ROYAL PLANT WORKERS UNION v.

COCA-COLA BOTTLERS PHILIPPINES

GR No. 198783 (April 15, 2013)

FACTS:

Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in the
manufacture, sale and distribution of softdrink products. It has several bottling plants all over the
country, one of which is located in Cebu City. The bottling operators work in two shifts. The first shift is
from 8 a.m. to 5 p.m. and the second shift is from 5 p.m. up to the time production operations is
finished. Thus, the second shift varies and may end beyond eight (8) hours. However, the bottling
operators are compensated with overtime pay if the shift extends beyond eight (8) hours.

Each shift has rotations of work time and break time. Prior to September 2008, the rotation is this: after
two and a half (2 ½) hours of work, the bottling operators are given a 30-minute break and this goes on
until the shift ends. In September 2008 and up to the present, the rotation has changed and bottling
operators are now given a 30-minute break after one and one half (1 ½) hours of work.

The bottling operators of then Bottling Line 2 were provided with chairs upon their request. The bottling
operators of then Bottling Line 1 followed suit and asked to be provided also with chairs. Their request
was likewise granted. Sometime in September 2008, the chairs provided for the operators were
removed pursuant to a national directive of petitioner. This directive is in line with the "I Operate, I
Maintain, I Clean" program of petitioner for bottling operators, wherein every bottling operator is given
the responsibility to keep the machinery and equipment assigned to him clean and safe. The program
reinforces the task of bottling operators to constantly move about in the performance of their duties
and responsibilities. CCBPI rationalized that the removal of the chairs is implemented so that the
bottling operators will avoid sleeping, thus, prevent injuries to their persons. As bottling operators are
working with machines which consist of moving parts, it is imperative that they should not fall asleep as
to do so would expose them to hazards and injuries. In addition, sleeping will hamper the efficient flow
of operations as the bottling operators would be unable to perform their duties competently.

The bottling operators took issue with the removal of the chairs. Through the representation of herein
respondent, they initiated the grievance machinery of the Collective Bargaining Agreement (CBA) in
November 2008. Even after exhausting the remedies contained in the grievance machinery, the parties
were still at a deadlock with petitioner still insisting on the removal of the chairs and respondent still
against such measure. Respondent sent a Notice to Arbitrate to petitioner stating its position to submit
the issue on the removal of the chairs for arbitration. Nevertheless, they failed to arrive at an amicable
settlement. Opposing the Union's argument, CCBPI mainly contends that the removal of the subject
chairs is a valid exercise of management prerogative. The management decision to remove the subject
chairs was made in good faith and did not intend to defeat or circumvent the rights of the Union under
the special laws, the CBA and the general principles of justice and fair play.

ISSUE: Whether CCBPI's decision to unilaterally remove the operators' chairs from the
production/manufacturing lines of its bottling plants is not valid because it violates some fundamental
labor policies.
RULING: No. The Court has held that management is free to regulate, according to its own discretion
and judgment, all aspects of employment, including hiring, work assignments, working methods, time,
place, and manner of work, processes to be followed, supervision of workers, working regulations,
transfer of employees, work supervision, lay-off of workers, and discipline, dismissal and recall of
workers. The exercise of management prerogative, however, is not absolute as it must be exercised in
good faith and with due regard to the rights of labor.

In the present controversy, it cannot be denied that CCBPI removed the operators' chairs pursuant to a
national directive and in line with its "I Operate, I Maintain, I Clean" program, launched to enable the
Union to perform their duties and responsibilities more efficiently.

The chairs were not removed indiscriminately. They were carefully studied with due regard to the
welfare of the members of the Union. The removal of the chairs was compensated by: a) a reduction of
the operating hours of the bottling operators from a two-and-one-half (2 ½)-hour rotation period to a
one-and-a-half (1 ½) hour rotation period; and b) an increase of the break period from 15 to 30 minutes
between rotations.

