[G.R. No. 138051. June 10, 2004.

JOSE Y. SONZA, petitioner, vs. ABS-
CBN BROADCASTING CORPORATION, respondent.

DECISION

CARPIO, J  :p

The Case
Before this Court is a petition for review on certiorari 1 assailing the 26
March 1999 Decision 2 of the Court of Appeals in CA-G.R. SP No. 49190
dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals
affirmed the findings of the National Labor Relations Commission ("NLRC"),
which affirmed the Labor Arbiter's dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-
CBN") signed an Agreement ("Agreement") with the Mel and Jay Management
and Development Corporation ("MJMDC"). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President and
General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer.
Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZA's
services exclusively to ABS-CBN as talent for radio and television. The
Agreement listed the services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to
Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m.,
Sundays. 3
ABS-CBN agreed to pay for SONZA's services a monthly talent fee of
P310,000 for the first year and P317,000 for the second and third year of the
Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the
month.
On 1 April 1996, SONZA wrote a letter to ABS-CBN's President, Eugenio
Lopez III, which reads:
Dear Mr. Lopez,
 We would like to call your attention to the Agreement dated May
1994 entered into by your goodself on behalf of ABS-CBN with our
company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of
recent events concerning his programs and career. We consider these
acts of the station violative of the Agreement and the station as in breach
thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing
recovery of the remaining amount stipulated in paragraph 7 of the
Agreement but reserves the right to seek recovery of the other benefits
under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.) JOSE Y. SONZA
President and Gen. Manager 4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in Quezon
City. SONZA complained that ABS-CBN did not pay his salaries, separation pay,
service incentive leave pay, 13th month pay, signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no
employer-employee relationship existed between the parties. SONZA filed an
Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA's monthly talent fees
through his account at PCIBank, Quezon Avenue Branch, Quezon City. In July
1996, ABS-CBN opened a new account with the same bank where ABS-
CBN deposited SONZA's talent fees and other payments due him under the
Agreement.
In his Order dated 2 December 1996, the Labor Arbiter 5 denied the motion
to dismiss and directed the parties to file their respective position papers. The
Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that
he was an employee of respondent company until April 15, 1996 and
that he was not paid certain claims, it is sufficient enough as to confer
jurisdiction over the instant case in this Office. And as to whether or not
such claim would entitle complainant to recover upon the causes of
action asserted is a matter to be resolved only after and as a result of a
hearing. Thus, the respondent's plea of lack of employer-employee
 relationship may be pleaded only as a matter of defense. It behooves
upon it the duty to prove that there really is no employer-employee
relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The
parties submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent's Position Paper
with Motion to Expunge Respondent's Annex 4 and Annex 5 from the Records.
Annexes 4 and 5 are affidavits of ABS-CBN's witnesses Soccoro Vidanes and
Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing
practice in the television and broadcast industry is to treat talents like SONZA as
independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
complaint for lack of jurisdiction. 6 The pertinent parts of the decision read as
follows:
xxx xxx xxx
While Philippine jurisprudence has not yet, with certainty, touched
on the "true nature of the contract of a talent," it stands to reason that a
"talent" as above-described cannot be considered as an employee by
reason of the peculiar circumstances surrounding the engagement of his
services.
It must be noted that complainant was engaged by respondent by
reason of his peculiar skills and talent as a TV host and a radio
broadcaster. Unlike an ordinary employee, he was free to perform the
services he undertook to render in accordance with his own style. The
benefits conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to employees. For
one, complainant Sonza's monthly talent fees amount to a staggering
P317,000. Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight (8) hours of
work per day as he worked only for such number of hours as may be
necessary.
The fact that per the May 1994 Agreement complainant was
accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from
specific agreement by the parties and not by reason of employer-
employee relationship. As correctly put by the respondent, "All these
benefits are merely talent fees and other contractual benefits and should
not be deemed as 'salaries, wages and/or other remuneration' accorded
to an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given
to a stipulated benefit is not controlling, but the intent of the parties to the
Agreement conferring such benefit."
 The fact that complainant was made subject to respondent's
Rules and Regulations, likewise, does not detract from the absence of
employer-employee relationship. As held by the Supreme Court, "The
line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating
the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which
address both the result and the means to achieve it." (Insular Life
Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15,
1989).
xxx xxx xxx (Emphasis supplied) 7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered
a Decision affirming the Labor Arbiter's decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before
the Court of Appeals assailing the decision and resolution of the NLRC. On 26
March 1999, the Court of Appeals rendered a Decision dismissing the case. 8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRC's finding that no employer-
employee relationship existed between SONZA and ABS-CBN. Adopting the
NLRC's decision, the appellate court quoted the following findings of the NLRC:
. . . the May 1994 Agreement will readily reveal that MJMDC
entered into the contract merely as an agent of complainant Sonza, the
principal. By all indication and as the law puts it, the act of the agent is
the act of the principal itself. This fact is made particularly true in this
case, as admittedly MJMDC 'is a management company devoted
exclusively to managing the careers of Mr. Sonza and his broadcast
partner, Mrs. Carmela C. Tiangco.' (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between
complainant Sonza and MJMDC, and not between ABS-CBN and
MJMDC. This is clear from the provisions of the May 1994 Agreement
which specifically referred to MJMDC as the 'AGENT'. As a matter of
fact, when complainant herein unilaterally rescinded said May 1994
Agreement, it was MJMDC which issued the notice of rescission in
behalf of Mr. Sonza, who himself signed the same in his capacity as
President.
Moreover, previous contracts between Mr. Sonza and ABS-
CBN reveal the fact that historically, the parties to the said agreements
are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement,
which is the latest Agreement executed between ABS-CBN and
Mr. Sonza, that MJMDC figured in the said Agreement as the agent of
Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere 'labor-only'
contractor of ABS-CBN such that there exist[s] employer-employee
relationship between the latter and Mr. Sonza. On the contrary, We find
it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the
talent/contractor Mr. Sonza, as expressly admitted by the latter and
MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant
controversy indeed belongs to the regular courts, the same being in the
nature of an action for alleged breach of contractual obligation on the
part of respondent-appellee. As squarely apparent from complainant-
appellant's Position Paper, his claims for compensation for services,
'13th month pay', signing bonus and travel allowance against
respondent-appellee are not based on the Labor Code but rather on the
provisions of the May 1994 Agreement, while his claims for proceeds
under Stock Purchase Agreement are based on the latter. A portion of
the Position Paper of complainant-appellant bears perusal:
 
'Under [the May 1994 Agreement] with respondent ABS-
CBN, the latter contractually bound itself to pay complainant a
signing bonus consisting of shares of stocks . . . with FIVE
HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th
month pay based on an amount not lower than the amount he
was receiving prior to effectivity of (the) Agreement'.
Under paragraph 9 of (the May 1994 Agreement),
complainant is entitled to a commutable travel benefit amounting
to at least One Hundred Fifty Thousand Pesos (P150,000.00) per
year.'
Thus, it is precisely because of complainant-appellant's own
recognition of the fact that his contractual relations with ABS-CBN are
founded on the New Civil Code, rather than the Labor Code, that instead
of merely resigning from ABS-CBN, complainant-appellant served upon
the latter a 'notice of rescission' of Agreement with the station, per his
letter dated April 1, 1996, which asserted that instead of referring to
unpaid employee benefits, 'he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but
reserves the right to such recovery of the other benefits under said
Agreement.' (Annex 3 of the respondent ABS-CBN's Motion to Dismiss
dated July 10, 1996).
 Evidently, it is precisely by reason of the alleged violation of the
May 1994 Agreement and/or the Stock Purchase Agreement by
respondent-appellee that complainant-appellant filed his complaint.
Complainant-appellant's claims being anchored on the alleged breach of
contract on the part of respondent-appellee, the same can be resolved
by reference to civil law and not to labor law. Consequently, they are
within the realm of civil law and, thus, lie with the regular courts. As held
in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238
SCRA 267, 21 November 1994, an action for breach of contractual
obligation is intrinsically a civil dispute. 9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee
relationship between SONZA and ABS-CBN is a factual question that is within
the jurisdiction of the NLRC to resolve. 10 A special civil action
for certiorari extends only to issues of want or excess of jurisdiction of the
NLRC. 11 Such action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the NLRC's
conclusion. 12 The Court of Appeals added that it could not re-examine the
parties' evidence and substitute the factual findings of the NLRC with its own. 13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
NLRC'S DECISION AND REFUSING TO FIND THAT AN EMPLOYER-
EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-
CBN, DESPITE THE WEIGHT OF CONTROLLING LAW,
JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A
FINDING. 14
The Court's Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the
Court of Appeals affirming the NLRC ruling which upheld the Labor Arbiter's
dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine
labor laws and jurisprudence define clearly the elements of an employer-
employee relationship, this is the first time that the Court will resolve the nature of
the relationship between a television and radio station and one of its "talents."
There is no case law stating that a radio and television program host is an
employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely
Jose "Jay" Sonza, a known television and radio personality, and ABS-CBN, one
of the biggest television and radio networks in the country.
 SONZA contends that the Labor Arbiter has jurisdiction over the case
because he was an employee of ABS-CBN. On the other hand, ABS-CBN insists
that the Labor Arbiter has no jurisdiction because SONZA was an independent
contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact.
Appellate courts accord the factual findings of the Labor Arbiter and the NLRC
not only respect but also finality when supported by substantial
evidence. 15 Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion. 16 A party
cannot prove the absence of substantial evidence by simply pointing out that
there is contrary evidence on record, direct or circumstantial. The Court does not
substitute its own judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible. 17
SONZA maintains that all essential elements of an employer-employee
relationship are present in this case. Case law has consistently held that the
elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee on the means
and methods by which the work is accomplished. 18 The last element, the so-
called "control test", is the most important element. 19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA's services to co-host its television and radio
programs because of SONZA's peculiar skills, talent and celebrity
status. SONZA contends that the "discretion used by respondent in specifically
selecting and hiring complainant over other broadcasters of possibly similar
experience and qualification as complainant belies respondent's claim of
independent contractorship."
Independent contractors often present themselves to possess unique
skills, expertise or talent to distinguish them from ordinary employees. The
specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual relationship.
If SONZA did not possess such unique skills, talent and celebrity status, ABS-
CBN would not have entered into the Agreement with SONZA but would have
hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not
conclusively determine his status. We must consider all the circumstances of the
relationship, with the control test being the most important element.
 B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his
fees going to MJMDC. SONZA asserts that this mode of fee payment shows that
he was an employee of ABS-CBN. SONZA also points out that ABS-
CBN granted him benefits and privileges "which he would not have enjoyed if he
were truly the subject of a valid job contract." 
CHcTIA

All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-CBN's employee,
there would be no need for the parties to stipulate on benefits such as "SSS,
Medicare, . . . and 13th month pay" 20 which the law automatically incorporates
into every employer-employee contract. 21 Whatever benefits SONZA enjoyed
arose from contract and not because of an employer-employee relationship. 22
SONZA's talent fees, amounting to P317,000 monthly in the second and
third year, are so huge and out of the ordinary that they indicate more an
independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZA's unique skills, talent and celebrity status not possessed by
ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services.
The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent
contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not
negate the status of SONZA as an independent contractor. The parties expressly
agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT
of SONZA, to whom MJMDC would have to turn over any talent fee accruing
under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate
their relationship. SONZA failed to show that ABS-CBN could terminate his
services on grounds other than breach of contract, such as retrenchment to
prevent losses as provided under labor laws. 23
During the life of the Agreement, ABS-CBN agreed to pay SONZA's talent
fees as long as "AGENT and Jay Sonza shall faithfully and completely perform
each condition of this Agreement." 24 Even if it suffered severe business
losses, ABS-CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZA's talent fees during the life of the Agreement. This
circumstance indicates an independent contractual relationship
between SONZA and ABS-CBN.
 SONZA admits that even after ABS-CBN ceased broadcasting his
programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to
its undertaking in the Agreement to continue paying SONZA's talent fees during
the remaining life of the Agreement even if ABS-CBN cancelled SONZA's
programs through no fault of SONZA. 25
SONZA assails the Labor Arbiter's interpretation of his rescission of the
Agreement as an admission that he is not an employee of ABS-CBN. The Labor
Arbiter stated that "if it were true that complainant was really an employee, he
would merely resign, instead." SONZA did actually resign from ABS-CBN but he
also, as president of MJMDC, rescinded the Agreement. SONZA's letter clearly
bears this out. 26 However, the manner by which SONZA terminated his
relationship with ABS-CBN is immaterial. Whether SONZA rescinded the
Agreement or resigned from work does not determine his status as employee or
independent contractor.
 
