential element in labor-only contracting is that the contractor merely recruits,
supplies or places workers to perform a job, work or service for a principal. However,
the presence of this essential element is not enough and must, in fact, be accompanied
by any one of the confirmatory elements to be considered a labor-only contractor within
the contemplation of the rule.
The presence of the essential element is clearly provided in the service agreement
between WM MFG and Golden Rock which states that Golden Rock's lack of
substantial capital, coupled with the necessity and desirability of the job he performed in
WM MFG and that Golden Rock's lack of control over the employees it supplied WM
MFG.
The basis for determining the substantiality of a company's "capital" rests not only
thereon but also on the tools and equipment it owns in relation to the job, work, or
service it provides. DO 18-02 defines "substantial capital or investment" in the context of
labor-only contracting as referring not only to a contractor's financial capability, but also
encompasses the tools, equipment, implements, machineries and work premises,
actually and directly used by the contractor or subcontractor in the performance or
completion of the job, work or service contracted out.
Here, the Certificate of Registration may have prevented the presumption of labor-only
contracting from arising, but the evidence Dalag adduced was sufficient to overcome
the disputable presumption that Golden Rock is an independent contractor. To be sure,
in performing his tasks, Dalag made use of the raw materials and equipment that WM
MFG supplied. He also operated the side-seal machine in the workplace of WM MFG,
not of Golden Rock. With these attendant circumstances, the Court rules that the first
confirmatory element indubitably exists.
WM MFG exercised control over the employees supplied by Golden Rock. Under the
same DO 18-02, the "right to control" refers to the right to determine not only the end to
be achieved, but also the manner and means to be used in reaching that end. Here,
notwithstanding the contract stipulation leaving Golden Rock the exclusive right to
control the working warm bodies it provides WM MFG, evidence irresistibly suggests
that it was WM MFG who actually exercised supervision over Dalag's work
performance. As culled from the records, Dalag was supervised by WM MFG's
employees. Petitioner WM MFG even went as far as furnishing Dalag with not less than
seven (7) memos directing him to explain within twenty-four (24) hours his alleged work
infractions. The company likewise took pains in issuing investigation reports detailing its
findings on Dalag's culpability. Clearly, WM MFG took it upon itself to discipline Dalag
for violation of company rules, regulations, and policies, validating the presence of the
second confirmatory element.Having ascertained that the essential element and at least
one confirmatory element obtain in the extant case, there is then no other result than for
the Court to rule that WM MFG and Golden Rock engaged in labor-only contracting. As
such, they are, by legal fiction, considered principal and agent, respectively, jointly and
severally liable to their illegally dismissed employees, in accordance with Art. 109 of the
Labor Code and Sec. 19 of DO 18-02.

Page | 48
Page | 49
 13.A.19. Diamond Farms vs. Southern Phils Fed of Labor, GR No. 173254-55,
January 13, 2016, citing 2014 Alilin

Facts:
Diamond Farms, Inc (DFI) owns an 800-hectare banana plantation. The farmers
working in the plantation organized themselves into a multi-purpose cooperative named
"DARBMUPCO," which is one of the respondents in this case. To assist DARBMUPCO
in meeting its production obligations under the Banana Production and Purchase
Agreement (BPPA), DFI engaged the services of the respondent-contractors, who in
turn recruited the respondent-workers.

Respondent Southern Philippines Federation of Labor ("SPFL") filed a petition for

certification election in the Office of the Med-Arbiter. SPFL filed the petition on behalf of
some 400 workers (the respondent-workers in this petition) "jointly employed by DFI and
DARBMUPCO" working in the awarded plantation. DARBMUPCO and DFI denied that
they are the employers of the respondent-workers. They claimed, instead, that the
respondent-workers are the employees of the respondent-contractors. SPFL, together
with more than 300 workers, filed a case for underpayment of wages, non-payment of
13th month pay and service incentive leave pay and attorney's fees against DFI,
DARBMUPCO and the respondent contractors before the National Labor Relations
Commission ("NLRC").

The Labor Arbiter ("LA") held that the respondent-contractors are "labor-only
contractors." The NLRC modified the Decision of the LA and declared that
DARBMUPCO and DFI are the statutory employers of the workers. The CA agreed with
the ruling of the SOLE that DFI is the statutory employer of the respondent workers.

Issue:
Who among DFI, DARBMUPCO and the respondent contractors is the employer of the
respondent workers?

Ruling:
Respondent-contractors are labor-only contractors and DFI is their principal. Under
Article 106 of the Labor Code, a principal or employer refers to the person who enters
into an agreement with a job contractor, either for the performance of a specified work
or for the supply of manpower.

DFI does not deny that it engaged the services of the respondent -contractors. It does
not dispute the claims of respondent-contractors that they sent their billing to DFI for
payment; and that DFI's managers and personnel are in close consultation with the
respondent-contractors. DFI, through its manager and supervisors provides for the work
Page | 50
assignments and performance targets of the respondent-workers. The managers and
supervisors also have the power to directly hire and terminate the respondent-workers.
Evidently, DFI wields control over the respondent-workers.

Respondent-contractors categorically stated that they are "labor only" contractors who
have been engaged by DFI and DARBMUPCO. They admitted that they do not have
substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials, and they recruited workers to perform activities directly
related to the principal operations of their employer.

As stated in the Alilin v. Petron Corporation, a finding that a contractor is a labor-only

contractor is equivalent to a declaration that there is an employer-employee relationship
between the principal, and the workers of the labor-only contractor; the labor-only
contractor is deemed only as the agent of the principal. DFI shall be solidarity liable with
the respondent-contractors for the rightful claims of the respondent-workers, to the
same manner and extent as if the latter are directly employed by DFI.

Page | 51
 13.A.20. Philippine Airlines vs. Ligan et al., GR No. 203932, June 8, 2016

Facts:
Petitioner Philippine Airlines and Synergy Services Corporation, as Contractor, entered
into an Agreement whereby Synergy undertook to provide loading and delivery services
by furnishing all the necessary capital, workers, materials, supplies and equipment for
the performance and execution of said work. Herein respondents who appear to have
been assigned to work for petitioner filed complaints before the NLRC for the payment
of their labor standard benefits and regularization of employment status claiming that
they are performing duties directly connected with petitioner’s business. The Labor
Arbiter’s decision found Synergy an independent contractor but was vacated on appeal.
The NLRC tribunal declared Synergy to be a labor-only contractor and was affirmed by
the CA. Petitioner moved for reconsideration but was denied.

Issue:
Whether or not there is labor-only contracting.

Ruling:
YES. For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any
of two elements to be present is, for convenience, re-quoted:

(i) The contractor or subcontractor does not have substantial capital or investment
which relates to the job, work or service to be performed and the employees recruited,
supplied or placed by such contractor or subcontractor are performing activities which
are directly related to the main business of the principal, OR

(ii) The contractor does not exercise the right to control over the performance of the
work of the contractual employee.

Even if only one of the two elements is present then, there is labor-only contracting.

From the records of the case, it is gathered that the work performed by almost all of the
respondents – loading and unloading of baggage and cargo of passengers – is directly
related to the main business of petitioner. And the equipment used by respondents as
station loaders, such as trailers and conveyors, are owned by petitioner.

Petitioner PAL, and not Synergy, exercises control and supervision over the respondent
workers’ methods of doing the work, as reflected in their Agreement: (1) Contractor
(Synergy) shall require all its workers, employees, suppliers and visitors to comply with
OWNER’S (PAL) rules, regulations, procedures and directives relative to the safety and
security of OWNER’S premises, properties and operations (2) xxx shall furnish its
Page | 52
employees and workers identification cards to be countersigned by OWNER and
uniforms to be approved by OWNER. (3) OWNER may require CONTRACTOR to
dismiss immediately and prohibit entry into OWNER’S premises of any person
employed therein by CONTRACTOR who in OWNER’S opinion is incompetent or
misconducts himself or does not comply with OWNER’S reasonable instructions xxx

Petitioner in fact admitted that it fixes the work schedule of respondents as their work
was dependent on the frequency of plane arrivals. And as the NLRC found, petitioner’s
managers and supervisors approved respondents’ weekly work assignments and
respondents and other regular PAL employees were all referred to as “station
attendants” of the cargo operation and airfreight services of petitioner.

Respondents having performed tasks which are usually necessary and desirable in the
air transportation business of petitioner, they should be deemed its regular employees
and Synergy as a labor-only contractor.

Page | 53
 13.A.21. Cagayan Electric Power & Light Company Inc., vs. Cepalco Employees
Labor union-ALU TUCP, Gr. No. 211015, 213835, June 20, 2016

Facts:
Respondent is the duly certified bargaining representative of CEPALCO's regular rank-
and-file employees. On the other hand, CEPALCO is a domestic corporation engaged in
electric distribution in Cagayan de Oro and other municipalities in Misamis Oriental;
while CESCO is a business entity engaged in trading and services.

On February 19, 2007, CEPALCO and CESCO (petitioners) entered into a Contract for
Meter Reading Work where CESCO undertook to perform CEPALCO's meter-reading
activities. As a result, several employees and union members of CEPALCO were
relieved, assigned in floating positions, and replaced with CESCO workers, prompting
respondent to file a complaint for unlawful labor practice (ULP) against petitioners.

Respondent alleged that when CEPALCO engaged CESCO to perform its meter-
reading activities, its intention was to evade its responsibilities under the Collective
Bargaining Agreement (CBA) and labor laws, and that it would ultimately result in the
dissipation of respondent's membership in CEPALCO. Thus, respondent claimed that
CEPALCO's act of contracting out services, which used to be part of the functions of the
regular union members, is violative of Article 259 (c) of the Labor Code, as amended.

On the other hand, petitioners averred that CESCO is an independent job contractor
and that the contracting out of the meter-reading services did not interfere with
CEPALCO's regular workers' right to self-organize, denying that none of respondent's
members was put on floating status.

The LA dismissed the complaint for lack of merit. The LA found that petitioners have
shown by substantial evidence that CESCO carries on an independent business of
contracting services and that CESCO has an authorized capital stock of P100,000,000,
as well as equipment and materials necessary to carry out its business. As an
independent contractor, CESCO is the statutory employer of the workers it supplied to
CEPALCO pursuant to their contract.

On appeal by respondent, the NLRC affirmed the LA's ruling in toto, finding that the
evidence proffered by respondent proved inadequate in establishing that the service
contract amounted to the interference of the right of the union members to self-
organization and collective bargaining. Respondent then filed a petition for certiorari
before the CA.

Page | 54
Pending resolution of the case in the CA, CEPALCO and CESCO entered into another
Contract of Service, this time for the warehousing works of CEPALCO. Alleging that
three (3) union members who were assigned at the warehouse of the logistics
department were transferred to other positions and departments without their conformity
and, eventually, were replaced by workers recruited by CESCO, respondent filed
another complaint for ULP against petitioners similarly decrying that CEPALCO was
engaged in labor-only contracting and, thus, committed ULP.

LA dismissed the second case for lack of merit and explained that the only difference
between the previous case and the present case was that in the former, CEPALCO
contracted out its meter-reading activities, while in the latter, it contracted out its
warehousing works. However, both cases essentially raised the same issue between
the same parties. LA applied the principle of res judicata under the rule on
conclusiveness of judgment and dismissed the complaint for ULP. NLRC dismissed the
appeal and affirmed the LA's ruling in toto. Hence, respondent elevated the matter to
the CA.

In both appeals, CA partially granted respondent's certiorari petition and reversed and
set aside the assailed NLRC issuances. CA found that CESCO was a labor-only
contractor as it had no substantial capitalization, as well as tools, equipment, and
machineries used in the work contracted out by CEPALCO. Consequently, the workers
hired by CESCO pursuant to the service contract for the meter-reading activities were
declared regular employees of CEPALCO. It further stated that CESCO is merely an
agent of CEPALCO, and that the latter is still responsible to the workers recruited by
CESCO in the same manner and extent as if those workers were directly employed by
CEPALCO.

However, the CA found no substantial evidence that CEPALCO was engaged in ULP,
there being no showing that when it contracted out the activities to CESCO, CEPALCO
was motivated by ill will, bad faith or malice, or that it was aimed at interfering with its
employees' right to self-organize. Hence, the present petition.

Issue:
Whether or not CESCO is an independent contractor

Ruling:
No, CESCO is not an independent contractor.

Under Article 106 of the Labor Code, as amended, labor-only contracting is an

arrangement where the contractor, who does not have substantial capital or investment
in the form of tools, equipment, machineries, work premises, among others, supplies
Page | 55
workers to an employer and the workers recruited are performing activities which are
directly related to the principal business of such employer.

Labor-only contracting is considered as a form of ULP when the same is devised by the
employer to "interfere with, restrain or coerce employees in the exercise of their rights to
self-organization.”

SC agreed with the CA that CEPALCO was engaged in labor-only contracting as its
Contract for Meter-Reading Work and Contract of Service to Perform Warehousing
Works with CESCO fit the criteria provided for in Section 5 of DO 18-02. Petitioners
failed to show that CESCO has substantial capital or investment which relates to the
job, work or service to be performed. It is also evident that meter-reading is a job that is
directly related to the main business of CEPALCO. More significantly, records are
devoid of evidence to prove that the work undertaken in furtherance of the meter-
reading contract was made under the sole control and supervision of CESCO.

However, the Court, similar to the CA and the labor tribunals, found that CEPALCO's
contracting arrangements with CESCO did not amount to ULP. This is because
respondent was not able to present any evidence to show that such arrangements
violated CEPALCO's workers' right to self-organization, which, as above-mentioned,
constitutes the core of ULP. Thus, the complaints filed by respondent were dismissed
with finality.

Page | 56
13.A.22. Quintanar et al., vs. Coca-Cola Bottlers Phils GR No. 210565, June 28,
2016

Facts:
Complainants allege that they are former employees directly hired by respondent Coca-
Cola on different dates from 1984 up to 2000, assigned as regular Route Helpers under
the direct supervision of the Route Sales Supervisors. Their duties consist of distributing
bottled Coca-Cola products to the stores and customers in their assigned areas/routes,
and they were paid salaries and commissions at the average of P3,000.00 per month.
Later on, complainants were allegedly transferred successively as agency workers to
the following manpower agencies, namely, Lipercon Services, Inc., People's Services,
Inc., ROMAC, and the latest being respondent Interserve Management and Manpower
Resources, Inc.
       
Moreover, they alleged that during DOLE’s inspection they were declared to be regular
employees of Coca-Cola and the latter was held liable to pay complainants the
underpayment of their 13t h month pay, emergency cost of living allowance, and other
claims. As soon as respondents learned of the filing of the claims with DOLE, they were
dismissed. Their claims were later settled by the respondent company, but the
settlement allegedly did not include the issues on reinstatement and payment of CBA
benefits. Thus, they filed their complaint for illegal dismissal.

Respondent Coca-Cola denies employer-employee relationship with the complainants

pointing to respondent Interserve with whom it has a service agreement as the
complainants' employer.

The Labor Arbiter In view of said facts, the LA concluded that the petitioners were
simply employees of Coca-Cola who were "seconded" to Interserve. Ultimately, the LA
ordered Coca-Cola to reinstate the petitioners to their former positions and to pay their
full backwages. NLRC affirmed such decision. However, CA reversed such decision and
found that the petitioners were not employees of Coca-Cola but that of Interserve.

Issue:
Whether or not the petitioners were employees of Coca-Cola or that of Interserve

Ruling:

First. Contrary to the position taken by Coca-Cola, it cannot be said that route-helpers,
such as the petitioners no longer enjoy the employee-employer relationship they had
with Coca-Cola since they became employees of Interserve. As early as in the case of
Magsalin, it struck down Coca-Cola’s contention that route-helpers, were its "temporary"
Page | 57
workers. In Bantolino v. Coca-Cola, among others, agreed with the unanimous finding of
the LA, the NLRC and the CA that the route-helpers therein were not simply employees
of Lipercon, Peoples Specialist Services, Inc. or ISI, which, as Coca-Cola claimed were
independent job contractors, but rather, those of Coca-Cola itself. In Pacquing v. Coco-
Cola Philippines Inc. It was stressed therein that because the petitioners, as route
helpers, were performing the same functions as the employees in Magsalin, which were
necessary and desirable in the usual business or trade of Coca- Cola Philippines, Inc.,
they were considered regular employees of Coca-Cola entitled to security of tenure.
And that as to the substantial capital, it is the contractor and not the employee, had the
burden of proof that it has the substantial capital, investment and tool to engage in job
contracting. Thus the Court, in this case held that Interserve is a labor-only contractor.
       
From all these, a pattern emerges by which Coca-Cola consistently resorts to various
methods in order to deny its route-helpers the benefits of regular employment. Despite
this, the Court, consistent with sound pronouncements above, adopts the rulings made
in Pacquing that Interserve was a labor-only contractor and that Coca-Cola should be
held liable pursuant to the principle of stare decisis et non quieta movere. In this case,
Coca-Cola has not shown any strong and compelling reason to convince the Court that
the doctrine of stare decisis should not be applied.

Second, complainants' allegation that they were directly hired by respondent Coca-Cola
and had been working with the latter for quite some time when they were subsequently
referred to successive agencies such as Lipercon, ROMAC, People's Services, and
most recently, respondent Interserve, has not been controverted by the respondents.
Moreover, record shows that the complainants received their payments from Coca-Cola.

Third, although Interserve that it was registered with the DOLE as independent
contractor and that it had a total capitalization of P27,509,716.32 and machineries and
equipment worth P12,538859.55, the possession of substantial capital is only one
element. Labor-only contracting exists when any of the two elements is present. Thus,
even if the Court would indulge

Coca-Cola and admit that Interserve had more than sufficient capital or investment in
the form of tools, equipment, machineries, work premises, still, it cannot be denied that
the petitioners were performing activities which were directly related to the principal
business of such employer. More importantly, even if Interserve were to be considered
as a legitimate job contractor, Coca-Cola failed to rebut the allegation that petitioners
were transferred from being its employees to become the employees of ISI, Lipercon,
PSI, and ROMAC, which were labor-only contractors.

Page | 58
Fourth. In this connection, even granting that the petitioners were last employed by
Interserve, the record is bereft of any evidence that would show that the petitioners
voluntarily resigned from their employment with Coca-Cola only to be later hired by
Interserve. Thus, the complainants are employees of Coca-Cola Philippines Inc.

Page | 59
 13.A.23. Soliman Security Services, Inc. vs Sarmiento, et. al.,
G.R. 194649. August 10, 2016

Facts:
Respondents were hired as security guards by petitioner Soliman Security Services,
Inc. and were assigned to Interphil Laboratories, working seven days a week for twelve
straight hours daily. However, they were paid below the minimum wage and were not
paid ECOLA, night shift differentials, holiday pay, as well as rest day premiums. Cash
bonds and mutual aid contributions were also deducted from their salaries per month.
The contract between Interphil and Soliman Security contained stipulations pertaining to
the client’s policy of replacing guards on duty every six months without repeat
assignment. On January 21, 2007, they received an order relieving them from their
posts and since then, they were not given any assignments.
On February 22, 2007, respondents filed their complaint for illegal dismissal against
petitioner. Months later, petitioner presented respondents an offer to return to work.
The NLRC, as affirmed by the CA, ordered petitioners to pay respondents backwages,
separation pay, and salary differentials for the period which are not yet barred by
prescription.
Respondents contend that they were constructively dismissed when they were not given
new assignments. Petitioner, on the other hand, argues that notices for their return to
work were sent, and respondents allegedly failed to comply with such directives.
Issue/s:
1. Whether respondent security guards were constructively dismissed
2. If yes, whether the dismissal was justified

Decision:
Placement on floating status as a management prerogative
The employer has the right to transfer or assign its employees from one area of
operation to another, provided there is no diminution of salary, benefits, and other
privileges, and the transfer is not motivated by discrimination or bad faith, or effected as
a form of punishment or demotion without sufficient cause. During that period of time
when they are in between assignments or when they are made to wait for new
assignments after being relieved from a previous post, guards are considered on
temporary off-detail or under “floating status.”