Apparently, the decision to remove the chairs was done with good intentions as CCBPI wanted to avoid
instances of operators sleeping on the job while in the performance of their duties and responsibilities
and because of the fact that the chairs were not necessary considering that the operators constantly
move about while working. In short, the removal of the chairs was designed to increase work efficiency.
Hence, CCBPI's exercise of its management prerogative was made in good faith without doing any harm
to the workers' rights. The fact that there is no proof of any operator sleeping on the job is of no
moment. There is no guarantee that such incident would never happen as sitting on a chair is relaxing.
Besides, the operators constantly move about while doing their job. The ultimate purpose is to promote
work efficiency.

The rights of the Union under any labor law were not violated. There is no law that requires employers
to provide chairs for bottling operators. The CA correctly ruled that the Labor Code, specifically Article
132thereof, only requires employers to provide seats for women. No similar requirement is mandated
for men or male workers. It must be stressed that all concerned bottling operators in this case are men.
GREGORIO V. TONGKO v. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC.
and RENATO A. VERGEL DE DIOS

FACTS: Manufacturers Life Insurance, Co. is a domestic corporation engaged in life insurance business.
De Dios was its President and Chief Executive Officer. Petitioner Tongko started his relationship with
Manulife in 1977 by virtue of a Career Agent's Agreement.

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

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

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

c) Either of the parties hereto may likewise terminate his Agreement at any time without cause, by
giving to the other party fifteen (15) days notice in writing.

De Dios addressed a letter to Tongko, then one of the Metro North Managers, regarding meetings
wherein De Dios found Tongko's views and comments to be unaligned with the directions the company
was taking. De Dios also expressed his concern regarding the Metro North Managers' interpretation of
the company's goals. He maintains that Tongko's allegations are unfounded. Some allegations state that
some Managers are unhappy with their earnings, that they're earning less than what they deserve and
that these are the reasons why Tonko's division is unable to meet agency development objectives.
However, not a single Manager came forth to confirm these allegations. Finally, De Dios related his
worries about Tongko's inability to push for company development and growth.

De Dios subsequently sent Tongko a letter of termination in accordance with Tongko's Agents Contract.
Tongko filed a complaint with the NLRC against Manulife for illegal dismissal, alleging that he had an
employer-employee relationship with De Dios instead of a revocable agency by pointing out that the
latter exercised control over him through directives regarding how to manage his area of responsibility
and setting objectives for him relating to the business. Tongko also claimed that his dismissal was
without basis and he was not afforded due process. The NLRC ruled that there was an employer-
employee relationship as evidenced by De Dios's letter which contained the manner and means by
which Tongko should do his work. The NLRC ruled in favor of Tongko, affirming the existence of the
employer-employee relationship.

The Court of Appeals, however, set aside the NLRC's ruling. It applied the four-fold test for determining
control and found the elements in this case to be lacking, basing its decision on the same facts used by
the NLRC. It found that Manulife did not exert control over Tongko, there was no employer-employee
relationship and thus the NLRC did not have jurisdiction over the case. The Supreme Court reversed the
ruling of the Court of Appeals and ruled in favor of Tongko. However, the Supreme Court issued another
Resolution dated June 29, 2010, reversing its decision. Tongko filed a motion for reconsideration, which
is now the subject of the instant case.

ISSUE: Whether the Supreme Court err in issuing the June 29, 2010 resolution, reversing its earlier
decision that an employer-employee relationship existed?

HELD: The Supreme Court finds no reason to reverse the June 29, 2010 decision. Control over the
performance of the task of one providing service both with respect to the means and manner, and the
results of the service is the primary element in determining whether an employment relationship exists.
The Supreme Court ruled petitioners Motion against his favor since he failed to show that the control
Manulife exercised over him was the control required to exist in an employer-employee relationship;
Manulifes control fell short of this norm and carried only the characteristic of the relationship between
an insurance company and its agents, as defined by the Insurance Code and by the law of agency under
the Civil Code.

