Sonza vs.

ABS-CBN
GR No. 138051
June 10, 2004

Facts:
ABS-CBN signed an Agreement with MJMDC which was represented by Jose Sonza, as President
and General Manager, and Carmela Tiangco as EVP and Treasurer. Referred to in the Agreement as
“Agent”, MJMDC agreed to provide Sonza’s services exclusively to ABS-CBN as talent for radio and
television. ABS-CBN agreed to pay for Sonza’s services a monthly talent fee of P310,000 for the first
year and P317,000 for the second and third year or the Agreement.

Two years after the signing of the Agreement, MJMDC wrote a letter to ABS-CBN saying that
Sonza irrevocably resigned in view of recent events concerning his programs and career. They consider
the acts of ABS-CBN violative of the Agreement, and that they are serving a notice of rescission of the
said Agreement. The letter was signed by Sonza himself as President and General Manager of MJMDC.

Sonza filed a complaint against ABS-CBN before the DOLE for non-payment of his salaries,
separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance, and
amounts due under the Employees Stock Option Plan (ESOP). ABS-CBN filed a Motion to Dismiss on the
ground that no employer-employee relationship existed between them and Sonza. The Labor Arbiter
agreed with this and dismissed the complaint for lack of jurisdiction. Sonza appealed to the NLRC and
afterwards to the CA but both successively affirmed the Labor Arbiter’s Decision.

Issue:
Whether or not there exists an employer-employee relationship between Sonza and ABS-CBN.

Ruling:
No. The Supreme Court agrees with the findings of the Labor Arbiter and the CA that Sonza’s
claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor Code.
Sonza’s cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the
regular courts.

Rationale:
Case law has consistently held that Elements of an Employer-Employee relationship are: a) the
selection and engagement of the employee; b) the payment of wages; c) the power of dismissal; and d)
the employer’s power to control the employee on the means and methods by which the work is
accomplished.

A. Selection and Engagement of Employee

ABS-CBN engaged Sonza’s services to co-host its television and radio programs because of
Sonza’s peculiar skills, talent, and celebrity status. This circumstance is indicative, although not
conclusive, of an independent contractual relationship. If Sonza did not possess such unique skills,
talent, and celebrity status, ABS-CBN would not have entered into the Agreement with Sonza but
would have hired him through its Personnel Department just like any other employee.

B. Payment of Wages
All the talent fees and benefits paid to Sonza were the result of negotiations that led to the
Agreement. If Sonza were the ABS-CBN’s employee, there would be no need for the parties to stipulate
on the benefits such as SSS, Medicare, and 13 th month pay, which the law automatically incorporates
into every employer-employee contract. Whatever benefits Sonza enjoyed arose from the Agreement
and not because of an employer-employee relationship.
Sonza’s talent fees, amounting to P317,000 monthly in the second and third year are huge and
out of the ordinary which indicate more an independent contractual relationship rather than an
employer-employee relationship. ABS-CBN agreed to pay Sonza such huge talent fees precisely
because of Sonza’s unique skills, talent, and celebrity status not possessed by ordinary employees. The
power to bargain talent fees way above the salary scales of ordinary employees is a circumstance
indicative, although not conclusive, of an independent contractual relationship.
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 C. Power of Dismissal
Sonza failed to show that ABS-CBN could terminate his services on grounds other than breach
of contract, such as retrenchment to prevent losses as provided under Labor laws. ABS-CBN agreed to
pay Sonza’s talent fees as long as “Agent” and Jay Sonza shall faithfully and completely perform each
condition of their Agreement. Even if it suffered severe business losses, ABS-CBN could not retrench
Sonza because ABS-CBN remained obligated to pay Sonza’a talent fees during the life of the
Agreement. Sonza admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still
paid him his talent fees. This circumstance indicates an independent contractual relationship between
Sonza and ABS-CBN.

D. Power of Control
In the case of Alberty-Velez vs. Corporacion De Puerto Rico Para La Difusion Publica, the United
States CA held that a television program host is an independent contractor.

The Control Test is based on the extent of control the hirer exercises over a worker. The greater
the supervision and control the hirer exercises, the more likely the worker is deemed an employee.
Conversely, the lesser control the hirer exercises, the more likely the worker is considered an
independent contractor. Applying the Control Test, the Supreme Court finds that Sonza is not an
employee but an independent contractor.

ABS-CBN engaged Sonza’s services specifically to co-host the “Mel & Jay” programs. ABS-CBN
did not assign any other work to Sonza. To perform his work, SONZA only needed his skills and talent.
How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN's
control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to
attend only rehearsals and tapings of the shows, as well as pre- and postproduction staff meetings. 31
ABS-CBN could not dictate the contents of SONZA's script. The clear implication is that SONZA had a
free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.

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

No doubt, ABS-CBN supplied the place, equipment, crew, and airtime needed to broadcast the
“Mel & Jay” programs. However, such supply are not the “tools and instrumentalities” that Sonza
needed to perform his job. What Sonza principally needed was his talent or skills and the costumes
necessary for his appearance. ABS-CBN's sole concern was for SONZA to display his talent during the
airing of the programs. The records do not show that ABS-CBN exercised any supervision and control
over how SONZA utilized his skills and talent in his shows.

The Agreement stipulates that SONZA shall abide with the rules and standards of performance
"covering talents" of ABS-CBN. The Agreement does not require SONZA to comply with the rules and
standards of performance prescribed for employees of ABSCBN. The code of conduct imposed on
SONZA under the Agreement refers to the Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by ABS-CBN as its Code of Ethics. The KBP code
applies to broadcasters, not to employees of radio and television stations. Clearly, the rules and
standards of performance referred to in the Agreement are those applicable to talents and not to
employees of ABS-CBN.

Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even
an independent contractor can validly provide his services exclusively to the hiring party. In the
broadcast industry, exclusivity is not necessarily the same as control. The hiring of exclusive talents is
not designed to control the means and methods of work of the talent, but simply to protect the
investment of the broadcast station. Normally, a much higher fee is paid to talents who agree to work
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exclusively for a particular radio or television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.

MJMDC as Agent of Sonza

Sonza cannot insist that MJMDC is a "labor-only" contractor and ABS-CBN is his employer. In a
labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee
who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed
the real employer. Under this scheme, the "labor-only" contractor is the agent of the principal. The law
makes the principal responsible to the employees of the "labor-only contractor" as if the principal itself
directly hired or employed the employees.

These circumstances are not present in this case. There are essentially only two parties involved
under the Agreement, namely, Sonza and ABS-CBN. MJMDC merely acted as Sonza's agent. The
President and General Manager of MJMDC is Sonza himself. It is absurd to hold that MJMDC, which is
owned, controlled, headed and managed by Sonza, acted as agent of ABS-CBN in entering into the
Agreement with Sonza, who himself is represented by MJMDC. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting as
agent of Sonza or Tiangco to promote their careers in the broadcast and television industry.