Page | 60
Such period of temporary off-detail can only be made for a maximum period of six
months and requires the dire exigency of the employer’s bona fide suspension of
operation. In security services, this happens when there is a surplus of security guards
over available assignments as when the clients do not renew their contracts with the
security agency are more than those clients that do.

Respondents were constructively and unjustifiably dismissed

First, the notices sent by petitioner were mere afterthoughts. The notices were sent to
respondents only after the hearing before the Executive Labor Arbiter. By the time the
notices were sent, a complaint for illegal dismissal with prayer for reinstatement was
already filed. It was intended to cover the illegality of the termination of respondents’
employment.
Second, it bears stressing that the only time a prolonged floating status is considered an
authorized cause for dismissal is when the security agency experiences a surplus of
security guards brought about by lack of clients. Absent such justification, the placing of
a security guard on floating status is tantamount to constructive dismissal. There was no
bona fide business exigency in the case of petitioner which would justify its non-
assignment of respondents to new assignments.
Lastly, to validly terminate a security guard for lack of service assignment for a
continuous period of six months, the agency must serve a written notice on the
employee on floating status. No such notice was sent by Soliman.
Therefore, respondents were constructively and illegally dismissed and are entitled to
the payment of backwages, separation pay, and salary differentials for the period not
yet barred by prescription.

Page | 61
 13.A.24. De Castro and Platon vs Court of Appeals, et. al.,
G.R. 204261. October 5, 2016

Facts:
Nuvoland is a corporation engaged in the real estate business. Respondents
Bienvenida and Martinez were its principal stockholder and Board Member, and
President, respectively.
Martinez recruited petitioner De Castro, a sales and marketing professional in the field
of real estate, to handle its sales and marketing operations, including the hiring and
supervision of the sales and marketing personnel. To formalize this undertaking,
Martinez and De Castro entered into a Shareholders Agreement wherein Martinez
proposed to create Silvericon, a corporation, through which the latter’s compensation
and benefits, including those of other personnel, would be coursed. Supericon has a
capital stock of P4M of which P1M was subscribed and paid. De Castro was appointed
President of Silvericon, while Bienvenida and Martinez were named as stockholders
and incorporators.
De Castro was able to recruit 40 sales and marketing personnel. One of them was
petitioner Platon. De Castro and his team of sales personnel were responsible for the
sale of 100% of the projects owned and developed by Nuvoland.
In a latter in 2008, Nuvoland terminated the SMA on the ground that Silvericon
personnel committed an unauthorized walkout and abandonment of the Nuvo City
Showroom. They were later on barred from entering the office premises. Aggrieved, De
Castro and Platon filed a complaint for illegal dismissal, demanding the payment of their
unpaid wages, commissions, and other benefits against Nuvoland.
Petitioners argue that Silevericon was far from being an independent contractor as
shown by its (1) lack of substantial capital, (2) lack of investment on tools, equipment,
machinery, work premises, and other materials, (3) failure to secure a certificate of
authority to act as an independent contractor, and (4) its services to Nuvoland being
exclusive in nature.
Nuvoland denied a contractual relationship with De Castro and Platon, contending that if
there was any dispute at all, it was merely between complainants and Silvericon.

Issue/s:
Whether Silvericon is a labor-only contractor and Nuvoland should be responsible for
the claims of the complainants

Page | 62
Decision:
Silvericon is a labor-only contractor and Nuvoland is deemed the employer of the
former’s employees by operation of law
First, D.O. 18-02 expressly provides for a registration requirement, for otherwise, the
failure to register shall give rise to the presumption that a contractor is engaged in labor-
only contracting. Silvericon has no such registration. Nuvoland did not even bother to
make Silvericon comply with this vital requirement.
Second, D.O. 18-A defines substantial capital as the paid-up capital stocks/shares of at
least P3M in the case of corporations, partnerships and cooperatives. At the time
Nuvoland engaged the services of Silvericon, the latter’s paid-up capital was only P1M.
This being the case, the P1M is woefully inadequate to be considered as substantial
capital.
Third, Silvericon had no substantial investment in the form of tools, equipment,
machinery and work premises. Records reveal that Nuvoland itself designed and
constructed the model units used in the sales and marketing of its condominium units.
Fourth, the exclusivity which characterized the relationship between Nuvoland and
Silvericon negates the status of a legitimate contractor. If Silvericon was an independent
contractor, it is only but logical that it should have also offered its services to the public.
Fifth, Nuvoland and Silvericon shared the same officers and employees. They were not
separate entities. In truth, the termination of the SMA was actually a ruse to make it
appear that Silvericon was an independent entity. It was simply a way to terminate the
employment of several employees altogether and escape liability as an employer.
Lastly, it was Nuvoland which exercised control over the employees of Silvericon – that
it dictated the end result of the undertaking; that it decided on the models, designs and
prices of the units; that it was the ultimate recipient of the amounts received by
Silvericon; and Nuvoland determined the maximum amount of marketing expenses for
the accomplishment of the goal.
Having found that Silvericon is a mere labor-only contractor, Nuvoland is the direct
employer of petitioners and shall be liable for the separation pay, backwages and other
monetary awards that the petitioners deserve to receive.

Page | 63
 13.A.25 Nestle Philippines Inc. vs. Puedan, Jr.
GR No. 220617, January 30, 2017
FACTS
Respondents filed a complaint against Ocho de Septiembre, Inc. (ODSI) and petitioner
Nestle Philippines, Inc. (NPI) for illegal dismissal, damages, and attorney's fees. They
alleged that on various dates, ODSI and NPI hired them to sell various NPI products in
the assigned covered area. After some time, respondents demanded that they be
considered regular employees of NPI, but they were directed to sign contracts of
employment with ODSI instead. When respondents refused to comply with such
directives, NPI and ODSI terminated them from their position. Thus, they were
constrained to file the complaint, claiming that: (a) ODSI is a labor-only contractor and,
thus, they should be deemed regular employees of NPI; and (b) there was no just or
authorized cause for their dismissal.
ODSI averred that it is a company engaged in the business of buying, selling,
distributing, and marketing of goods and commodities of every kind and it enters into all
kinds of contracts for the acquisition thereof. ODSI admitted that on various dates, it
hired respondents as its employees and assigned them to execute the Distributorship
Agreement it entered with NPI. The business relationship between NPI and ODSI
turned sour. Eventually, NPI downsized its marketing and promotional support from
ODSI which resulted to business reverses and the termination of the Distributorship
Agreement. ODSI argued that respondents were not dismissed but merely put in
floating status.
Labor Arbiter (LA) dismissed the complaint for lack of merit. NLRC reversed and set
aside the LA ruling and ordered ODSI and NPI to pay each of the respondents
separation pay, nominal damages, and attorney’s fees. NPI moved for reconsideration
which was denied. Dissatisfied, NPI filed a petition for certiorari before the CA which
subsequently affirmed the NLRC ruling. Hence, this petition.

ISSUES
Whether or not ODSI is a labor-only contractor of NPI

HELD
No, ODSI is NOT a labor-only contractor of NPI.
An examination of the Distributorship Agreement reveals that the relationship of NPI
and ODSI is not that of a principal and a contractor but that of a seller and a buyer/re-
seller. As stipulated in the Distributorship Agreement, NPI agreed to sell its products to
ODSI at discounted prices, which in turn will be re-sold to identified customers, ensuring

Page | 64
in the process the integrity and quality of the said products based on the standards
agreed upon by the parties. Therefore, the reselling activities allegedly performed by the
respondents properly pertain to ODSI, whose principal business consists of the "buying,
selling, distributing, and marketing goods and commodities of every kind" and
"[entering] into all kinds of contracts for the acquisition of such goods [and
commodities].”
Thus, contrary to the CA's findings, the aforementioned stipulations in the
Distributorship Agreement hardly demonstrate control on the part of NPI over the means
and methods by which ODSI performs its business, nor were they intended to dictate
how ODSI shall conduct its business as a distributor. The stipulations in the
Distributorship Agreement do not operate to control or fix the methodology on how
ODSI should do its business, but merely provide rules of conduct or guidelines towards
the achievement of a mutually desired result - which in this case is the sale of NPI
products to the end consumer.
Thus, the foregoing circumstances show that ODSI was not a labor only contractor of
NPI; hence, the latter cannot be deemed the true employer of respondents. NPI cannot
be held jointly and severally liable to ODSI's monetary obligations towards respondents.

Page | 65
 13.A.26 VALENCIA VS CLASSIQUE VINYL, GR NO 206390

FACTS: Petitioner Valencia filed a complaint with the LA a complaint for money claims
and illegal dismissal against respondents Classique Vinyl Products and its owner
Chang, and/or respondent Cantingas Manpower Services (CMS).
Valencia alleged that he applied for work with Classique Vinyl but was told by the
latter’s personnel to proceed to CMS, a local mapower agency. Upon submission of
requirements, CMS and Valencia signed an employment contract. He then proceeded
to Classique Vinyl and worked as a fertilizer operator. He argues that the equipment he
used to peform his job were owned by Classique Vinyl, and his work was regularly
supervised by Classique Vinyl. Furthermore, he contends that CMS is a labor-only
contractor.
Classique Vinyl denies the existence of an employer-employee relationship. It contends
that CMS is the employer of Valencia and the former only deployed Valencia to
Classique Vinyl whenever there was an urgent temporary task that had to be done.
Likewise, CMS denied any employer-employee relationship between it and Valencia
contending that when it deployed Valencia to Classique Vinyl, it was already the latter
that exercised full control and supervision over him.
The LA issued a decision holding that respondent CMS, a legitimate Private and
Recruitment Placement Agency, entered into several Employment Contracts with
complainant Valencia as Contractual employee for deployment to Classique Vinyl. The
NLRC declared CMS as Valenci’s employer. The CA rendered a decision denying the
appeal holding that Valencia is an employee of CMS and further ruled that he is not
entitled to his monetary claims. Aggrieved, Valencia filed the present petition.

ISSUE:
Whether there exists an employer-employee relationship between petitioner Valencia
and Classique Vinyl

RULING:
No, petitioner Valencia failed to present competent evidence to support his claimed
employer-employee relationship between him and Classique Vinyl.
Selection and Engagement. Valencia’s application was received and processed by CMS
which required him to submit necessary requirements for employment. Upon
submission thereof, it was CMS that caused him to sign an employment contract
between CMS and Valencia - this was not denied by Valencia. It was only after he was

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engaged as a contractual employee of CMS that he was deployed to Classique Vinyl.
Thus, the selection and engagement was undertaken by CMS which negates the claim
taken by Valencia.
Payment of Wages. CMS was not able to present sufficient proof that the wages paid to
Valencia were from Classique Vinyl. Furthermore, CMS had mentioned that it paid non-
cash wages in an approximate amount of P3,000 to Valencia - a clear showing that the
element of payment of wages is exercised by CMS.
Power of Control and Dismissal. Valencia’s allegations that Classique Vinyl exercised
supervision and control over him are merely self-serving. On the other hand, the
employment contract between Valencia and CMS states that the latter possessed not
only the power of control but also the power of dismissal over Valencia.
CMS is a legitimate contractor. Classique Vinyl presented the CMS’s Certificate of
Registration with the Department of Trade and Industry and, License as private
recruitment and placement agency from the Department of Labor and Employment.
Indeed, these documents are not conclusive evidence of the status of CMS as a
contractor. However, such fact of registration of CMS prevented the legal presumption
of it being a mere labor-only contractor from arising. It must be stressed that "in labor-
only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been directly
employed by the principal employer. The principal employer therefore becomes
solidarity liable with the labor-only contractor for all the rightful claims of the employees.”
In sum, CMS is a legitimate contractor and applying the four-fold test, Valencia is to be
considered as an employee of the former.

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 13.A.27 Lingat vs. Coca-Cola Bottlers Phils., GR No. 205688, July 4, 2018
FACTS:
Petitioners filed a Complaint for illegal dismissal, moral and exemplary damages, and
attorney's fees against respondents. CCBPI employed Lingat and Altoveros as plant
driver and forklift operator, and segregator/mixer respectively. They had continually
worked for CCBPI until their illegal dismissal in April 2005 (Lingat) and December 2005
(Altoveros).
Petitioners stated, that after becoming regular employees (as they had been employed
for more than a year), and by way of a modus operandi, CCBPI transferred them from
one agency to another as a scheme to prevent regularization. Petitioners stressed that
the aforesaid agencies were labor-only contractors which did not have any equipment,
machinery, and work premises for warehousing purposes. They insisted that CCBPI
owned the warehouse where they worked; the supervisors thereat were CCBPI's
employees; and, petitioners themselves worked for CCBPI, not for any agency.
Petitioners argued that CCBPI dismissed them after it found out that they were
"overstaying.”
Respondents move that this case must be dismissed because the Labor Arbiter lacked
jurisdiction, there being no employer-employee relationship between the parties. They
alleged that CCBPI entered into a Warehousing Management Agreement with MDTC
for the latter to perform warehousing and inventory functions for the former. They
insisted that MDTC was a legitimate and independent contractor, which only assigned
petitioners at CCBPI's plant in Otis, Manila. They posited that MDTC carried on a
distinct and independent business; catered to other clients, aside from CCBPI; and
possessed sufficient capital and investment in machinery and equipment for the
conduct of its business as well as an office building. They likewise stressed that
petitioners were employees of MDTC, not CCBPI. They averred that MDTC was the
one who engaged petitioners and paid their salaries. They averred that when the
Warehousing Management Agreement between CCBPI and MDTC expired, the parties
no longer renewed the same.
ISSUE:
WON there exists an employer-employee relationship between Petitioners and
Respondent CCBI.
RULING:
Yes. To ascertain if one is a regular employee, it is primordial to determine the
reasonable connection between the activity he or she performs and its relation to the
trade or business of the supposed employer. Relating petitioners' tasks to the nature of

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the business of CCBPI — which involved the manufacture, distribution, and sale of soft
drinks and other beverages — it cannot be denied that mixing and segregating as well
as loading and bringing of CCBPI's products to its customers involved distribution and
sale of these items. Simply put, petitioners' duties were reasonably connected to the
very business of CCBPI. They were indispensable to such business because without
them the products of CCBPI would not reach its customers.
Moreover, CCBPI and Lyons' contention that MDTC was a legitimate labor contractor
and was the actual employer of petitioners does not hold water. A labor-only contractor
is one who enters into an agreement with the principal employer to act as the agent in
the recruitment, supply, or placement of workers for the latter. A labor-only contractor
1) does not have substantial capital or investment in tools, equipment, work premises,
among others, and the recruited employees perform tasks necessary to the main
business of the principal; or 2) does not exercise any right of control anent the
performance of the contractual employee. In such case, where a labor-only contracting
exists, the principal shall be deemed the employer of the contractual employee; and
the principal and the labor-only contractor shall be solidarily liable for any violation of
the Labor Code. On the other hand, a legitimate job contractor enters into an
agreement with the employer for the supply of workers for the latter but the "employer-
employee relationship between the employer and the contractor's employees [is] only
for a limited purpose, i.e., to ensure that the employees are paid their wages.”
A permissible job contracting 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.

In contrast, job contracting shall be deemed as labor-only contracting, an

arrangement prohibited by law, if a person who undertakes to supply workers to an
employer: (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.
CCBPI hired MDTC to perform warehousing management services, which it claimed
did not directly relate to its (CCBPI's) manufacturing operations. However, it must be

Page | 69
stressed that CCBPI's business not only involved the manufacture of its products but
also included their distribution and sale. Thus, CCBPI's argument that petitioners were
employees of MDTC because they performed tasks directly related to "warehousing
management services," lacks merit. On the contrary, records show that petitioners
were performing tasks directly related to CCBPI's distribution and sale aspects of its
business.

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13.A.28 Mago vs. Sunpower Manufacturing Ltd., GR No. 210961, January 24, 2018
FACTS:
The petitioners are former employees of Jobcrest, a corporation duly organized under
existing laws of the Philippines, engaged in the business of contracting management
consultancy and services and duly registered with DOLE.
Jobcrest and Sunpower entered into a Service Contract Agreement, in which Jobcrest
undertook to provide business process services for Sunpower, a corporation principally
engaged in the business of manufacturing automotive computer and other electronic
parts. Jobcrest then trained its employees, including the petitioners, for purposes of
their engagement in Sunpower. After the satisfactory completion of this training, the
petitioners were assigned to Sunpower's plant in Laguna Technopark. Leo was tasked
as a Production Operator in the Coinstacking Station, while Leilanie was assigned as a
Production Operator. Jobcrest's On-site Supervisor, Allan, supervised the petitioners
during their assignment with Sunpower.
Sunpower conducted an operational alignment, which affected some of the services
supplied by Jobcrest. Sunpower decided to terminate the Coinstacking/Material
Handling segment and the Visual Inspection segment. Meanwhile, Leo and Leilanie
were respectively on paternity and maternity leave because Leilanie was due to give
birth to their common child. When Leo reported for work to formally file his paternity
leave, Allan purportedly informed Leo that his employment was terminated due to his
absences. Leo went to Jobcrest's office and while he was there, Jobcrest's Human
Resource Manager served Leo with a "Notice of Admin Charge/Explanation Slip." The
notice stated that Leo violated the Jobcrest policy against falsification or tampering
because he failed to disclose his relationship with Leilanie. Leilanie, on the other hand,
alleged that when she reported for work at Jobcrest, she was informed by one of the
Jobcrest personnel that she will be transferred to another client company. Leilanie
returned to Jobcrest, where she was served with a similar "Notice of Admin
Charge/Explanation Slip," requiring her to explain why she failed to disclose her co-
habitation status with Leo.
Leo and Leilanie filed a complaint for illegal dismissal and regularization with the
NLRC. Leo and Leilanie alleged that he was dismissed. During the mandatory
conference, Jobcrest clarified that the petitioners were not dismissed from employment
and offered to accept them when they report back to work. The petitioners refused and
insisted that they were regular employees of Sunpower, not Jobcrest.
ISSUE:
WON Jobcrest is a labor-only contractor.

Page | 71
RULING:
No. Jobcrest is a legitimate and independent contractor.
The Labor Code defines labor-only contracting as a situation "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.” Thus, in order to become a
legitimate contractor, the contractor must have substantial capital or investment, and
must carry a distinct and independent business free from the control of the principal.
Ordinarily, a contractor is presumed to be a labor-only contractor, unless the contractor
is able to discharge the burden of overcoming this presumption. However, the
companies have no operative presumption of labor-only contracting since the
petitioners do not dispute that Jobcrest was a duly-registered contractor. The Court
emphasizes that the DOLE Certificate of Registration issued in favor of Jobcrest is
presumed to have been issued in the regular performance of official duty.
Jobcrest has substantial capital. Substantial capital or investment was defined in DOLE
DO No. 18-02 as "capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the performance or completion
of the job, work or service contracted out.” Jobcrest established that it had an
authorized capital stock of Php8,000,000.00, Php2,000,000.00 of which was
subscribed, and a paid-up capital stock of Php500,000.00, in full compliance with
Section 13 of the Corporation Code. It has its own office, to which the petitioners
admittedly reported to, possessed numerous assets for the conduct of its business,
and even continuously earned profit as a result.
Sunpower does not control the manner by which the petitioners accomplish their work.
The "right to control" shall refer to the right reserved to the person for whom the
services of the contractual workers are performed, to determine not only the end to be
achieved, but also the manner and means to be used in reaching that end. The Court
finds that the evidence clearly points to Jobcrest as the entity that exercised control
over the petitioners' work with Sunpower. Upon the petitioners' assignment to
Sunpower, Jobcrest conducted a training and certification program, during which time,
the petitioners reported directly to the designated Jobcrest trainer. Operational control
over Jobcrest employees was exercised to make sure that they conform to the quantity
and time specifications of the service agreements with Jobcrest's clients. Managers
and shift supervisors were assigned to the premises of Sunpower, with the task to
oversee the accomplishment of the target volume of work. There is administrative
control over Jobcrest employees because they monitor the employees' attendance and
punctuality, and the employees' observance of other rules and regulations.
All things considered, Sunpower is not the statutory employer of the petitioners. The
circumstances obtaining in this case, as supported by the evidence on record,
establish that Jobcrest was a legitimate and independent contractor.