D. Power of Control
Since there is no local precedent on whether a radio and television
program host is an employee or an independent contractor, we refer to foreign
case law in analyzing the present case. The United States Court of Appeals,
First Circuit, recently held in Alberty-Vélez v. Corporación De Puerto Rico Para
La Difusión Pública ("WIPR") 27 that a television program host is an independent
contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent
contractor. First, a television actress is a skilled position requiring talent
and training not available on-the-job. . . . In this regard, Alberty
possesses a master's degree in public communications and journalism;
is trained in dance, singing, and modeling; taught with the drama
department at the University of Puerto Rico; and acted in several theater
and television productions prior to her affiliation with "Desde Mi
Pueblo." Second, Alberty provided the "tools and instrumentalities"
necessary for her to perform. Specifically, she provided, or obtained
sponsors to provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance. Alberty disputes
that this factor favors independent contractor status because WIPR
provided the "equipment necessary to tape the show." Alberty's
argument is misplaced. The equipment necessary for Alberty to
conduct her job as host of "Desde Mi Pueblo" related to her appearance
on the show. Others provided equipment for filming and producing the
show, but these were not the primary tools that Alberty used to perform
her particular function. If we accepted this argument, independent
contractors could never work on collaborative projects because other
 individuals often provide the equipment required for different aspects of
the collaboration. . . .
Third, WIPR could not assign Alberty work in addition to filming
"Desde Mi Pueblo." Alberty's contracts with WIPR specifically provided
that WIPR hired her "professional services as Hostess for the Program
Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty
tasks in addition to work related to these tapings. . . . 28 (Emphasis
supplied)
Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most
important test our courts apply in distinguishing an employee from an
independent contractor. 29 This test is based on the extent of control the hirer
exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse
holds true as well — the less control the hirer exercises, the more likely the
worker is considered an independent contractor. 30
First, SONZA contends that ABS-CBN exercised control over the means
and methods of his work.
SONZA's argument is misplaced. ABS-CBN engaged SONZA's services
specifically to co-host the "Mel & Jay" programs. ABS-CBN did not assign any
other work to SONZA. To perform his work, SONZA only needed his skills and
talent. How SONZA delivered his lines, appeared on television, and sounded on
radio were outside ABS-CBN's control. SONZA did not have to render eight
hours of work per day. The Agreement required SONZA to attend only rehearsals
and tapings of the shows, as well as pre- and post-production staff
meetings. 31 ABS-CBN could not dictate the contents of SONZA's script.
However, the Agreement prohibited SONZA from criticizing in his shows ABS-
CBN or its interests. 32 The clear implication is that SONZA had a free hand on
what to say or discuss in his shows provided he did not attack ABS-CBN or its
interests.
We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZA's work. 33 ABS-CBN did not
instruct SONZA how to perform his job. ABS-CBN merely reserved the right to
modify the program format and airtime schedule "for more effective
programming." 34 ABS-CBN's sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise control over the
means and methods of performance of SONZA's work.
SONZA claims that ABS-CBN's power not to broadcast his shows
proves ABS-CBN's power over the means and methods of the performance of his
work. Although ABS-CBN did have the option not to broadcast SONZA's
show, ABS-CBN was still obligated to pay SONZA's talent fees. Thus, even
if ABS-CBN was completely dissatisfied with the means and methods
of SONZA's performance of his work, or even with the quality or product of his
work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-
CBN could do is not to broadcast SONZA's show but ABS-CBN must still pay his
talent fees in full. 35
Clearly, ABS-CBN's right not to broadcast SONZA's show, burdened as it
was by the obligation to continue paying in full SONZA's talent fees, did not
amount to control over the means and methods of the performance of SONZA's
work. ABS-CBN could not terminate or discipline SONZA even if the means and
methods of performance of his work — how he delivered his lines and appeared
on television — did not meet ABS-CBN's approval. This proves that ABS-CBN's
control was limited only to the result of SONZA's work, whether to broadcast the
final product or not. In either case, ABS-CBN must still pay SONZA's talent fees
in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., 36 the United States Circuit Court of
Appeals ruled that vaudeville performers were independent contractors although
the management reserved the right to delete objectionable features in their
shows. Since the management did not have control over the manner of
performance of the skills of the artists, it could only control the result of the work
by deleting objectionable features. 37
SONZA further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment,
crew and airtime needed to broadcast the "Mel & Jay" programs. However, the
equipment, crew and airtime are not the "tools and
instrumentalities" SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary for his
appearance. 38 Even though ABS-CBN provided SONZA with the place of work
and the necessary equipment, SONZA was still an independent contractor
since ABS-CBN did not supervise and control his work. ABS-CBN's sole concern
was for SONZA to display his talent during the airing of the programs. 39
A radio broadcast specialist who works under minimal supervision is an
independent contractor. 40 SONZA's work as television and radio program host
required special skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision and control over
how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBN's employee
because ABS-CBN subjected him to its rules and standards of
performance. SONZA claims that this indicates ABS-CBN's control "not only
[over] his manner of work but also the quality of his work."
 The Agreement stipulates that SONZA shall abide with the rules and
standards of performance "covering talents" 41 of ABS-CBN. The Agreement
does not require SONZA to comply with the rules and standards of performance
prescribed for employees of ABS-CBN. The code of conduct imposed
on SONZA under the Agreement refers to the "Television and Radio Code of the
Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by
the COMPANY (ABS-CBN) as its Code of Ethics." 42 The KBP code applies to
broadcasters, not to employees of radio and television stations. Broadcasters are
not necessarily employees of radio and television stations. Clearly, the rules and
standards of performance referred to in the Agreement are those applicable to
talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former. 43 In this case, SONZA failed
to show that these rules controlled his performance. We find that these general
rules are merely guidelines towards the achievement of the mutually desired
result, which are top-rating television and radio programs that comply with
standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself
over the conduct of the other party in relation to the services being
rendered may be accorded the effect of establishing an employer-
employee relationship. The facts of this case fall squarely with the case
of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that
merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to
be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address
both the result and the means used to achieve it. 44
The Vaughan case also held that one could still be an independent
contractor although the hirer reserved certain supervision to insure the
attainment of the desired result. The hirer, however, must not deprive the one
hired from performing his services according to his own initiative. 45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the
most extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean
that SONZA is an employee of ABS-CBN. Even an independent contractor can
validly provide his services exclusively to the hiring party. In the broadcast
industry, exclusivity is not necessarily the same as control.
  
The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry. 46 This practice is not designed to control the means and
methods of work of the talent, but simply to protect the investment of the
broadcast station. The broadcast station normally spends substantial amounts of
money, time and effort "in building up its talents as well as the programs they
appear in and thus expects that said talents remain exclusive with the station for
a commensurate period of time." 47 Normally, a much higher fee is paid to talents
who agree to work exclusively for a particular radio or television station. In short,
the huge talent fees partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiter's finding that he is a talent of MJMDC,
which contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a
talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that
MJMDC is a "labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-
only" contractor; (2) the employee who is ostensibly under the employ of the
"labor-only" contractor; and (3) the principal who is deemed the real employer.
Under this scheme, the "labor-only" contractor is the agent of the principal. The
law makes the principal responsible to the employees of the "labor-only
contractor" as if the principal itself directly hired or employed the
employees. 48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement,
namely, SONZA and ABS-CBN. MJMDC merely acted as SONZA's agent. The
Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The
records do not show that MJMDC acted as ABS-CBN's agent. MJMDC, which
stands for Mel and Jay Management and Development Corporation, is
a corporation organized and owned by SONZA and TIANGCO. The President
and General Manager of MJMDC is SONZA himself. It is absurd to hold that
MJMDC, which is owned, controlled, headed and managed by SONZA, acted as
agent of ABS-CBN in entering into the Agreement with SONZA, who himself is
represented by MJMDC. That would make MJMDC the agent of both ABS-
CBN and SONZA.
As SONZA admits, MJMDC is a management company
devoted exclusively to managing the careers of SONZA and his broadcast
partner, TIANGCO. MJMDC is not engaged in any other business, not even job
contracting. MJMDC does not have any other function apart from acting as agent
of SONZA or TIANGCO to promote their careers in the broadcast and television
industry. 49
 Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of
Labor Blas Ople on 8 January 1979 finally settled the status of workers in the
broadcast industry. Under this policy, the types of employees in the broadcast
industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not
have the force and effect of law. There is no legal presumption that Policy
Instruction No. 40 determines SONZA's status. A mere executive issuance
cannot exclude independent contractors from the class of service providers to the
broadcast industry. The classification of workers in the broadcast industry into
only two groups under Policy Instruction No. 40 is not binding on this Court,
especially when the classification has no basis either in law or in fact.
Affidavits of ABS-CBN's Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro
Vidanes and Rolando Cruz without giving his counsel the opportunity to cross-
examine these witnesses. SONZA brands these witnesses as incompetent to
attest on the prevailing practice in the radio and television
industry. SONZA views the affidavits of these witnesses as misleading and
irrelevant.
While SONZA failed to cross-examine ABS-CBN's witnesses, he was
never prevented from denying or refuting the allegations in the affidavits. The
Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing
after the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx xxx xxx
These verified position papers shall cover only those claims and
causes of action raised in the complaint excluding those that may have
been amicably settled, and shall be accompanied by all supporting
documents including the affidavits of their respective witnesses which
shall take the place of the latter's direct testimony. . . .
Section 4. Determination of Necessity of Hearing. — Immediately
after the submission of the parties of their position papers/memorandum,
the Labor Arbiter shall motu propio determine whether there is need for a
formal trial or hearing. At this stage, he may, at his discretion and for the
purpose of making such determination, ask clarificatory questions to
further elicit facts or information, including but not limited to the
subpoena of relevant documentary evidence, if any from any party or
witness. 50
 The Labor Arbiter can decide a case based solely on the position papers
and the supporting documents without a formal trial. 51 The holding of a formal
hearing or trial is something that the parties cannot demand as a matter of
right. 52 If the Labor Arbiter is confident that he can rely on the documents before
him, he cannot be faulted for not conducting a formal trial, unless under the
particular circumstances of the case, the documents alone are insufficient. The
proceedings before a Labor Arbiter are non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and the rules obtaining in
the courts of law do not strictly apply in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast
and entertainment industries to treat talents like SONZA as independent
contractors. SONZA argues that if such practice exists, it is void for violating the
right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in
the Constitution 53 arises only if there is an employer-employee relationship
under labor laws. Not every performance of services for a fee creates an
employer-employee relationship. To hold that every person who renders services
to another for a fee is an employee — to give meaning to the security of tenure
clause — will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer
their services as independent contractors. The right to life and livelihood
guarantees this freedom to contract as independent contractors. The right of
labor to security of tenure cannot operate to deprive an individual, possessed
with special skills, expertise and talent, of his right to contract as an independent
contractor. An individual like an artist or talent has a right to render his services
without any one controlling the means and methods by which he performs his art
or craft. This Court will not interpret the right of labor to security of tenure to
compel artists and talents to render their services only as employees. If radio and
television program hosts can render their services only as employees, the station
owners and managers can dictate to the radio and television hosts what they say
in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC") 54 in relation to Republic Act
No. 7716, 55 as amended by Republic Act No. 8241, 56 treats talents, television
and radio broadcasters differently. Under the NIRC, these professionals are
subject to the 10% value-added tax ("VAT") on services they render. Exempted
from the VAT are those under an employer-employee relationship. 57 This
different tax treatment accorded to talents and broadcasters bolters our
conclusion that they are independent contractors, provided all the basic elements
of a contractual relationship are present as in this case.
Nature of SONZA's Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month
pay, separation pay, service incentive leave, signing bonus, travel allowance,
and amounts due under the Employee Stock Option Plan. We agree with the
findings of the Labor Arbiter and the Court of Appeals that SONZA's claims are
all based on the May 1994 Agreement and stock option plan, and not on
the Labor Code. Clearly, the present case does not call for an application of
the Labor Code provisions but an interpretation and implementation of the May
1994 Agreement. In effect, SONZA's cause of action is for breach of contract
which is intrinsically a civil dispute cognizable by the regular courts. 58
WHEREFORE, we DENY the petition. The assailed Decision of the Court
of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs
against petitioner.
SO ORDERED.
Davide, Jr., C .J ., Panganiban, Ynares-Santiago and Azcuna,
JJ ., concur.
 
Footnotes
1.Under Rule 45 of the Rules of Court.
2.Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M.
Elbinias and Marina L. Buzon concurring.
3.Rollo, p. 150.
4.Ibid., p. 204.
5.Donato G. Quinto, Jr.
6.Rollo, pp. 114–130.
7.Ibid., pp. 123–125.
8.Ibid., p. 39.
9.Rollo, pp. 37–39.
10.Ibid., p. 39.
11.Ibid.
12.Ibid.
13.Ibid.
14.Ibid., p. 269.
15.Fleischer Company, Inc. v. National Labor Relations Commission, G.R. No.
121608, 26 March 2001, 355 SCRA 105; AFP Mutual Benefit Association,
Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47; Cathedral
School of Technology v. NLRC, G.R. No. 101438, 13 October 1992, 214 SCRA
551. See also Ignacio v. Coca-Cola Bottlers Phils., Inc., 417 Phil. 747
(2001); Gonzales v. National Labor Relations Commission, G.R. No. 131653,
26 March 2001, 355 SCRA 195; Sandigan Savings and Loan Bank, Inc. v.
NLRC, 324 Phil. 348 (1996); Magnolia Dairy Products Corporation v. NLRC,
322 Phil. 508 (1996).
 