Policy Instruction No. 40

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect
of law. There is no legal presumption that Policy Instruction No. 40 determines SONZA's status. A mere
executive issuance cannot exclude independent contractors from the class of service providers to the
broadcast industry. The classi7cation of workers in the broadcast industry into only two groups under
Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis
either in law or in fact.

Talents as Independent Contractors

The right of labor to security of tenure as guaranteed in the Constitution arises only if there is
an employer-employee relationship under labor laws. Not every performance of services for a fee
creates an employer-employee relationship. To hold that every person who renders services to
another for a fee is an employee — to give meaning to the security of tenure clause — will lead to
absurd results. The right of labor to security of tenure cannot operate to deprive an individual,
possessed with special skills, expertise and talent, of his right to contract as an independent contractor.
An individual like an artist or talent has a right to render his services without any one controlling the
means and methods by which he performs his art or craft. The Supreme Court will not interpret the
right of labor to security of tenure to compel artists and talents to render their services only as
employees. This is not conducive to freedom of the press.

Lazaro vs. Social Security Commission

GR No. 138254
July 30, 2004

Facts:
Rosalina Laudato filed a petition before she Social Security Commission for social security
coverage and remittance of unpaid monthly social security contributions against Angelito Lazaro,
proprietor of Royal Star Marketing. Laudato alleged that despite her employment as sales supervisor of
the sales agents for Royal Star, Lazaro had failed to report her to the SSC for compulsory coverage or
remit Laudato’s social security contributions.

Lazaro denied that Laudato was a sales supervisor of Royal Star and claimed that Laudato was a
mere sales agent whom he paid purely on commission basis. Lazaro also maintained that Laudato was
not subject to definite hours and conditions of work and that Royal Star had no control over Laudato’s

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activities. Therefore, Laudato should not be considered an employee of Royal Star and should not be
qualified for social security coverage.

SSC, in applying the Control Test, held that Laudato was an employee of Royal Star and ordered
Royal Star to pay the unremitted social security contributions of Laudato. CA affirmed the finding of
SSC.

Issue:
Whether Rosalina Laudato was an employee of Royal Star Marketing.

Ruling:
The Supreme Court rules in the affirmative. There is no showing that Royal Star was precluded
from exerting control or interference over the manner by which Laudato performed her duties.
Substantial evidence as found the SSC and the CA have established the element of Control
determinative of an employer-employee relationship.

Rationale:
For the purposes of coverage under the Social Security Act, the determination of employer-
employee relationship warrants the application of the Control Test, that is, whether the employer
controls or has reserved the right to control the employee, not only as to the result of the work done,
but also as to the means and methods by which the same is accomplished.

The SSC examined the cash vouchers issued by Royal Star to Laudato, calling cards of Royal Star
denominating Laudato as a “Sales Supervisor” of the company, and Certificates of Appreciation issued
by Royal Star to Laudato in recognition of her unselfish and loyal efforts in promoting the company. SSC
found that Laudato was a sales supervisor and not a mere agent. As such, Laudato oversaw and
supervised the sales agents of the company, and thus was subject to the control of management as to
how she implements its policies and its end results.

The fact that Laudato was paid by way of commission does not preclude the establishment of
an employer-employee relationship. In the case of Grepalife vs. Judico, the Supreme Court upheld the
existence of an employer-employee relationship between the insurance company and its agents,
despite the fact that the compensation that the agents on the commission received was not paid by
the company but by the investor or the person insured. This is because the employer exercised
sufficient control over the employee, not only as to the result of the work done but also as to the
means and methods by which the same is to be accomplished.

Neither does it follow that a person who does not observe normal hours of work cannot be
deemed an employee. In Cosmopolitan Funeral Homes vs. Maalat, the Supreme Court declared that
there was an employer-employee relationship, noting that the supervisor, although compensated on
commission basis, is exempt from the observance of normal hours of work for his compensation is
measured by the number of sales he makes.

A piece of documentary evidence appreciated by the SSC is a Memorandum by Teresita Lazaro,

General Manager of Royal Star, directing that no commissions were to be given on all "main office"
sales from walk-in customers and enjoining salesmen and sales supervisors to observe this new policy.
The Memorandum evinces the fact that, contrary to Lazaro's claim, Royal Star exercised control over its
sales supervisors or agents such as Laudato as to the means and methods through which these
personnel performed their work.

Phil. Global Communication vs. De Vera

GR No. 157214
June 7, 2005

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Facts:
Dr. Ricardo De Vera, a physician by profession, offered his services to Philippine Global
Communications, Inc. (PhilCom) through a letter. The parties agreed and formalized Dr. De Vera’s
proposal in a document called Retainership Contract. After about 15 years of maintaining such
retainership arrangement, PhilCom, through a letter, informed Dr. De Vera that it will discontinue his
retainer’s contract with the company by the end of 1996.

Dr. De Vera filed a complaint for illegal dismissal before the NLRC alleging that he had been
employed by PhilCom as its company physician and was dismissed without due process. The Labor
Arbiter dismissed Dr. De Vera’s complaint for lack of merit, saying that as a “retained physician” under
a valid contract mutually agreed upon by the parties, Dr. De Vera was an Independent Contractor and
that he was not dismissed but rather his contract simply ended and was not renewed.

NLRC modified the Labor Arbiter’s Decision on a finding that De Vera is PhilCom’s Regular
Employee and accordingly directed the company to reinstate Dr. De Vera to his former position
without loss of seniority rights and privileges and with full backwages. CA modified NLRC’s Decision by
deleting the award of travel allowance and ordering payment of separation pay to De Vera instead of
reinstatement.

Issue:
Whether Dr. De Vera was actually an employee of PhilCom.

Ruling:
No. Clearly, the elements of an employer-employee relationship are wanting in this case. The
power to terminate the parties’ relationship was mutually vested on both. Either may terminate the
arrangement at will, with or without cause.

Rationale:
The Supreme Court, in determining the existence of an employer-employee relationship
adheres to the Four-Fold Test, to wit: 1) the selection and engagement of the employee; 2) the
payment of wages; 3) The power of dismissal; and 4) the power to control the employee’s conduct, or
the so-called Control Test.

The Court finds that it was Dr. De Vera himself who sets the parameters of what his duties
would be when he offered his services in his letter to PhilCom. Regarding another letter sent by Dr. De
Vera to PhilCom, the Court agrees with the Labor Arbiter that the tenor of the said letter indicates that
Dr. De Vera was proposing to extend his time with PhilCom and seeking additional compensation for
the said extension. This shows that PhilCom did not have control over the schedule of Dr. De Vera as it
is the doctor who is proposing his own schedule and asking to be paid for the same. This is proof that
Dr. De Vera understood that his relationship with PhilCom was a retained physician and not as an
employee. If he were an employee, he could not negotiate as to his hours of work.

Dr. De Vera never disputed that from the beginning of his service, PhilCom never included him
in its payroll; never deducted any contribution for remittance to the SSS; and was in fact subjected by
PhilCom to the 10% withholding tax for his Professional Fee, in accordance with the NLRC Code. These
are matters which are simply inconsistent with an employer-employee relationship. This shows that Dr.
De Vera never considered himself as an employee of PhilCom. Records show that the doctor had to bill
PhilCom for his monthly Professional Fees. It simply runs against the grain of common experience to
imagine that an ordinary employee has yet to bill his employer in order to receive his salary.