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Page | 73
 13.B.1. BARAYOGA VS ASSET PRIVATIZATION TRUST (2005)
G.R. 160073

FACTS:
Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia
Sugar Development Corporation (BISUDECO), a sugar plantation mill located in
Himaao, Pili, Camarines Sur.On December 8, 1986, [Respondent] Asset Privatization
Trust (APT), a public trust was created under Proclamation No. 50, as amended,
mandated to take title to and possession of, conserve, provisionally manage and
dispose of non-performing assets of the Philippine government identified for
privatization or disposition.
Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino
issued Administrative Order No. 14 identifying certain assets of government institutions
that were to be transferred to the National Government. Among the assets transferred
was the financial claim of the Philippine National Bank against BISUDECO in the form
of a secured loan. Consequently, by virtue of a Trust Agreement executed between the
National Government and APT on February 27, 1987, APT was constituted as trustee
over BISUDECO's account with the PNB.
Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine
Sugar Corporation (Philsucor) to take over the management of the sugar plantation and
milling operations until August 31, 1992. Meanwhile, because of the continued failure of
BISUDECO to pay its outstanding loan with PNB, its mortgaged properties were
foreclosed and subsequently sold in a public auction to APT, as the sole bidder. On
April 2, 1991, APT was issued a Sheriff's Certificate of Sale.
On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal,
illegal deduction and underpayment of wages and other labor standard benefits plus
damages. In the meantime, on July 15, 1992, APT's Board of Trustees issued a
resolution accepting the offer of Bicol-Agro-Industrial Cooperative (BAPCI) to buy the
sugar plantation and mill. Again, on September 23, 1992, the board passed another
resolution authorizing the payment of separation benefits to BISUDECO's employees in
the event of the company's privatization. Then, on October 30, 1992, BAPCI purchased
the foreclosed assets of BISUDECO from APT and took over its sugar milling
operations under the trade name Peñafrancia Sugar Mill (Pensumil).
On December 17, 1992, the union filed a similar complaint, later to be consolidated with
its earlier complaint and docketed as RAB V Case No. 07-00184-91. On March 2, 1993,
it filed an amended complaint, impleading as additional party respondents APT and
Pensumil.
In their Position Paper, the union alleged that when Philsucor initially took over the
operations of the company, it retained BISUDECO's existing personnel under the same

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terms and conditions of employment. Nonetheless, at the start of the season sometime
in May 1991, Philsucor started recalling workers back to work, to the exception of the
union members. Management told them that they will be re-hired only if they resign from
the union. Just the same, thereafter, the company started to employ the services of
outsiders under the 'pakyaw' system.
BISUDECO, Pensumil and APT all interposed the defense of lack of employer-
employee relationship.After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso
T. Aurellano disposed as follows:
'WHEREFORE, premises considered, respondent APT is hereby ordered to pay herein
complainants of the mandated employment benefits provided for under Section 27 of
Proclamation No. 50 which benefits had been earlier extended to other employees
similarly situated.
The NLRC affirmed APT's liability for petitioners' money claims. While no employer-
employee relationship existed between members of the petitioner union and APT, at the
time of the employees' illegal dismissal, the assets of BISUDECO had been transferred
to the national government through APT. Moreover, the NLRC held that APT should
have treated petitioners' claim as a lien on the assets of BISUDECO. The Commission
opined that APT should have done so, considering its awareness of the pending
complaint of petitioners at the time BISUDECO sold its assets to BAPCI, and APT
started paying separation pay to the workers.
Finding their computation to be in order, the NLRC awarded to petitioners their money
claims for underpayment, labor-standard benefits, and ECOLA. It also awarded them
their back wages, computed at the prevailing minimum wage, for the period May 1,
1991 (the date of their illegal dismissal) until October 30, 1992 (the sale of BISUDECO
assets to the BAPCI). On the other hand, the NLRC ruled that petitioners were not
entitled to separation pay because of the huge business losses incurred by BISUDECO,
which had resulted in its bankruptcy.
Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the
Rules of Court. The CA ruled that APT should not be held liable for petitioners' claims
for unfair labor practice, illegal dismissal, illegal deduction and underpayment of wages,
as well as other labor-standard benefits plus damages. As found by the NLRC, APT
was not the employer of petitioners, but was impleaded only for possessing
BISUDECO's mortgaged properties as trustee and, later, as the highest bidder in the
foreclosure sale of those assets.
Citing Batong Buhay Gold Mines v. Dela Serna, 8 the CA concluded that petitioners'
claims could not be enforced against APT as mortgagee of the foreclosed properties of
BISUDECO.
Clarification of the facts according to the SC: It should be stressed at the outset that,
pursuant to Administrative Order No. 14, Series of 1987, PNB's assets, loans and

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receivables from its borrowers were transferred to APT as trustee of the national
government. Among the liabilities transferred to APT was PNB's financial claim against
BISUDECO, not the latter's assets and chattel. Contrary to petitioners' assertions,
BISUDECO remained the owner of the mortgaged properties in August 1988, when the
Philippine Sugar Corporation (Philsucor) undertook the operation and management of
the sugar plantation until August 31, 1992, under a so-called Contract of Lease between
the two corporations. At the time, APT was merely a secured creditor of BISUDECO.
It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO
because of the latter's continued failure to pay outstanding loan obligations to PNB/APT.
The properties were sold at public auction to APT, the highest bidder, as indicated in the
Sheriff's Certificate of Sale issued on April 2, 1991. It was only in September 1992 (after
the expiration of the lease/management Contract with Philsucor in August 1992),
however, when APT took over BISUDECO assets, preparatory to the latter's
privatization.
In the present case, petitioner-union's members who were not recalled to work by
Philsucor in May 1991 seek to hold APT liable for their monetary claims and allegedly
illegal dismissal. Significantly, prior to the actual sale of BISUDECO assets to BAPCI on
October 30, 1992, the APT board of trustees had approved a Resolution on September
23, 1992. The Resolution authorized the payment of separation benefits to the
employees of the corporation in the event of its privatization. Not included in the
Resolution, though, were petitioner-union's members who had not been recalled to work
in May 1991.
ISSUES:
I. Whether or not APT is liable to pay petitioners' monetary claims, including back
wages from May 1, 1991, to October 30, 1992 (the date of the sale of BISUDECO
assets to BAPCI).
II. Whether or not the claims of herein petitioners can be enforced against the
foreclosed properties of BISUDECO.
RULINGS:
I. Whether or not APT is liable to pay petitioners' monetary claims, including back
wages from May 1, 1991, to October 30, 1992 (the date of the sale of BISUDECO
assets to BAPCI).
NO. The duties and liabilities of BISUDECO, including its monetary liabilities to its
employees, were not all automatically assumed by APT as purchaser of the foreclosed
properties at the auction sale. Any assumption of liability must be specifically and
categorically agreed upon. In Sundowner Development Corp. v. Drilon, the Court ruled
that, unless expressly assumed, labor contracts like collective bargaining agreements
are not enforceable against the transferee of an enterprise. Labor contracts are in
personam and thus binding only between the parties.

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No succession of employment rights and obligations can be said to have taken place
between the two. Between the employees of BISUDECO and APT, there is no privity of
contract that would make the latter a substitute employer that should be burdened with
the obligations of the corporation. To rule otherwise would result in unduly imposing
upon APT an unwarranted assumption of accounts not contemplated in Proclamation
No. 50 or in the Deed of Transfer between the national government and PNB.
Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or
substantially all, the properties of the seller or transferor is not obliged to absorb the
latter's employees. The most that the purchasing company may do, for reasons of public
policy and social justice, is to give preference of reemployment to the selling company's
qualified separated employees, who in its judgment are necessary to the continued
operation of the business establishment.
In any event, the national government (in whose trust APT previously held the mortgage
credits of BISUDECO) is not the employer of petitioner-union's members, who had been
dismissed sometime in May 1991, even before APT took over the assets of the
corporation. Hence, under existing law and jurisprudence, there is no reason to expect
any kind of bailout by the national government. Even the NLRC found that no employer-
employee relationship existed between APT and petitioners. Thus, the Commission
gravely abused its discretion in nevertheless holding that APT, as the transferee of the
assets of BISUDECO, was liable to petitioners.
A careful reading of the Court's Decision in that case plainly shows that it does not
contain the words quoted by counsel for petitioners. At this juncture, we admonish their
counsel of his bounden duty as an officer of the Court to refrain from misquoting or
misrepresenting the text of its decisions. Ever present is the danger that, if not faithfully
and exactly quoted, they may lose their proper and correct meaning, to the detriment of
other courts, lawyers and the public who may thereby be misled.
In that case, contrary to the assertions of petitioners, the Court held as follows:
"There can be no controversy for it is a principle well-recognized, that it is within the
employer's legitimate sphere of management control of the business to adopt economic
policies or make some changes or adjustments in their organization or operations that
would insure profit to itself or protect the investment of its stockholders. As in the
exercise of such management prerogative, the employer may merge or consolidate its
business with another, or sell or dispose all or substantially all of its assets and
properties which may bring about the dismissal or termination of its employees in the
process. Such dismissal or termination should not however be interpreted in such a
manner as to permit the employer to escape payment of termination pay. . . . .
"In a number of cases on this point, the rule has been laid down that the sale or
disposition must be motivated by good faith as an element of exemption from liability.
Indeed, an innocent transferee of a business establishment has no liability to the
employees of the transferor to continue employing them. Nor is the transferee liable for

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past unfair labor practices of the previous owner, except, when the liability therefor is
assumed by the new employer under the contract of sale, or when liability arises
because of the new owner's participation in thwarting or defeating the rights of the
employees."
In other words, the liabilities of the previous owner to its employees are not enforceable
against the buyer or transferee, unless (1) the latter unequivocally assumes them; or (2)
the sale or transfer was made in bad faith. Thus, APT cannot be held responsible for the
monetary claims of petitioners who had been dismissed even before it actually took over
BISUDECO's assets.
II. Whether or not the claims of herein petitioners can be enforced against the
foreclosed properties of BISUDECO.
NO. It should be remembered that APT merely became a transferee of BISUDECO's
assets for purposes of conservation because of its lien on those assets — a lien it
assumed as assignee of the loan secured by the corporation from PNB. Subsequently,
APT, as the highest bidder in the auction sale, acquired ownership of the foreclosed
properties.
Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by
Republic Act No. 6715, which reads:
"Article 110. Worker's preference in case of bankruptcy. — In the event of bankruptcy or
liquidation of the employer's business, his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims shall be paid in full before the
claims of the Government and other creditors may be paid."
This Court has ruled in a long line of cases that under Articles 2241 and 2242 of the
Civil Code, a mortgage credit is a special preferred credit that enjoys preference with
respect to a specific/determinate property of the debtor. On the other hand, the worker's
preference under Article 110 of the Labor Code is an ordinary preferred credit. While
this provision raises the worker's money claim to first priority in the order of preference
established under Article 2244 of the Civil Code, the claim has no preference over
special preferred credits.
Thus, the right of employees to be paid benefits due them from the properties of their
employer cannot have any preference over the latter's mortgage credit. In other words,
being a mortgage credit, APT's lien on BISUDECO's mortgaged assets is a special
preferred lien that must be satisfied first before the claims of the workers.
Development Bank of the Philippines v. NLRC explained the rationale of this ruling as
follows:
". . . . A preference applies only to claims which do not attach to specific properties. A
lien creates a charge on a particular property. The right of first preference as regards
unpaid wages recognized by Article 110 does not constitute a lien on the property of the

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insolvent debtor in favor of workers. It is but a preference of credit in their favor, a
preference in application. It is a method adopted to determine and specify the order in
which credits should be paid in the final distribution of the proceeds of the insolvent's
assets. It is a right to a first preference in the discharge of the funds of the judgment
debtor. . . ."
Furthermore, workers' claims for unpaid wages and monetary benefits cannot be paid
outside of a bankruptcy or judicial liquidation proceedings against the employer. 26 It is
settled that the application of Article 110 of the Labor Code is contingent upon the
institution of those proceedings, during which all creditors are convened, their claims
ascertained and inventoried, and their preferences determined. Assured thereby is an
orderly determination of the preference given to creditors' claims; and preserved in
harmony is the legal scheme of classification, concurrence and preference of credits in
the Civil Code, the Insolvency Law, and the Labor Code.
The Court hastens to add that the present Petition was brought against APT alone. In
holding that the latter, which has never really been an employer of petitioners, is not
liable for their claims, this Court is not reversing or ruling upon their entitlement to back
wages and other unpaid benefits from their previous employer.

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 13.B.2. PHILIPPINE AIRLINES VS. ZAMORA (2007)
G.R. 166996

Facts:
On 1 February 2005, the Court of Appeals promulgated an Amended Decision
modifying its 13 August 2004 Decision but at the same time resolving petitioner PAL's
Motion for Reconsideration in this wise: WHEREFORE, this Court's August 13, 2004
decision is hereby AMENDED, the dispositive portion to read as follows:
WHEREFORE, in view of the foregoing, the petition is GRANTED. The NLRC
resolution dated April 27, 2001 is MODIFIED. Considering that petitioner is a
detention prisoner making reinstatement impossible, PAL is hereby ordered to
pay petitioner Zamora his separation pay, in lieu of reinstatement, to be
computed at one month salary for every year of service from February 9, 1981
and backwages to be computed from December 19, 1995, both up to October 1,
2000, the date of his incarceration.
Considering that PAL is still under receivership, the monetary claims of petitioner
Zamora must be presented to the PAL Rehabilitation Receiver, subject to the rules on
preference of credits. The Court of Appeals took into account respondent Zamora's
incarceration when it recalled its order of reinstatement. Anent its earlier
pronouncement against the suspension of the proceedings of the case owing to the
present rehabilitation of petitioner PAL, the appellate court only had this to say:
However, since PAL is still under receivership, the provisions of PD 902-A, should
apply. The enforcement of the monetary claims of petitioner should be brought before
the PAL Rehabilitation Receiver for proper disposition.
Issue:
Whether or not respondent Zamora’s monetary claim should be presented to the PAL
rehabilitation receiver, subject to the rules on preference of credits.
RULING:
No. The relevant law dealing with the suspension of actions for claims against
corporations is Presidential Decree No. 902-A, 52 as amended. The term "claim," as
contemplated in Sec. 6 (c) of Presidential Decree No. 902-A, refers "to debts or
demands of a pecuniary nature. It means 'the assertion of a right to have money paid.
It is plain from the foregoing provisions of law that "upon the appointment [by the SEC]
of a management committee or a rehabilitation receiver," all actions for claims against
the corporation pending before any court, tribunal or board shall ipso jure be suspended
The law is clear: upon the creation of a management committee or the appointment of a
rehabilitation receiver, all claims for actions "shall be suspended accordingly." No

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exception in favor of labor claims is mentioned in the law. Since the law makes no
distinction or exemptions, neither should this Court.
Otherwise stated, no other action may be taken in, including the rendition of judgment
during the state of suspension — what are automatically stayed or suspended are the
proceedings of an action or suit and not just the payment of claims during the execution
stage after the case had become final and executory.
The suspension of action for claims against a corporation under rehabilitation receiver
or management committee embraces all phases of the suit, be it before the trial court or
any tribunal or before this Court. Furthermore, the actions that are suspended cover all
claims against a distressed corporation whether for damages founded on a breach of
contract of carriage, labor cases, collection suits or any other claims of a pecuniary
nature. As to the appellate court's amended directive that "the monetary claims of
petitioner Zamora must be presented to the PAL Rehabilitation Receiver, subject to the
rules on preference of credits," the same is erroneous for there has been no declaration
of bankruptcy or judicial liquidation. Thus, the rules on preference of credits do not
apply.

Page | 81
 13.B.3 PHILIPPINE AIRLINES, INCORPORATED, petitioner, vs. PHILIPPINE
AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondent.

FACTS:
The case arose from a labor Complaint, filed by herein PALEA against herein PAL and
one Mary Anne del Rosario, charging them with unfair labor practice for the non-
payment of 13th month pay of employees who had not been regularized as of 30 April
1988, as allegedly stipulated in the CBA entered into by herein parties.

Respondent’s contentions:
It is of the view that all employees of PAL, whether regular or non-regular, should be
paid their
13th month pay. PALEA, filed a Complaint for unfair labor practice before the NLRC.
The union argued that “the cut-off period for regularization should not be used as the
parameter for granting [the] 13th month pay considering that the law does not
distinguish the status of employment but (sic) the law covers all employees.”

Petitioner’s contentions:
PAL informed PALEA that rank and file employees who were regularized after 30 April
1988
were not entitled to the 13th month pay as they were already given the Christmas bonus
in December of 1988, per the Implementing Rules of Presidential Decree No. 851.
In its Position Paper submitted before the LA, PAL countered that those rank and file
employees
who were not regularized by April 30 of a particularly year are, in principle, not denied
their 13th month pay, considering they received said mandatory bonus in the form of the
Christmas Bonus given to all its employees is deemed a compliance with P.D. 851 and
the latter’s implementing rules; and that the foregoing has been the practice and has
been formally adopted in the previous CBA’s as early as 1970.

LA Ruling:
The LA rendered his decision dismissing the complaint for lack of merit. It rules that PAL
was
not guilty of unfair labor practice in withholding the grant of the 13th Month Pay or Mid-
Year Bonus, as set out in Section 4 of the CBA, the concerned employees. The giving
of the particular bonus was said to be merely an addition practice made in the past,
“such being the case, it violated no agreement or existing practice or committed unfair
labor practice, as charged.”

NLRC Ruling:
On appeal to the NLRC, the assailed decision of the LA was reversed. The subsequent
motion for reconsideration filed by PAL was denied in a Resolution. Thereafter, PAL
filed a Petition for Review on Certiorari.

CA Ruling:

Page | 82
The CA held that “from the … provision of the said inter-office memo, employees who
are regulars of 30 April 1988 and those regularized thereafter, are entitled for (sic) the
payment of the nonregular employees as provided for under letter (c) of the Guidelines
issued."It reasoned that "if the intention is not to include employees regularized beyond
30 April 1988, they would not have placed letter (c)." The Court of Appeals further
rationalized that "well-settled is the rule that all doubts should be resolved in favor of
labor. To rule otherwise is a betrayal of our zealous commitment to uphold the
constitutional provision affording protection to labor." PAL seasonably moved for the
reconsideration of the CA decisions which was subsequently denied.

ISSUES:
WON a court or quasi-judicial agency amend or alter a Collective Bargaining Agreement
by expanding its coverage to non-regular employees who are not covered by the
bargaining unit

RULING:
The pertinent law concerning the suspension of actions for claims against corporations
is Presidential Decree No. 902-A, as amended. Particularly, Section 5 (d) “x x x In
addition to the regulatory adjudicative functions of the Securities and Exchange
Commission over corporations x x x decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving x x x Petitions of corporations x x x in
cases where the corporation, partnership or association has no sufficient assets to
cover its liabilities, but is under the [management of a rehabilitation receiver or]
management committee created x x x”

Likewise Section 6 (c) provides, x x x That upon appointment of a management

committee, the
rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims
against corporations, partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be suspended accordingly.
(Emphasis supplied.)

RULE:

The Securities and Exchange Commission (SEC) had mandated the rehabilitation of
PAL. On 17 May 1999, the SEC approved the "Amended and Restated Rehabilitation
Plan" of PAL and appointed a "permanent rehabilitation receiver for the latter." 21 To
date, PAL is still undergoing rehabilitation.