16.Madlos v. NLRC, 324 Phil. 498 (1996).
17.Domasig v. National Labor Relations Commission, G.R. No. 118101, 16
September 1996, 261 SCRA 779.
18.De Los Santos v. NLRC, 423 Phil. 1020 (2001); Traders Royal Bank v. NLRC, 378
Phil. 1081 (1999); Aboitiz Shipping Employees Association v. National Labor
Relations Commission, G.R. No. 78711, 27 June 1990, 186 SCRA
825; Ruga v. National Labor Relations Commission, G.R. Nos. 72654-61, 22
January 1990, 181 SCRA 266.
19.Ibid.
20.Paragraph 10 of the Agreement provides: "The COMPANY shall provide him with
the following benefits: SSS, Medicare, Healthcare, executive life and accident
insurance, and a 13th-month pay based on an amount not lower than the
amount he was receiving prior to the effectivity of this Agreement."
21.Presidential Decree No. 851 (Requiring All Employers to Pay their Employees a
13th-month Pay) for the 13th month pay; Republic Act No. 1161 (Social
Security Law) for the SSS benefits; and Republic Act No. 7875 (National Health
Insurance Act of 1995) for the Philhealth insurance.
22.Article 1157 of the Civil Code explicitly provides:
  Obligations arise from:
  (1) Law;
  (2) Contracts;
  (3) Quasi-contracts;
  (4) Acts or omissions punished by law; and
  (5) Quasi-delicts. (Emphasis supplied)
23.See Article 283, Labor Code.
24.Paragraph 7 of the Agreement states: "Provided that the AGENT and
Jay Sonza shall faithfully and completely perform each condition of this
Agreement for and in consideration of the aforesaid services by the AGENT
and its talent, the COMPANY agrees to pay the AGENT for the first year of this
Agreement the amount of THREE HUNDRED TEN THOUSAND PESOS ONLY
(P310,000.00) per month, payable on the 10th and 25th of each month. For the
second and third year of this Agreement, the COMPANY shall pay the amount
of THREE HUNDRED SEVENTEEN THOUSAND PESOS ONLY
(P317,000.00) per month, payable likewise on the 10th and 25th of each
month."
25.Paragraph 11 of the Agreement states: "In the event of cancellation of this
Agreement through no fault of the AGENT and its talent, COMPANY agrees to
pay the full amount specified in this Agreement for the remaining period
covered by this Agreement, provided that the talent shall not render any service
for or in any other radio or television production of any person,
firm, corporation or any entity competing with the COMPANY until the expiry
hereof."
26.The opening sentence of the second paragraph of SONZA's letter reads:
  "As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. . . ."
27.361 F.3d 1, 2 March 2004.
28.See also Spirides v. Reinhardt, 486 F. Supp. 685 (1980).
29.In the United States, aside from the right of control test, there are the "economic
reality" test and the "multi-factor test." The tests are drawn from statutes,
regulations, rules, policies, rulings, case law and the like. The "right of control"
test applies under the federal Internal Revenue Code ("IRC"). The "economic
reality" test applies to the federal Fair Labor Standards Act ("FLSA"). 29 The
California Division of Labor Standards Enforcement ("DLSE") uses a hybrid of
these two tests often referred to as the "multi-factor test" in determining who an
employee is.
  Most courts in the United States have utilized the control test to determine whether
one is an employee. Under this test, a court must consider the hiring party's
right to control the manner and means by which the product is accomplished.
Among other factors relevant to this inquiry are the skills required; the source of
the instrumentalities and tools; the location of the work; the duration of the
relationship between the parties; whether the hiring party has the right to assign
additional projects to the hired party; the extent of the hired party's discretion
over when and how long to work; the method of payment; the hired party's role
in hiring and paying assistants; whether the work is part of the regular business
of the hiring party; whether the hiring party is in business; the provision of
employee benefits; and the tax treatment of the hired party.
(www.piercegorman.com, quoted from the article entitled "Management-side
employment law advice for the entertainment industry" with subtitle
 "Classification of Workers: Independent Contractors versus Employee" by
David Albert Pierce, Esq.)
30.www.piercegorman.com, quoted from the article entitled "Management-side
employment law advice for the entertainment industry" with subtitle
"Classification of Workers: Independent Contractors versus Employee" by
David Albert Pierce, Esq.
31.Paragraph 4 of the Agreement provides: "AGENT will make available
Jay Sonza for rehearsals and tapings of the Programs on the day and time set
by the producer and director of the Programs and to attend pre and post
production staff meetings."
32.Paragraph 15 of the Agreement provides: "AGENT, talent shall not use the
Programs as a venue to broadcast or announce any criticism on any
operational, administrative, or legal problems, situations or other matter which
may occur, exist or alleged to have occurred or existed within the COMPANY.
Likewise, AGENT, talent shall, in accordance with good broadcast
management and ethics, take up with the proper officers of the COMPANY
suggestions or criticisms on any matter or condition affecting the COMPANY or
its relation to the public or third parties."
33.In Zhengxing v. Nathanson, 215 F.Supp.2d 114, citing Redd v. Summers, 232
F.3d 933 (D.C. Cir.), plaintiff's superior was not involved in the actual
performance that produced the final product.
34.Paragraph 3 of the Agreement provides: "The COMPANY reserves the right to
modify the program format and likewise change airtime schedule for more
effective programming."
35.The right not to broadcast an independent contractor's show also gives the radio
and television station protection in case it deems the contents of the show
libelous.
36.157 F.2d 26, 8 August 1946.
37.Ibid.
38.In Zhengxing v. Nathanson, 215 F.Supp.2d 114, 5 August 2002, plaintiff was also
provided with the place of work and equipment to be used.
39.In the Alberty case, the US Court of Appeals rejected Alberty's contention that
WIPR provided the "equipment necessary to tape the show." The court held
there that "the equipment necessary for Alberty to conduct her job as program
host related to her appearance on the show. Others provided equipment for
filming and producing the show, but these were not the primary tools that
Alberty used to perform her particular function." Since Alberty provided, or
obtained sponsors to provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance, she provided the "tools
and instrumentalities" necessary for her to perform. The US Court of Appeals
added that if it accepted Alberty's argument, independent contractors could
 never work on collaborative projects because other individuals often provide the
equipment required for different aspects of the collaboration.
  The Alberty case further ruled that "while 'control' over the manner, location, and
hours of work is often critical to the independent contractor/employee analysis,
it must be considered in light of the work performed and the industry at issue.
Considering the tasks that an actor performs, the court does not believe that
the sort of control identified by Alberty necessarily indicates employee status."
40.In Zhengxing, a Chinese language broadcaster and translator was deemed an
independent contractor because she worked under minimal supervision. The
U.S. court also found that plaintiff was required to possess specialized
knowledge before commencing her position as a broadcaster.
41.Paragraph 13 of the Agreement provides: "AGENT agrees that talent shall abide by
the rules, regulations and standards of performance of the COMPANY covering
talents, and that talent is bound to comply with the Television and Radio Code
of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been
adopted by the COMPANY as its Code of Ethics. AGENT shall perform and
keep all of the duties and obligations assumed or entered by the AGENT
hereunder using its best talents and abilities. Any violation of or non-conformity
with this provision by talent shall be a valid and sufficient ground for the
immediate termination of the Agreement." (Emphasis supplied)
42.Ibid.
43.AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997,
267 SCRA 47.
44.Ibid.
45.Supra note 36.
46.Rollo, p. 302.
47.Ibid.
48.The second paragraph of Article 106 of the Labor Code reads:
  There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and
placed by such persons are performing activities which are directly related to
the principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter
were directly employed by him.
49.Rollo, p. 90.
50.New Rules of Procedure of the National Labor Relations Commission, as amended
by Resolution 3-99, series of 1999.
 51.University of the Immaculate Concepcion v. U.I.C. Teaching and Non-Teaching
Personnel and Employees Union, 414 Phil. 522 (2001).
52.Columbus Philippine Bus Corp. v. NLRC, 417 Phil. 81 (2001).
53.Section 3, Article XIII of the Constitution.
54.Republic Act No. 8424. BIR Revenue Regulations No. 19-99 also provides the
following:
  SECTION 1. Scope. — Pursuant to the provisions of Sections 244 and 108 of
the National Internal Revenue Code of 1997, in relation to Section 17
of Republic Act No. 7716, as amended by Section 11 of Republic Act 8241,
these Regulations are hereby promulgated to govern the imposition of value-
added tax on sale of services by persons engaged in the practice of profession
or calling and professional services rendered by general professional
partnerships; services rendered by actors, actresses, talents, singers and
emcees, radio and television broadcasters and choreographers; musical, radio,
movie, television and stage directors; and professional athletes.
 
  SECTION 2. Coverage. — Beginning January 1, 2000, general professional
partnerships, professionals and persons described above shall be governed by
the provisions of Revenue Regulations No. 7-95, as amended, otherwise
known as the "Consolidated Value-Added Tax Regulations". . . .
55.Otherwise known as the Expanded Value-Added Tax Law.
56.Act amending Republic Act No. 7716, otherwise known as the Expanded Value-
Added Tax Law and other pertinent provisions of the National Internal Revenue
Code, as amended (December 20, 1996).
57.Section 109 of the NIRC provides:
  Exempt transactions. — The following shall be exempt from the value-added tax:
   xxx xxx xxx
  (o) Services rendered by individuals pursuant to an employer-employee
relationship; . . .
58.Singapore Airlines Ltd. v. Hon. Cruz, etc., et al., 207 Phil. 585 (1983).
|||  (Sonza v. ABS-CBN Broadcasting Corp., G.R. No. 138051, [June 10, 2004])
[G.R. No. 167648. January 28, 2008.]

TELEVISION AND PRODUCTION EXPONENTS, INC. and/or

ANTONIO P. TUVIERA, petitioners, vs. ROBERTO
C. SERVAÑA, respondent.
 DECISION

TINGA, J  :p

This petition for review under Rule 45 assails the 21 December 2004
Decision 1 and 8 April 2005 Resolution 2 of the Court of Appeals declaring
Roberto Servaña (respondent) a regular employee of
petitioner Television and Production Exponents, Inc. (TAPE). The appellate
court likewise ordered TAPE to pay nominal damages for its failure to observe
statutory due process in the termination of respondent's employment for
authorized cause.
TAPE is a domestic corporation engaged in
the production of television programs, such as the long-running variety
program, "Eat Bulaga!". Its president is Antonio P. Tuviera (Tuviera).
Respondent Roberto C. Servaña had served as a security guard for TAPE
from March 1987 until he was terminated on 3 March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of
benefits against TAPE. He alleged that he was first connected with Agro-
Commercial Security Agency but was later on absorbed by TAPE as a regular
company guard. He was detailed at Broadway Centrum in Quezon City where
"Eat Bulaga!" regularly staged its productions. On 2 March 2000, respondent
received a memorandum informing him of his impending dismissal on account
of TAPE's decision to contract the services of a professional security agency.
At the time of his termination, respondent was receiving a monthly salary of
P6,000.00. He claimed that the holiday pay, unpaid vacation and sick leave
benefits and other monetary considerations were withheld from him. He
further contended that his dismissal was undertaken without due process and
violative of existing labor laws, aggravated by nonpayment of separation
pay. 3
In a motion to dismiss which was treated as its position paper, TAPE
countered that the labor arbiter had no jurisdiction over the case in the
absence of an employer-employee relationship between the parties. TAPE
made the following assertions: (1) that respondent was initially employed as a
security guard for Radio Philippines Network (RPN-9); (2) that he was tasked
to assist TAPE during its live productions, specifically, to control the crowd; (3)
that when RPN-9 severed its relationship with the security agency, TAPE
engaged respondent's services, as part of the support group and thus a talent,
to provide security service to production staff, stars and guests of "Eat
Bulaga!" as well as to control the audience during the one-and-a-half hour
noontime program; (4) that it was agreed that complainant would render his
services until such time that respondent company shall have engaged the
services of a professional security agency; (5) that in 1995, when his contract
with RPN-9 expired, respondent was retained as a talent and a member of the
support group, until such time that TAPE shall have engaged the services of a
professional security agency; (6) that respondent was not prevented from
seeking other employment, whether or not related to security services, before
or after attending to his "Eat Bulaga!" functions; (7) that sometime in late
1999, TAPE started negotiations for the engagement of a professional
security agency, the Sun Shield Security Agency; and (8) that on 2 March
2000, TAPE issued memoranda to all talents, whose functions would be
rendered redundant by the engagement of the security agency, informing
them of the management's decision to terminate their services. 4  DSIaAE