In the Supreme Courts June 29, 2010 Resolution, they noted that there are built-in elements of control
specific to an insurance agency, which do not amount to the elements of control that characterize an
employment relationship governed by the Labor Code. The Insurance Code provides definite parameters
in the way an agent negotiates for the sale of the company’s insurance products, his collection activities
and his delivery of the insurance contract or policy. They do not reach the level of control into the
means and manner of doing an assigned task that invariably characterizes an employment relationship
as defined by labor law.

To reiterate, guidelines indicative of labor law "control" do not merely relate to the mutually desirable
result intended by the contractual relationship; they must have the nature of dictating the means and
methods to be employed in attaining the result. In sum, the Supreme Court found absolutely no
evidence of labor law control. DENIED.

Additional reading (just in case): DISSENT by Justice Presbitero J. Velasco, Jr.

FACTS: The facts are culled from the main case.

ISSUE: Whether or not Tongko during all the time he was directly or indirectly connected with the
company, first as an agent, pursuant to a Career Agents Agreement (Agreement), and then as unit,
branch and eventually regional sales manager of Manulife's Sales Agency Organization was an employee
of Manulife.

HELD: The petition is meritorious.

In resolving the issue of whether an employer-employee tie obtains, attention was focused, as
jurisprudential trend dictates, on the four-fold test on employment developed and invariably invoked by
labor officials and this Court as a guiding, if not governing norm, to determine, based on the facts and
circumstances involved in a given situation, whether such relationship exists. These four elements are:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the control test.
The control test meaning whether or not the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also the means and methods employed in
reaching that end constitutes the most important index of the existence of an employer-employee
relationship.

From the evidence on record, it appears that Manulife had control over the work of Tongko after his
appointment as manager of the company's insurance sales force, indubitably implying the existence of
an employer-employee relationship between them.

In the case of Great Pacific Life Assurance Corporation v. NLRC, Ernesto Ruiz and Rodrigo Ruiz (the
Grepalife case), as Justice Velasco cites, it was held that the employer company practically dictated the
manner by which jobs were to be carried out. The functions of the then district managers are similar to
the functions of Tongko in the present case. Thus, if the district managers in the Grepalife case were
held by the court to be employees then Tongko who is in the same situation, according to Justice
Velasco, should also be deemed an employee of Manulife.

Also, he maintains that, similar to the respondent in the Grepa case who was an insurance agent but
also had a management contract, the fact that the Agents Agreement was subsisting even after Tongko's
appointment as manager does not militate against a conclusion that Tongko was Manulife's employee
during his stint as a manager. While there was perhaps no written management contract whence
Tongko's rights, duties and functions as unit/branch manager may easily be fleshed out as a prelude to
determining if an employer-employee relationship with Manulife did exist, other evidence was adduced
to show such duties and responsibilities. The petition is partially granted such that Tongko may only be
considered an employee of Manulife from the time of his appointment as manager.
G.R. No. 210565, June 28, 2016

QUINTANAR, et al v. COCA-COLA BOTTLERS, PHILIPPINES, INC.

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. After
working for quite sometime as directly-hired employees of Coca-Cola,
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.

Further, complainants allege that the Department of Labor and Employment

(DOLE) conducted an inspection of Coca-Cola to determine whether it is
complying with the various mandated labor standards, and relative thereto,
they were declared to be regular employees of Coca-Cola, which was held
liable to pay complainants the underpayment of their 13th month pay,
emergency cost of living allowance (ECOLA), and other claims. As soon as
respondents learned of the filing of the claims with DOLE, they were
dismissed on various dates in January 2004. 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, on November
10, 2006, they filed their complaint for illegal dismissal.