The term "claim", as contemplated in Sec. 6 (c) of Presidential Decree No. 902-A, refers
"to debts or demands of a pecuniary nature. It means 'the assertion of a right to have
money paid.'" In the case at bar, in the event that the present petition is found to be
without merit, PAL will be obliged to satisfy the pecuniary claims of PALEA — the
payment of the 13th Month Pay for the particular year to all rank and file employees
whether or not regularized by 30 April 1988.

Page | 83
The underlying principle behind the suspension of claims pending rehabilitation
proceedings was explained in the case of BF Homes, Incorporated v. Court of Appeals.
This Court clarified that:

In light of these powers, the reason for suspending actions for claims against the
corporation should not be difficult to discover. It is not really to enable the management
committee or the rehabilitation receiver to substitute the defendant in any pending
action against it before any court, tribunal, board or body. Obviously, the real
justification is to enable the management committee or rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extra-judicial interference that
might unduly hinder or prevent the "rescue" of the debtor company. To allow such other
action to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending
claims against the corporation instead of being directed toward its restructuring and
rehabilitation.

This Court's adherence to the above-stated rule has been resolute and steadfast as
evidenced by its oft-repeated application in a plethora of cases. If truth be told, there
have been several PAL cases to which said rule have been applied to.
In Philippine  Airlines, Inc.  v. National Labor Relations Commission ,  PAL questioned,
albeit via a Petition for Certiorari under Rule 65 of the Rules of Court, before us, the
decision of the NLRC awarding separation pay to Quijano, an employee of PAL. During
the pendency of the petition, however, PAL moved for the suspension of proceedings of
the case by virtue of the SEC order, which appointed an Interim Rehabilitation Receiver
for PAL. The employee, however, argued that the claim for separation pay may be
awarded despite PAL being under a state of receivership since said claim was secured
by the supersedeas bond posted by the employer. The employee maintained that the
suspension of proceedings provided in Section 6 (c) of Presidential Decree No. 902-
A refers to actions or suits for claims against corporations placed under receivership
and not to Petitions for Certiorari initiated by the corporation under receivership. In a
Resolution dated 4 September 2000, this Court granted PAL's motion elucidating that:
In Rubberworld (Phils.), Inc. v. NLRC, we held that worker's claims before the NLRC
and labor arbiters are included among the actions suspended upon the placing under
receivership of the employer-corporations. Although strictly speaking, the ruling
in Rubberworld dealt with actions for claims pending before the NLRC and labor
arbiters, we find that the rationale for the automatic suspension therein set out would
apply to the instant case where the employee's claim was elevated on certiorari  before
this Court, . . .
xxx xxx xxx
The Court holds that rendition of judgment while petitioner is under a state of
receivership could render violence to the rationale for suspension of payments in
Section 6 (c) of P.D. 902-A, if the judgment would result in the granting of private
respondent's claim to separation pay, thus defeating the basic purpose behind Section 6

Page | 84
(c) of P.D. 902-A which is to prevent dissipation of the distressed company's resources .
(Emphasis supplied.)

In actual fact, allowing such actions to proceed would only increase the work-load of the
management committee or the rehabilitation receiver, whose precious time and effort
would be dissipated and wasted in defending suits against the corporation, instead of
being channeled toward restructuring and rehabilitation. All told, this Court is
constrained to suspend the progress, development and other proceedings in the
present petition.

Page | 85
13.B.4. GARCIA VS. PHILIPPINE AIR LINES, G.R. NO. 164856, JANUARY 20, 2009

FACTS:

Philippine Airlines filed a case against its employees –herein petitioners for allegedly
caught in the act of sniffing shabu when a team of company security personnel and law
enforcers raided the PAL Technical Center’s Toolroom Section. After due notice, PAL
dismissed petitioner for transgressing company’s Code of Discipline prompting them to
file a Complaint for illegal dismissal which the Labor Arbiter (LA) in its decision ruled on
their favor ordering PAL to immediately comply with the reinstatement aspect of the
decision.

Prior to the judgment, SEC placed PAL under Interim Rehabilitation Receiver who
subsequently replaced by Permanent Rehabilitation Receiver. On appeal, NLRC
reversed said decision and dismissed petitioner’s complaint for lack of merit.
Subsequently, LA issued a Writ of Execution respecting the reinstatement aspect of his
decision. Respondent filed an Urgent Petition for Injunction with the NLRC.

The NLRC affirmed the validity of the Writ and the Notice issued by LA but suspended
and referred the action to the Rehabilitation Receiver for appropriate action. On appeal,
the appellate court partially granted the petition and effectively reinstated the NLRC
resolution insofar as it suspended the proceedings. By manifestation, respondent
informed the Court that SEC issued an Order granting its request to exit from
rehabilitation proceedings.

ISSUE:

Whether or not petitioner may collect their wages during the period between the LA’s
Order of reinstatement pending appeal and the NLRC decision overturning that of the
LA, now that PAL has exited from rehabilitation proceedings.

RULING:

A dismissed employee whose case was favorably decided by the LA is entitled to

receive wages
pending appeal upon reinstatement, which is immediately executory. Unless there is a
restraining order, it is ministerial upon the LA to implement the order of reinstatement
and it is mandatory on the employer to comply therewith. The Court reaffirms the
prevailing principle that even if the order of reinstatement of the LA is reversed on
appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the higher court. It
settles the view that the LA’s order of reinstatement is immediately executory and the
employer has to either re-admit them to work under the same terms and conditions
prevailing prior to their dismissal, or to reinstate them in the payroll, and that filing to
exercise the options in the alternative, employer must pay the employee’s salaries.

Page | 86
When reinstatement pending appeal aims to avert the continuing threat or danger to the
survival or even the life of the dismissed employee and his family, it does not
contemplate the period when the employer-corporation itself is similarly in a judicially
monitored state of being resuscitated in order to survive.

Page | 87
 13.C.1. Sapio vs. Undaloc Construction et al., G.R. No. 155034, May 22, 2008

FACTS
Petitioner filed against Undaloc Construction and/or Engineer Cirilo Undaloc for illegal
dismissal, underpayment of wages and nonpayment of statutory benefits. Respondent
Undaloc Construction, a single proprietorship owned by Cirilo Undaloc, is engaged in
road construction business in Cebu City.

Petitioner had been employed as watchman from 1 May 1995 to 30 May 1998 when he
was terminated on the ground that the project he was assigned to was already finished,
he being allegedly a project employee.  Petitioner asserted he was a regular employee
having been engaged to perform works which are “usually necessary or desirable” in
respondents’ business. He claimed that from 1 May to 31 August 1995 and from 1
September to 31 December 1995, his daily wage rate was only P80.00 and P90.00,
respectively, instead of P121.87 as mandated by Wage Order No. ROVII-03.  From 1
March 1996 to 30 May 1998, his daily rate was P105.00. He further alleged that he was
made to sign two payroll sheets, the first bearing the actual amount he received wherein
his signature was affixed to the last column opposite his name, and the second
containing only his name and signature.To buttress this allegation, petitioner presented
the payroll sheet covering the period from 4 to 10 December 1995 in which the entries
were written in pencil.  He also averred that his salary from 18 to 30 May 1998 was
withheld by respondents.

Respondent Cirilo Undaloc maintained that petitioner was hired as a project employee
on 1 May 1995 and was assigned as watchman from one project to another until the
termination of the project on 30 May 1998. Refuting the claim of underpayment,
respondent presented the payroll sheets from 2 September to 8 December 1996, 26
May to 15 June 1997, and 12 January to 31 May 1998.

ISSUES
Whether petitioner was entitled to the award of salary differential and attorney’s fees.

HELD
While the SC adhered to the position of the appellate court that the “tendency” to alter
the entries in the payrolls was not substantiated, it did subscribe to the total deletion of
the award of salary differential and attorney’s fees.

The Labor Arbiter erred in his computation, it granted a higher salary differential. He
fixed the daily wage rate actually received by petitioner at P105.00 without taking into
consideration the P141.00 rate indicated in the typewritten payroll sheets submitted by
respondents.  Moreover, the Labor Arbiter misapplied the wage orders when he wrongly
Page | 88
categorized respondent as falling within the first category. Based on the stipulated
number of employees and audited financial statements, respondents should have been
covered by the second category (which is lower).

The total salary differential that petitioner is lawfully entitled to amounts to P6,578.00.
However, pursuant to Section 12 of Republic Act (R.A.) No. 6727, as amended by R.A.
No. 8188.  Respondents are required to pay double the amount owed to petitioner,
bringing their total liability to P13,156.00.

Section 12. Any person, corporation, trust, firm, partnership, association or entity which
refuses or fails to pay any of the prescribed increases or adjustments in the wage rates
made in accordance with this Act shall be punished by a fine not less than Twenty-five
thousand pesos (P25,000.00) nor more than One hundred thousand pesos
(P100,000.00) or imprisonment of not less than two (2) years nor more than four (4)
years, or both such fine and imprisonment at the discretion of the court: Provided, That
any person convicted under this Act shall not be entitled to the benefits provided for
under the Probation Law.

The employer concerned shall be ordered to pay an amount equivalent to double the
unpaid benefits owing to the employees: Provided, That payment of indemnity shall not
absolve the employer from the criminal liability imposable under this Act.
           
If the violation is committed by a corporation, trust or firm, partnership, association or
any other entity, the penalty of imprisonment shall be imposed upon the entity’s
responsible officers, including, but not limited to, the president, vice president, chief
executive officer, general manager, managing director or partner. (Emphasis supplied)
         
The award of attorney’s fees is warranted under the circumstances of this case. Under
Article 2208 of the New Civil Code,attorney's fees can be recovered in actions for the
recovery of wages of laborers and actions for indemnity under employer's liability laws
but shall not exceed 10% of the amount awarded. The fees may be deducted from the
total amount due the winning party.

Page | 89
 13.C.2. Atty. Ortiz vs. San Miguel Corp., G.R. No. 151983-84, July 31, 2008

FACTS:

Petitioner, Jose Max S. Ortiz, is a member of the Philippine Bar who represented the
complainants in the Aguirre and Toquero Cases instituted against herein private
respondent San MIguel Corporation in 1992 and 1993.

The Complainants of these cases got a favorable decision in NLRC regarding  their
money claims against San Miguel Corporation. Failing to get a favorable ruling from the
NLRC in both the Aguirre and Toquero Cases, private respondent elevated the NLRC
Decisions to this Court via a Petition for Certiorari. While the private respondents
Petitions for Certiorari were pending before the Court of Appeals, all but one of the
remaining complainants in the Aguirre and Toquero Cases appeared on various dates
before two Labor Arbiters, and in the presence of two witnesses, signed separate
Deeds of Release, Waiver and Quitclaim in favor of private respondent.

Based on the Deeds they executed, the complainants agreed to settle their claims
against private respondent for amounts less than what the NLRC actually awarded.
Private respondent withheld 10% of the total amount agreed upon by the parties in the
said Deeds as attorney’s fees and handed it over to petitioner. Private respondent then
attached the Deeds of Release, Waiver and Quitclaim to its Manifestation and Motion
filed before the appellate court.Then the Court of Appeals rendered a Decision affirming
the NLRC Decisions, only insofar as it concerned complainant Alfredo Gadian, Jr.
(complainant Gadian), the only complainant who did not execute a Deed of Release,
Waiver and Quitclaim.

With respect to the other complainants in the Aguirre and Toquero Cases, their
complaints were dismissed on account of their duly executed Deeds of Release, Waiver
and Quitclaim. In a resolution dated January 9, 2002, the appellate court denied the
motion of complainant Gadiana and his counsel, herein petitioner, praying that the
award of attorney’s fees of 10% should be based on the monetary awards adjudged by
the NLRC.

Thus, this petition filed before the court praying to affirm the award of attorney’s fees
equivalent to 10% of the monetary award adjudged by the NLRC in its decisions in
Toquero and Aguirre Cases respectively.

ISSUE:
Page | 90
Whether or not Atty Ortiz is entitled to the amount of attorney’s fees adjudged by the
NLRC in its decisions in Toquero and Aguirre cases or only to the 10% of the amounts
actually paid to his clients, the complainants who signed the Deeds of Release, Waiver
and Quitclaim

HELD:
Article 111 of the Labor Code, as amended, specifically provides:

ART. 111. ATTORNEYS FEES. - (a) In cases of unlawful withholding of wages the
culpable party may be assessed attorneys fees equivalent to ten percent of the amount
of wages recovered.
(b) It shall be unlawful for any person to demand or accept, in any judicial or
administrative proceedings for the recovery of the wages, attorneys fees which exceed
ten percent of the amount of wages recovered. (Emphasis supplied.)

In PCL Shipping Philippines, Inc. v. National Labor Relations Commission citing Dr.
Reyes v. Court of Appeals, this Court enunciated that there are two commonly accepted
concepts of attorneys fees, the so-called ordinary and extraordinary. In its ordinary
concept, an attorneys fee is the reasonable compensation paid to a lawyer by his client
for the legal services the former has rendered to the latter. The basis of this
compensation is the fact of the attorneys employment by and his agreement with the
client. In its extraordinary concept, attorneys fees are deemed indemnity for damages
ordered by the court to be paid by the losing party in a litigation. The instances in which
these may be awarded are those enumerated in Article 2208 of the Civil Code,
specifically paragraph 7 thereof, which pertains to actions for recovery of wages, and is
payable not to the lawyer but to the client, unless they have agreed that the award shall
pertain to the lawyer as additional compensation or as part thereof. Article 111 of the
Labor Code, as amended, contemplates the extraordinary concept of attorneys fees.

Based on the foregoing, the attorneys fees awarded by the NLRC in its Decisions in the
Aguirre and Toquero Cases pertain to the complainants, petitioners clients, as
indemnity for damages; and not to petitioner as compensation for his legal services.
Records show that the petitioner neither alleged nor proved that his clients, the
complainants, willingly agreed that the award of attorneys fees would accrue to him as
an additional compensation or part thereof.What the complainants explicitly agreed to in
their individual Deeds of Release, Waiver, and Quitclaim was that the 10% attorneys
fees of the petitioner shall be deducted from the amount of the gross settlement.

Thus, this Court has no recourse but to interpret the award of attorneys fees by the
NLRC in its extraordinary concept. And since the attorneys fees pertained to the
complainants as indemnity for damages, it was totally within the complainants right to
Page | 91
waive the amount of said attorneys fees and settle for a lesser amount thereof in
exchange for the immediate end to litigation. Petitioner cannot prevent complainants
from compromising and/or withdrawing their complaints at any stage of the proceedings
just to protect his anticipated attorneys fees.

Even assuming arguendo that the complainants in the Aguirre and Toquero Cases did
indeed agree that the attorneys fees awarded by the NLRC should be considered in
their ordinary concept, i.e., as compensation for petitioners services, we refer back to
Article 111 of the Labor Code, as amended, which provides that the attorneys fees
should be equivalent to 10% of the amount of wages recovered. Since the complainants
decided to settle their complaints against the private respondent, the amounts actually
received by them pursuant to the Deeds of Release, Waiver and Quitclaim are the
amounts recovered and the proper basis for determining the 10% attorneys fees.

In the case at bar, it is beyond cavil that the petitioner is not the real party in interest;
hence, he cannot file this Petition to recover the attorneys fees as adjudged by the
NLRC in its Decisions dated 21 July 1995 and 25 July 1995 in the Aguirre and Toquero
Cases, respectively. To reiterate, the award of attorneys fees pertain to the prevailing
parties in the NLRC cases, namely, the complainants, all but one of whom no longer
pursued their complaints against private respondent after executing Deeds of Release,
Waiver and Quitclaim. Not being the party to whom the NLRC awarded the attorneys
fees, neither is the petitioner the proper party to question the non-awarding of the same
by the appellate court.

This would show that petitioner has been compensated for the services he rendered the
complainants. It may do well for petitioner to remember that as a lawyer, he is a
member of an honorable profession, the primary vision of which is justice. The practice
of law is a decent profession and not a money-making trade. Compensation should be
but a mere incident.

If petitioner earnestly believes that the amounts he already received are grossly
deficient, considering the substantial time and efforts he and his assistant lawyers
invested, as well as the personal money he expended for the prosecution of
complainants cases for more than seven or eight years, then petitioners remedy is not
against the private respondent, but against his own clients, the complainants. He should
file a separate action for collection of sum of money against complainants to recover
just compensation for his legal services, and not the present Petition for Review to claim
from private respondent the attorneys fees which were adjudged by the NLRC in favor
of complainants as the prevailing parties in the Aguirre and Toquero Cases.

WHEREFORE, the instant Petition is hereby DENIED.

Page | 92
Page | 93
 13.C.3. Masmud vs. NLRC et al., G.R. No. 183385, Feb. 13, 2009

Principle:
The decree of unconscionability or unreasonableness of a stipulated amount in a
contingent fee contract for attorney’s fees in its ordinary concept will not preclude
recovery. It merely justifies the fixing by the court of a reasonable compensation for the
lawyer's services.
A much higher compensation is allowed as contingent fees because of the risk that the
lawyer may get nothing if the suit fails. The Court finds nothing illegal in the contingent
fee contract between Atty. Go and Evangelina's husband. The CA committed no error of
law when it awarded the attorney's fees of Atty. Go and allowed him to receive an
equivalent of 39% of the monetary award.

FACTS:
Alexander, the husband of Evangelina filed a complaint against First Victory Shipping
Services for non-payment of permanent disability benefits, medical expenses, sickness
allowance, moral and exemplary damages, and attorney's fees.
Alexander engaged the services of Atty. Go on a contingent basis, as follows: twenty
percent (20%) of total monetary claims as settled or paid and an additional ten percent
(10%) in case of appeal.
On November 21, 2003, the Labor Arbiter (LA) rendered a Decision granting the
monetary claims of Alexander. Alexander's employer filed an appeal before the National
Labor Relations Commission (NLRC). During the pendency of the proceedings before
the NLRC, Alexander died. On April 30, 2004, the NLRC rendered a Decision
dismissing the appeal of Alexander's employer. On appeal before the CA, the decision
of the LA was affirmed with modification. Thereafter, Alexander’s employer appealed to
the Supreme Court. On February 6, 2006, the Court issued a Resolution dismissing the
case for lack of merit.
On January 10, 2005, the LA directed the NLRC Cashier to release the amount of
P3,454,079.20 to Evangelina. Evangelina paid only the amount of P680,000.00,
equivalent to 20% of the award as attorney's fees, thus, leaving a balance of 10%, plus
the award pertaining to the counsel as attorney's fees. In her comment, Evangelina
manifested that Atty. Go's claim for attorney's fees of 40% of the total monetary award
was null and void based on Article 111 of the Labor Code.

Page | 94
ISSUE:
Whether or not the legal compensation of a lawyer in a labor proceeding should be
based on Article 111 of the Labor Code.