TAPE averred that respondent was an independent contractor falling

under the talent group category and was working under a special
arrangement which is recognized in the industry. 5
Respondent for his part insisted that he was a regular employee having
been engaged to perform an activity that is necessary and desirable to
TAPE's business for thirteen (13) years. 6
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared
respondent to be a regular employee of TAPE. The Labor Arbiter relied on the
nature of the work of respondent, which is securing and maintaining order in
the studio, as necessary and desirable in the usual business activity of TAPE.
The Labor Arbiter also ruled that the termination was valid on the ground of
redundancy, and ordered the payment of respondent's separation pay
equivalent to one (1)-month pay for every year of service. The dispositive
portion of the decision reads:
WHEREFORE, complainant's position is hereby declared
redundant. Accordingly, respondents are hereby ordered to pay
complainant his separation pay computed at the rate of one (1) month
pay for every year of service or in the total amount of P78,000.00. 7
On appeal, the National Labor Relations Commission (NLRC) in a
Decision 8 dated 22 April 2002 reversed the Labor Arbiter and considered
respondent a mere program employee, thus:
We have scoured the records of this case and we find nothing to
support the Labor Arbiter's conclusion that complainant was a regular
employee.
xxx xxx xxx
The primary standard to determine regularity of employment is
the reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the employer.
This connection can be determined by considering the nature and work
performed and its relation to the scheme of the particular business or
 trade in its entirety. . . . Respondent company is engaged in the
business of production of television shows. The records of this case
also show that complainant was employed by respondent company
beginning 1995 after respondent company transferred from RPN-9 to
GMA-7, a fact which complainant does not dispute. His last salary was
P5,444.44 per month. In such industry, security services may not be
deemed necessary and desirable in the usual business of the
employer. Even without the performance of such services on a regular
basis, respondent's company's business will not grind to a halt.
xxx xxx xxx
Complainant was indubitably a program employee of
respondent company. Unlike [a] regular employee, he did not observe
working hours . . . . He worked for other companies, such as M-Zet
TV Production, Inc. at the same time that he was working for
respondent company. The foregoing indubitably shows that
complainant-appellee was a program employee. Otherwise, he would
have two (2) employers at the same time. 9
Respondent filed a motion for reconsideration but it was denied in a
Resolution 10 dated 28 June 2002.  CAScIH

Respondent filed a petition for certiorari with the Court of Appeals

contending that the NLRC acted with grave abuse of discretion amounting to
lack or excess of jurisdiction when it reversed the decision of the Labor
Arbiter. Respondent asserted that he was a regular employee considering the
nature and length of service rendered. 11
Reversing the decision of the NLRC, the Court of Appeals found
respondent to be a regular employee. We quote the dispositive portion of the
decision:
IN LIGHT OF THE FOREGOING, the petition is
hereby GRANTED. The Decision dated 22 April 2002 of the public
respondent NLRC reversing the Decision of the Labor Arbiter and its
Resolution dated 28 June 2002 denying petitioner's motion for
reconsideration are REVERSED and SET ASIDE. The Decision dated
29 June 2001 of the Labor Arbiter
is REINSTATED with MODIFICATION in that private respondents are
ordered to pay jointly and severally petitioner the amount of
P10,000.00 as nominal damages for non-compliance with the statutory
due process.
SO ORDERED. 12
Finding TAPE's motion for reconsideration without merit, the Court of
Appeals issued a Resolution 13 dated 8 April 2005 denying said motion.
 TAPE filed the instant petition for review raising substantially the same
grounds as those in its petition for certiorari before the Court of Appeals.
These matters may be summed up into one main issue: whether an employer-
employee relationship exists between TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition and
considered the case submitted for decision. 14
At the outset, it bears emphasis that the existence of employer-
employee relationship is ultimately a question of fact. Generally, only
questions of law are entertained in appeals by certiorari to the Supreme
Court. This rule, however, is not absolute. Among the several recognized
exceptions is when the findings of the Court of Appeals and Labor Arbiters, on
one hand, and that of the NLRC, on the other, are conflicting, 15 as obtaining
in the case at bar.
Jurisprudence is abound with cases that recite the factors to be
considered in determining the existence of employer-employee relationship,
namely: (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 with respect to the means and method by which the work is to
be accomplished. 16 The most important factor involves the control test. Under
the control test, there is an employer-employee relationship when the person
for whom the services are performed reserves the right to control not only the
end achieved but also the manner and means used to achieve that end. 17
In concluding that respondent was an employee of TAPE, the Court of
Appeals applied the "four-fold test" in this wise:
First. The selection and hiring of petitioner was done by private
respondents. In fact, private respondents themselves admitted having
engaged the services of petitioner only in 1995 after TAPE severed its
relations with RPN Channel 9.  TAScID

By informing petitioner through the Memorandum dated 2 March

2000, that his services will be terminated as soon as the services of
the newly hired security agency begins, private respondents in effect
acknowledged petitioner to be their employee. For the right to hire and
fire is another important element of the employer-employee
relationship.
Second. Payment of wages is one of the four factors to be
considered in determining the existence of employer-employee
relation. . . Payment as admitted by private respondents was given by
them on a monthly basis at a rate of P5,444.44.
Third. Of the four elements of the employer-employee
relationship, the "control test" is the most important. . . .
 The bundy cards representing the time petitioner had reported
for work are evident proofs of private respondents' control over
petitioner more particularly with the time he is required to report for
work during the noontime program of "Eat Bulaga!" If it were not so,
petitioner would be free to report for work anytime even not during the
noontime program of "Eat Bulaga!" from 11:30 a.m. to 1:00 p.m. and
still gets his compensation for being a "talent." Precisely, he is being
paid for being the security of "Eat Bulaga!" during the above-mentioned
period. The daily time cards of petitioner are not just for mere record
purposes as claimed by private respondents. It is a form of control by
the management of private respondent TAPE. 18
TAPE asseverates that the Court of Appeals erred in applying the "four-
fold test" in determining the existence of employer-employee relationship
between it and respondent. With respect to the elements of selection, wages
and dismissal, TAPE proffers the following arguments: that it never hired
respondent, instead it was the latter who offered his services as a talent to
TAPE; that the Memorandum dated 2 March 2000 served on respondent was
for the discontinuance of the contract for security services and not a
termination letter; and that the talent fees given to respondent were the pre-
agreed consideration for the services rendered and should not be construed
as wages. Anent the element of control, TAPE insists that it had no control
over respondent in that he was free to employ means and methods by which
he is to control and manage the live audiences, as well as the safety of
TAPE's stars and guests. 19
The position of TAPE is untenable. Respondent was first connected
with Agro-Commercial Security Agency, which assigned him to assist TAPE in
its live productions. When the security agency's contract with RPN-9 expired
in 1995, respondent was absorbed by TAPE or, in the latter's language,
"retained as talent." 20 Clearly, respondent was hired by TAPE. Respondent
presented his identification card 21 to prove that he is indeed an employee of
TAPE. It has been in held that in a business establishment, an identification
card is usually provided not just as a security measure but to mainly identify
the holder thereof as a bona fide employee of the firm who issues it. 22
Respondent claims to have been receiving P5,444.44 as his monthly
salary while TAPE prefers to designate such amount as talent fees. Wages,
as defined in the Labor Code, are remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or to be done, or
for service rendered or to be rendered. It is beyond dispute that respondent
received a fixed amount as monthly compensation for the services he
rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his
service proves that TAPE had the power to dismiss respondent.
Control is manifested in the bundy cards submitted by respondent in
evidence. He was required to report daily and observe definite work hours. To
negate the element of control, TAPE presented a certification from M-Zet
Productions to prove that respondent also worked as a studio security guard
for said company. Notably, the said certificate categorically stated that
respondent reported for work on Thursdays from 1992 to 1995. It can be
recalled that during said period, respondent was still working for RPN-9. As
admitted by TAPE, it absorbed respondent in late 1995. 23  AaIDCS

TAPE further denies exercising control over respondent and maintains

that the latter is an independent contractor. 24 Aside from possessing
substantial capital or investment, a legitimate job contractor or subcontractor
carries on a distinct and independent business and undertakes to perform the
job, work or service on its own account and under its own responsibility
according to its own manner and method, and free from the control and
direction of the principal in all matters connected with the performance of the
work except as to the results thereof. 25 TAPE failed to establish that
respondent is an independent contractor. As found by the Court of Appeals:
We find the annexes submitted by the private respondents
insufficient to prove that herein petitioner is indeed an independent
contractor. None of the above conditions exist in the case at bar.
Private respondents failed to show that petitioner has substantial
capital or investment to be qualified as an independent contractor.
They likewise failed to present a written contract which specifies the
performance of a specified piece of work, the nature and extent of the
work and the term and duration of the relationship between herein
petitioner and private respondent TAPE. 26
TAPE relies on Policy Instruction No. 40, issued by the Department of
Labor, in classifying respondent as a program employee and equating him to
be an independent contractor.
Policy Instruction No. 40 defines program employees as —
. . . those whose skills, talents or services are engaged by the
station for a particular or specific program or undertaking and who are
not required to observe normal working hours such that on some days
they work for less than eight (8) hours and on other days beyond the
normal work hours observed by station employees and are allowed to
enter into employment contracts with other persons, stations,
advertising agencies or sponsoring companies. The engagement of
 program employees, including those hired by advertising or sponsoring
companies, shall be under a written contract specifying, among other
things, the nature of the work to be performed, rates of pay and the
programs in which they will work. The contract shall be duly registered
by the station with the Broadcast Media Council within three (3) days
from its consummation. 27
TAPE failed to adduce any evidence to prove that it complied with the
requirements laid down in the policy instruction. It did not even present its
contract with respondent. Neither did it comply with the contract-registration
requirement.
Even granting arguendo that respondent is a program employee, still,
classifying him as an independent contractor is misplaced. The Court of
Appeals had this to say:
We cannot subscribe to private respondents' conflicting
theories. The theory of private respondents that petitioner is an
independent contractor runs counter to their very own allegation that
petitioner is a talent or a program employee. An independent
contractor is not an employee of the employer, while a talent or
program employee is an employee. The only difference between a
talent or program employee and a regular employee is the fact that a
regular employee is entitled to all the benefits that are being prayed
for. This is the reason why private respondents try to seek refuge
under the concept of an independent contractor theory. For if petitioner
were indeed an independent contractor, private respondents will not be
liable to pay the benefits prayed for in petitioner's complaint. 28
More importantly, respondent had been continuously under the employ
of TAPE from 1995 until his termination in March 2000, or for a span of 5
years. Regardless of whether or not respondent had been performing work
that is necessary or desirable to the usual business of TAPE, respondent is
still considered a regular employee under Article 280 of the Labor Code which
provides: 
CaASIc

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 engagement of the employee or
where the work or service to be performed is seasonal in nature and
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph. Provided, that, any employee who has
 rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment
shall continue while such activity exists.
As a regular employee, respondent cannot be terminated except for just
cause or when authorized by law. 29 It is clear from the tenor of the 2 March
2000 Memorandum that respondent's termination was due to redundancy.
Thus, the Court of Appeals correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that the employer may
also terminate the employment of any employee due to the installation
of labor saving devices, redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before
the intended date thereof. In case of termination due to the installation
of labor saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year or service,
whichever is higher.
xxx xxx xxx
We uphold the finding of the Labor Arbiter that "complainant
[herein petitioner] was terminated upon [the] management's option to
professionalize the security services in its operations. . . ." However,
[we] find that although petitioner's services [sic] was for an authorized
cause, i.e., redundancy, private respondents failed to prove that it
complied with service of written notice to the Department of Labor and
Employment at least one month prior to the intended date of
retrenchment. It bears stressing that although notice was served upon
petitioner through a Memorandum dated 2 March 2000, the effectivity
of his dismissal is fifteen days from the start of the agency's take over
which was on 3 March 2000. Petitioner's services with private
respondents were severed less than the month requirement by the law.
Under prevailing jurisprudence the termination for an authorized
cause requires payment of separation pay. Procedurally, if the
dismissal is based on authorized causes under Articles 283 and 284,
the employer must give the employee and the Department of Labor
and Employment written notice 30 days prior to the effectivity of his
separation. Where the dismissal is for an authorized cause but due
process was not observed, the dismissal should be upheld. While the
procedural infirmity cannot be cured, it should not invalidate the
dismissal. However, the employer should be liable for non-compliance
with procedural requirements of due process.
xxx xxx xxx
 Under recent jurisprudence, the Supreme Court fixed the
amount of P30,000.00 as nominal damages. The basis of the violation
of petitioners' right to statutory due process by the private respondents
warrants the payment of indemnity in the form of nominal damages.
The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances. We believe
this form of damages would serve to deter employer from future
violations of the statutory due process rights of the employees. At the
very least, it provides a vindication or recognition of this fundamental
right granted to the latter under the Labor Code and its Implementing
Rules. Considering the circumstances in the case at bench, we deem it
proper to fix it at P10,000.00. 30
In sum, we find no reversible error committed by the Court of Appeals in
its assailed decision.
However, with respect to the liability of petitioner Tuviera, president of
TAPE, absent any showing that he acted with malice or bad faith in
terminating respondent, he cannot be held solidarily liable with TAPE. 31 Thus,
the Court of Appeals ruling on this point has to be modified.
WHEREFORE, the assailed Decision and Resolution of the Court of
Appeals are AFFIRMED with MODIFICATION in that only
petitioner Television and Production Exponents, Inc. is liable to pay
respondent the amount of P10,000.00 as nominal damages for non-
compliance with the statutory due process and petitioner Antonio P. Tuviera is
accordingly absolved from liability.
SO ORDERED.
Quisumbing, Carpio, Carpio-Morales and Velasco, Jr., JJ., concur.
 