Remarkably absent from the parties' arrangement is the element of control. PhilCom had no
control over the means and methods by which Dr. De Vera went about performing his work at the
company premises. He could even embark in the private practice of his profession, not to mention the
fact that the doctor's work hours and the additional compensation therefor were negotiated upon by
the parties. The parties themselves practically agreed on every terms and conditions of Dr. De Vera's
engagement, which thereby negates the element of control in their relationship.
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 Art. 280 of the Labor Code upon which the CA based its Decision is not applicable in this case.
The provision merely distinguishes between 2 kinds of employees, which are Regular and Casual. It
does not apply where the very existence of an employment relationship is in dispute.

Neither does Art. 157 of the Labor Code apply in this case. It may be true that the provision
requires employers to engage the services of medical practitioners in certain establishments,
depending on the number of their employees, however, nothing in this law says that medical
practitioners so engaged must be actually hired as employees. The law only requires the employer “to
retain”, not employ, a part-time physician.

ABS-CBN vs. Nazareno

GR No. 164156
September 26, 2006

Facts:
ABS-CBN employed Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine, and Josephine
Lerasan as Production Assistants (PAs). They were assigned at the news and public affairs, for various
radio programs in the Cebu Broadcasting Station, with monthly compensation of P4,000.00. They were
issued ABS-CBN employee IDs and were required to work for a minimum of eight hours a day, including
Sundays and Holidays. ABS-CBN executed a Collective Bargaining Agreement (CBA) between itself and
its Rank-and-File Employees. However, PAs were not recognized as part of the bargaining unit and
were not included in the CBA.

Assistant Station Manager, Dante Luzon issued a Memorandum informing the PAs that they
would be assigned to non-drama programs and they were given revised work schedules and other
assignments.

Nazareno and the 3 others abovementioned filed a Complaint against ABS-CBN before the NLRC
for Recognition of Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium
Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with damages. Nazareno’s party failed
to file their Position Paper within the reglementary period so the Labor Arbiter dismissed the complaint
without prejudice for lack of interest to pursue the case. Instead of re-filing their complaint with the
NLRC within 10 days from receipt of the Labor Arbiter’s Order, Nazareno’s party filed an Earnest
Motion to Refile Complaint with Motion to Admit Position Paper and Motion to Submit Case for
Resolution. The Labor Arbiter granted their Motion.

Nazareno’s party alleged that they were full-time employees of ABS-CBN for a continuous
period of more than 5 years, attaching machine copies of their ABS-CBN IDs and salary vouchers. They
insisted that they belonged to a “work pool” from which ABS-CBN chose persons to be given specific
assignments at its discretion, and were thus under its direct supervision and control, regardless of
nomenclature.

ABS-CBN alleged that Nazareno’s party are PAs who basically assist in the conduct of a
particular program ran by an anchor or talent. That they are considered in the industry as “program
employees” in that, as distinguished from regular or station employees, they are basically engaged by
the station for a particular or specific program broadcasted by the radio station. ABS-CBN maintained
that PAs’ engagement is coterminous with the completion of the program, and may be extended or
renewed, provided that the program is on-going; a PA may also be assigned to new programs upon the
cancellation of one program and the commencement of another. As such, their compensation is
computed on a program basis, a fixed amount for performance services irrespective of the time
consumed. ABS-CBN claimed that Nazareno’s party was paid all salaries and benefits due to them

6
under the law. ABS-CBN also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and
interpret the same, especially since Nazareno’s party was not included in the bargaining unit.

The Labor Arbiter rendered judgment in favor or Nazareno’s party, declaring them to be regular
employees of ABS-CBN and awarding them monetary benefits. However, the Labor Arbiter did not
award the benefits provided in the CBA on his belief that he had no jurisdiction, pursuant to Art. 261 of
the Labor Code.

Upon appeal by ABS-CBN, the NLRC modified the Labor Arbiter’s Order. NLRC awarded to
Nazareno’s party their wage differentials and the other benefits arising form the CBA. NLRC also ruled
that the Labor Arbiter had jurisdiction over the complaint because Nazareno’s party acted in their
individual capacities and not as members of the Union. That Nazareno’s party was entitled to the
benefits under the CBA because they were regular employees who contributed to the profits of ABS-
CBN through their labor. ABS-CBN filed a Petition for Certiorari before the CA but CA dismissed it.

Issue:
1) Whether the lower courts committed error in reviving and further entertaining the case
despite the admitted lapse of the reglementary period.
2) Whether Nazareno, Gerzon, Deiparine, and Lerasan were regular employees and
entitled to the benefits of the CBA, or if they are project employees or independent contractors.

Ruling:
1) The Supreme Court agrees with ABS-CBN that the perfection of an appeal within the
statutory or reglementary period is not only mandatory, but also jurisdictional; failure to do so renders
the assailed decision final and executory and deprives the appellate court or body of the legal authority
to alter the final judgment, much less entertain the appeal. However, this Court has time and again
ruled that in exceptional cases, a belated appeal may be given due course if greater injustice may occur
if an appeal is not given due course than if the reglementary period to appeal were strictly followed.
The Court resorted to this extraordinary measure even at the expense of sacrificing order and
efficiency if only to serve the greater principles of substantial justice and equity.

2) Nazareno’s party cannot be considered as project or program employees because no

evidence was presented to show that the duration and scope of the project was determined or
specified at the time of their engagement. It is undisputed that Nazareno’s party are regular employees
since they have continuously performed the same activities for an average of five years. Their assigned
tasks are necessary or desirable in the usual business or trade of ABS-CBN.

The reason why PAs were excluded from the said agreement is because they were classified
and treated as project employees. However, it is not the will or word of the employer which
determines whether a certain employment is regular or otherwise. It is the character of the activities
performed by the employee in relation to the particular business or trade of the employer, taking into
account all the circumstances, in some cases the length of time of its performance and its continued
existence. One year after they were employed by ABS-CBN, Nazareno’s party became regular
employees by operation of law. As regular employees, Nazareno’s party are entitled to the benefits
provided for in the CBA between ABS-CBN and its rank-and-file employees.

Rationale:
1) ABS-CBN’s suggestion that the Labor Arbiter should have issued an Order for Nazareno’s
party to refile the case acknowledges the right to prosecute the case. But to do so gives the burden of
repeating the same procedure, thus entailing additional time, efforts, and litigation cost.

The Labor Arbiter failed to follow Sec. 16, Rule V, Rules of Procedure of the NLRC, but the such
is not a serious flaw that had prejudiced ABS-CBN’s right to due process. The case can still be refiled
because it has not yet prescribed. Anyway, Art. 221 of the Labor Code provides:
In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence
prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of
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 this Code that the Commission and its members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of due process.
NLRC did not commit a grave abuse of discretion in giving Art. 223 of the Labor Code a Liberal
application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the way
of equitably and completely resolving the rights and obligations of the parties. Jurisprudence dictates
that technical rules are not binding in labor cases and are not to be applied strictly if the result would
be detrimental to the workingman.