RULING:
There are two concepts of attorney's fees. In the ordinary sense, attorney's fees
represent the reasonable compensation paid to a lawyer by his client for the legal
services rendered to the latter. On the other hand, in its extraordinary concept,
attorney's fees may be awarded by the court as indemnity for damages to be paid by
the losing party to the prevailing party, such that, in any of the cases provided by law
where such award can be made, e.g., those authorized in Article 2208 of the Civil Code,
the amount is payable not to the lawyer but to the client, unless they have agreed that
the award shall pertain to the lawyer as additional compensation or as part thereof.
Here, we apply the ordinary concept of attorney's fees, or the compensation that Atty.
Go is entitled to receive for representing Evangelina, in substitution of her husband,
before the labor tribunals and before the court. The retainer contract between Atty. Go
and Evangelina provides for a contingent fee. The contract shall control in the
determination of the amount to be paid, unless found by the court to be unconscionable
or unreasonable. Attorney's fees are unconscionable if they affront one's sense of
justice, decency or reasonableness. The decree of unconscionability or
unreasonableness of a stipulated amount in a contingent fee contract will not preclude
recovery. It merely justifies the fixing by the court of a reasonable compensation for the
lawyer's services.
Why Contingent Fee Contracts may have a higher %
Contingent fee contracts are subject to the supervision and close scrutiny of the court in
order that clients may be protected from unjust charges. The amount of contingent fees
agreed upon by the parties is subject to the stipulation that counsel will be paid for his
legal services only if the suit or litigation prospers. A much higher compensation is
allowed as contingent fees because of the risk that the lawyer may get nothing if the suit
fails. The Court finds nothing illegal in the contingent fee contract between Atty. Go and
Evangelina's husband. The CA committed no error of law when it awarded the
attorney's fees of Atty. Go and allowed him to receive an equivalent of 39% of the
monetary award.
Considering that Atty. Go successfully represented his client, it is only proper that he
should receive adequate compensation for his efforts. With his capital consisting of his
brains and with his skill acquired at tremendous cost not only in money but in
expenditure of time and energy, he is entitled to the protection of any judicial tribunal
against any attempt on the part of his client to escape payment of his just

Page | 95
compensation. It would be ironic if after putting forth the best in him to secure justice for
his client, he himself would not get his due.

Page | 96
13.C.4. Kaisahan at kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone
Union vs. Manila Water Company, G.R. No. 174179, November 16, 2011

Principle:
Ten percent (10%) attorney’s fees awarded by the NLRC on the basis of Article 111 of
the Labor Code accrue to the Union’s members as indemnity for damages and not to
the Union’s counsel as compensation for his legal services, unless, they agreed that the
award shall be given to their counsel as additional or part of his compensation. Further
Beyond the limit fixed by Article 111 of the Labor Code, such as between the lawyer and
the client, the attorney’s fees may exceed ten percent (10%) on the basis of quantum
meruit.

FACTS:
The Union is the duly-recognized bargaining agent of the rank-and-file employees of the
respondent Manila Water Company, Inc. while Borela is the Union President. In 1997,
the Metropolitan Waterworks and Sewerage System (MWSS) entered into a
Concession Agreement with the Company to privatize the operations of the MWSS. The
Agreement provides that “the Concessionaire shall grant its employees benefits no less
favorable than those granted to MWSS employees at the time of their separation from
MWSS.” Among the benefits enjoyed by the employees of the MWSS were the
amelioration allowance (AA) and the cost-of-living allowance (COLA). The payment of
the AA and the COLA was discontinued pursuant to Republic Act No. 6758, otherwise
known as the “Salary Standardization Law,” which integrated the allowances into the
standardized salary. The Company agreed to reinstate them upon renegotiation of the
parties’ CBA but however failed to give them. As a result, the Union and Borela filed a
complaint against the Company for payment of the AA, COLA, moral and exemplary
damages, legal interest, and attorney’s fees before the National Labor Relations
Commission (NLRC). In his decision of August 20, 2003, Labor Arbiter Aliman D.
Mangandog (LA) ruled in favor of the petitioners and ordered the payment of ten
percent (10%) attorney’s fees in addition to their benefits and interests. The award of
attorney’s fees was upheld by NLRC. However, this was reversed by the CA.

CA’s Decision: The additional grant of 10% attorney’s fees violates Article 111 of the
Labor Code considering that the MOA between the parties already ensured the
payment of 10% attorney’s fees, deductible from the AA and CBA receivables of the
Union’s members.

ISSUE:
Whether or not the workers are entitled to attorney’s fees.

RULING:
Yes. In the present case, the ten percent (10%) attorney’s fees awarded by the NLRC
on the basis of Article 111 of the Labor Code accrue to the Union’s members as
indemnity for damages and not to the Union’s counsel as compensation for his legal
services, unless, they agreed that the award shall be given to their counsel as additional
or part of his compensation; in this case the Union bound itself to pay 10% attorney’s

Page | 97
fees to its counsel under the MOA and also gave up the attorney’s fees awarded to the
Union’s members in favor of their counsel. This is supported by Borela’s affidavit which
stated that “[t]he 10% attorney’s fees paid by the members/employees is separate and
distinct from the obligation of the company to pay the 10% awarded attorney’s fees
which we also gave to our counsel as part of our contingent fee agreement.”[43] The
limit to this agreement is that the indemnity for damages imposed by the NLRC on the
losing party (i.e., the Company) cannot exceed ten percent (10%).

Properly viewed from this perspective, the award cannot be taken to mean an additional
grant of attorney’s fees, in violation of the ten percent (10%) limit under Article 111 of
the Labor Code since it rests on an entirely different legal obligation than the one
contracted under the MOA. Simply stated, the attorney’s fees contracted under the
MOA do not refer to the amount of attorney’s fees awarded by the NLRC; the MOA
provision on attorney’s fees does not have any bearing at all to the attorney’s fees
awarded by the NLRC under Article 111 of the Labor Code. Based on these
considerations, it is clear that the CA erred in ruling that the LA’s award of attorney’s
fees violated the maximum limit of ten percent (10%) fixed by Article 111 of the Labor
Code.

Under this interpretation, the Company’s argument that the attorney’s fees are
unconscionable as they represent 20% of the amount due or about P21.4 million is
more apparent than real. Since the attorney’s fees awarded by the LA pertained to the
Union’s members as indemnity for damages, it was totally within their right to waive the
amount and give it to their counsel as part of their contingent fee agreement. Beyond
the limit fixed by Article 111 of the Labor Code, such as between the lawyer and the
client, the attorney’s fees may exceed ten percent (10%) on the basis of quantum meruit
(a reasonable sum of money to be paid for services rendered or work done when the
amount due is not stipulated in a legally enforceable contract).

Page | 98
 13.C.5 MALVAR VS. KRAFT FOOD PHILS INC. ET AL.,
G.R. No. 183952, Sept. 9, 2013

FACTS:
1. On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as
its Corporate Planning Manager. From then on, she gradually rose from the ranks,
becoming in 1996 the Vice President for Finance in the Southeast Asia Region of Kraft
Foods International (KFI), KFPI’s mother company.
2. On November 29, 1999, respondent Bienvenido S. Bautista, as Chairman of the
Board of KFPI and concurrently the Vice President and Area Director for Southeast Asia
of KFI, sent Malvar a memo directing her to explain why no administrative sanctions
should be imposed on her for possible breach of trust and confidence and for willful
violation of company rules and regulations.
3. On March 16, 2000, petitioner was served a notice of termination.
4. Malvar filed a complaint for illegal suspension and illegal dismissal against KFPI and
Bautista in the National Labor Relations Commission (NLRC). In a decision dated April
30, 2001, the Labor Arbiter found and declared her suspension and dismissal illegal,
and ordered her reinstatement, and the payment of her full backwages, inclusive of
allowances and other benefits, plus attorney’s fees.
5. On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but
additionally ruled that Malvar was entitled to “any and all stock options and bonuses she
was entitled”
6. Respondents sought the reconsideration but was denied by NLRC.
7. Respondents assailed the adverse outcome before the CA on certiorari.
8. After the judgment in favor of petitioner Malvar became final and executory on March
14, 2006, Malvar moved for the issuance of a writ of execution.
9. Both parties appealed the computation on several motions.
10. On December 9, 2010, while Malvar’s appeal was pending in this Court, Malvar and
the respondents entered into a compromise agreement.
11. Malvar withdrew the appeal for the case.
12. An intervention was entered into by the counsel of Malvar for making both Malvar
and Respondents who entered into a compromise agreement, jointly and severaly
ordered to pay the Intevenor’s contigent attorney’s fee.
13. It appears that in July 2009, to the Intervenor’s surprise, Malvar unceremoniously
and

Page | 99
without any justifiable reason terminated its legal service and required it to withdraw
from the case.
14. The Intervenor prays for the following reliefs:
a) Granting the Motion for Intervention to Protect Attorney’s Rights in favor of the
Intervenor;
b) Directing both Petitioner and Respondents jointly and severally to pay Intervenor its
contingent fees;
c) Granting a lien upon all judgments for the payment of money and executions issued
in
pursuance of such judgments; and
d) Holding in Abeyance in the meantime the Resolution of the Motion to
Dismiss/Withdraw Case filed by Petitioner and granting the Motion only after Intervenor
has been fully paid its just compensation; and
e) Other reliefs just and equitable.
ISSUES:
1. Whether or not Malvar’s motion to dismiss the petition on the ground of the execution
of the compromise agreement was proper.
2. Whether or not the Motion for Intervention to protect attorney’s rights can prosper,
and, if so, how much could it recover as attorney’s fees.
RULING:
A compromise agreement is a contract, whereby the parties undertake reciprocal
obligations to avoid litigation, or put an end to one already commenced. The client may
enter into a compromise agreement with the adverse party to terminate the litigation
before a judgment is rendered therein If the compromise agreement is found to be in
order and not contrary to law, morals, good customs and public policy, its judicial
approval is in order.
A client may at any time dismiss his attorney or substitute another in his place, but if the
contract between client and attorney has been reduced to writing and the dismissal of
the attorney was without justifiable cause, he shall be entitled to recover from the client
the full compensation stipulated in the contract. However, the attorney may, in the
discretion of the court, intervene in the case to protect his rights. For the payment of his
compensation the attorney shall have a lien upon all judgments for the payment of
money, and executions issued in pursuance of such judgment, rendered in the case
wherein his services had been retained by the client.

Page | 100
On considerations of equity and fairness, the Court disapproves of the tendencies of
clients compromising their cases behind the backs of their attorneys for the purpose of
unreasonably reducing or completely setting to naught the stipulated contingent fees.
Thus, the Court grants the Intervenor’s Motion for Intervention to Protect Attorney’s
Rights as a measure of protecting the Intervenor’s right to its stipulated professional
fees that would be denied under the compromise agreement. The Court does so in the
interest of protecting the rights of the practicing Bar rendering professional services on
contingent fee basis.
The unusual timing of Malvar’s letter terminating the Intervenor’s legal representation of
her, of her Motion to Dismiss/Withdraw Case, and of the execution of compromise
agreement manifested her desire to evade her legal obligation to pay to the Intervenor
its attorney’s fees for the legal services rendered. The objective of her withdrawal of the
case was to release the respondents from all her claims and causes of action in
consideration of the settlement. In other words, she thereby waived more than what she
was lawfully expected to receive from the respondents.
Secondly, the respondents suddenly turned around from their strong stance of berating
her demand as offensive to all precepts of justice and fair play and as a form of unjust
enrichment for her to a surprisingly generous surrender to her demand. Under such
circumstances, it is plausible to conclude that her termination of the Intervenor’s
services was instigated by their prodding in order to remove the Intervenor from the
picture for being a solid obstruction to the settlement for a much lower liability, and
thereby save for themselves and for her some more amount.
Thirdly, the compromise agreement was silent on the Intervenor’s contingent fee,
indicating that the objective of the compromise agreement was to secure a huge
discount from its liability towards Malvar.
The waiver could not negate the Intervenor’s right to 10% of the value of the stock
options she was legally entitled to under the decisions of the NLRC and the CA, for that
right was expressly stated in the written agreement between her and the Intervenor.
Thus, the Intervenor should be declared entitled to recover full compensation in
accordance with the written agreement because it did not assent to the waiver of the
stock options, and did not waive its right to that part of its compensation.
The Court approved the compromise agreement and it granted the Motion for
Intervention to Protect Attorney’s Rights; and ordered Czarina T. Malvar and
respondents Kraft Food Philippines, Inc. and Kraft Foods International to jointly and
severally pay to Intervenor Law Firm, represented by Retired Associate Justice Josue
N. Bellosillo, its stipulated contingent fees of 10% of P41,627,593.75, and the further
sum equivalent to 10% of the value of the stock option.

Page | 101
 13.C.6. T&H Shopfitters Corporation/Gin Queen Corporation v. T&H Shopfitters
Corporation/Gin Queen Corporation Workers Union
G.R. No. 183952, Sept. 9, 2013

FACTS:

Respondent filed a complaint of unfair labor practice by way of union busting and illegal
lockout with moral and exemplary damages and attorney’s fees against Petitioners.

The unfair labor practice done by petitioners consisted of (1) not giving respondents
regular work assignments; (2) made respondents to work as grass cutters in Zambales;
(3) exclusion of respondents from a company field trip; (4) petitioners putting pressure
to respondents during the certification election of the union; (5) retrenching of petitioner
by lowering the work week to 3 days/month after the certification election.

The LA dismissed the complaint, but on appeal NLRC reversed the decision stating that
it may be concluded that the petitioners committed unfair labor practice acts consisting
in interfering with the exercise of the employees’ right to self-organization and
discriminating in regard to conditions of employment in order to discourage union
membership. Hence the present petition

ISSUE:
Whether or not Petitioners are liable to the Respondents for Unfair Labor Practice;
Whether or not the award of 10% attorney’s fees in favor of respondents is proper.

HELD:
Petition DENIED; 10% attorney’s fees deleted for respondent’s failure to prove.

ON THE UNFAIR LABOR PRACTICE.

Indubitably, the various acts of petitioners, taken together, reasonably support an
inference that, indeed, such were all orchestrated to restrict respondents’ free exercise
of their right to self-organization. The Court is of the considered view that petitioners’
undisputed actions prior and immediately before the scheduled certification election,
while seemingly innocuous, unduly meddled in the affairs of its employees in selecting
their exclusive bargaining representative.

ON THE 10% ATTORNEY’S FEES

Anent the issue on the award of attorney's fees, the applicable law concerning the grant
thereof in labor cases is Article 111 of the Labor Code. Pursuant thereto, the award of
10% attorney's fees is limited to cases of unlawful withholding of wages. In this case,
however, the Court cannot find any claim or proof that petitioners unlawfully withheld the
Page | 102
wages of respondents. Consequently, the grant of 10% attorney's fees in favor of
respondents is not justified under the circumstances. Accordingly, the Court deems it
proper to delete the same.

Page | 103
 14.A.1. Bernardo vs. NLRC, 310 SCRA 186 [1999]

Principle:
Magna Carta for Disabled Persons – No disabled person shall be denied access to
opportunities for suitable employment. A qualified disabled employee shall be subject to
the same terms and conditions of employment and the same compensation, privileges,
benefits, fringe benefits, incentives or allowances as a qualified able-bodied person.
Thus, a disabled person who performs a job that is necessary or essential to the
business of an employer may be deemed regular. Employment of at least 1 year
whether continuous or broken creates and evidence that work done is necessary or
essential to the business.

Facts:
Petitioners are deaf-mutes who were hired by Far Eastern Bank and Trust Company as
Money sorters and counters through an Employed Contract for Handicapped Workers
and that they were rehired by virtue of subsequent contract renewals. Petitioners
claimed that they are regular employees of the bank. On the other hand, the bank
denied such contention and contended instead that were special class of workers and
were hired under a special employment arrangement which was effected by reason of
propositions of various civic and political personalities to whom the bank granted such
proposal and that the contracts they entered stated that they could not become
regular employees. Further, the bank contended that the jobs that they did were part
and parcel of the jobs of the tellers of the bank. Thus, the tasks performed did not
create a new position. Petitioners maintain that they should be considered regular
employees, because their task as money sorters and counters was necessary and
desirable to the business of respondent bank. They further allege that their contracts
served merely to preclude the application of Article 280 and to bar them from becoming
regular employees.
Issue:
WON petitioners can be considered as regular employees of the bank?
Held:
Petitioners are regular employees.
Respondent bank entered into the aforesaid contract with a total of 56 handicapped
workers and renewed the contracts of 37 of them. In fact, two of them worked from 1988
to 1993. Verily, the renewal of the contracts of the handicapped workers and the hiring
of others lead to the conclusion that their tasks were beneficial and necessary to the

Page | 104
bank. More important, these facts show that they were qualified to perform the
responsibilities of their positions. In this light, the Magna Carta for Disabled Persons
mandates that a qualified disabled employee should be given the same terms and
conditions of employment as a qualified able-bodied person. Section 5 of the Magna
Carta provides:
Section 5. Equal Opportunity for Employment. No disabled person shall be denied
access to opportunities for suitable employment. A qualified disabled employee shall be
subject to the same terms and conditions of employment and the same compensation,
privileges, benefits, fringe benefits, incentives or allowances as a qualified able bodied
person.
On the other hand, Art. 280 provides:
ART. 280. Regular and Casual Employment. -- The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
The primary standard, therefore, of determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the
usual trade or business of the employer. The test is whether the former is usually
necessary or desirable in the usual business or trade of the employer. The connection
can be determined by considering the nature of the work performed and its relation to
the scheme of the particular business or trade in its entirety. Also, if the employee has
been performing the job for at least one year, even if the performance is not continuous
and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity
to the business. Hence, the employment is considered regular, but only with respect to
such activity, and while such activity exists. Without a doubt, the task of counting and
sorting bills is necessary and desirable to the business of respondent bank. 

Page | 105
 14.B.1 PT&T vs. NLRC, 272 SCRA 596 [1997]

Facts:
PT&T (Philippine Telegraph & Telephone Company) initially hired Grace de Guzman
specifically as “Supernumerary Project Worker”, for a fixed period from November 21,
1990 until April 20, 1991 as reliever for C.F. Tenorio who went on maternity leave.  She
was again invited for employment as replacement of Erlina F. Dizon who went on leave
on 2 periods, from June 10, 1991 to July 1, 1991 and July 19, 1991 to August 8, 1991. 

On September 2, 1991, de Guzman was again asked to join PT&T as a probationary

employee where probationary period will cover 150 days.  She indicated in the portion
of the job application form under civil status that she was single although she had
contracted marriage a few months earlier. When petitioner learned later about the
marriage, its branch supervisor, Delia M. Oficial, sent de Guzman a memorandum
requiring her to explain the discrepancy.  Included in the memorandum, was a reminder
about the company’s policy of not accepting married women for employment.  She was
dismissed from the company effective January 29, 1992.  Labor Arbiter handed down
decision on November 23, 1993 declaring that petitioner illegally dismissed De Guzman,
who had already gained the status of a regular employee.  Furthermore, it was apparent
that she had been discriminated on account of her having contracted marriage in
violation of company policies.

Issue: 
Whether the alleged concealment of civil status can be grounds to terminate the
services of an employee.

Ruling:
Article 136 of the Labor Code, one of the protective laws for women, explicitly prohibits
discrimination merely by reason of marriage of a female employee.  It is recognized that
company is free to regulate manpower and employment from hiring to firing, according
to their discretion and best business judgment, except in those cases of unlawful
discrimination or those provided by law.

PT&T’s policy of not accepting or disqualifying from work any woman worker who
contracts marriage is afoul of the right against discrimination provided to all women

Page | 106
workers by our labor laws and by our Constitution.  The record discloses clearly that de
Guzman’s ties with PT&T were dissolved principally because of the company’s policy
that married women are not qualified for employment in the company, and not merely
because of her supposed acts of dishonesty.

The government abhors any stipulation or policy in the nature adopted by PT&T.  As
stated in the labor code: 
“ART. 136. Stipulation against marriage. — It shall be unlawful for an employer to
require as a condition of employment or continuation of employment that a woman shall
not get married, or to stipulate expressly or tacitly that upon getting married, a woman
employee shall be deemed resigned or separated, or to actually dismiss, discharge,
discriminate or otherwise prejudice a woman employee merely by reason of marriage.”

The policy of PT&T is in derogation of the provisions stated in Art.136 of the Labor Code
on the right of a woman to be free from any kind of stipulation against marriage in
connection with her employment and it likewise is contrary to good morals and public
policy, depriving a woman of her freedom to choose her status, a privilege that is
inherent in an individual as an intangible and inalienable right.  The kind of policy
followed by PT&T strikes at the very essence, ideals and purpose of marriage as an
inviolable social institution and ultimately, family as the foundation of the nation.  Such
policy must be prohibited in all its indirect, disguised or dissembled forms as
discriminatory conduct derogatory of the laws of the land not only for order but also
imperatively required.