Footnotes
1.Rollo, pp. 47-64. Penned by Associate Justice Japar B. Dimaampao and concurred
in by Associate Justices Renato C. Dacudao and Edgardo F. Sundiam.
2.Id. at 66-67.
3.Id. at 98.
4.Id. at 100-102.
5.Id. at 98, 103.  DCHaTc

6.Id. at 103.
7.Id. at 106.
8.Id. at 107-118.
 9.Id. at 115-117.
10.Id. at 119-120.
11.Id. at 130.
12.Id. at 63.
13.Id. at 66-67.
14.Id. at 284.
15.Molina  v. Pacific Plans, Inc., G.R. No. 165476, 10 March 2006, 484 SCRA 498.
16.Dumpit-Murillo  v. Court of Appeals, G.R. No. 164652, 8 June 2007, 524 SCRA
290, 302 citing Manila Water Company, Inc.  v. Pena, G.R. No. 158255, 8 July
2004, 434 SCRA 53; Coca-Cola Bottlers v. Climaco, G.R. No. 146881, 5
February 2007, 514 SCRA 164, 177; Lakas sa Industriya ng Kapatirang Haligi
ng Alyansa-Pinagbuklod ng Manggagawang Promo ng Burlingame v.
Burlingame Corporation, G.R. No. 162833, 15 June 2007, 524 SCRA 690, 695.
17.Leonardo  v. Court of Appeals, G.R. No. 152459, 15 June 2006.
18.Rollo, pp. 56-57.
19.Id. at 30-34.
20.Id. at 101.
21.CA rollo, p. 37.
22.Villamaria v. Court of Appeals, G.R. No. 165881, 19 April 2006.
23.Id. at 16-17.
24.Id. at 28.
25.Department of Labor and Employment, Department Order No. 10 (1997).
26.Rollo, p. 55.
27.Department of Labor and Employment Policy Instruction No. 40 (1979).
28.Id. at 57-58.
29.LABOR CODE, Art. 279.
30.Rollo, pp. 60-63.
31.Kay Products, Inc.  v. Court of Appeals, G.R. No. 162472, 28 July 2005, 464 SCRA
544.  AaIDHS

 (Television and Production Exponents, Inc. v. Servaña, G.R. No. 167648,

|||

[January 28, 2008], 566 PHIL 564-578)

[G.R. No. 164156. September 26, 2006.]
 ABS-CBN BROADCASTING CORPORATION, petitioner, vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER
DEIPARINE, and JOSEPHINE LERASAN, respondents.

DECISION

CALLEJO, SR., J  : p

Before us is a petition for review on certiorari of the Decision 1 of the Court

of Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the
motion for reconsideration thereof. The CA affirmed the Decision 2 and
Resolution 3 of the National Labor Relations Commission (NLRC) in NLRC Case
No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which likewise affirmed,
with modification, the decision of the Labor Arbiter declaring the respondents
Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as
regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in
the broadcasting business and owns a network of television and radio stations,
whose operations revolve around the broadcast, transmission, and relay of
telecommunication signals. It sells and deals in or otherwise utilizes the airtime it
generates from its radio and television operations. It has a franchise as
a broadcasting company, and was likewise issued a license and authority to
operate by the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and
Lerasan as production assistants (PAs) on different dates. They were assigned
at the news and public affairs, for various radio programs in the
Cebu Broadcasting Station, with a monthly compensation of P4,000. They were
issued ABS-CBN employees' identification cards and were required to work for a
minimum of eight hours a day, including Sundays and holidays. They were made
to perform the following tasks and duties:
a) Prepare, arrange airing of commercial broadcasting based on the
daily operations log and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news
reporting and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service
announcement and complaints;
 e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio. 4
Their respective working hours were as follows:
       
Name Time No. of Hours
       
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 1/2
    8:00 A.M.-12:00 noon  
       
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 1/2
       
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
    9:00 A.M.-6:00 P.M. (WF) 9 hrs.
       
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs. 5 
The PAs were under the control and supervision of Assistant Station
Manager Dante J. Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File
Employees executed a Collective Bargaining Agreement (CBA) to be effective
during the period from December 11, 1996 to December 11, 1999. However,
since petitioner refused to recognize PAs as part of the bargaining unit,
respondents were not included to the CBA. 6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum
informing the PAs that effective August 1, 2000, they would be assigned to non-
drama programs, and that the DYAB studio operations would be handled by the
studio technician. Thus, their revised schedule and other assignments would be
as follows:
Monday-Saturday
4:30 A.M.-8:00 A.M.-Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M.-12:00 MN-Jennifer Deiparine
Sunday
5:00 A.M.-1:00 P.M.-Jennifer Deiparine
1:00 P.M.-10:00 P.M.-Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV News
Department reporting directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint 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 against the petitioner before the NLRC. The Labor Arbiter directed the
parties to submit their respective position papers. Upon respondents' failure to
file their position papers within the reglementary period, Labor Arbiter Jose G.
Gutierrez issued an Order dated April 30, 2001, dismissing the complaint without
prejudice for lack of interest to pursue the case. Respondents received a copy of
the Order on May 16, 2001. 7 Instead of re-filing their complaint with the NLRC
within 10 days from May 16, 2001, they filed, on June 11, 2001, an Earnest
Motion to Refile Complaint with Motion to Admit Position Paper and Motion to
Submit Case For Resolution. 8 The Labor Arbiter granted this motion in an Order
dated June 18, 2001, and forthwith admitted the position paper of the
complainants. Respondents made the following allegations:
1. Complainants were engaged by respondent ABS-CBN as
regular and full-time employees for a continuous period of more than five
(5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos
beginning 1995 up until the filing of this complaint on November 20,
2000. DaAIHC

Machine copies of complainants' ABS-CBN Employee's

Identification Card and salary vouchers are hereto attached as follows,
thus:
I. Jennifer Deiparine:    
  Exhibit "A" - ABS-CBN Employee's Identification Card
  Exhibit "B", - ABS-CBN Salary Voucher from Nov.
  Exhibit "B-1" &   1999 to July 2000 at P4,000.00
  Exhibit "B-2"    
  Date employed:   September 15, 1995
  Length of service:   5 years & nine (9) months
       
II. Merlou Gerzon - ABS-CBN Employee's Identification Card
  Exhibit "C"    
  Exhibit "D"    
  Exhibit "D-1" &    
  Exhibit "D-2" - ABS-CBN Salary Voucher from March
      1999 to January 2001 at P4,000.00
  Date employed:   September 1, 1995
  Length of service:   5 years & 10 months
       
III. Marlene Nazareno    
  Exhibit "E" - ABS-CBN Employee's Identification Card
  Exhibit "E" - ABS-CBN Salary Voucher from Nov.
  Exhibit "E-1" &   1999 to December 2000
  Exhibit :E-2"    
  Date employed:   April 17, 1996
  Length of service:   5 years and one (1) month
       
IV. Joy Sanchez Lerasan    
  Exhibit "F" - ABS-CBN Employee's Identification Card
  Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
  Exhibit "F-2" &   2000 to Jan. 2001
  Exhibit "F-3"    
  Exhibit "F-4" - Certification dated July 6, 2000
      Acknowledging regular status of
      Complainant Joy Sanchez Lerasan
      Signed by ABS-CBN Administrative
      Officer May Kima Hife
  Date employed:   April 15, 1998
  Length of service:   3 yrs. and one (1) month 9 
Respondents insisted that they belonged to a "work pool" from which
petitioner chose persons to be given specific assignments at its discretion, and
were thus under its direct supervision and control regardless of nomenclature.
They prayed that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is
most respectfully prayed, to issue an order compelling defendants to pay
complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each and by
way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular
and permanent employees of respondent ABS-CBN as a condition
precedent for their admission into the existing union and collective
bargaining unit of respondent company where they may as such acquire
or otherwise perform their obligations thereto or enjoy the benefits due
therefrom.
 Complainants pray for such other reliefs as are just and equitable
under the premises. 10
For its part, petitioner alleged in its position paper that the respondents
were PAs who basically assist in the conduct of a particular program ran by an
anchor or talent. Among their duties include monitoring and receiving incoming
calls from listeners and field reporters and calls of news sources; generally, they
perform leg work for the anchors during a program or a particular production.
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.
Petitioner asserted that as PAs, the complainants were issued talent information
sheets which are updated from time to time, and are thus made the basis to
determine the programs to which they shall later be called on to assist. The
program assignments of complainants were as follows:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)
b. Complainant Deiparine assists in the programs:
1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu
6) Pangutana Lang
c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
 2) On Thursdays
 Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan 11
Petitioner maintained that PAs, reporters, anchors and talents occasionally
"sideline" for other programs they produce, such as drama talents in other
productions. As program employees, a PA's engagement is coterminous with the
completion of the program, and may be extended/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
program employees, their compensation is computed on a program basis, a fixed
amount for performance services irrespective of the time consumed. At any rate,
petitioner claimed, as the payroll will show, respondents were paid all salaries
and benefits due them under the law. 12
 
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve
the CBA and interpret the same, especially since respondents were not covered
by the bargaining unit.  ADaSEH

On July 30, 2001, the Labor Arbiter rendered judgment in favor of the
respondents, and declared that they were regular employees of petitioner; as
such, they were awarded monetary benefits. The fallo of the decision reads:
WHEREFORE, the foregoing premises considered, judgment is
hereby rendered declaring the complainants regular employees of the
respondent ABS-CBN Broadcasting Corporation and directing the same
respondent to pay complainants as follows:
I - Merlou A. Gerzon P12,025.00
 II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
      –––––––––
      P48,100.00
plus ten (10%) percent Attorney's Fees or a TOTAL aggregate
amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN
(P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED. 13
However, the Labor Arbiter did not award money benefits as provided in
the CBA on his belief that he had no jurisdiction to interpret and apply the
agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as
provided in Article 261 of the Labor Code.
Respondents' counsel received a copy of the decision on August 29, 2001.
Respondent Nazareno received her copy on August 27, 2001, while the other
respondents received theirs on September 8, 2001. Respondents signed and
filed their Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor
Arbiter denied and considered as an appeal, conformably with Section 5, Rule V,
of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the
NLRC, while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which
had long been dismissed without prejudice for more than thirty
(30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its
Constitutional right to due process of law;
3. That the Labor Arbiter erred in denying respondent's Motion for
Reconsideration on an interlocutory order on the ground that the
same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the complainants are
regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are
entitled to 13th month pay, service incentive leave pay and salary
differential; and
6. That the Labor Arbiter erred when he ruled that complainants are
entitled to attorney's fees. 14
 On November 14, 2002, the NLRC rendered judgment modifying the
decision of the Labor Arbiter. The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor
Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and
VACATED and a new one is entered ORDERING respondent ABS-
CBN Broadcasting Corporation, as follows:
1. To pay complainants of their wage differentials and other benefits
arising from the CBA as of 30 September 2002 in the aggregate
amount of Two Million Five Hundred, Sixty-One Thousand Nine
Hundred Forty-Eight Pesos and 22/100 (P2,561,948.22), broken
down as follows:
a. Deiparine, Jennifer - P716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
      ––––––––––––
  Total - P2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks
of rice as of 30 September 2002 representing their rice subsidy in
the CBA, broken down as follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
      –––––––
  Total   233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30
September 2002.
SO ORDERED. 15
The NLRC declared that the Labor Arbiter acted conformably with
the Labor Code when it granted respondents' motion to refile the complaint and
admit their position paper. Although respondents were not parties to the CBA
between petitioner and the ABS-CBN Rank-and-File Employees Union, the
NLRC nevertheless granted and computed respondents' monetary benefits
based on the 1999 CBA, which was effective until September 2002. The NLRC
also ruled that the Labor Arbiter had jurisdiction over the complaint of
respondents because they acted in their individual capacities and not as
members of the union. Their claim for monetary benefits was within the context of
Article 217(6) of the Labor Code. The validity of respondents' claim does not
depend upon the interpretation of the CBA.
 The NLRC ruled that respondents were entitled to the benefits under the
CBA because they were regular employees who contributed to the profits of
petitioner through their labor. The NLRC cited the ruling of this Court in New
Pacific Timber & Supply Company v. National Labor Relations Commission. 16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of
Court before the CA, raising both procedural and substantive issues, as follows:
(a) whether the NLRC acted without jurisdiction in admitting the appeal of
respondents; (b) whether the NLRC committed palpable error in scrutinizing the
reopening and revival of the complaint of respondents with the Labor Arbiter
upon due notice despite the lapse of 10 days from their receipt of the July 30,
2001 Order of the Labor Arbiter; (c) whether respondents were regular
employees; (d) whether the NLRC acted without jurisdiction in entertaining and
resolving the claim of the respondents under the CBA instead of referring the
same to the Voluntary Arbitrators as provided in the CBA; and (e) whether the
NLRC acted with grave abuse of discretion when it awarded monetary benefits to
respondents under the CBA although they are not members of the appropriate
bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition.
It held that the perfection of an appeal shall be upon the expiration of the last day
to appeal by all parties, should there be several parties to a case. Since
respondents received their copies of the decision on September 8, 2001 (except
respondent Nazareno who received her copy of the decision on August 27,
2001), they had until September 18, 2001 within which to file their Appeal
Memorandum. Moreover, the CA declared that respondents' failure to submit
their position paper on time is not a ground to strike out the paper from the
records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents
are not mere project employees, but regular employees who perform tasks
necessary and desirable in the usual trade and business of petitioner and not just
its project employees. Moreover, the CA added, the award of benefits accorded
to rank-and-file employees under the 1996-1999 CBA is a necessary
consequence of the NLRC ruling that respondents, as PAs, are regular
employees.
Finding no merit in petitioner's motion for reconsideration, the CA denied
the same in a Resolution 17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises
the following assignments of error:
 1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT
JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE
NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING
THE PATENT NULLITY OF THE LATTER'S DECISION AND
RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN AFFIRMING THE RULING OF THE NLRC FINDING
RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA
BENEFITS TO RESPONDENTS. 18
Considering that the assignments of error are interrelated, the Court shall
resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious
error of law when it affirmed the rulings of the NLRC, and entertained
respondents' appeal from the decision of the Labor Arbiter despite the admitted
lapse of the reglementary period within which to perfect the same. Petitioner
likewise maintains that the 10-day period to appeal must be reckoned from
receipt of a party's counsel, not from the time the party learns of the decision,
that is, notice to counsel is notice to party and not the other way around. Finally,
petitioner argues that the reopening of a complaint which the Labor Arbiter has
dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC
Rules; such order of dismissal had already attained finality and can no longer be
set aside. 
TaCDAH