2) Where a person has rendered at least one year of service, regardless of the nature of
the activity performed, or where the work is continuous or intermittent, the employment is considered
regular as long as the activity exists, the reason being that a customary appointment is not
indispensable before one may be formally declared as having attained regular status. Article 280 of the
Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT. — The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer except
where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature and the employment is for
the duration of the season.

In summary of the findings in the 2 cases of Universal Robina Corporation v. Catapang and
Magsalin v. National Organization of Working Men, the Supreme Court states that there are two kinds
of regular employees under the law: 1) those engaged to perform activities which are necessary or
desirable in the usual business or trade of the employer; and 2) those casual employees who have
rendered at least one year of service, whether continuous or broken, with respect to the activities in
which they are employed.

Under existing jurisprudence, project could refer to two distinguishable types of activities: 1) a
project may refer to a particular job or undertaking that is within the regular or usual business of the
employer, but which is distinct and separate, and identifiable as such, from the other undertakings of
the company. Such job or undertaking begins and ends at determined or determinable times; 2), the
term project may also refer to a particular job or undertaking that is not within the regular business of
the employer. Such a job or undertaking must also be identifiably separate and distinct from the
ordinary or regular business operations of the employer. The job or undertaking also begins and ends
at determined or determinable times

Supreme Court notes further that ABS-CBN did not report the termination of respondents'
employment in the particular "project" to the Department of Labor and Employment Regional Office having
jurisdiction over the workplace within 30 days following the date of their separation from work, using the
prescribed form on employees' termination/dismissals/suspensions.

ABS-CBN itself is not certain how to categorize Nazareno’s party. In its earlier pleadings, ABS-
CBN classified Nazareno’s party as program employees, and in later pleadings, independent
contractors. Program employees, or project employees, are different from independent contractors
because in the case of the latter, no employer-employee relationship exists. The ruling in Sonza v. ABS-
CBN Broadcasting Corporation cannot apply in this case.

First. In the selection and engagement of Nazareno’s party, no peculiar or unique skill, talent or
celebrity status was required from them because they were merely hired through ABS-CBN's personnel
department just like any ordinary employee.

Second. The so-called "talent fees" of ABS-CBN correspond to wages given as a result of an
employer-employee relationship. Nazareno’s party did not have the power to bargain for huge talent
fees, a circumstance negating independent contractual relationship.
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 Third. ABS-CBN could always discharge Nazareno’s party should it find their work
unsatisfactory, and Nazareno’s party are highly dependent on ABS-CBN for continued work.

Fourth. The degree of control and supervision exercised by ABS-CBN over Nazareno’s party
through its supervisors negates the allegation that Nazareno’s party are independent contractors.

The presumption is that when the work done is an integral part of the regular business of the
employer and when the worker, relative to the employer, does not furnish an independent business or
professional service, such work is a regular employment of such employee and not an independent
contractor.

____________________________________________________________________________________

Francisco vs. NLRC

GR No. 170087
August 31, 2006

Facts:
Angelina Francisco was hired by Kasei Corporation during its incorporation stage. She was
designated as Accountant and Liaison Officer. She was assigned to handle all the accounting needs of
the company and to secure all necessary permits and licenses for the initial operation of the company.
She was also designated as Corporate Secretary but she never prepared nor was entrusted with
corporate documents, neither was she made to attend any board meeting.

After one year, Francisco was designated as Acting Manager. She was assigned to handle
recruitment of employees and perform management administration functions; represent the company
in dealings with government agencies; and to handle the operations of Kasei Restaurant.

After another five years, Francisco was replaced as Manager but was assured that she was still
connected with Kasei Corporation as a Technical Assistant to Seiji Kamura. Thereafter, Francisco’s
salary was reduced by P 2,500 for nine months, and was not paid her mid-year bonus. On the tenth
month, Francisco did not receive her salary and was merely advised that the company was not earning
well. Upon inquiry with their Treasurer, Francisco was informed that she was no longer connected with
Kasei Corporation. Francisco filed an action for constructive dismissal before the Labor Arbiter.

Kasei Corporation averred that Francisco is not an employee of the company, that she was
hired as one of its technical consultants and performed her work at her own discretion without control
and supervision. They said that Francisco had no daily time record and came to the office any time she
wanted. She did not go through the usual procedure of selection of employees, but her services were
engaged through a Board Resolution. The money Francisco received was her professional fee subject to
the 10% expanded withholding tax on professionals. Kasei Corporation showed that she was not one of
those reported to the BIR or SSS, submitting a list of employees which was duly received by BIR.

Labor Arbiter found that Francisco was illegally dismissed, ordering Kasei Corporation to either
reinstate her without loss of seniority rights or to pay her separation pay. NLRC affirmed the Order
with modifications. CA, however, reversed the NLRC’s Decision.

Issue:
Whether there was an employer-employee relationship between Kasei Corporation and
Angelina Francisco, and if the latter was illegally dismissed.

Ruling:

9
 It is the conclusion of the Supreme Court that Francisco was and employee of Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically
dependent upon Kasei Corporation for her continued employment. Her main job function involved
accounting and tax services rendered to the company on a regular basis over an indefinite period of
engagement. Kasei Corporation had the power to dismiss Francisco for cause and had the power to
control her work with the means and methods by which it was to be accomplished.
Kasei Corporation constructively dismissed Francisco when it reduced her salary by P 2,500 a
month. This amounts to illegal termination of employment where Francisco is entitled to full
backwages. Since the position of Francisco as accountant is one of trust and confidence, and under the
principle of strained relations, Francisco is further entitled to separation pay instead of reinstatement.

Rationale:
In deciding the case, the Supreme Court adopted a Two-Tiered Test involving: 1) the putative
employer’s power to control the employee with respect to the means and methods by which the work
is to be accomplished; and 2) the underlying economic realities of the activity or relationship.

By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura, the
corporation's Technical Consultant. She reported for work regularly and served in various capacities as
Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with
substantially the same job functions, that is, rendering accounting and tax services to the company and
performing functions necessary and desirable for the proper operation of the corporation such as
securing business permits and other licenses over an indefinite period of engagement.

The determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, such as: (1) the extent to which the services performed
are an integral part of the employer's business; (2) the extent of the worker's investment in equipment
and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker's
opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the
success of the claimed independent enterprise; (6) the permanency and duration of the relationship
between the worker and the employer; and (7) the degree of dependency of the worker upon the
employer for his continued employment in that line of business.

Under the broader economic reality test, the petitioner can likewise be said to be an employee
of respondent corporation because she had served the company for six years before her dismissal,
receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from August 1, 1999 to December
18, 2000. When petitioner was designated General Manager, respondent corporation made a report to
the SSS signed by Irene Ballesteros. Petitioner's membership in the SSS as manifested by a copy of the
SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion
of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation.

The affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner
never acted as Corporate Secretary and that her designation as such was only for convenience. The
actual nature of petitioner's job was as Kamura's direct assistant with the duty of acting as Liaison
Officer in representing the company to secure construction permits, license to operate and other
requirements imposed by government agencies.