Page | 107
 14.B.2. Del Monte Phils vs. Velasco, G.R. No. 153477, March 6, 2007

Facts:
Velasco started working with Del Monte Philippines (petitioner) on October 21, 1976 as
a seasonal employee and was regularized on May 1, 1977. Her latest assignment was
as Field Laborer. On June 16, 1987, respondent was warned in writing due to her
absences. On May 4, 1991, respondent, thru a letter, was again warned in writing by
petitioner about her absences without permission and a forfeiture of her vacation leave
entitlement for the year 1990-1991 was imposed against her. On September 14, 1992,
another warning letter was sent to respondent regarding her absences without
permission during the year 1991-1992. Her vacation entitlement for the said
employment year affected was consequently forfeited.

In view of the said alleged absences without permission, on September 17, 1994, a
notice of hearing was sent to respondent notifying her of the charges filed against her
for violating the Absence Without Official Leave rule: that is for excessive absence
without permission on August 15-18, 29-31 and September 1-10, 1994. Respondent
having failed to appear on September 23, 1994 hearing, another notice of hearing was
sent to her resetting the investigation on September 30, 1994. It was again reset to
October 5, 1994. After hearing, the petitioner terminated the services of respondent
effective January 16, 1994 due to excessive absences without permission.

Issue:
Whether the employment of respondent had been terminated on account of her
pregnancy.

Ruling:
Respondent's sickness was pregnancy-related and, therefore, the petitioner cannot
terminate respondent's services because in doing so, petitioner will, in effect, be
violating the Labor Code which prohibits an employer to discharge an employee on
account of the latter's pregnancy. Article 137 of the Labor Code provides: that it shall be
unlawful for any employer: (1) To deny any woman employee the benefits provided for
in this Chapter or to discharge any woman employed by him for the purpose of
preventing her from enjoying any of the benefits provided under this Code; (2) To
discharge such woman on account of her pregnancy, while on leave or in confinement

Page | 108
due to her pregnancy; or (3) To discharge or refuse the admission of such woman upon
returning to her work for fear that she may again be pregnant.

Respondent was able to subsequently justify her absences in accordance with company
rules and policy; that the respondent was pregnant at the time she incurred the
absences; that this fact of pregnancy and its related illnesses had been duly proven
through substantial evidence; that the respondent attempted to file leaves of absence
but the petitioner's supervisor refused to receive them; that she could not have filed
prior leaves due to her continuing condition; and that the petitioner, in the last analysis,
dismissed the respondent on account of her pregnancy, a prohibited act.

Petitioner terminated the services of respondent on account of her pregnancy which

justified her absences and, thus, committed a prohibited act rendering the dismissal
illegal.

Page | 109
 14.F.1. Remington Industrial Sales Corp., vs. Castaneda,
G.R. No. 169295-96, Nov. 20, 2006 citing Apex Mining

Facts:
Erlinda alleged that she started working in August 1983 as company cook with a
salary of Php 4,000.00 for Remington, a corporation engaged in the trading business;
that she worked for six (6) days a week, starting as early as 6:00 a.m. because she had
to do the marketing and would end at around 5:30 p.m., or even later, after most of the
employees, if not all, had left the company premises; that she continuously worked with
Remington until she was unceremoniously prevented from reporting for work when
Remington transferred to a new site in Edsa, Caloocan City.

She averred that she reported for work at the new site in Caloocan City on
January 15, 1998, only to be informed that Remington no longer needed her services.
Erlinda believed that her dismissal was illegal because she was not given the notices
required by law; hence, she filed her complaint for reinstatement without loss of
seniority rights, salary differentials, service incentive leave pay, 13th month pay and
10% attorney's fees.

Remington denied that it dismissed Erlinda illegally. It posited that Erlinda was a
domestic helper, not a regular employee; Erlinda worked as a cook and this job had
nothing to do with Remington's business of trading in construction or hardware
materials, steel plates and wire rope products. It also contended that contrary to
Erlinda's allegations that the (sic) she worked for eight (8) hours a day, Erlinda's duty
was merely to cook lunch and "merienda", after which her time was hers to spend as
she pleased. Allegedly, it was Erlinda who refused to report for work when Remington
moved to a new location in Caloocan City.

The Labor Arbiter dismissed the complaint and ruled that the respondent was a
domestic helper in the service of Remington’s Managing Director. Upon appeal, the
National Labor Relations Commission reversed the Labor Arbiter. The Court of Appeals
affirmed the NLRC.

Issue:
Whether or not the respondent was petitioner's regular employee and not a
domestic helper.

Page | 110
Ruling:
Yes, respondent was petitioner’s regular employee. Petitioner relies heavily on
the affidavit of a certain Mr. Antonio Tan and contends that respondent is the latter's
domestic helper and not a regular employee of the company since Mr. Tan has a
separate and distinct personality from the petitioner. It maintains that it did not exercise
control and supervision over her functions; and that it operates as a trading company
and does not engage in the restaurant business, and therefore respondent's work as a
cook, which was not usually necessary or desirable to its usual line of business or trade,
could not make her its regular employee.

This argument is unmeritorious. In Apex Mining Company, Inc. v. NLRC, the

Supreme Court held that a househelper in the staff houses of an industrial company
was a regular employee of the said firm.

Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended, the terms
"househelper" or "domestic servant" are defined as follows:
"The term 'househelper' as used herein is synonymous to the term 'domestic
servant' and shall refer to any person, whether male or female, who renders
services in and about the employer's home and which services are usually
necessary or desirable for the maintenance and enjoyment thereof, and
ministers
exclusively to the personal comfort and enjoyment of the employer's family."

The foregoing definition clearly contemplates such househelper or domestic

servant who is employed in the employer's home to minister exclusively to the personal
comfort and enjoyment of the employer's family. The criteria is the personal comfort and
enjoyment of the family of the employer in the home of said employer. While it may be
true that the nature of the work of a househelper, domestic servant or laundrywoman in
a home or in a company staffhouse may be similar in nature, the difference in their
circumstances is that in the former instance they are actually serving the family while in
the latter case, whether it is a corporation or a single proprietorship engaged in
business or industry or any other agricultural or similar pursuit, service is being
rendered in the staffhouses or within the premises of the business of the employer. In
such instance, they are employees of the company or employer in the business
concerned entitled to the privileges of a regular employee.

Page | 111
 Petitioner contends that it is only when the househelper or domestic servant is
assigned to certain aspects of the business of the employer that such househelper or
domestic servant may be considered as such an employee. The Court finds no merit in
making any such distinction. The mere fact that the househelper or domestic servant is
working within the premises of the business of the employer and in relation to or in
connection with its business, as in its staffhouses for its guest or even for its officers and
employees, warrants the conclusion that such househelper or domestic servant is and
should be considered as a regular employee of the employer and not as a mere family
househelper or domestic servant as contemplated in Rule XIII, Section 1(b), Book 3 of
the Labor Code, as amended.

In the case at bar, the petitioner itself admits in its position paper that respondent
worked at the company premises and her duty was to cook and prepare its employees'
lunch and merienda. Clearly, the situs, as well as the nature of respondent's work as a
cook, who caters not only to the needs of Mr. Tan and his family but also to that of the
petitioner's employees, makes her fall squarely within the definition of a regular
employee under the doctrine enunciated in the Apex Mining case. That she works within
company premises, and that she does not cater exclusively to the personal comfort of
Mr. Tan and his family, is reflective of the existence of the petitioner's right of control
over her functions, which is the primary indicator of the existence of an employer-
employee relationship.

Page | 112
 14.F.2. Co vs. Vargas, G.R. No. 195167, November 16, 2011

Facts:

Respondent alleged that she started working at the bakeshop in October 1994 as a
baker and worked from 8:00 a.m. until 8:30 p.m., Monday to Saturday. Aside from
baking, respondent also served the customers and supervised the other workers in the
absence of the owner. Furthermore, respondent claimed that she sometimes cooked
and did the chores of a housemaid whenever the latter was not available. Respondent
had a salary of P220 per day, which she received every Saturday afternoon. During the
period of her employment, respondent was not given a payslip and she was never
asked to sign a payroll.

On 6 April 2003, petitioner Co's wife, Nely Co, told respondent to cook their lunch
because the housemaid was ironing clothes. Since respondent was busy preparing
customers' orders, she lost track of time and was unable to cook lunch as instructed.
Irate at respondent's failure to cook, Nely Co cussed respondent and told her to leave
and never to return because she was not needed anymore. Respondent was so
humiliated and could no longer bear the treatment she received from her employers that
she decided to take her salary and leave that same day. Respondent later filed the
complaint against Nathaniel Bakeshop and its owner Fernando Co.
The Labor Arbiter found that the place of business of petitioner is the same as his place
of residence and that respondent works for petitioner as well as for his business which
is based in his home. The NLRC reversed and set aside the Labor Arbiter's Decision.
The Court of Appeals promulgated its Decision in favor of respondent.

Issue:
Whether the "Court of Appeals erred in ruling that at the time Respondent was working
with the Co family, the business was being conducted at the residence."

Ruling:

The issue raised by petitioner is clearly a question of fact which requires a review of the
evidence presented. The Supreme Court is not a trier of facts.  It is not the function of
this Court to examine, review or evaluate the evidence all over again,  specially on
evidence raised for the first time on appeal.

Page | 113
A petition for review under Rule 45 of the Rules of Court should cover only questions of
law, thus:

Section 1.Filing of petition with Supreme Court. — A party desiring to appeal

by certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The petition
shall raise only questions of law which must be distinctly set forth.

As a rule, the findings of fact of the Court of Appeals are final and conclusive and this
Court will not review them on appeal, subject to exceptions such as those enumerated
by this Court in Development Bank of the Philippines v. Traders Royal Bank: 

The jurisdiction of the Court in cases brought before it from the appellate court is limited
to reviewing errors of law, and findings of fact of the Court of Appeals are conclusive
upon the Court since it is not the Court's function to analyze and weigh the evidence all
over again. Nevertheless, in several cases, the Court enumerated the exceptions to the
rule that factual findings of the Court of Appeals are binding on the Court: (1) when the
findings are grounded entirely on speculations, surmises or conjectures; (2) when the
inference made is manifestly mistaken, absurd or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when in making its findings the Court of
Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are contrary to
that of the trial court; (8) when the findings are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the petition as well as
in the petitioner's main and reply briefs are not disputed by the respondent; (10) when
the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; or (11) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion. 

Petitioner failed to show that this case falls under any of the exceptions. The finding of
the Labor Arbiter that petitioner's bakery and his residence are located at the same
place was not reversed by the NLRC.  Furthermore, the Court of Appeals upheld this
finding of the Labor Arbiter.

Page | 114
 14.L.1 University of the East et al., vs. Pepanio, G.R. No. 193897, Jan. 23, 2013

Facts:
In 1992, DECS issued the Revised Manual of Regulations for Private Schools, which
requires college faculty members to have a master's degree as a minimum educational
qualification for acquiring regular status.

University of the East hired respondent Mariti D. Bueno (Bueno) in 1997 and
respondent Analiza F. Pepanio (Pepanio) in 2000, both on a semester-to-semester
basis to teach in its college. During this time, the 1994 CBA was still in force. It provided
that UE shall extend only semester-to-semester appointments to college faculty staffs
who did not possess the minimum qualifications. Meantime, DECS-CHED-TESDA-
DOLE Joint Order 1 was issued which provides that “teaching or academic personnel
who do not meet the minimum academic qualifications shall not acquire tenure or
regular status.”

Then in 2001, UE and the faculty union entered into a new CBA that would have the
school extend probationary full-time appointments to full-time faculty members who did
not yet have the required postgraduate degrees provided that the latter would obtain
such requirement during their probationary period. Hence, UE extended probationary
appointments to Bueno and Pepanio. The two, however, failed to obtain post-graduate
degrees.

UE informed Bueno and Pepanio that their probationary status is about to expire since
they lack the required post-graduate qualification. However, Bueno and Pepanio
demanded that they should be considered as regular employees since they were hired
in 1997 and 2000, when what was in force was the 1994 CBA which did not require a
master’s degree before attaining regular status. UE did not heed to their demands.

Thus, they filed a case for illegal dismissal before the Labor Arbiter. The LA ruled in
their favor. Dissatisfied, UE appealed to the NLRC. The NLRC reversed the LA’s ruling.
On petition for certiorari, the Court of Appeals rendered a Decision reinstating the LA’s
Decision by reason of technicality. This prompted UE to file the present petition.

Issue:
Whether Bueno and Pepanio were validly terminated from their employment?

Page | 115
Ruling:

The policy requiring postgraduate degrees of college teachers was provided in the
Manual of Regulations as early as 1992. Indeed, recognizing this, the 1994 CBA
provided even then that UE was to extend only semester-to-semester appointments to
college faculty staffs, like Bueno and Pepanio, who did not possess the minimum
qualifications for their positions.

Besides, as the Court held in Escorpizo v. University of Baguio, a school CBA must be
read in conjunction with statutory and administrative regulations governing faculty
qualifications. Such regulations form part of a valid CBA without need for the parties to
make express reference to it. While the contracting parties may establish such
stipulations, clauses, terms and conditions, as they may see fit, the right to contract is
still subject to the limitation that the agreement must not be contrary to law or public
policy.

Here, UE gave Bueno and Pepanio more than ample opportunities to acquire the
postgraduate degree required of them. But they did not take advantage of such
opportunities. Justice, fairness, and due process demand that an employer should not
be penalized for situations where it had little or no participation or control.

NLRC’s decision is reinstated.

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 14.L.2 Colegio Del Santisimo Rosario et al., vs. Rojo,
G.R. No. 170388, Sept. 4, 2013 citing Mercado et al., vs. AMA Computer College-
Paranaque City, GR No. 183572, April 13, 2010
Facts:
Colegio del Santisimo Rosario (CSR) hired Rojo as a high school teacher on
probationary basis for the school years 1992-1993, 1993-1994 and 1994-1995.
On April 5, 1995, CSR, through petitioner Sr. Zenaida S. Mofada, OP (Mofada), decided
not to renew respondent’s services.
Thus, on July 13, 1995, respondent filed a Complaint for illegal dismissal. He alleged
that since he had served three consecutive school years which is the maximum number
of terms allowed for probationary employment, he should be extended permanent
employment. Citing paragraph 75 of the 1970 Manual of Regulations for Private Schools
(1970 Manual), respondent asserted that "full- time teachers who have rendered three
(3) consecutive years of satisfactory services shall be considered permanent
On the other hand, petitioners argued that respondent knew that his Teacher’s Contract
for school year 1994-1995 with CSR would expire on March 31, 1995.12 Accordingly,
respondent was not dismissed but his probationary contract merely expired and was not
renewed. Petitioners also claimed that the "three years" mentioned in paragraph 75 of
the 1970 Manual refer to "36 months," not three school years. And since respondent
served for only three school years of 10 months each or 30 months, then he had not yet
served the "three years" or 36 months mentioned in paragraph 75 of the 1970 Manual.
The LA ruled that "three school years" means three years of 10 months, not 12 months.
Considering that respondent had already served for three consecutive school years,
then he has already attained regular employment status. Thus, the non-renewal of his
contract for school year 1995-1996 constitutes illegal dismissal.
On appeal, the NLRC affirmed the LA’s Decision with modification. It held that after
serving three school years, respondent had attained the status of regular employment
especially because CSR did not make known to respondent the reasonable standards
he should meet
The NLRC also agreed with the LA that respondent’s termination was done in bad faith.
It held that respondent is entitled to reinstatement, if viable; or separation pay, if
reinstatement was no longer feasible, and back wages.
According to the CA, respondent has attained the status of a regular employee after he
was employed for three consecutive school years as a full-time teacher and had served
CSR satisfactorily. Aside from being a high school teacher, he was also the Prefect of
Discipline, a task entailing much responsibility. The only reason given by Mofada for not
renewing respondent’s contract was the alleged expiration of the contract, not any
unsatisfactory service. Also, there was no showing that CSR set performance standards

Page | 117
for the employment of respondent, which could be the basis of his satisfactory or
unsatisfactory performance. Hence, there being no reasonable standards made known
to him at the time of his engagement, respondent was deemed a regular employee and
was, thus, declared illegally dismissed when his contract was not renewed.

ISSUE:
The main issue revolves if there is automatic permanency after the teacher served for
certain period as probationary period with satisfactory performance.

HELD:
In Mercado v. AMA Computer College-Parañaque City, Inc., dealing with employment
on probationary status of teaching personnel are not governed solely by the Labor Code
as the law is supplemented, with respect to the period of probation, by special rules
found in the Manual of Regulations for Private Schools (the Manual). With regard to the
probationary period, Section 92 of the 1992 Manual33 provides:
Section 92. Probationary Period. – Subject in all instances to compliance with the
Department and school requirements, the probationary period for academic personnel
shall not be more than three (3) consecutive years of satisfactory service for those in
the elementary and secondary levels, six (6) consecutive regular semesters of
satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of
satisfactory service for those in the tertiary level where collegiate courses are offered on
a trimester basis
In this case, school’s teacher who were on probationary employment were made to
enter into a contract effective for one school year. Thereafter, it may be renewed for
another school year, and the probationary employment continues. At the end of the
second fixed period of probationary employment, the contract may again be renewed for
the last time.
Such employment for fixed terms during the teachers’ probationary period is an
accepted practice in the teaching profession as established in Magis Young Achievers’
Learning Center v. Manalo,
However, this scheme "of fixed-term contract is a system that operates during the
probationary period and for this reason is subject to Article 281 of the Labor Code,"35
which provides:
x x x The services of an employee who has been engaged on a probationary basis may
be terminated for a just cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the employee

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at the time of his engagement. An employee who is allowed to work after a probationary
period shall be considered a regular employee.
That teachers on probationary employment also enjoy the protection afforded by Article
281 of the Labor Code is supported by Section 93 of the 1992 Manual which provides:
Sec. 93. Regular or Permanent Status. - Those who have served the probationary
period shall be made regular or permanent. Full-time teachers who have satisfactorily
completed their probationary period shall be considered regular or permanent.
The above provision clearly provides that full-time teachers become regular or
permanent employees once they have satisfactorily completed the probationary
period of three school years. The use of the term satisfactorily necessarily
connotes the requirement for schools to set reasonable standards to be followed
by teachers on probationary employment. For how else can one determine if
probationary teachers have satisfactorily completed the probationary period if
standards therefor are not provided?
As such, "no vested right to a permanent appointment shall accrue until the employee
has completed the prerequisite three-year period necessary for the acquisition of a
permanent status. [However, it must be emphasized that] mere rendition of service for
three consecutive years does not automatically ripen into a permanent appointment. It
is also necessary that the employee be a full-time teacher, and that the services he
rendered are satisfactory."
The SC has definitively pronounced that "in a situation where the probationary status
overlaps with a fixed-term contract not specifically used for the fixed term it offers,
Article 281 should assume primacy and the fixed-period character of the contract must
give way."
An example given of a fixed-term contract specifically used for the fixed term it offers is
a replacement teacher or a reliever contracted for a period of one year to temporarily
take the place of a permanent teacher who is on leave. The expiration of the reliever’s
fixed-term contract does not have probationary status implications as he or she was
never employed on probationary basis. This is because his or her employment is for a
specific purpose with particular focus on the term. There exists an intent to end his or
her employment with the school upon expiration of this term.
However, for teachers on probationary employment, in which case a fixed term contract
is not specifically used for the fixed term it offers, it is incumbent upon the school to
have not only set reasonable standards to be followed by said teachers in determining
qualification for regular employment, the same must have also been communicated to
the teachers at the start of the probationary period, or at the very least, at the start of
the period when they were to be applied. These terms, in addition to those expressly
provided by the Labor Code, would serve as the just cause for the termination of the
probationary contract. The specific details of this finding of just cause must be

Page | 119
communicated to the affected teachers as a matter of due process. Corollarily, should
the teachers not have been apprised of such reasonable standards at the time specified
above, they shall be deemed regular employees.
In Tamson’s Enterprises, Inc. v. Court of Appeals, we held that "[t]he law is clear
that in all cases of probationary employment, the employer shall [convey] to the
employee the standards under which he will qualify as a regular employee at the
time of his engagement. Where no standards are made known to the employee at
that time, he shall be deemed a regular employee.
In this case, glaringly absent from petitioners’ evidence are the reasonable standards
that respondent was expected to meet that could have served as proper guidelines for
purposes of evaluating his performance. Nowhere in the Teacher’s Contract could such
standards be found. Neither was it mentioned that the same were ever conveyed to
respondent.