Respondents, on the other hand, allege that their late appeal is a non-
issue because it was petitioner's own timely appeal that empowered the NLRC to
reopen the case. They assert that although the appeal was filed 10 days late, it
may still be given due course in the interest of substantial justice as an exception
to the general rule that the negligence of a counsel binds the client. On the issue
of the late filing of their position paper, they maintain that this is not a ground to
strike it out from the records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioner's contention 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. 19 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. 20
 
In the case at bar, the NLRC did not commit a grave abuse of its discretion
in giving Article 223 21 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. 22 We
have held in a catena of cases 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. 23
Admittedly, respondents failed to perfect their appeal from the decision of
the Labor Arbiter within the reglementary period therefor. However, petitioner
perfected its appeal within the period, and since petitioner had filed a timely
appeal, the NLRC acquired jurisdiction over the case to give due course to its
appeal and render the decision of November 14, 2002. Case law is that the party
who failed to appeal from the decision of the Labor Arbiter to the NLRC can still
participate in a separate appeal timely filed by the adverse party as the situation
is considered to be of greater benefit to both parties. 24
We find no merit in petitioner's contention that the Labor Arbiter abused his
discretion when he admitted respondents' position paper which had been
belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use
every reasonable means to ascertain the facts in each case speedily and
objectively, without technicalities of law or procedure, all in the interest of due
process. 25 Indeed, as stressed by the appellate court, respondents' failure to
submit a position paper on time is not a ground for striking out the paper from the
records, much less for dismissing a complaint. 26 Likewise, there is simply no
truth to petitioner's assertion that it was denied due process when the Labor
Arbiter admitted respondents' position paper without requiring it to file a comment
before admitting said position paper. The essence of due process in
administrative proceedings is simply an opportunity to explain one's side or an
opportunity to seek reconsideration of the action or ruling complained of.
Obviously, there is nothing in the records that would suggest that petitioner had
absolute lack of opportunity to be heard. 27 Petitioner had the right to file a motion
for reconsideration of the Labor Arbiter's admission of respondents' position
paper, and even file a Reply thereto. In fact, petitioner filed its position paper on
April 2, 2001. It must be stressed that Article 280 of the Labor Code was
encoded in our statute books to hinder the circumvention by unscrupulous
employers of the employees' right to security of tenure by indiscriminately and
absolutely ruling out all written and oral agreements inharmonious with the
concept of regular employment defined therein. 28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents
assailed the Labor Arbiter's order dated 18 June 2001 as violative of
the NLRC Rules of Procedure and as such is violative of their right to
procedural due process. That while suggesting that an Order be instead
issued by the Labor Arbiter for complainants to refile this case,
respondents impliedly submit that there is not any substantial damage or
prejudice upon the refiling, even so, respondents' suggestion
acknowledges complainants right to prosecute this case, albeit with the
burden of repeating the same procedure, thus, entailing additional time,
efforts, litigation cost and precious time for the Arbiter to repeat the same
process twice. Respondent's suggestion, betrays its notion of
prolonging, rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which
revived and re-opened the dismissed case without prejudice beyond the
ten (10) day reglementary period had inadvertently failed to follow
Section 16, Rule V, Rules Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case
dismissed without prejudice within ten (10) calendar days from
receipt of notice of the order dismissing the same; otherwise, his
only remedy shall be to re-file the case in the arbitration branch of
origin."
the same is not a serious flaw that had prejudiced the
respondents' right to due process. The case can still be refiled because
it has not yet prescribed. Anyway, Article 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
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."
The admission by the Labor Arbiter of the complainants' Position
Paper and Supplemental Manifestation which were belatedly filed just
only shows that he acted within his discretion as he is enjoined by law to
use every reasonable means to ascertain the facts in each case speedily
and objectively, without regard to technicalities of law or procedure, all in
the interest of due process. Indeed, the failure to submit a position paper
on time is not a ground for striking out the paper from the records, much
less for dismissing a complaint in the case of the complainant.
 (University of Immaculate Conception vs. UIC Teaching and Non-
Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents' position paper albeit late, the
Labor Arbiter acted within her discretion. In fact, she is enjoined
by law to use every reasonable means to ascertain the facts in
each case speedily and objectively, without technicalities of law or
procedure, all in the interest of due process". (Panlilio vs. NLRC,
281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity
to submit position paper. In fact, the respondents had filed their position
paper on 2 April 2001. What is material in the compliance of due process
is the fact that the parties are given the opportunities to submit position
papers.
"Due process requirements are satisfied where the parties
are given the opportunities to submit position papers".
(Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right
to due process of law. 29
We reject, as barren of factual basis, petitioner's contention that
respondents are considered as its talents, hence, not regular employees of
the broadcasting company. Petitioner's claim that the functions performed by the
respondents are not at all necessary, desirable, or even vital to its trade or
business is belied by the evidence on record.
Case law is that this Court has always accorded respect and finality to the
findings of fact of the CA, particularly if they coincide with those of the Labor
Arbiter and the National Labor Relations Commission, when supported by
substantial evidence. 30 The question of whether respondents are regular or
project employees or independent contractors is essentially factual in nature;
nonetheless, the Court is constrained to resolve it due to its tremendous effects
to the legions of production assistants working in the
Philippine broadcasting industry.
We agree with respondents' contention that 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.  AHaETS

In Universal Robina Corporation v. Catapang, 31 the Court reiterated the

test in determining whether one is a regular employee:
The primary standard, therefore, of determining regular
employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of
the employer. The test is whether the former is usually necessary or
desirable in the usual business or trade of the employer. The connection
can be determined by considering the nature of work performed and its
relation to the scheme of the particular business or trade in its entirety.
Also, if the employee has been performing the job for at least a year,
even if the performance is not continuous and merely intermittent, the
law deems repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity
to the business. Hence, the employment is considered regular, but only
with respect to such activity and while such activity exists. 32
As elaborated by this Court in Magsalin v. National Organization of
Working Men: 33
Even while the language of law might have been more definitive,
the clarity of its spirit and intent, i.e., to ensure a "regular" worker'’s
security of tenure, however, can hardly be doubted. In determining
whether an employment should be considered regular or non-regular,
the applicable test is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or
trade of the employer. The standard, supplied by the law itself, is
whether the work undertaken is necessary or desirable in the usual
business or trade of the employer, a fact that can be assessed by
looking into the nature of the services rendered and its relation to the
general scheme under which the business or trade is pursued in the
usual course. It is distinguished from a specific undertaking that is
divorced from the normal activities required in carrying on the particular
business or trade. But, although the work to be performed is only for a
specific project or seasonal, where a person thus engaged has been
performing the job for at least one year, even if the performance is not
continuous or is merely intermittent, the law deems the repeated and
continuing need for its performance as being sufficient to indicate the
necessity or desirability of that activity to the business or trade of the
 employer. The employment of such person is also then deemed to be
regular with respect to such activity and while such activity exists. 34
 
Not considered regular employees are "project employees," the completion
or termination of which is more or less determinable at the time of employment,
such as those employed in connection with a particular construction project, and
"seasonal employees" whose employment by its nature is only desirable for a
limited period of time. Even then, any employee who has rendered at least one
year of service, whether continuous or intermittent, is deemed regular with
respect to the activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact
that respondents received pre-agreed "talent fees" instead of salaries, that they
did not observe the required office hours, and that they were permitted to join
other productions during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered "talents" because they are not
actors or actresses or radio specialists or mere clerks or utility employees. They
are regular employees who perform several different duties under the control and
direction of ABS-CBN executives and supervisors.
Thus, 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. 35
The law overrides such conditions which are prejudicial to the interest of
the worker whose weak bargaining situation necessitates the succor of the State.
What determines whether a certain employment is regular or otherwise is not the
will or word of the employer, to which the worker oftentimes acquiesces, much
less the procedure of hiring the employee or the manner of paying the salary or
the actual time spent at work. It is the character of the activities performed in
relation to the particular trade or business taking into account all the
circumstances, and in some cases the length of time of its performance and its
continued existence. 36 It is obvious that one year after they were employed by
petitioner, respondents became regular employees by operation of law. 37
Additionally, respondents cannot be considered as project or program
employees because no evidence was presented to show that the duration and
scope of the project were determined or specified at the time of their
engagement. Under existing jurisprudence, project could refer to two
distinguishable types of activities. First, 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. Second, 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. 38
The principal test is whether or not the project employees were assigned to
carry out a specific project or undertaking, the duration and scope of which were
specified at the time the employees were engaged for that project. 39
In this case, it is undisputed that respondents had 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 the petitioner. The
persisting need for their services is sufficient evidence of the necessity and
indispensability of such services to petitioner's business or trade. 40 While length
of time may not be a sole controlling test for project employment, it can be a
strong factor to determine whether the employee was hired for a specific
undertaking or in fact tasked to perform functions which are vital, necessary and
indispensable to the usual trade or business of the employer. 41 We note further
that petitioner 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. 42
As gleaned from the records of this case, petitioner itself is not certain how
to categorize respondents. In its earlier pleadings, petitioner classified
respondents 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.
Petitioner's reliance on the ruling of this Court in Sonza v. ABS-
CBN Broadcasting Corporation  43 is misplaced. In that case, the Court explained
why Jose Sonza, a well-known television and radio personality, was an
independent contractor and not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA'S services to co-host its television
and radio programs because of SONZA'S peculiar skills, talent and
celebrity status. SONZA contends that the "discretion used by
respondent in specifically selecting and hiring complainant over other
broadcasters of possibly similar experience and qualification as
complainant belies respondent's claim of independent contractorship."
 Independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA, because of his
unique skills, talent and celebrity status not possessed by ordinary
employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such
unique skills, talent and celebrity status, ABS-CBN would not have
entered into the Agreement with SONZA but would have hired him
through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does
not conclusively determine his status. We must consider all the
circumstances of the relationship, with the control test being the most
important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no
part of his fees going to MJMDC. SONZA asserts that this mode of fee
payment shows that he was an employee of ABS-CBN. SONZA also
points out that ABS-CBN granted him benefits and privileges "which he
would not have enjoyed if he were truly the subject of a valid job
contract."
All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-CBN's
employee, there would be no need for the parties to stipulate on benefits
such as "SSS, Medicare, . . . and 13th month pay which the law
automatically incorporates into every employer-employee contract.
Whatever benefits SONZA enjoyed arose from contract and not because
of an employer-employee relationship.
SONZA's talent fees, amounting to P317,000 monthly in the
second and third year, are so huge and out of the ordinary that they
indicate more an independent contractual relationship rather than an
employer-employee relationship. ABS-CBN agreed to pay SONZA such
huge talent fees precisely because of SONZA'S unique skills, talent and
celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand
and receive such huge talent fees for his services. The power to bargain
talent fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent
contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC
does not negate the status of SONZA as an independent contractor. The
parties expressly agreed on such mode of payment. Under the
Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would
have to turn over any talent fee accruing under the Agreement. 44
 In the case at bar, however, the employer-employee relationship between
petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or
unique skill, talent or celebrity status was required from them because they were
merely hired through petitioner's personnel department just like any ordinary
employee.
Second. The so-called "talent fees" of respondents correspond to wages
given as a result of an employer-employee relationship. Respondents did not
have the power to bargain for huge talent fees, a circumstance negating
independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their
work unsatisfactory, and respondents are highly dependent on the petitioner for
continued work.
Fourth. The degree of control and supervision exercised by petitioner over
respondents through its supervisors negates the allegation that respondents are
independent contractors.
The presumption is that when the work done is an integral part of the
regular business of the employer and when the worker, relative to the
employer, does not furnish an independent business or professional
service, such work is a regular employment of such employee and not an
independent contractor. 45 The Court will peruse beyond any such agreement
to examine the facts that typify the parties' actual relationship. 46
It follows then that respondents are entitled to the benefits provided for in
the existing CBA between petitioner and its rank-and-file employees. As regular
employees, respondents are entitled to the benefits granted to all other regular
employees of petitioner under the CBA. 47 We quote with approval the ruling of
the appellate court, that the reason why production assistants were excluded
from the CBA is precisely because they were erroneously classified and treated
as project employees by petitioner:
 
. . . The award in favor of private respondents of the benefits
accorded to rank-and-file employees of ABS-CBN under the 1996-1999
CBA is a necessary consequence of public respondent's ruling that
private respondents as production assistants of petitioner are regular
employees. The monetary award is not considered as claims involving
the interpretation or implementation of the collective bargaining
agreement. The reason why production assistants were excluded from
the said agreement is precisely because they were classified and treated
as project employees by petitioner.
 As earlier stated, it is not the will or word of the employer which
determines the nature of employment of an employee but the nature of
the activities performed by such employee in relation to the particular
business or trade of the employer. Considering that We have clearly
found that private respondents are regular employees of petitioner, their
exclusion from the said CBA on the misplaced belief of the parties to the
said agreement that they are project employees, is therefore not proper.
Finding said private respondents as regular employees and not as mere
project employees, they must be accorded the benefits due under the
said Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by
the union representing the employees and the employer. However, even
the non-member employees are entitled to the benefits of the contract.
To accord its benefits only to members of the union without any valid
reason would constitute undue discrimination against non-members. A
collective bargaining agreement is binding on all employees of the
company. Therefore, whatever benefits are given to the other employees
of ABS-CBN must likewise be accorded to private respondents who
were regular employees of petitioner. 48
Besides, only talent-artists were excluded from the CBA and not
production assistants who are regular employees of the respondents. Moreover,
under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation
and all labor contracts shall be construed in favor of the safety and decent living
of the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of
merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R.
SP No. 76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban, C.J., Ynares-Santiago, Austria-Martinez and Chico-Nazario,
JJ., concur.
 