As ruled in Globe Telecom, Inc. v. Florendo-Flores, A diminution of pay is prejudicial to the

employee and amounts to constructive dismissal. Constructive dismissal is an involuntary resignation
resulting in cessation of work resorted to when 1) continued employment becomes impossible,
unreasonable or unlikely; 2) when there is a demotion in rank or a diminution in pay; or 3) when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an employee.

10
____________________________________________________________________________________

Nogales et al. vs. Capitol Medical Center et al.

GR No. 142625
December 19, 2006

Facts:
Corazon Nogales was pregnant with her fourth child and was under the exclusive prenatal care
of Dr. Oscar Estrada. While Corazon was on her last trimester, Dr. Estrada noted dangerous
complications in her pregnancy. Dr. Estrada advised Corazon to have herself admitted to the Capitol
Medical Center (CMC). Corazon was admitted after the staff nurse noted the written admission request
of Dr. Estrada. Rogelio Nogales, husband of Corazon, executed and signed the “Consent on Admission
and Agreement” and the “Admission Agreement” before Corazon was brought to the labor room of
CMC.

From the admission up until Corazon’s delivery of her baby, various complications took place
which involved different other doctors and staff, namely: Dr. Rosa Uy, who was the resident physician
who conducted an internal examination of Corazon before the delivery; Dr. Joel Enriquez, the
anesthesiologist who came to observe Corazon’s condition but was not asked to assist; Dr. Ely Villaflor,
who was assisting Dr. Estrada during the delivery; Dr. Perpetua Lacson, the head of the CMC blood
bank who supplied Corazon with the blood she needed; Dr. Noe Espinola, head of the Obstetics-
Gynecology Department of CMC who ordered and performed an immediate hysterectomy to stabilize
Corazon’s Condition; and Nurse J. Dumlao, who also assisted Dr. Estrada in the Delivery Room.

Corazon’s baby came out in an apnic, cyanotic, weak, and injured condition but was intubated
and resuscitated by Dr. Enriquez and Dr. Payumo. Meanwhile, Corazon manifested moderate vaginal
bleeding which rapidly became profuse. Rogelio was made to sign a “Consent to Operation” before a
hysterectomy was performed on Corazon. Despite the attempts to stabilize and resuscitate Corazon,
she died due to hemorrhage, post-partum.

Rogelio Nogales, for himself and on behalf of his minor children, filed a complaint for damages
before the RTC of Manila against CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr.
Espinola, and Nurse J. Dumlao for the death of Corazon. Nogales contends that said physicians and
CMC personnel were negligent in the treatment and management of Corazon’s condition. Nogales
charged CMC with negligence in the selectio and supervision of the physicians and hospital staff.

Only CMC, Dr. Villaflor, Dr. Uy, Dr. Espinola, and Dr. Lacson filed their respective answers
denying and opposing the allegations in the complaint. CMC claims that it did not have any hand or
participation in the selection or hiring of Dr. Estrada or his assistant Dr. Villaflor as attending physicians
of the deceased Corazon, that the two doctors were not employees of the hospital and therefore the
hospital did not have control over their professional conduct. CMC argues that there is no legal ground
to apply the provisions of Art. 2176 and 2180 of the New Civil Code referring to Vicarious Liability of an
employer for the negligence of its employees. If ever there is fault or negligence in the treatment of
the deceased by the attending physicians who were employed by the family of the deceased, such civil
liability should be borne by the attending physicians under the principle of respondeat superior.

The RTC rendered judgment finding Dr. Estrada solely liable for damages, stating that there are
no evidence to show that all the other physicians and Nurse Dumlao committed negligence and any
error on their part was due to the incompetence of Dr. Estrada.

Nogales filed an appeal, claiming that aside form Dr. Estrada, the remaining respondents should
be held equally liable for negligence. Nogales also insists on the liability of CMC, citing the case of
Darling v. Charleston Community Memorial Hospital which involved a physician and a nurse who were
employees of the hospital. Nogales maintains that CMC, in allowing Dr. Estrada to practice and admit

11
patients at CMC, should be liable for Dr. Estrada's malpractice. Rogelio claims that he knew Dr. Estrada
as an accredited physician of CMC, though he discovered later that Dr. Estrada was not a salaried
employee of the CMC. Rogelio further claims that he was dealing with CMC, whose primary concern
was the treatment and management of his wife's condition. Dr. Estrada just happened to be the
specific person he talked to representing CMC. Moreover, the fact that CMC made Rogelio sign a
Consent on Admission and Admission Agreement and a Consent to Operation printed on the letterhead
of CMC indicates that CMC considered Dr. Estrada as a member of its medical staff.

However, CA affirmed the Decision of the RTC, saying that the cited case does not apply to the
present case where Dr. Estrada is an independent contractor-physician.

Issue:
Whether there is an employer-employee relationship between CMC and Dr. Estrada, making
CMC vicariously liable for the negligence of Dr. Estrada.

Ruling:
After a thorough examination of the voluminous records of this case, the Court finds no single
evidence pointing to CMC's exercise of control over Dr. Estrada's treatment and management of
Corazon's condition. It is undisputed that throughout Corazon's pregnancy, she was under the
exclusive prenatal care of Dr. Estrada. At the time of Corazon's admission at CMC and during her
delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended to Corazon. There was no showing
that CMC had a part in diagnosing Corazon's condition. While Dr. Estrada enjoyed staff privileges at
CMC, such fact alone did not make him an employee of CMC. CMC merely allowed Dr. Estrada to use
its facilities when Corazon was about to give birth, which CMC considered an emergency. Considering
these circumstances, Dr. Estrada is not an employee of CMC, but an independent contractor.

In general, a hospital is not liable for the negligence of an independent contractor-physician.

There is, however, an exception to this principle. The hospital may be liable if the physician is the
"ostensible" agent of the hospital This exception is also known as the doctrine of apparent authority. In
this regard, the hospital need not make express representations to the patient that the treating
physician is an employee of the hospital; rather a representation may be general and implied.

In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical staff.
Through CMC's acts, CMC clothed Dr. Estrada with apparent authority thereby leading the Spouses
Nogales to believe that Dr. Estrada was an employee or agent of CMC. CMC cannot now repudiate such
authority

The Court finds respondent Capitol Medical Center vicariously liable for the negligence of Dr.
Oscar Estrada.

Rationale:

Control Test and Vicarious Liability

The ruling in Ramos v. Court of Appeals determines the relationship between a hospital and a
consultant or visiting physician and the liability of such hospital for that physician’s negligence, to wit:

“Hospitals exercise significant control in the hiring and firing of consultants and in the conduct
of their work within the hospital premises. Doctors who apply for "consultant" slots, visiting or
attending, are required to submit proof of completion of residency, their educational qualifications;
generally, evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in
most cases, and references. These requirements are carefully scrutinized by members of the hospital
administration or by a review committee set up by the hospital who either accept or reject the
application.