The Decision of the LA

On August 29, 2008, the LA rendered its decision granting the prayer in the
complaint. In its assessment, the LA explained that the documentary
evidence submitted by both parties confirmed the petitioners' allegation that
they had been working for Coca-Cola for quite some time. It also noted that
Coca-Cola never disputed the petitioners' contention that after working for
Coca-Cola through the years, they were transferred to the various service
contractors engaged by it, namely, Interim Services, Inc. (ISI), Lipercon
Services, Inc. (Lipercon), People Services, Inc. (PSI), ROMAC, and lastly,
Interserve Management and Manpower Resources, Inc. (Interserve). In view
of said facts, the LA concluded that the petitioners were simply employees of
Coca-Cola who were "seconded" to Interserve.6chanrobleslaw

The LA opined that it was highly inconceivable for the petitioners, who were
already enjoying a stable job at a multi-national company, to leave and
become mere agency workers. He dismissed the contention of Coca-Cola
that the petitioners were employees of Interserve, stressing that they
enjoyed the constitutional right to security of tenure which Coca-Cola could
not compromise by entering into a service agreement manpower supply
contractors, make petitioners sign employment contracts with them, and
convert their employment status from regular to contractual.7chanroblesla

Ultimately, the LA ordered Coca-Cola to reinstate the petitioners to their

former positions and to pay their full backwages.8 The dispositive portion of
the decision reads:

WHEREFORE, all the foregoing premises being considered,

judgment is hereby rendered ordering respondent Coca-Cola Bottlers
Phils., Inc. to reinstate complainants to their former or substantially
equivalent positions, and to pay their full backwages which as of
August 29, 2008 already amounts to P15,319,005.00, without
prejudice to recomputation upon subsequent determination of the
applicable salary rates and benefits due a regular route helper or
substantially equivalent position on the plantilla of respondent CCBPI.

SO ORDERED.9chanroblesvirtuallaw

The Decision of the NLRC

Similar to the conclusion reached by the LA, the NLRC found that the
petitioners were regular employees of Coca-Cola. In its decision, dated
March 25, 2010, it found that the relationship between the parties in the
controversy bore a striking similarity with the facts in the cases of Coca-Cola
Bottlers Philippines, Inc. v. National Organization of
Workingmen10(N.O.W.) and Magsalin v. National Organization of
11
Workingmen (Magsalin).  The NLRC, thus, echoed the rulings of the Court in
the said cases which found the employees involved, like the petitioners in
this case, as regular employees of Coca-Cola. It stated that the entities ISI,
Lipercon, PSI, ROMAC, and Interserve simply "played to feign that status of
an employer so that its alleged principal would be free from any liabilities
and responsibilities to its employees."12 As far as it is concerned, Coca-Cola
failed to provide evidence that would place the subject controversy on a
different plane from N.O.W and Magsalin as to warrant a deviation from the
rulings made therein.
As for the quitclaims executed by the petitioners, the NLRC held that the
same could not be used by Coca-Cola to shield it from liability. The NLRC
noted the Minutes of the National Conciliation and Mediation Board (NCMB)
which stated that the petitioners agreed to settle their claims with Coca-Cola
only with respect to their claims for violation of labor standards law, and that
their claims for illegal dismissal would be submitted to the NLRC for
arbitration.13chanrobleslaw

Coca-Cola sought reconsideration of the NLRC decision but its motion was
denied.14chanrobleslaw

The Decision of the CA

Reversing the findings of the LA and the NLRC, the CA opined that the
petitioners were not employees of Coca-Cola but of Interserve. In its
decision, the appellate court agreed with the contention of Coca-Cola that it
was Interserve who exercised the power of selection and engagement over
the petitioners considering that the latter applied for their jobs and went
through the pre-employment processes of Interserve. It noted that the
petitioners' contracts of employment and personal data sheets, which were
filed with Interserve, categorically stipulated that Interserve had the sole
power to assign them temporarily as relievers for absent employees of their
clients. The CA also noted that the petitioners had been working for other
agencies before they were hired by Interserve.15chanrobleslaw

The CA also gave credence to the position of Coca-Cola that it was

Interserve who paid the petitioners' salaries. This, coupled with the CA's
finding that Coca-Cola paid Interserve for the services rendered by the
petitioners whenever they substituted for the regular employees of Coca-
Cola, led the CA to conclude that it was Interserve who exercised the power
of paying the petitioners' wages.