Footnotes
1.Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices
Rodrigo V. Cosico and Rosalinda Asuncion-Vicente, concurring, rollo, pp. 9-34.
2.Id. at 170-219.
3.Id. at 220-227.
4.Rollo, p. 180.
5.Id. at 183.
6.Id. at 213.
7.Id. at 174.
8.Id. at 248-250.
9.CA rollo, pp. 128-129.
10.Id. at 138-139.
11.See CA rollo, pp. 7-8.
12.Rollo, pp. 229-233.
13.Id. at 257-258.
14.Rollo, p. 172.
15.Rollo, p. 218.
16.385 Phil. 93 (2000).
17.Rollo, p. 36.
18.Id. at 58-59.
19.Mabuhay Development Industries v. National Labor Relations Commission, 351
Phil. 227, 234-235 (1998), citing City Fair Corporation v. National Labor
Relations Commission, 313 Phil. 464, 465 (1995).
20.Sublay v. National Labor Relations Commission, 381 Phil. 198, 204 (2000).
21.Art. 223. APPEAL
  Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar
days from receipt of such decisions, awards, or orders. . . .
22.Buenaobra v. Lim King Guan, G.R. No. 150147, January 20, 2004, 420 SCRA 359,
364 (2004).
23.Huntington Steel Products, Inc. v. National Labor Relations Commission, G.R. No.
158311, November 14, 2004, 442 SCRA 551, 560.
24.See Sadol v. Pilipinas Kao, Inc., et al., G.R. No. 87530, June 13, 1990, 186 SCRA
491.
25.Panlilio v. National Labor Relations Commission, 346 Phil. 30, 35-36 (1997).
26.U.I.C. v. U.I.C. Teaching & Non-Teaching Personnel and Employees Union, 414
Phil. 522, 533 (2001).
27.Mayon Hotel & Restaurant v. Adana, G.R. No. 157634, May 16, 2005, 458 SCRA
609, 629-630.
28.Philips Semiconductors (Phils.), Inc. v. Fadriquela, Infra note 35, at 418.
29.CA rollo, pp. 51-52.
30.Lopez v. National Steel Corporation, G.R. No. 149674, February 16, 2004, 423
SCRA 109, 113.
31.G.R. No. 164736, October 14, 2005, 473 SCRA 189.
32.Id. at 203-204, citing Abasolo v. National Labor Relations Commission, 400 Phil.
86, 103 (2000), De Leon v. National Labor Relations Commission, G.R. No.
70705, August 21, 1989, 176 SCRA 615, 621.
33.451 Phil. 254 (2003).
34.Id. at 260-261.
35.Philips Semiconductors (Phils.), Inc. v. Fadriquela, G.R. No. 141717, April 14,
2004, 427 SCRA 408, 419.
36.De Leon v. National Labor Relations Commission, supra note 32, at 624.
37.Kimberly Independent Labor Union for Solidarity v. Drilon, et al., G.R. Nos. 77629
and 78791, May 9, 1990, 185 SCRA 190, 204.
38.Villa v. National Labor Relations Commission, 348 Phil. 116, 143 (1998).
39.ALU-TUCP, et al. v. National Labor Relations Commission, G.R. No. 109902,
August 2, 1994, 234 SCRA 678, 685.
40.Samson v. National Labor Relations Commission, 323 Phil 135, 148 (1996).
41.Tomas Lao Construction v. National Labor Relations Commission, 344 Phil. 268,
279 (1997).
42.Section 2.2 of Department Order No. 19, cited in Integrated Contractor and
Plumbing Works, Inc. v. National Labor Relations Commission, G.R. No.
152427, August 9, 2005, 466 SCRA 265, 273-274 and Samson v. National
Labor Relations Commission, supra note 40, at 147.
43.G.R. No. 138051, June 10, 2004, 431 SCRA 538.
44.Id. at 595-596.
45.David Albert Pierce, Esq., "Management-side employment law advice for
entertainment industry" with subtitle "Classification of Workers: Independent
Contractor versus Employee" http://www.piercegorman.com/Classification_of_
Workers.html (visited July 14, 2006).
46.Id.
47.Cinderella Marketing Corporation v. National Labor Relations Commission,
Second Division, G.R. Nos. 112535 and 113758, June 22, 1998, 291 SCRA 91,
96.
48.Rollo, pp. 121-122.
 (ABS-CBN Broadcasting Corp. v. Nazareno, G.R. No. 164156, [September 26,
|||

2006], 534 PHIL 306-338)

[G.R. No. 183810. January 21, 2010.]

FARLEY FULACHE, MANOLO JABONERO, DAVID CASTILLO,

JEFFREY LAGUNZAD, MAGDALENA MALIG-ON BIGNO,
FRANCISCO CABAS, JR., HARVEY PONCE and ALAN C.
ALMENDRAS, petitioners, vs. ABS-CBN BROADCASTING
CORPORATION, respondent.

DECISION

BRION, J  :
p

The petition for review on certiorari 1 now before us seeks to set aside

the decision 2 and resolution 3 of the Court of Appeals, Nineteenth
Division (CA) promulgated on March 25, 2008 and July 8, 2008, respectively,
in CA-G.R. SP No. 01838. 4
The Antecedents
The Regularization Case.
In June 2001, petitioners Farley Fulache, Manolo Jabonero, David
Castillo, Jeffrey Lagunzad, Magdalena Malig-on Bigno, Francisco Cabas, Jr.,
Harvey Ponce and Alan C. Almendras (petitioners) and Cresente Atinen
(Atinen) filed two separate complaints for regularization, unfair labor practice
and several money claims (regularization case) against ABS-
CBN Broadcasting Corporation-Cebu (ABS-CBN). Fulache and Castillo were
drivers/cameramen; Atinen, Lagunzad and Jabonero were drivers; Ponce and
Almendras were cameramen/editors; Bigno was a PA/Teleprompter Operator-
Editing, and Cabas was a VTR man/editor. The complaints (RAB VII Case
Nos. 06-1100-01 and 06-1176-01) were consolidated and were assigned to
Labor Arbiter Julie C. Rendoque.
The petitioners alleged that on December 17, 1999, ABS-CBN and
the ABS-CBN Rank-and-File Employees Union (Union) executed a collective
bargaining agreement (CBA) effective December 11, 1999 to December 10,
2002; they only became aware of the CBA when they obtained copies of the
agreement; they learned that they had been excluded from its coverage
as ABS-CBN considered them temporary and not regular employees, in
violation of the Labor Code.They claimed they had already rendered more
than a year of service in the company and, therefore, should have been
recognized as regular employees entitled to security of tenure and to the
privileges and benefits enjoyed by regular employees. They asked that they
be paid overtime, night shift differential, holiday, rest day and service incentive
leave pay. They also prayed for an award of moral damages and attorney's
fees. 
TCacIA

ABS-CBN explained the nature of the petitioners' employment within

the framework of its operations. It claimed that: it operates in several
divisions, one of which is the Regional Network Group (RNG). The RNG
exercises control and supervision over all the ABS-CBN local stations to
ensure that ABS-CBN programs are extended to the provinces. A local
station, like the Cebu station, can resort to cost-effective and cost-saving
measures to remain viable; local stations produced shows and programs that
were constantly changing because of the competitive nature of the industry,
the changing public demand or preference, and the seasonal nature of media
broadcasting programs. ABS-CBN claimed, too, that the production of
programs per se is not necessary or desirable in its business because it could
generate profits by selling airtime to block-timers or through advertising.
ABS-CBN further claimed that to cope with fluctuating business
conditions, it contracts on a case-to-case basis the services of persons who
possess the necessary talent, skills, training, expertise or qualifications to
meet the requirements of its programs and productions. These contracted
persons are called "talents" and are considered independent contractors who
offer their services to broadcasting companies.
Instead of salaries, ABS-CBN pointed out that talents are paid a pre-
arranged consideration called "talent fee" taken from the budget of a
particular program and subject to a ten percent (10%) withholding tax. Talents
do not undergo probation. Their services are engaged for a specific program
or production, or a segment thereof. Their contracts are terminated once the
program, production or segment is completed.
ABS-CBN alleged that the petitioners' services were contracted on
various dates by its Cebu station as independent contractors/off camera
talents, and they were not entitled to regularization in these capacities.
On January 17, 2002, Labor Arbiter Rendoque rendered his
decision 5 holding that the petitioners were regular employees of ABS-CBN,
not independent contractors, and are entitled to the benefits and privileges of
regular employees.
ABS-CBN appealed the ruling to the National Labor Relations
Commission (NLRC) Fourth Division, mainly contending that the petitioners
were independent contractors, not regular employees. 6
The Illegal Dismissal Case.
While the appeal of the regularization case was pending, ABS-
CBN dismissed Fulache, Jabonero, Castillo, Lagunzad and Atinen (all drivers)
for their refusal to sign up contracts of employment with service contractor
Able Services. The four drivers and Atinen responded by filing a complaint
for illegal dismissal (illegal dismissal case). The case (RAB VII Case No. 07-
1300-2002) was likewise handled by Labor Arbiter Rendoque.
In defense, ABS-CBN alleged that even before the labor arbiter
rendered his decision of January 17, 2002 in the regularization case, it had
already undertaken a comprehensive review of its existing organizational
structure to address its operational requirements. It then decided to course
through legitimate service contractors all driving, messengerial, janitorial,
utility, make-up, wardrobe and security services for both the Metro Manila and
provincial stations, to improve its operations and to make them more
economically viable. Fulache, Jabonero, Castillo, Lagunzad and Atinen were
not singled out for dismissal; as drivers, they were dismissed because they
belonged to a job category that had already been contracted out. It argued
that even if the petitioners had been found to have been illegally dismissed,
their reinstatement had become a physical impossibility because their
employer-employee relationships had been strained and that Atinen had
executed a quitclaim and release. aTIEcA

In her April 21, 2003 decision in the illegal dismissal case, 7 Labor

Arbiter Rendoque upheld the validity of ABS-CBN's contracting out of certain
work or services in its operations. The labor arbiter found that
petitioners Fulache, Jabonero, Castillo, Lagunzad and Atinen had been
dismissed due to redundancy, an authorized cause under the law. 8 He
awarded them separation pay of one (1) month's salary for every year of
service.
Again, ABS-CBN appealed to the NLRC which rendered on December
15, 2004 a joint decision on the regularization and illegal dismissal
cases. 9 The NLRC ruled that there was an employer-employee relationship
between the petitioners and ABS-CBN as the company exercised control over
the petitioners in the performance of their work; the petitioners were regular
employees because they were engaged to perform activities usually
necessary or desirable in ABS-CBN's trade or business; they cannot be
considered contractual employees since they were not paid for the result of
their work, but on a monthly basis and were required to do their work in
accordance with the company's schedule. The NLRC thus affirmed with
modification the labor arbiter's regularization decision of January 17, 2002,
additionally granting the petitioners CBA benefits and privileges.
 The NLRC reversed the labor arbiter's ruling in the illegal dismissal
case; it found that petitioners Fulache, Jabonero, Castillo, Lagunzad and
Atinen had been illegally dismissed and awarded them backwages and
separation pay in lieu of reinstatement. Under both cases, the petitioners were
awarded CBA benefits and privileges from the time they became regular
employees up to the time of their dismissal.
The petitioners moved for reconsideration, contending that Fulache,
Jabonero, Castillo and Lagunzad are entitled to reinstatement and full
backwages, salary increases and other CBA benefits as well as 13th month
pay, cash conversion of sick and vacation leaves, medical and dental
allowances, educational benefits and service awards. Atinen appeared to
have been excluded from the motion and there was no showing that he
sought reconsideration on his own.
ABS-CBN likewise moved for the reconsideration of the decision,
reiterating that Fulache, Jabonero, Castillo and Lagunzad were independent
contractors, whose services had been terminated due to redundancy; thus, no
backwages should have been awarded. It further argued that the petitioners
were not entitled to the CBA benefits because they never claimed these
benefits in their position paper before the labor arbiter while the NLRC failed
to make a clear and positive finding that they were part of the bargaining unit;
neither was there evidence to support this finding.
The NLRC resolved the motions for reconsideration on March 24,
2006 10 by reinstating the two separate decisions of the labor arbiter dated
January 17, 2002, 11 and April 21, 2003, 12 respectively. Thus, on the
regularization issue, the NLRC stood by the ruling that the petitioners were
regular employees entitled to the benefits and privileges of regular
employees. On the illegal dismissal case, the petitioners, while recognized as
regular employees, were declared dismissed due to redundancy. The NLRC
denied the petitioners' second motion for reconsideration in its order of May
31, 2006 for being a prohibited pleading. 13 
CAHaST