12
 The physician's performance as a specialist is generally evaluated by a peer review committee
on the basis of mortality and morbidity statistics, and feedback from patients, nurses, interns and
residents. A consultant remiss in his duties, or a consultant who regularly falls short of the minimum
standards acceptable to the hospital or its peer review committee, is normally politely terminated.

Therefore, private hospitals, hire, fire and exercise real control over their attending and visiting
"consultant" staff. While "consultants" are not, technically employees, a point which respondent
hospital asserts in denying all responsibility for the patient's condition, the control exercised, the
hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-
employee relationship, with the exception of the payment of wages. In assessing whether such a
relationship in fact exists, the control test is determining.

The basis for holding an employer solidarily responsible for the negligence of its employee is
found in Article 2180 of the Civil Code which considers a person accountable not only for his own acts
but also for those of others based on the former's responsibility under a relationship of patria
potestas.”

The Doctrine of Apparent Authority

The case of Gilbert v. Sycamore Municipal Hospital explained the Doctrine of Apparent
Authority in this wise:
“Under the doctrine of apparent authority, a hospital can be held vicariously liable for the
negligent acts of a physician providing care at the hospital, regardless of whether the physician is an
independent contractor, unless the patient knows, or should have known, that the physician is an
independent contractor. The elements of the action have been set out as follows:

"For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show that:
(1) the hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that
the individual who was alleged to be negligent was an employee or agent of the hospital; (2) where the
acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had
knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon the conduct of the
hospital or its agent, consistent with ordinary care and prudence."

The element of "holding out" on the part of the hospital does not require an express
representation by the hospital that the person alleged to be negligent is an employee. Rather, the
element is satisfied if the hospital holds itself out as a provider of emergency room care without
informing the patient that the care is provided by independent contractors.

The element of justifiable reliance on the part of the plaintiff is satisfied if the plaintiff relies
upon the hospital to provide complete emergency room care, rather than upon a specific physician. ”

The doctrine of apparent authority is a species of the doctrine of estoppel. Art. 1431 of the New
Civil Code provides that "through estoppel, an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person relying thereon."
Estoppel rests on this rule: "Whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to act upon such belief,
he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it."

The first factor focuses on the hospital's manifestations and is sometimes described as an
inquiry whether the hospital acted in a manner which would lead a reasonable person to conclude that
the individual who was alleged to be negligent was an employee or agent of the hospital. CMC granted
staff privileges to Dr. Estrada. CMC extended its medical staff and facilities to Dr. Estrada. Upon Dr.
Estrada's request for Corazon's admission, CMC, through its personnel, readily accommodated Corazon
and updated Dr. Estrada of her condition.

13
 Furthermore, CMC made Rogelio sign consent forms printed on CMC letterhead. Prior to
Corazon's admission and supposed hysterectomy, CMC asked Rogelio to sign release forms, the
contents of which reinforced Rogelio's belief that Dr. Estrada was a member of CMC's medical staff.
Without any indication in these consent forms that Dr. Estrada was an independent contractor-
physician, the Spouses Nogales could not have known that Dr. Estrada was an independent contractor.
Significantly, no one from CMC informed the Spouses Nogales that Dr. Estrada was an independent
contractor. On the contrary, Dr. Atencio, who was then a member of CMC Board of Directors, testified
that Dr. Estrada was part of CMC's surgical staff.

The second factor focuses on the patient's reliance. It is sometimes characterized as an inquiry
on whether the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with
ordinary care and prudence. The records show that the Spouses Nogales relied upon a perceived
employment relationship with CMC in accepting Dr. Estrada's services. Rogelio testified that he and his
wife specifically chose Dr. Estrada to handle Corazon's delivery not only because of their friend's
recommendation, but more importantly because of Dr. Estrada's "connection with a reputable
hospital, the CMC. In other words, Dr. Estrada's relationship with CMC played a significant role in the
Spouses Nogales' decision in accepting Dr. Estrada's services as the obstetrician-gynecologist for
Corazon's delivery.

Diggs v. Novant Health, Inc.

“Present day hospitals, as their manner of operation plainly demonstrates, do far more than
furnish facilities for treatment. They regularly employ on a salary basis a large staff of physicians,
nurses and internes, as well as administrative and manual workers, and they charge patients for
medical care and treatment, collecting for such services, if necessary, by legal action. Certainly, the
person who avails himself of 'hospital facilities' expects that the hospital will attempt to cure him, not
that its nurses or other employees will act on their own responsibility. ”

Effect of Consent / Waiver Forms

CMC's argument that petitioners are estopped from claiming damages based on the Consent on
Admission and Consent to Operation does not hold water. Both release forms consist of two parts. The
first part gave CMC permission to administer to Corazon any form of recognized medical treatment
which the CMC medical staff deemed advisable. The second part of the documents, which may
properly be described as the releasing part, releases CMC and its employees "from any and all claims"
arising from or by reason of the treatment and operation.

The documents do not expressly release CMC from liability for injury to Corazon due to
negligence during her treatment or operation. Neither do the consent forms expressly exempt CMC
from liability for Corazon's death due to negligence during such treatment or operation. Such release
forms, being in the nature of contracts of adhesion, are construed strictly against hospitals. Besides, a
blanket release in favor of hospitals "from any and all claims," which includes claims due to bad faith or
gross negligence, would be contrary to public policy and thus void.

Even simple negligence is not subject to blanket release in favor of establishments like hospitals
but may only mitigate liability depending on the circumstances. When a person needing urgent medical
attention rushes to a hospital, he cannot bargain on equal footing with the hospital on the terms of
admission and operation. Such a person is literally at the mercy of the hospital. There can be no clearer
example of a contract of adhesion than one arising from such a dire situation. Thus, the release forms
of CMC cannot relieve CMC from liability for the negligent medical treatment of Corazon.

___________________________________________________________________________________________

14
Coca-cola Bottlers Phils. vs. Dr. Climaco
GR No. 146881
February 5, 2007

Facts:
Dr. Dean Climaco is a medical doctor who was hired by Coca-cola Bottlers Phils. by virtue of a
Retainer Agreement which was valid for one year but was renewed annually for 6 years. Dr. Climaco
continue to serve Coca-cola for about another year despite the non-renewal of the said agreement.
During his 5th year of working with the company, Dr. Climaco made inquiries regarding his status with
Coca-cola with various offices, namely: The Philippine College of Occupational Medicine; DOLE; SSS;
and the NLRC. All of which responded saying that Dr. Climaco should be considered as a regular
employee of Coca-cola. However, upon inquiry with the management of the company whether he
could be recognized as a regular employee, Dr. Climaco was refused.

Dr. Climaco filed a Complaint before the NLRC seeking recognition as regular employee of Coca-
cola and prayed for the payment of all benefits of a regular employee, including 13 th Month Pay, Cost
of Living Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas Bonus. While his
Complaint was pending before the Labor Arbiter, Dr. Climaco received a letter from Coca-cola
concluding their retainership agreement effective 30 days from receipt thereof. Dr. Climaco
immediately filed another Complaint, this time for illegal dismissal against Coca-cola before the NLRC.