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 14.L.3 MERCADO vs AMA COMPUTER COLLEGE-PARAÑAQUE CITY, INC.,
G.R. No. 183572

Facts

The petitioners were faculty members who started teaching at AMACC on May 25,
1998. The petitioners executed individual Teacher’s Contracts for each of the trimesters
that they were engaged to teach, with the following common stipulation: 1. POSITION.
The TEACHER has agreed to accept a non-tenured appointment to work in the College
of xxx effective xxx to xxx or for the duration of the last term that the TEACHER is given
a teaching load based on the assignment duly approved by the DEAN/SAVP-COO.

For the school year 2000-2001, AMACC implemented new faculty screening guidelines,
set forth in its Guidelines on the Implementation of AMACC Faculty Plantilla. Under the
new screening guidelines, teachers were to be hired or maintained based on extensive
teaching experience, capability, potential, high academic qualifications and research
background.

On September 7, 2000, the petitioners individually received a memorandum from

AMACC, through, informing them that with the expiration of their contract to teach, their
contract would no longer be renewed.

The Labor Arbiter Ruling declared that the petitioners had been illegally dismissed. On
appeal, the NLRC in a Resolution dated July 18, 2005 denied AMACC’s appeal for lack
of merit and affirmed in toto the LA’s ruling. The NLRC, however, observed that the
applicable law is Section 92 of the Manual of Regulations for Private Schools (which
mandates a probationary period of nine consecutive trimesters of satisfactory service for
academic personnel in the tertiary level where collegiate courses are offered on a
trimester basis), not Article 281 of the Labor Code (which prescribes a probationary
period of six months) as the LA ruled. The CA Ruling the CA granted AMACC’s petition
for certiorari and dismissed the petitioners’ complaint for illegal dismissal.

Issue

WON the CA correctly found that the NLRC committed grave abuse of discretion in
ruling that the petitioners were illegally dismissed.

Ruling
Page | 121
The use of employment for fixed periods during the teachers’ probationary period is
likewise an accepted practice in the teaching profession.

The provision on employment on probationary status under the Labor Code is a primary
example of the fine balancing of interests between labor and management that the
Code has institutionalized pursuant to the underlying intent of the Constitution.

Labor, for its part, is given the protection during the probationary period of knowing the
company standards the new hires have to meet during the probationary period, and to
be judged on the basis of these standards, aside from the usual standards applicable to
employees after they achieve permanent status. Under the terms of the Labor Code,
these standards should be made known to the teachers on probationary status at the
start of their probationary period, or at the very least under the circumstances of the
present case, at the start of the semester or the trimester during which the probationary
standards are to be applied. Of critical importance in invoking a failure to meet the
probationary standards, is that the school should show – as a matter of due process –
how these standards have been applied.

The school, however, cannot forget that its system of fixed-term contract is a system
that operates during the probationary period and for this reason is subject to the terms
of Article 281 of the Labor Code. Unless this reconciliation is made, the requirements of
this Article on probationary status would be fully negated as the school may freely
choose not to renew contracts simply because their terms have expired. The inevitable
effect of course is to wreck the scheme that the Constitution and the Labor Code
established to balance relationships between labor and management.

Given the clear constitutional and statutory intents, we cannot but conclude that in a
situation where the probationary status overlaps with a fixed-term contract not
specifically used for the fixed term it offers, Article 281 should assume primacy and the
fixed-period character of the contract must give way. This conclusion is immeasurably
strengthened by the petitioners’ and the AMACC’s hardly concealed expectation that
the employment on probation could lead to permanent status, and that the contracts are
renewable unless the petitioners fail to pass the school’s standards.

While we can grant that the standards were duly communicated to the petitioners and
could be applied beginning the 1st trimester of the school year 2000-2001, glaring and
very basic gaps in the school’s evidence still exist. The exact terms of the standards
were never introduced as evidence; neither does the evidence show how these
standards were applied to the petitioners. Without these pieces of evidence (effectively,

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the finding of just cause for the non-renewal of the petitioners’ contracts), we have
nothing to consider and pass upon as valid or invalid for each of the petitioners.

In this light, the CA decision should be reversed.

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 14.L.4 Jocelyn Herrera-Manaois vs. St. Scholastica’s College,
G.R. No. 188914, Dec. 11, 2013

Facts
Because of the forthcoming completion of her third year on probationary employment,
petitioner Jocelyn Herrera-Manaois applied with respondent St. Scholastica’s College
(SSC) for an extension of her teaching load for the school year 2003-2004. Upon review
of her case, however, the members of SSC’s Permanency Board decided not to renew
her contract. SSC explained that the petitioner had not finished her master’s degree
within the three-year probationary period. It likewise pointed out that she had received
merely an average rating from her students. Finally, it asserted that her specialization
was the subject of writing and not English literature, which was the subject area that
they needed a faculty member for.
Issue
Is the disapproval of petitioner’s application justified? 

Held
Yes. Pursuant to the 1992 Manual, private educational institutions in the tertiary level
may extend “full–time faculty” status only to those who possess, inter alia, a master’s
degree in the field of study that will be taught. This minimum requirement is neither
subject to the prerogative of the school nor to the agreement between the parties. For
all intents and purposes, this qualification must be deemed impliedly written in the
employment contracts between private educational institutions and prospective faculty
members. The issue of whether probationers were informed of this academic
requirement before they were engaged as probationary employees is thus no longer
material, as those who are seeking to be educators are presumed to know these
mandated qualifications. Thus, all those who fail to meet the criteria under the 1992
Manual cannot legally attain the status of permanent full–time faculty members, even if
they have completed three years of satisfactory service.

In the light of the failure of Manaois to satisfy the academic requirements for the
position, she may only be considered as a part–time instructor pursuant to Section 45 of
the 1992 Manual. In turn, as we have enunciated in a line of cases, a part–time member
of the academic personnel cannot acquire permanence of employment and security of
tenure under the Manual of Regulations in relation to the Labor Code.

Page | 124
 15.1 Tolosa vs. NLRC
G.R. No. 149578, April 10, 2003

Facts:

Captain Virgilio Tolosa was hired by Qwana-Kaiun, through Asia Bulk Transport to be
the master of the Vessel named M/V Lady Dona. His contract officially began on
November 1, 1992 where he assumed command of the Lady Dona in Yokohama,
Japan. At the time of embarkation, Captain Tolosa was allegedly shown to in good
health. During one of the channeling activities on November 6, 1992, Captain Tolosa
was drenched with rainwater where on the following day he had a slight fever. On the
succeeding days, Capt. Tolosa experienced high fever and had LBM. On November 13,
he slipped in the toilet and suffered scratches. Finally, in November 17, 1992, Captain
Tolosa was losing resistance and his condition deteriorated. Hence, the crew of M/V
Lady Dona sent a telex to Asia Bulk requesting for the immediate evacuation of Capt.
Tolosa and thereafter an airlift was set on November 19, 1992. However, on November
18, 1992, at 0753 GMT, CAPT. TOLOSA was officially recorded as having breathed his
last.

Thereafter Evelyn Tolosa, widow of Captain Tolosa, filed a complaint before the POEA
against Qwana Kauin and crew members of M/V Lady Dona for their acts which caused
the death of Captain Tolosa.

Labor Arbiter: Awarded damages in favor of petitioner

NLRC: Dismissed the complaint of petitioner for lack of jurisdiction

CA: NLRC had no jurisdiction as the suit was a quasi-delict and did not involve the
issue of employer-employee relationship.

Issue:
a) Whether NLRC had jurisdiction

Petitioner alleged that her cause of action is based on the Labor Code provision obliging
the employer to provide him with timely, adequate and competent medical services
under Article 161 of the Labor Code. She insists that a reasonable causal connection
between the claim asserted and the employer-employee relation confers jurisdiction
upon labor tribunals.

Page | 125
Ruling:

Labor Tribunals had no jurisdiction over the suit.

The Court examined the complaint filed by petitioner and concluded that it was primarily
based on the gross negligence of the crew members on board. The complaint averred
that the on-board medical officer failed to monitor the condition of Capt. Tolosa when he
was sick and that crew-members never initiated actions to save him.

With respect on the claim for damages, the loss petitioner claims did not refer to the
actual earnings of the deceased, but to his earning capacity based on a life expectancy
of 65 years. This amount is recoverable if the action is based on a quasi delict as
provided for in Article 2206 of the Civil Code, but not in the Labor Code. Thus, the Court
concluded that the suit was a quasi-delict.

The Court admitted that while labor tribunals have the competence to award damages
the same must be based on a reasonable causal connection with the Labor Code, other
labor statutes, or collective bargaining agreements.

Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code,
which does not grant or specify a claim or relief. This provision is only a safety
and health standard under Book IV of the same Code. The enforcement of this labor
standard rests with the labor secretary. Thus, claims for an employers violation thereof
are beyond the jurisdiction of the labor arbiter. In other words, petitioner cannot enforce
the labor standard provided for in Article 161 by suing for damages before the labor
arbiter.

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 15.2 U-Bix Corp. vs Bandiola (2007) G.R. 157168

Facts:

Sometime in April 1995, Bandiola was employed by U-BIX to install furniture for its
customers. On 13 April 1997, Bandiola and two other U-BIX employees were involved in
a vehicular accident on their way to Baguio, where they were assigned by U-BIX to
install furniture for an exhibit. As a result of the accident, Bandiola sustained a fracture
on his left leg. Bandiola and his co-employees were initially brought to the Rosario
District Hospital. The next day, 14 April 1997, they were transferred to the Philippine
Orthopedic Hospital (Orthopedic). After his broken leg was cemented, Bandiola was
advised to go back for further medical treatment. U-BIX paid for the medical expenses
incurred in both mentioned hospitals.

When Bandiola asked for additional financial assistance for further expenses in the
treatment of his leg which even needed to be casted in fiberglass, U-BIX allegedly
refused. On September 1998, Bandiola filed a Complaint before the Labor Arbiter,
where he alleged underpayment of salary; non-payment of overtime pay; premium pay
for work performed on holidays and rest days; separation pay; service incentive leave
pay; 13th month pay; and the payment of actual, moral and exemplary damages.

In its Decision, dated 16 September 1998, Labor Arbiter allowed Bandiola's claim for
salary differential, service incentive leave pay and 13th month pay due to U-BIX's failure
to present payrolls or similar documents. Incidentally, the award of these claims is no
longer questioned in the present petition. The other claims, particularly those for
medical expenses that Bandiola allegedly incurred and for moral and exemplary
damages, were dismissed. Bandiola asserts that U-BIX failed to extend to him any
financial assistance after he was injured in the performance of his duties, and that as a
result, he suffered physical pain, mental torture, fright, sleepless nights, and serious
anxiety. He claims that this entitles him to moral and exemplary damages.

Bandiola filed an appeal before the NLRC. NLRC amended the Decision rendered by
the Labor Arbiter ruling that U-BIX should reimburse Bandiola the amount for the
medical expenses he incurred in connection with his fractured leg; and further ruled that
U-BIX is liable to pay Bandiola P25,000.00 in moral damages and P25,000.00 in
exemplary damages for refusing to reimburse Bandiola for the medical expenses he
incurred after it failed to report to the Social Security System (SSS) the injuries
sustained by Bandiola

Page | 127
It affirmed Bandiola's entitlement to reimbursement of his medical expenses, but
reduced the amount to P7,742.50, the amount of actual damages he was able to prove.
It also affirmed without modification the award of moral and exemplary damages, and
the monetary award granted by the Labor Arbiter

Issue:

WON petitioner U-BIX should reimburse respondent Bandiola for alleged medical
expenses of P7,742.50 and pay for moral damages of P25,000.00 and exemplary
damages of P25,000.00 to said respondent Bandiola.

Held:

Yes. Contrary to the arguments put forward by U-BIX, it is liable to reimburse Bandiola
the amount of P7,742.50 for medical expenses because its failure to comply with its
duty to record and report Bandiola's injury to the SSS precluded Bandiola from making
any claims. Moreover, U-BIX, by its own admission, reimbursed its other employees
who were involved in the same accident for their medical expenses. Clearly, the
reimbursement of medical expenses for injuries incurred in the course of employment is
part of the benefits enjoyed by U-BIX's employees. The only justification for its refusal to
reimburse Bandiola was that he intended to defraud the company by presenting
spurious receipts amounting to P7,742.50 that were allegedly issued four months before
their presentation.

In the present case, there is no dispute that Bandiola's leg injury was sustained in the
course of his employment with U-BIX. At the time of the accident, Bandiola was on the
way to Baguio, where he was ordered by U-BIX to install furniture for an exhibit.
Moreover, U-BIX was aware that Bandiola, as well as his other co-employees, were
injured during the accident. U-BIX admitted to providing Bandiola and his co-employees
with medical assistance and it even sent its representative, Rey Reynes, to Rosario
District Hospital, where they were confined, and had them transferred to the Orthopedic.
U-BIX was also aware that the Orthopedic instructed Bandiola to return for further
medical treatment. It is implicit that Bandiola needed further treatment for his broken leg
and was, thus, incapacitated to work.

Given the foregoing circumstances, U-BIX had the legal obligation to record pertinent
information in connection with the injuries sustained by Bandiola in its logbook within
five days after it had known about the injuries; and to report the same to the SSS within
five days after it was recorded in the logbook, in accordance with Articles 205 and 206
of the Labor Code. Had U-BIX performed its lawful duties, the SSS, or the ECC on
appeal, could have properly considered whether or not Bandiola was entitled to
reimbursement for his medical expenses, as well as disability benefits while he was
unable to work. However, U-BIX did not present any evidence showing that it had

Page | 128
complied with these legal requirements. It had not even replied to Bandiola's allegations
in his Position Paper, dated 13 April 1998, that its employees were not even members
of the SSS.

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 15.3 Ocean Builders Construction vs. Sps. Cubacub

Facts:
Bladimir Cubacub (Bladimir) was employed as maintenance man by petitioner
company Ocean Builders Construction Corp. at its office in Caloocan City. On April 9,
1995, Bladimir was afflicted with chicken pox. He was thus advised by petitioner Dennis
Hao (Hao), the company's general manager, to rest for three days which he did at the
company's "barracks" where he lives free of charge.
Three days later or on April 12, 1995, Bladimir went about his usual chores of
manning the gate of the company premises and even cleaned the company vehicles.
Later in the afternoon, however, he asked a co-worker, Ignacio Silangga (Silangga), to
accompany him to his house in Capas, Tarlac so he could rest. Informed by Silangga of
Bladimir's intention, Hao gave Bladimir P1,000.00 and ordered Silangga to instead bring
Bladimir to the nearest hospital.
Along with co-workers Narding and Tito Vergado, Silangga thus brought Bladimir
to the Caybiga Community Hospital (Caybiga Hospital), a primary-care hospital around
one kilometer away from the office of the company.
The hospital did not allow Bladimir to leave the hospital. He was then confined,
with Narding keeping watch over him. The next day, April 13, 1995, a doctor of the
hospital informed Narding that they needed to talk to Bladimir's parents, hence, on
Silangga's request, their co-workers June Matias and Joel Edrene fetched Bladimir's
parents from Tarlac.
At about 8 o'clock in the evening of the same day, April 13, 1995, Bladimir's
parents-respondent spouses Cubacub, with their friend Dr. Hermes Frias (Dr. Frias),
arrived at the Caybiga Hospital and transferred Bladimir to the Quezon City General
Hospital (QCGH) where he was placed in the intensive care unit and died the following
day. The death certificate issued by the QCGH recorded Bladimir's immediate cause of
death as cardio-respiratory arrest and the antecedent cause as pneumonia. On the
other hand, the death certificate issued by Dr. Frias recorded the causes of death as
cardiac arrest, multiple organ system failure, septicemia and chicken pox.

Issue:
Whether the petitioners are guilty of negligence and if they were, can the
respondents claims for damages based on torts?

Page | 130
Held:
To successfully prosecute an action anchored on torts, three elements must be
present, viz.: (1) duty (2) breach (3) injury and proximate causation. The assailed
decision of the appellate court held that it was the duty of petitioners to provide
adequate medical assistance to the employees under Art. 161 of the Labor Code, failing
which a breach is committed.

Art. 161 of the Labor Code provides:

ART. 161. Assistance of employer. — It shall be the duty of any employer to
provide all the necessary assistance to ensure the adequate and immediate
medical and dental attendance and treatment to an injured or sick employee in
case of emergency. (emphasis and underscoring supplied)

The Implementing Rules of the Code do not enlighten what the phrase "adequate
and immediate" medical attendance means in relation to an "emergency."

In the present case, there is no allegation that the company premises are
hazardous. Neither is there any allegation on the number of employees the company
has. If Hao's testimony would be believed, the company had only seven regular
employees and 20 contractual employees — still short of the minimum 50 workers that
an establishment must have for it to be required to have a full-time registered nurse.
The Court can thus only determine whether the actions taken by petitioners when
Bladimir became ill amounted to the "necessary assistance" to ensure "adequate and
immediate medical . . . attendance" to Bladimir as required under Art. 161 of the Labor
Code.
As found by the trial court and borne by the records, petitioner Hao's advice for
Bladimir to, as he did, take a 3-day rest and to later have him brought to the nearest
hospital constituted "adequate and immediate medical" attendance that he is mandated,
under Art. 161, to provide to a sick employee in an emergency.
Chicken pox is self-limiting. Hao does not appear to have a medical background.
He may not be thus expected to have known that Bladimir needed to be brought to a
hospital with better facilities than the Caybiga Hospital, contrary to appellate court's
ruling. aDSAE
AT ALL EVENTS, the alleged negligence of Hao cannot be considered as the
proximate cause of the death of Bladimir. Proximate cause is that which, in natural and
continuous sequence, unbroken by an efficient intervening cause, produces injury, and
without which, the result would not have occurred.

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 IN FINE, petitioner company and its co-petitioner manager Dennis Hao are not
guilty of negligence.

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 16.1 ATCI Overseas Corp. et al., vs. Echin

Facts:
Respondent Echin was hired by petitioner ATCI in behalf of its principal co-
petitioner, Ministry of Public Health of Kuwait, for the position of medical technologist
under a two-year contract with a monthly salary of US$1,200.00.Within a year,
Respondent was terminated for not passing the probationary period which was under
the Memorandum of Agreement.

Ministry denied respondent‘s request and she returned to the Philippines

shouldering her own fair. Respondent filed with the National Labor Relations
Commission (NLRC) a complaint against ATCI for illegal dismissal. Labor Arbiter
rendered judgment in favor of respondent and ordered ATCI to pay her $3,600.00, her
salary for the three months unexpired portion of the contract.

ATCI appealed Labor Arbiter‘s decision, however, NLRC affirmed the latter‘s
decision and denied petitioner ATCI‘s motion for reconsideration. Petitioner appealed to
the Court Appeals contending that their principal being a foreign government agency is
immune from suit, and as such, immunity extended to them.

Appellate Court affirmed NLRC‘s decision. It noted that under the law, a private
employment agency shall assume all responsibilities for the implementation of the
contract of employment of an overseas worker; hence, it can be sued jointly and
severally with the foreign principal for any violation of the recruitment agreement or
contract of employment.
Petitioner‘s motion for reconsideration was denied; hence, this present petition.