The CA then took into consideration Interserve's admission that they had to
sever the petitioners' from their contractual employment because its
contract with Coca-Cola expired and there was no demand for relievers from
its other clients. The CA equated this with Interserve's exercise of its power
to fire the petitioners.16chanrobleslaw

Finally, the CA was of the considered view that it was Interserve which
exercised the power of control. Citing the Affidavit17 of Noel F. Sambilay
(Sambilay), Coordinator of Interserve, the CA noted that Interserve
exercised the power of control, monitoring the petitioners' attendance,
providing them with their assignments to the delivery trucks of Coca-Cola,
and making sure that they were able to make their
18
deliveries. chanrobleslaw

The CA then went on to conclude that Interserve was a legitimate

independent contractor. It noted that the said agency was registered with
the Department of Labor and Employment (DOLE) as an independent
contractor which had provided delivery services for other beverage products
of its clients, and had shown that it had substantial capitalization and owned
properties and equipment that were used in the conduct of its business
operations. The CA was, thus, convinced that Interserve ran its own
business, separate and distinct from Coca-Cola.19chanrobleslaw

The petitioners sought reconsideration, but they were

20
rebuffed. chanrobleslaw

Hence, this petition, raising the following

Issue:

Whether the manpower agencies are labor-only contractors.

Ruling:

Yes. As to the characterization of Interserve as a contractor, the Court finds

that, contrary to the conclusion reached by the CA, the petitioners were
made to suffer under the prohibited practice of labor-only contracting.

The law clearly establishes an employer-employee relationship between the

principal employer and the contractor's employee upon a finding that the
contractor is engaged in "labor-only" contracting. Article 106 of the Labor
Code categorically states: "There is labor-only' contracting where the person
supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such persons are
performing activities which are directly related to the principal business of
such employer." Thus, performing activities directly related to the
principal business of the employer is only one of the two indicators
that "labor-only" contracting exists; the other is lack of substantial
capital or investment. The Court finds that both indicators exist in Agito
case.
In this case, the appellate court considered the evidence of 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
P12,538859.55.62 As stated above, however, the possession of
substantial capital is only one element. Labor-only contracting exists
when any of the two elements is present.63 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. Also, it has been ruled that no absolute figure is set for what is
considered 'substantial capital' because the same is measured against the
type of work which the contractor is obligated to perform for the
principal.64chanrobleslaw

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. Well-settled is
the rule that "[t]he contractor, not the employee, has the burden of proof
that it has the substantial capital, investment, and tool to engage in job
contracting."65 In this case, the said burden of proof lies with Coca-Cola
although it was not the contractor itself, but it was the one invoking the
supposed status of these entities as independent job contractors.

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. Other than insisting that the petitioners were
last employed by Interserve, Coca-Cola failed not only to show by convincing
evidence how it severed its employer relationship with the petitioners, but
also to prove that the termination of its relationship with them was made
through any of the grounds sanctioned by law.

For failure to overcome this burden, the Court concurs in the observation of
the LA that it was highly inconceivable for the petitioners, who were already
enjoying a stable job at a multi-national company, to leave and become
mere agency workers. Indeed, it is contrary to human experience that one
would leave a stable employment in a company like Coca-Cola, only to
become a worker of an agency like Interserve, and be assigned back to his
original employer — Coca-Cola.

Although it has been said that among the four (4) tests to determine the
existence of any employer-employee relationship, it is the "control test" that
is most persuasive, the courts cannot simply ignore the other circumstances
obtaining in each case in order to determine whether an employer-employee
relationship exists between the parties.

The Decision of the Labor Arbiter as affirmed in toto by the National Labor
Relations Commission, is hereby REINSTATED.
G.R. No. 194765

MARSMAN & COMPANY, INC.

vs
RODIL C. STA. RITA,

FACTS:

Marsman, a domestic corporation and was engaged in the business of distribution and sale of
pharmaceutical and consumer products for different manufacturers within the country, temporarily
hired Sta. Rita as a warehouse helper with a contract and paid him a monthly wage.