Labor Arbiter Rodriguez found that Coca-cola lacked the power of control over Dr. Climaco’s
performance of duties, and recognized as valid the Retainer Agreement between the parties. Labor
Arbiter dismissed the complaint in the first case. Likewise, Labor Arbiter Pelaez dismissed the
complaint for illegal dismissal in view of the previous finding of Labor Arbiter Rodriguez in the first
case.

NLRC dismissed the appeal in both cases for lack of merit. It declared that no employer-
employee relationship existed between Coca-cola and Dr. Climaco.

CA reversed the ruling, saying that the Retainer Agreement executed by and between the
parties, when read together with the Comprehensive Medical Plan which was made an integral part of
the retainer agreements, coupled with the actual services rendered by Dr. Climaco, would show that all
the elements of the Four-fold Test are present. CA declared that Dr. Climaco should be classified as a
regular employee, having rendered six years of service as plant physician by virtue of several renewed
retainer agreements, pursuant to Art. 280 of the Labor Code. Further, CA held that the termination of
Dr. Climaco’s services withour any just or authorized cause constituted illegal dismissal.

Issue:
Whether Dr. Climaco was indeed an employee of Coca-cola, making the former’s termination
from the company count as illegal dismissal.

Ruling:
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of
this case show that no employer-employee relationship exists between the parties. The Labor Arbiter
and the NLRC correctly found that Coca-cola lacked the power of control over the performance by Dr.
Climaco of his duties. The Labor Arbiter reasoned that the Comprehensive Medical Plan, which
contains Dr. Climaco's objectives, duties and obligations, does not tell the doctor "how to conduct his
physical examination, how to immunize, or how to diagnose and treat his patients, employees of Coca-
cola, in each case." Citing the case of Neri v. National Labor Relations Commission, Labor Arbiter held
that petitioner company, through the Comprehensive Medical Plan, provided guidelines merely to
ensure that the end result was achieved, but did not control the means and methods by which
respondent performed his assigned tasks.

15
 Considering that there is no employer-employee relationship between the parties, the
termination of the Retainership Agreement, which is in accordance with the provisions of the
Agreement, does not constitute illegal dismissal of respondent.

Rationale:
The Labor Arbiter correctly found that the provision in the Retainer Agreement that respondent
was on call during emergency cases did not make him a regular employee. Outside of the 2 hours that
Dr. Climaco is required to be at Coca-cola's premises, he is not at all further required to just sit around
in the premises and wait for an emergency to occur so as to enable him from using such hours for his
own benefit and advantage. In fact, Dr. Climaco maintains his own private clinic attending to his private
practice in the city, where he services his patients, bills them accordingly. The Supreme Court finds that
the schedule of work and the requirement to be on call for emergency cases do not amount to such
control, but are necessary incidents to the Retainership Agreement.

The Supreme Court also notes that the Retainership Agreement granted to both parties the
power to terminate their relationship upon giving a 30-day notice. Hence, Coca-cola did not wield the
sole power of dismissal or termination.

Calamba Medical Center vs. NLRC et al.

GR No. 176484
November 25, 2008

Facts:
Calamba Medical Center (CMC)

WAGE enforcement and recovery

Tiger Construction and Development Corp. vs. Abay et. al.

GR No. 164141
February 26, 2010

Facts:
Reynaldo Abay and 59 others filed a complaint against their employer, Tiger Construction and
Development Corporation, before the Regional Office of DOLE. After an inspection was conducted,
DOLE noted several labor standard violations such as deficiencies in record keeping, non-compliance
with various wage orders, non-payment of holiday pay, and underpayment of 13 th month pay.

The case was set for summary hearing. But before the hearing, Director Manalo of the said
Regional Office issued an Order referring the case to the NLRC. The Order was issued pursuant to Art.
217 (now Art. 224) of the Labor Code, considering that the aggregate money claim of each worker
exceeds the jurisdictional amount of the DOLE Regional Office which is only P 5,000.00. Despite such
Order, DOLE officials still issued a Notice of Inspection Results to Tiger Construction and directed it to
rectify the violations within five days from notice. For failure to comply, the case was again set for a
summary hearing.

Tiger Construction argued that the proceedings before the Regional Office have been rendered
moot by the Order issued by Director Manalo, and that such Order was tantamount to a dismissal on
the ground of lack of jurisdiction. Not a month after, Director Manalo issued another Order directing
Tiger Construction to pay to its employees the underpayments of the salaries, 13 th month pay, service
16
incentive leave pay, and regular holiday pay. But later, upon a Motion for Reconsideration filed by Tiger
Construction, Director Manalo again endorsed the case to the NLRC. NLRC, on the other hand,
returned the entire records of the case to Director Manalo on the ground that the NLRC does not have
jurisdiction over the complaint. After this, Director Manalo issued a third Order denying Tiger
Construction’s Motion for Reconsideration for lack of merit.

Three months after the denial of their MR, Tiger Construction filed an admittedly belated
Appeal with the DOLE Secretary, reiterating that all of Director Manalo’s actions concerning the case
are null and void after she had endorsed the case to the NLRC. Secretary Sto. Tomas dismissed the
Appeal for lack of merit, holding that the jurisdiction over the case properly belongs to the Regional
Director, and that Director Manalo’s endorsement to the NLRC was clearly and error.

Issue:
Whether the jurisdiction over the case belongs to the Regional Director or to the NLRC.

Ruling:
Jurisdiction belongs to the DOLE Regional Director. The Supreme Court rejects Tiger
Construction’s theory that Director Manalo’s initial endorsement of the case to the NLRC served as a
dismissal of the case. The Director’s mistaken opinion that the complaint was within the jurisdiction of
NLRC did not oust or deprive her of her jurisdiction over the case. Supreme Court denies the petition of
Tiger Construction.

Rationale:
Under Art. 128 (b) of the Labor Code, as amended by RA 7730, the DOLE Secretary and her
representatives, the Regional Directors, have jurisdiction over labor standards violations based on
findings made in the course of inspection of an employer’s premises. The said jurisdiction is not
affected by the amount of claim as RA 7730 had effectively removed the jurisdictional limitations found
in Art. 129 and Art. 217 (now Art. 224) of the Labor Code insofar as inspection cases pursuant to the
visitorial and enforcement powers of the DOLE Secretary, are concerned. The exception to the
jurisdiction of the DOLE Secretary and its representatives stated in the last sentence of Art. 128 (b) of
the Labor Code does not apply in this case.

Although Director Manalo’s endorsement of the complaint to the NLRC turned out to be ill-
advised, no rights of the parties were prejudiced. Tiger Construction was still properly investigated, was
given Notice of Inspection Results, has fully participated in the summary hearings, and has even filed a
Motion for Reconsideration and a Supplemental Pleading.

Supreme Court also finds bad faith in the part of Tiger Construction for not taking the proper
measure of filing a Petition for Certiorari under Rule 65 within the proper period prescribed. Tiger
Construction’s failure to do so without explanation shows its lack of good faith. Tiger Construction is
merely using the alleged lack of jurisdiction in belated attempt to reverse or modify an order of
judgment that has already become final and executory.