Issue:
Whether or not petitioners be held liable considering that the contract specifically
stipulates that respondent‘s employment shall be governed by the Civil Service Law and
Regulations of Kuwait.

Ruling:
Court denied the petition. According to RA 8042: “The obligations covenanted in
the recruitment agreement entered into by and between the local agent and its foreign

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principal are not coterminous with the term of such agreement so that if either or both of
the parties decide to end the agreement, the responsibilities of such parties towards the
contracted employees under the agreement do not at all end, but the same extends up
to and until the expiration of the employment contracts of the employees recruited and
employed pursuant to the said recruitment agreement. In international law, the party
who wants to have a foreign law applied to a dispute or case has the burden of proving
the foreign law. Where a foreign law is not pleaded or, even if pleaded, is not proved,
the presumption is that foreign law is the same as ours. Thus, we apply Philippine labor
laws in determining the issues presented before us.

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 16.2 Yap vs. Thenamaris Ship Management

Facts:
Claudio S. Yap was employed as electrician. for a duration of 12 months. On 23
August 2001, Yap boarded and commenced his job as electrician. However, on 08
November 2001, the vessel was sold. The POEA was informed about the sale on 06
December 2001 in a letter signed by Capt. Adviento. Yap, along with the other
crewmembers, was informed by the Master of their vessel that the same was sold and
will be scrapped. They were also informed about the Advisory which asked the officers if
they wish to be transferred to other vessels afterwards.
Yap received his seniority bonus, vacation bonus, extra bonus along with the
scrapping bonus. However, he refused to accept the payment of one-month basic
wage. He insisted that he was entitled to the payment of the unexpired portion of his
contract since he was illegally dismissed. He alleged that he opted for immediate
transfer but none was made.
Respondents, Thenamaris Ship Management, contended that Yap was not
illegally dismissed. They alleged that Yap signed off from the vessel on 10 November
2001 and was paid his wages corresponding to the months he worked plus his seniority
bonus, vacation bonus and extra bonus. They further alleged that Yap/s employment
contract was validly terminated due to the sale of the vessel.
Yap filed a complaint for Illegal Dismissal before the Labor Arbiter. Both the
Labor Arbiter and the NLRC ruled that Yap was entitled to 9 months of wage for the
unexpired portion of the contract.
However, the CA ruled that the NLRC erred in sustaining the LA’s interpretation
of Section 10 of R.A. No. 8042. In this regard, the CA relied on the clause "or for three
months for every year of the unexpired term, whichever is less" provided in the 5th
paragraph of Section 10 of R.A. No. 8042.

Issue:

Whether or not Section 10 of R.A. [No.] 8042 is unconstitutional? YES

Whether or not the Court of Appeals gravely erred in granting petitioner only three (3)
months backwages when his unexpired term of 9 months is far short of the "every year
of the unexpired term" threshold? YES

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Ruling:

While this case was pending before the Supreme Court, it declared as
unconstitutional the clause "or for three months for every year of the unexpired term,
whichever is less" provided in the 5th paragraph of Section 10 of R.A. No. 8042.

       “Sec.10. Money Claims. – xxx In case of termination of overseas employment

without just, valid or authorized cause as defined by law or contract, the workers shall
be entitled to the full reimbursement of his placement fee with interest of twelve percent
(12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.” 
According to the Court, this provision violates the equal protection clause
because under the Labor Code, illegally dismissed workers are guaranteed
reinstatements with full backwages from the time compensation was withheld up to their
actual reinstatement. However, under the Migrant Worker’s Act, it imposes a 3-month
cap on the claim of OFWs.

We ought to be reminded of the plight and sacrifices of our OFWs. In Olarte v.

Nayona, this Court held that “Our overseas workers belong to a disadvantaged class.
Most of them come from the poorest sector of our society. The least we can do is to
protect them with our laws.”

The Court of Appeals Decision is modified to the effect that petitioner

is awarded his salaries for the entire unexpired portion of his employment contract
consisting of nine months, instead of three.

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 16.3 Skippers United Pacific vs. Doza

Facts:

This arose from consolidated labor cases filed by seafarers, Doza, etc.,against

Skippers United, Inc. for unremitted home allotment for the month of December 1998
and salaries for the unexpired portion of their employment contracts.

Petitioner Skipped United deployed respondents to work on board the vessel MV

Wisdom Star. Respondents claimed that Skippers failed to remit their respective
allotments for almost five months.s To date, however, Skippers only failed to remit the
home allotment for the month of December 1998. Respondents were discharged
allegedly due to their improper and disrespectful conduct during certain instances while
on board the ship. Upon repatriation and arrival in the Philippines, they filed a complaint
for illegal dismissal with the Labor Arbiter who dismissed herein action for lack of merit.
Respondents filed an appeal to the NLRC who dismissed the appeal for lack of merit
and affirmed the Labor Arbiter’s decision. The respondents appealed to the CA and
granted the respondents petition and reversed the decisions of the Labor Arbiter and
NLRC, Hence this petition.

Issue:

Whether the petitioner is liable to pay backwages and unremitted home allotment pay.

Ruling:

Yes, Skippers effectively admitted non-remittance of home allotment pay for the
month of December 1998 in its Position Paper. Skippers sought the repatriation
expenses to be offset with the home allotment pay. However, since respondents’
dismissal was illegal, their repatriation expenses were for the account of Skippers and
could not be offset with the home allotment pay.

Contrary to the claim of the Labor Arbiter and NLRC that the home allotment pay
is in “the nature of extraordinary money where the burden of proof is shifted to the
worker who must prove he is entitled to such monetary benefit,” Section 8 of POEA
Memorandum Circular No. 55, series of 1996, states that the allotment actually
constitutes at least eighty percent (80%) of the seafarer’s salary. The home allotment

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pay is not in the nature of an extraordinary money or benefit but should actually be
considered as salary which should be paid for services rendered.

For this reason, such non-remittance of home allotment pay should be

considered as unpaid salaries, and Skippers shall be liable to pay the home allotment
pay of respondents for the month of December 1998.

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 16.4. International Management Services vs. Logarta
G.R. No. 163657, April 18, 2012
Facts:
Petitioner recruitment agency, International Management Services (IMS), a single
proprietorship owned and operated by Pascual, deployed respondent Logarta to work
for Petrocon Arabia Limited (Petrocon) in Alkhobar, Kingdom of Saudi Arabia, in
connection with general engineering services of Petrocon for the Saudi Arabian Oil
Company (Saudi Aramco). Logarta was employed as piping designer for a period of 2
years, with a monthly salary of eight hundred US dollars.
Due to the reduction of man-hours allotted for cross-country pipeline projects, Petrocon
was constrained to terminate some of its employees, including Logarta. Petrocon sent
Logarta a 30-day notice of termination, with payment of all due benefits in accordance
with the terms and conditions of his employment contract, including his ticket back to
the Philippines.
Before his departure from Saudi Arabia, respondent received his final paycheck from
Petrocon. Upon his return, respondent filed a complaint with the Regional NLRC, Cebu
City, against petitioner as the recruitment agency on the ground of illegal dismissal.
Labor Arbiter Decision: In favor of the respondent.
NLRC Decision: Affirmed the decision of the Labor Arbiter, but reduced the amount to
be paid by the petitioner
CA Decision: Petition affirmed decision of NLRC.
CA agreed that reason for the termination was valid but the DOLE was not given a copy
of the 30-day notice of termination.

Issue:
Whether or not the 30-day notice to DOLE prior to retrenchment of OFW’s is necessary.

Ruling:
Yes. In the case at bar, despite the fact that respondent was employed by Petrocon as
an OFW in Saudi Arabia, still both he and his employer are subject to the provisions of
the Labor Code when applicable. The basic policy in this jurisdiction is that all Filipino
workers, whether employed locally or overseas, enjoy the protective mantle of
Philippine labor and social legislations.
Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant
or overseas Filipino worker under Article 283 of the Labor Code.

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Thus, retrenchment is a valid exercise of management prerogative subject to the strict
requirements set by jurisprudence:
(1) That the retrenchment is reasonably necessary and likely to prevent business losses
which, if already incurred, are not merely de minimis, but substantial, serious, actual
and real, or if only expected, are reasonably imminent as perceived objectively and in
good faith by the employer;
(2) That the employer served written notice both to the employees and to the
Department of Labor and Employment at least one month prior to the intended date of
retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent to one
month pay or at least 1/2 month pay for every year of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in good faith for
the advancement of its interest and not to defeat or circumvent the employees' right to
security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees, such as status, . . .
efficiency, seniority, physical fitness, age, and financial hardship for certain workers.
As for the notice requirement, however, contrary to petitioner's contention, proper notice
to the DOLE within 30 days prior to the intended date of retrenchment is NECESSARY
and must be complied with despite the fact that respondent is an overseas Filipino
worker. In the present case, although respondent was duly notified of his termination by
Petrocon 30 days before its effectivity, no allegation or proof was advanced by petitioner
to establish that Petrocon ever sent a notice to the DOLE 30 days before the
respondent was terminated. Thus, this requirement of the law was not complied with.

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 16.5. Pert/Cpm Manpower Exponent Co., Inc. vs. Armando A. Vinuya, Louie M.
Ordovez, Arsenio S. Lumanta, Jr., Robelito S. Anipan, Virgilio R. Alcantara,
Marino M. Era, Sandy O. Enjambre And Noel T. Ladea
G.R. No. 197528, September 5, 2012.
Facts:
Respondents were contracted by the petitioner, PERT/CPM, for deployment to work as
aluminum fabricator/installer in Modern Metal Solution LLC (Modern Metal) in Dubai,
UAE. The contract was for 2 years, approved by POEA, providing 9 working hours a
day, a salary of 1,350 AED with overtime pay, food allowance, free and suitable
housing, free transportation, free laundry, and free medical and dental services.
However, in Dubai, Modern Metals gave them appointment letters with terms different
from those they signed in the Philippines – increasing their employment terms, reducing
salaries, allowances, and benefits. The working conditions were also not as promised.
They complained to their agency but to no avail. Due to unbearable living and working
condition, they resigned from their job and indicated personal/family problems as their
reasons.
On March 15, 2008, respondents file a complaint for illegal dismissal against PERT
CPM. The agency alleged that they were not illegally dismissed because they resigned
voluntarily.
Labor Arbiter: Dismissed the petition, ruled that respondents voluntarily resigned.
NLRC Decision: Reversed LA decision. Ruled that the respondents had been illegally
dismissed. It stressed that it is illegal for an employer to require its employees to
execute new employment papers, especially those which provide benefits that are
inferior to the POEA-approved contracts. The agency moved for reconsideration. The
respondents, on the other hand, moved for partial reconsideration, maintaining that their
salaries should have covered the unexpired portion of their employment contracts.
NLRC also denied the agency's motion for reconsideration, but granted the
respondents' motion. It sustained the respondents' argument that the award needed to
be adjusted, particularly in relation to the payment of their salaries, consistent with the
Court's ruling in Serrano v. Gallant Maritime Services, Inc. The ruling declared
unconstitutional the clause, "or for three (3) months for every year of the unexpired
term, whichever is less," in Section 10, paragraph 5, of R.A. 8042, limiting the
entitlement of illegally dismissed overseas Filipino workers to their salaries for the
unexpired term of their contract or three months, whichever is less.
CA Decision: Dismissed the petition for lack of merit. It upheld the NLRC ruling that the
respondents were illegally dismissed.

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Issue:
1. Whether or not respondents were illegally dismissed.
2. Whether or not CA erred in affirming the NLRC’s award to the respondents of their
salaries for the unexpired portion of their employment contracts, pursuant to the
Serrano ruling.

Ruling:
The CA committed no reversible error and neither did it commit grave abuse of
discretion in affirming the NLRC's illegal dismissal ruling.
The agency and Modern Metal are guilty of contract substitution. The respondents
entered into a POEA approved two-year employment contract, with Modern Metal
providing among others, as earlier discussed, for a monthly salary of 1350 AED. On
April 2, 2007, Modern Metal issued to them appointment letters whereby the
respondents were hired for a longer three-year period and a reduced salary, from 1,100
AED to 1,200 AED, among other provisions. Then, on May 5, 2007, they were required
to sign new employment contracts reflecting the same terms contained in their
appointment letters, except that this time, they were hired as "ordinary laborer," no
longer aluminum fabricator/installer. The respondents complained with the agency
about the contract substitution, but the agency refused or failed to act on the matter.
Clearly, the agency and Modern Metal committed a prohibited practice and engaged in
illegal recruitment under the law. Article 34 of the Labor Code provides:
Art. 34. Prohibited Practices. — It shall be unlawful for any individual, entity, licensee, or
holder of authority: (i) To substitute or alter employment contracts approved and verified
by the Department of Labor from the time of actual signing thereof by the parties up to
and including the periods of expiration of the same without the approval of the Secretary
of Labor.
Further, Article 38 of the Labor Code, as amended by R.A. 8042, 35 defined "illegal
recruitment" to include the following act:
To substitute or alter to the prejudice of the worker, employment contracts approved
and verified by the Department of Labor and Employment from the time of actual
signing thereof by the parties up to and including the period of the expiration of the
same without the approval of the Department of Labor and Employment.

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The agency posits that in any event, the Serrano ruling has been nullified by R.A. No.
10022, entitled "An Act Amending Republic Act No. 8042, Otherwise Known as the
Migrant Workers and Overseas Filipinos Act of 1995, As Amended, Further Improving
the Standard of Protection and Promotion of the Welfare of Migrant Workers, Their
Families and Overseas Filipinos in Distress, and for Other Purposes." It argues that
R.A. 10022, which lapsed into law (without the Signature of the President) on March 8,
2010, restored the subject clause in the 5th paragraph, Section 10 of R.A. 8042. The
amendment, contained in Section 7 of R.A. 10022, reads as follows:
In case of termination of overseas employment without just, valid or authorized cause
as defined by law or contract, or any unauthorized deductions from the migrant worker's
salary, the worker shall be entitled to the full reimbursement "of" his placement fee and
the deductions made with interest at twelve percent (12%) per annum, plus his salaries
for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
The SC held that the amendment introduced by R.A. 10022 cannot be given retroactive
effect not only because there is no express declaration of retroactivity of the law, but
because the retroactive application will result in an impairment of right that had accrued
to the respondents by virtue of the Serrano Ruling. The SC reiterated that all statutes
are to be construed as having only a prospective application, unless the purpose and
intention of the legislature to give them retrospective effect are expressly declared or
are necessarily implied from the language used.

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 16.6. Hon. Sto. Tomas, et al., vs. Salac et al.,
G.R. No. 152642 & 152710, November 13, 2013

Facts:
This case is a consolidation of the following cases: G.R. No. 152642, G.R. No. 152710,
G.R. No. 167590, G.R. Nos. 182978-79, and G.R. Nos. 184298-99.

G.R. No. 152642 and G.R. No. 152710

In G.R. No. 152642, in 2002, Rey Salac et al, who are recruiters deploying
workers abroad, sought to enjoin the Secretary of Labor, Patricia Sto. Tomas, the
POEA, and TESDA, from regulating the activities of private recruiters. Salac et al
invoked Sections 29 and 30 of the Republic Act 8042 or the Migrant Workers Act which
provides that recruitment agency in the Philippines shall be deregulated one year from
the passage of the said law; that 5 years thereafter, recruitment should be fully
deregulated. RA 8042 was passed in 1995, hence, Salac et al insisted that as early as
2000, the aforementioned government agencies should have stopped issuing
memorandums and circulars regulating the recruitment of workers abroad. Sto. Tomas
then questioned the validity of Sections 29 and 30.

Issue:
Whether or not Sections 29 and 30 are valid.

Ruling:
The issue became moot and academic. It appears that during the pendency of this case
in 2007, RA 9422 (An Act to Strengthen the Regulatory Functions of the POEA) was
passed which repealed Sections 29 and 30 of RA 8042.

G.R. 167590
In this case, the Philippine Association of Service Exporters, Inc. (PASEI) questioned
the validity of the following provisions of RA 8042:

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a. Section 6, which defines the term “illegal recruitment”. PASEI claims that the
definition by the law is vague as it fails to distinguish between licensed and non-licensed
recruiters;
b. Section 7, which penalizes violations against RA 8042. PASEI argues that the
penalties for simple violations against RA 8042, i.e., mere failure to render report or
obstructing inspection are already punishable for at least 6 years and 1 day
imprisonment an a fine of at least P200k. PASEI argues that such is unreasonable;
c. Section 9, which allows the victims of illegal recruitment to have the option to either
file the criminal case where he or she resides or at the place where the crime was
committed. PASEI argues that this provision is void for being contrary to the Rules of
Court which provides that criminal cases must be prosecuted in the place where the
crime or any of its essential elements were committed;
d. Section 10, which provides that corporate officers and directors of a company found
to be in violation of RA 8042 shall be themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages. PASEI claims that this
automatic liability imposed upon corporate officers and directors is void for being
violative of due process.

RTC Judge Jose Paneda of Quezon City agreed with PASEI and he declared the said
provisions of RA 8042 as void. Secretary Sto. Tomas petitioned for the annulment of the
RTC judgment.

Issue:
Whether or not Sections 6, 7, 9, and 10 of RA 8042 are void.

Ruling:
No, they are valid provisions.
a. Section 6: The law clearly and unambiguously distinguished between licensed and
non-licensed recruiters. By its terms, persons who engage in “canvassing, enlisting,
contracting, transporting, utilizing, hiring, or procuring workers” without the appropriate
government license or authority are guilty of illegal recruitment whether or not they
commit the wrongful acts enumerated in that section. On the other hand, recruiters who
engage in the canvassing, enlisting, etc. of OFWs, although with the appropriate

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government license or authority, are guilty of illegal recruitment only if they commit any
of the wrongful acts enumerated in Section 6.

b. Section 7: The penalties are valid. Congress is well within its right to prescribed the
said penalties. Besides, it is not the duty of the courts to inquire into the wisdom behind
the law.
c. Section 9: The Rules on Criminal Procedure, particularly Section 15(a) of Rule 110,
itself, provides that the rule on venue when it comes to criminal cases is subject to
existing laws. Therefore, there is nothing arbitrary when Congress providesd an
alternative venue for violations of a special penal law like RA 8042.
d. Section 10: The liability of corporate officers and directors is not automatic. To make
them jointly and solidarily liable with their company, there must be a finding that they
were remiss in directing the affairs of that company, such as sponsoring or tolerating the
conduct of illegal activities.

G.R. 182978-79, and G.R. 184298-99

Facts:
In this case, Jasmin Cuaresma, a nurse working in Saudi Arabia was found dead. Her
parents received insurance benefits from the OWWA (Overseas Workers Welfare
Administration). But when they found out based on an autopsy conducted in the
Philippines that Jasmin was raped and thereafter killed, her parents (Simplicio and Mila
Cuaresma) filed for death and insurance benefits with damages from the recruitment
and placement agency which handled Jasmin (Becmen Service Exporter and
Promotion, Inc.).
The case reached the Supreme Court where the Supreme Court ruled that since
Becmen was negligent in investigating the true cause of death of Jasmin ( a violation of
RA 8042), it shall be liable for damages. The Supreme Court also ruled that pursuant to
Section 10 of RA 8042, the directors and officers of Becmen are themselves jointly and
solidarily liable with Becmen.
Eufrocina Gumabay and the other officers of Becmen filed a motion for leave to
intervene. They aver that Section 10 is invalid.

Issue:
Whether or not Section 10 is invalid.

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Ruling:
No. As earlier discussed, Section 10 is valid. The liability of Gumabay et al is not
automatic. However, the SC reconsidered its earlier ruling that Gumabay et al are
solidarily and jointly liable with Becmen there being no evidence on record which shows
that they were personally involved in their company’s particular actions or omissions in
Jasmin’s case.

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