After the contract expired, Marsman rehired Sta. Rita as a warehouseman and placed him on
probationary status with pay. Marsman then confirmed Sta. Rita's status as a regular employee and
adjusted his monthly wage. Later, Sta. Rita joined Marsman Employees Union (MEU), the recognized
sole and exclusive bargaining representative of Marsman's employees. Marsman administered Sta.
Rita's warehouse assignments.

Initially, Marsman assigned her to work in its GMA warehouse, and then transferred to the
Warehouses C and E of Kraft General Foods, Inc.

Sometime in July 1995, Marsman purchased Metro, a company that was also engaged in the
distribution and sale of pharmaceutical and consumer products. The similarity in Marsman's and Metro
Drug's business led to the integration of their employees which was formalized in a Memorandum of
Agreement (MOA).

Concomitant to the integration of employees is the transfer of all office, sales and warehouse
personnel of Marsman to Metro Drug and the latter's assumption of obligation with regard to the
affected employees' labor contracts and Collective Bargaining Agreement. The integration and transfer
of employees ensued out of the transitions of Marsman and CPDSI into, respectively, a holding company
and an operating company.

Thereafter, on November 7, 1997, Metro Drug changed its name to "Consumer Products
Distribution Services, Inc." (CPDSI) which was approved by the SEC. In the meantime, CPDSI contracted
its logistic services to EAC Distributors (EAC). CPDSI and EAC agreed that CPDSI would provide
warehousemen to EAC's tobacco business which operated in EAC-Libis Warehouse.
 A letter issued by Marsman confirmed Sta. Rita's appointment as one of the warehousemen for
EACLibis Warehouse. Parenthetically, EAC's use of the EAC-Libis Warehouse was dependent upon the
lease contract between EAC and Valiant Distribution (Valiant), owner of the EAC-Libis Warehouse.
Hence, EAC's operations were affected when Valiant decided to terminate their contract of lease on
January 31, 2000. In response to the cessation of the contract of lease, EAC transferred their stocks into
their own warehouse and decided to operate the business by themselves, thereby ending their logistic
service agreement with CPDSI.

This sequence of events left CPDSI with no other option but to terminate the employment of those
assigned to EAC-Libis Warehouse, including Sta. Rita. According to CPDSI, she was terminated due to
redundancy.

Aggrieved, Sta. Rita filed a complaint in the NLRC against Marsman for illegal dismissal with
damages. Sta. Rita alleged that his dismissal was without just or authorized cause and without
compliance with procedural due process.

Marsman filed a Motion to Dismiss on the premise that the Labor Arbiter had no jurisdiction over
the complaint for illegal dismissal because Marsman is not Sta. Rita's employer. Marsman averred that
the MOA effectively transferred Sta. Rita's employment from Marsman and Company, Inc. to CPDSI.

The Labor Arbiter found Marsman as Sta.Rita’s employer and declared it guilty of illegal dismissal.

The NLRC, on the contrary, found that using the four-fold test, there is no employee-employer
relationship.

Meanwhile, the Court of Appeals held that Marsman was Sta. Rita's employer because Sta. Rita was
allegedly not part of the integration of employees between Marsman and CPDSI.

ISSUE:

Whether or not an employer-employee relationship existed between Marsman and Sta. Rita at the time
of Sta. Rita's dismissal?

RULING:
 NO. In an illegal dismissal case, the the obligation to prove an assertion rests on the employer to
prove that its dismissal of an employee was for a valid cause. However, before a case for illegal dismissal
can prosper, an employer-employee relationship must first be established.

In this case, it was incumbent upon Sta. Rita as the complainant to prove the employer-employee
relationship by substantial evidence which Sta. Rita unfortunately failed.

It is imperative to point out that the integration and transfer was a necessary consequence of the
business transition or corporate reorganization that Marsman and CPDSI had undertaken, which had the
characteristics of a corporate spin-off.

The spin-off and the attendant transfer of employees are legitimate business interests of Marsman.
The transfer of employees through the MOA was proper and did not violate any existing law or
jurisprudence.