People’s Broadcasting (Bombo Radyo) vs. Secretary of DOLE, et al.

GR No. 179652
March 6, 2012

Facts:
Jandeleon Juezan filed a complaint with DOLE Regional Office against People’s Broadcasting
Service (Bombo Radyo) for illegal deduction, nonpayment of service incentive leave, 13 th month pay,
premium pay for holiday and rest day, illegal diminution of benefits, delayed payment of wages, and
noncoverage of SSS, PAG-IBIG, and PhilHealth. The DOLE Regional Director’ summary investigations
found that Juezan was an employee of Bombo Radyo and was entitled to his money claims. Bombo

17
Radyo filed an appeal to the DOLE Secretary insisting that Juezan was not its employee but a drama
talent hired on a per-drama basis. The Acting DOLE Secretary dismissed the appeal on the ground that
Bombo Radyo submitted a Deed of Assignment of Bank Deposit instead of posting a cash or surety
bond as required by Art. 128 (b) of the Labor Code. Bombo Radyo filed a petition for certiorari with the
CA but the appellate court dismissed the petition for lack of merit.

The Supreme Court reviewed the evidence and found that there was actually no employer-
employee relationship between Juezan and Bombo Rady. It rendered a Decision reversing the CA
rulings and dismissing Juezan’s complaint. Supreme Court also held that NLRC is the primary agency in
determining the existence of an employer-employee relationship.

From the said Supreme Court Decision, the Public Attorney’s Office and DOLE sought
clarification on when the visitorial and enforcement power of the DOLE can be considered co-extensive
or not, with the power to determine the existence of an employer-employee relationship.

Issue:
Whether DOLE has the power to determine the existence of an employer-employee
relationship.

Ruling:
Yes, the Supreme Court recognizes the validity of the Department of Labor and Employment's
(DOLE's) plenary power under Article 128 (b) of the Labor Code, as amended by Republic Act No. 7730,
including its power to determine the existence of employer-employee relationship in the exercise of its
Article 128 (b) powers.

Rationale:
No limitation in the law was placed upon the power of the DOLE to determine the existence of
an employer-employee relationship. No procedure was laid down where the DOLE would only make a
preliminary finding, that the power was primarily held by the NLRC. The law did not say that the DOLE
would first seek the NLRC's determination of the existence of an employer-employee relationship, or
that should the existence of the employer-employee relationship be disputed, the DOLE would refer
the matter to the NLRC. The DOLE must have the power to determine whether or not an employer-
employee relationship exists, and from there to decide whether or not to issue compliance orders in
accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.
The determination of the existence of an employer-employee relationship by the DOLE must be
respected. The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be
rendered nugatory if the alleged employer could, by the simple expedient of disputing the employer-
employee relationship, force the referral of the matter to the NLRC. The Court issued the declaration
that at least a prima facie showing of the absence of an employer-employee relationship be made to
oust the DOLE of jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is
the DOLE that will weigh it, to see if the same does successfully refute the existence of an employer-
employee relationship
This is not to say that the determination by the DOLE is beyond question or review. Suffice it to
say, there are judicial remedies such as a petition for certiorari under Rule 65 that may be availed of,
should a party wish to dispute the findings of the DOLE
The elements to determine the existence of an employment relationship are: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4) the
employer's power to control the employee's conduct. The use of this test is not solely limited to the
NLRC. The DOLE Secretary, or his or her representatives, can utilize the same test, even in the course of
inspection, making use of the same evidence that would have been presented before the NLRC.

18
Superior Packaging Corp. vs. Balagsay, et al.
GR No. 178909
October 10, 2012

Facts:
Superior Packaging engaged the services of Lancer Staffing & Services Network for 4 months.
Tasks of Lancer’s staff included loading, unloading, and segregation of corrugated boxes. Lancer’s staff
filed a complaint against Superior and its President, Cesar Luz, for underpayment of wages, non-
payment of premium pay for worked rest, overtime pay, and non-payment of salary. Upon inspection,
DOLE found several violations by Superior, to wit: 1) non-presentation of payroll and DTRs; 2) non-
submission of annual report of safety organization; 3) medical and accidental/illness reports; 4) non-
registration of establishment under Rule 1020 of Occupational and Health Standards; and non-
registration of establishment under Rule 1020 of Occupational and Health Standards; and 5) no trained
first aide. Superior failed to appear in the summary investigations, and DOLE issued an Order that
Superior pay Lancer’s staff the amount of P840,463.38.

Superior filed an MR on the ground that complainants were not their employees but rather,
were that of Lancer’s and that they pay in lump sum for the services to Lancer. DOLE denied such MR,
saying that Superior failed to support its argument, and even assuming that it was true, Superior still
cannot escape liability since Sec. 13 of D.O. No. 10 Series of 1997 makes a principal jointly and severally
liable with the contractor to contractual employees to the extent of the work performed when the
contractor fails to pay its employees’ wages. DOLE Secretary and CA both affirmed the Order.

Superior belatedly raises an objection to the finding that it is engaged in labor-only contracting
and is consequently an indirect employer, that such conclusion is beyond the visitorial and
enforcement power of the DOLE. According to Superior, such conclusion may only be made upon
consideration of evidentiary matters and cannot be determined solely through a labor inspection.

Issue:
Whether Superior may be considered and indirect employer of Lancer’s staff and should
therefore be held solidarily liable with Lancer Staffing & Services Network for Lancer staff’s unpaid
money claims.

Ruling:
Yes, the Supreme Court held that Lancer Staffing & Services Network is a “labor-only”
contractor and that equals to an employer-employee relationship between Superior and Lancer’s staff
since Lancer is considered as a mere agent of Superior, the real employer. Superior becomes solidarily
liable for all the rightful claims of the employees.

Rationale:
The Supreme Court upholds the Ruling in People’s Broadcasting (Bombo Radyo) vs. Secretary of
DOLE, et al. that it can be assumed that DOLE, in the exercise of its visitorial and enforcement power,
somehow has to make a determination of the existence of an employer-employee relationship. Such
determination is preliminary, incidental, and collateral to DOLE’s primary function of enforcing labor
standards provisions.

The determination of the existence of an employer-employee relationship was already made by

DOLE Regional Office, and was affirmed by the DOLE Secretary and the CA. It is therefore beyond the
ambit of a petition for review on certiorari.

At the time of Lancer staff’s employment in 1998, the applicable regulation was DOLE
Department Order No. 10, Series of 1997:

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

(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials; and
(2) The workers recruited and placed by such persons are performing activities which are
directly related to the principal business or operations of the employer in which workers are
habitually employed.

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 Staffing & Services Network’s authorized capital stock of P400,000.00 as against its
subscribed and paid-up capital stock of P25,000.00 show the inadequacy of its capital investment
necessary to maintain its business. Moreover, the nature of work of Lancer’s staff was directly related
to the petitioner’s business.

Most important is the undisputed fact that Superior failed to produce any written service
contract that might serve as proof of its alleged agreement with Lancer.

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