Analogously, the Court has upheld the transfer/absorption of employees from one company to
another, as successor employer, as long as the transferor was not in bad faith and the employees
absorbed by a successor-employer enjoy the continuity of their employment status and their rights and
privileges with their former employer. Sta. Rita's contention that the absence of his signature on the
MOA meant that his employment remained with Marsman is merely an allegation that is neither proof
nor evidence. It cannot prevail over Marsman's evident intention to transfer its employees. To assert
that Marsman remained as Sta. Rita's employer even after the corporate spin-off disregards the
separate personality of Marsman and CPDSI. It is a fundamental principle of law that a corporation has a
personality that is separate and distinct from that composing it as well as from that of any other legal
entity to which it may be related.

Other than Sta. Rita's bare allegation that Michael Leo T. Luna was Marsman's and CPDSI's
VicePresident and General Manager, Sta. Rita failed to support his claim that both companies were
managed and operated by the same persons, or that Marsman still had complete control over CPDSI's
operations. Moreover, the existence of interlocking directors, corporate officers and shareholders
without more, is not enough justification to pierce the veil of corporate fiction in the absence of fraud or
other public policy considerations.

Verily, the doctrine of piercing the corporate veil also finds no application in this case because bad
faith cannot be imputed to Marsman. On the contrary, the MOA guaranteed the tenure of the
employees, the honoring of the Collective Bargaining Agreement signed in June 1995, the preservation
of salaries and benefits, and the enjoyment of the same terms and conditions of employment by the
affected employees.

Sta. Rita also failed to satisfy the four-fold test which determines the existence of an employer-
employee relationship. There is no hard and fast rule designed to establish the elements. Any
competent and relevant evidence to prove the relationship may be admitted. Identification cards, cash
vouchers, social security registration, appointment letters or employment contracts, payrolls,
organization charts, and personnel lists, serve as evidence of employee status.

The MOA effectively transferred Marsman's employees to CPDSI. However, there was nothing in
the agreement to negate CPDSI's power to select its employees and to decide when to engage them.
This is in line with Article 1700 of the Civil Code which provides that:

Art. 1700. The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore, such
contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.

A labor contract merely creates an action in personam and does not create any real right which
should be respected by third parties. This conclusion draws its force from the right of an employer to
select his/her employees and equally, the right of the employee to refuse or voluntarily terminate
his/her employment with his/her new employer by resigning or retiring.The MOA clearly reflected
Marsman's intention to transfer all employees to CPDSI.

It is clear under the terms of the Memorandum of Agreement that Marsman may continue to
negotiate and address issues with the Union even after the signing and execution of said agreement in
the course of fully implementing the transfer to, and the integration of operations with, CPDSI.

To prove the element on the payment of wages, Sta. Rita submitted forms for leave application,
with either Marsman's logo or CPDSI's logo. In any event, the forms for leave application did not
sufficiently establish that Marsman paid Sta. Rita's wages. Sta. Rita could have presented pay slips, salary
vouchers, payrolls, certificates of withholding tax on compensation income or testimonies of his
witnesses. The submission of his SSS ID only proved his membership in the social insurance program.
Sta. Rita should have instead presented his SSS records which could have reflected his contributions, and
the name and address of his employer. Thus, Sta. Rita fell short in his claim that Marsman still had him in
its payroll at the time of his dismissal.
 As to the power of dismissal, the letter dated January 14, 2000 clearly indicated that CPDSI, and not
Marsman, terminated Sta. Rita's services by reason of redundancy.

Finally, Sta. Rita failed to prove that Marsman had the power of control over his employment at the
time of his dismissal. The power of an employer to control the work of the employee is considered the
most significant determinant of the existence of an employer-employee relationship.

The Court likewise takes notice of the company IDs attached in Sta. Rita's pleading. The "old" ID
bore Marsman's logo while the "new" ID carried Metro Drug's logo. The Court has held that in a business
establishment, an identification card is usually provided not only as a security measure but mainly to
identify the holder thereof as a bona fide employee of the firm that issues it. Thus the "new" ID
confirmed that Sta. Rita was an employee of Metro Drug, which, to reiterate, later changed its name to
CPDSI.