The CA Petition and Decision

The petitioners went to the CA through a petition for certiorari under
Rule 65 of the Rules of Court. 14 They charged the NLRC with grave abuse of
discretion in: (1) denying them the benefits under the CBA; (2) finding no
evidence that they are part of the company's bargaining unit; (3) not
reinstating and awarding backwages to Fulache, Jabonero, Castillo and
Lagunzad; and (4) ruling that they are not entitled to damages and attorney's
fees.
 ABS-CBN, on the other hand, questioned the propriety of the
petitioners' use of a certiorari petition. It argued that the proper remedy for the
petitioners was an appeal from the reinstated decisions of the labor arbiter. 
In its decision of March 25, 2008, 15 the appellate court brushed
aside ABS-CBN's procedural question, holding that the petition was justified
because there is no plain, speedy or adequate remedy from a final decision,
order or resolution of the NLRC; the reinstatement of the labor arbiter's
decisions did not mean that the proceedings reverted back to the level of the
arbiter. It likewise affirmed the NLRC ruling that the petitioners' second motion
for reconsideration is a prohibited pleading under the NLRC rules. 16
On the merits of the case, the CA ruled that the petitioners failed to
prove their claim to CBA benefits since they never raised the issue in the
compulsory arbitration proceedings, and did not appeal the labor arbiter's
decision which was silent on their entitlement to CBA benefits. The CA found
that the petitioners failed to show with specificity how Section 1 (Appropriate
Bargaining Unit) and the other provisions of the CBA applied to them.
On the illegal dismissal issue, the CA upheld the NLRC decision
reinstating the labor arbiter's April 21, 2003 ruling. 17 Thus, the drivers
— Fulache, Jabonero, Castillo and Lagunzad — were not illegally dismissed
as their separation from the service was due to redundancy; they had not
presented any evidence that ABS-CBN abused its prerogative in contracting
out the services of drivers. Except for separation pay, the CA denied the
petitioners' claim for backwages, moral and exemplary damages, and
attorney's fees.
The petitioners moved for reconsideration, but the CA denied the
motion in a resolution promulgated on July 8, 2008. 18 Hence, the present
petition.
The Petition
The petitioners challenge the CA ruling on both procedural and
substantive grounds. As procedural questions, they submit that the CA erred
in: (1) affirming the NLRC resolution which reversed its own decision; (2)
sustaining the NLRC ruling that their second motion for reconsideration is a
prohibited pleading; (3) not ruling that ABS-CBN admitted in its position paper
before the labor arbiter that they were members of the bargaining unit as the
matter was not raised in its appeal to the NLRC; and, (4) not ruling that
notwithstanding their failure to appeal from the first decision of the Labor
Arbiter, they can still participate in the appeal filed by ABS-CBN regarding
their employment status.  SEcTHA

On the substantive aspect, the petitioners contend that the CA gravely

erred in: (1) not considering the evidence submitted to the NLRC on appeal to
bolster their claim that they were members of the bargaining unit and
therefore entitled to the CBA benefits; (2) not ordering ABS-CBN to pay the
petitioners' salaries, allowances and CBA benefits after the NLRC has
declared that they were regular employees of ABS-CBN; (3) not ruling that
under existing jurisprudence, the position of driver cannot be declared
redundant, and that the petitioners-drivers were illegally dismissed; and, (4)
not ruling that the petitioners were entitled to damages and attorney's fees.
The petitioners argue that the NLRC resolution of March 24,
2006 19 which set aside its joint decision of December 15, 2004 20 and
reinstated the twin decisions of the labor arbiter, 21 had the effect of
promulgating a new decision based on issues that were not raised in ABS-
CBN's partial appeal to the NLRC. They submit that the NLRC should have
allowed their second motion for reconsideration so that it may be able to
equitably evaluate the parties' "conflicting versions of the facts" instead of
denying the motion on a mere technicality.
On the question of their CBA coverage, the petitioners contend that the
CA erred in not considering that ABS-CBN admitted their membership in the
bargaining unit, for nowhere in its partial appeal from the labor arbiter's
decision in the regularization case did it allege that the petitioners failed to
prove that they are members of the bargaining unit; instead, the company
stood by its position that the petitioners were not entitled to the CBA benefits
since they were independent contractors/program employees.
The petitioners submit that while they did not appeal the labor arbiter's
decision in the regularization case, ABS-CBN raised the employment status
issue in its own appeal to the NLRC; this appeal laid this issue open for
review. They argue that they could still participate in the appeal proceedings
at the NLRC; pursue their position on the issue; and introduce evidence as
they did in their reply to the company's appeal. 22 They bewail the appellate
court's failure to consider the evidence they presented to the NLRC
(consisting of documents and sworn statements enumerating the activities
they are performing) clearly indicating that they are part of the rank-and-file
bargaining unit at ABS-CBN.
The petitioners then proceeded to describe the work they render for the
company. Collectively, they claim that they work as assistants in the
production of the Cebuano news program broadcast daily over ABS-
CBN Channel 3, as follows: Fulache, Jabonero, Castillo and Lagunzad as
production assistants to drive the news team; Ponce and Almendras, to shoot
scenes and events with the use of cameras owned by ABS-CBN; Malig-on
Bigno, as studio production assistant and assistant editor/teleprompter
operator; and Cabas, Jr., as production assistant for video editing and
operating the VTR machine recorder. As production assistants, the petitioners
submit that they are rank-and-file employees (citing in support of their position
the Court's ruling in ABS-CBN Broadcasting Corp. v. Nazareno) 23 who are
entitled to salary increases and other benefits under the CBA. Relying on the
Court's ruling in New Pacific Timber and Supply Company, Inc. v.
NLRC,  24 they posit that to exclude them from the CBA "would constitute
undue discrimination and would deprive them of monetary benefits they would
otherwise be entitled to." 
TDaAHS

As their final point, the petitioners argue that even if they were not able
to prove that they were members of the bargaining unit, the CA should not
have dismissed their petition. When the CA affirmed the rulings of both the
labor arbiter and the NLRC that they are regular employees, the CA should
have ordered ABS-CBN to recognize their regular employee status and to
give them the salaries, allowances and other benefits and privileges under the
CBA.
On the dismissal of Fulache, Jabonero, Castillo and Lagunzad, the
petitioners impute bad faith on ABS-CBN when it abolished the positions of
drivers claiming that the company failed to comply with the requisites of a
valid redundancy action. They maintain that ABS-CBN did not present any
evidence on the new staffing pattern as approved by the management of the
company, and did not even bother to show why it considered the positions of
drivers superfluous and unnecessary; it is not true that the positions of drivers
no longer existed because these positions were contracted out to an agency
that, in turn, recruited four drivers to take the place of Fulache, Jabonero,
Castillo and Lagunzad. As further indication that the redundancy action
against the four drivers was done in bad faith, the petitioners call attention
to ABS-CBN's abolition of the position of drivers after the labor arbiter
rendered her decision declaring Fulache, Jabonero, Castillo and Lagunzad
regular company employees. The petitioners object to the dismissal of the
four drivers when they refused to sign resignation letters and join Able
Services, a contracting agency, contending that the four had no reason to
resign after the labor arbiter declared them regular company employees.
Since their dismissal was illegal and attended by bad faith, the
petitioners insist that they should be reinstated with backwages, and should
likewise be awarded moral and exemplary damages, and attorney's fees.
The Case for ABS-CBN
In its Comment filed on January 28, 2009, 25 ABS-CBN presents
several grounds which may be synthesized as follows:
1. The petition raises questions of fact and not of law.
2. The CA committed no error in affirming the resolution of the
NLRC reinstating the decisions of the labor arbiter.
 ABS-CBN submits that the petition should be dismissed for having
raised questions of fact and not of law in violation of Rule 45 of the Rules of
Court. It argues that the question of whether the petitioners were covered by
the CBA (and therefore entitled to the CBA benefits) and whether the
petitioners were illegally dismissed because of redundancy, are factual
questions that cannot be reviewed on certiorari because the Court is not a
trier of facts.
ABS-CBN dismisses the petitioners' issues and arguments as mere
rehash of what they raised in their pleadings with the CA and as grounds that
do not warrant further consideration. It further contends that because the
petitioners did not appeal the labor arbiter decisions, these decisions had
lapsed to finality and could no longer be the subject of a petition
for certiorari; the petitioners cannot obtain from the appellate court affirmative
relief other than those granted in the appealed decision. It also argues that the
NLRC did not commit any grave abuse of discretion in reinstating the twin
decisions of the labor arbiter, thereby affirming that no CBA benefits can be
awarded to the petitioners; in the absence of any illegal dismissal, the
petitioners were not entitled to reinstatement, backwages, damages, and
attorney's fees. 
THADEI

The Court's Ruling

We first resolve the parties' procedural questions.
ABS-CBN wants the petition to be dismissed outright for its alleged
failure to comply with the requirement of Rule 45 of the Rules of Court that the
petition raises only questions of law. 26
We find no impropriety in the petition from the standpoint of Rule 45.
The petitioners do not question the findings of facts of the assailed decisions.
They question the misapplication of the law and jurisprudence on the facts
recognized by the decisions. For example, they question as contrary to law
their exclusion from the CBA after they were recognized as regular rank-and-
file employees of ABS-CBN. They also question the basis in law of the
dismissal of the four drivers and the legal propriety of the redundancy action
taken against. To reiterate the established distinctions between questions of
law and questions of fact, we quote hereunder our ruling in New Rural Bank
of Guimba (N.E.) Inc. v. Fermina S. Abad and Rafael Susan: 27  
We reiterate the distinction between a question of law and a
question of fact. A question of law exists when the doubt or
controversy concerns the correct application of law or
jurisprudence to a certain set of facts; or when the issue does not
call for an examination of the probative value of the evidence
presented, the truth or falsehood of the facts being admitted. A
question of fact exists when a doubt or difference arises as to the
 truth or falsehood of facts or when the query invites calibration of
the whole evidence considering mainly the credibility of the
witnesses, the existence and relevancy of specific surrounding
circumstances, as well as their relation to each other and to the
whole, and the probability of the situation.
We also find no error in the CA's affirmation of the denial of the
petitioners' second motion for reconsideration of the March 24, 2006
resolution of the NLRC reinstating the labor arbiter's twin decisions. The
petitioners' second motion for reconsideration was a prohibited pleading under
the NLRC rules of procedure. 28
The parties' other procedural questions directly bear on the merits of
their positions and are discussed and resolved below, together with the core
substantive issues of: (1) whether the petitioners, as regular employees, are
members of the bargaining unit entitled to CBA benefits; and (2) whether
petitioners Fulache, Jabonero, Castillo and Lagunzad were illegally
dismissed.
The Claim for CBA Benefits
We find merit in the petitioners' positions.
As regular employees, the petitioners fall within the coverage of the
bargaining unit and are therefore entitled to CBA benefits as a matter of law
and contract. In the root decision (the labor arbiter's decision of January 17,
2002) that the NLRC and CA affirmed, the labor arbiter declared:
WHEREFORE, IN THE LIGHT OF THE FOREGOING, taking into
account the factual scenario and the evidence adduced by both parties,
it is declared that complainants in these cases are REGULAR
EMPLOYEES of respondent ABS-CBN and not INDEPENDENT
CONTRACTORS and thus henceforth they are entitled to the benefits
and privileges attached to regular status of their employment. 
aCIHcD

This declaration unequivocally settled the petitioners' employment

status: they are ABS-CBN's regular employees entitled to the benefits and
privileges of regular employees. These benefits and privileges arise from
entitlements under the law (specifically, the Labor Code and its related laws),
and from their employment contract as regular ABS-CBN employees, part of
which is the CBA if they fall within the coverage of this agreement. Thus, what
only needs to be resolved as an issue for purposes of implementation of the
decision is whether the petitioners fall within CBA coverage.
The parties' 1999-2002 CBA provided in its Article I (Scope of the
Agreement) that: 29
Section 1. Appropriate Bargaining Unit. — The parties agree that
the appropriate bargaining unit shall be regular rank-and-file
 employees of ABS-CBN BROADCASTING CORPORATION but shall
not include:
a) Personnel classified as Supervisor and Confidential
employees;
b) Personnel who are on "casual" or "probationary" status
as defined in Section 2 hereof;
c) Personnel who are on "contract" status or who are paid
for specified units of work such as writer-producers, talent-artists,
and singers.
The inclusion or exclusion of new job classifications into
the bargaining unit shall be subject of discussion between the
COMPANY and the UNION. [emphasis supplied]
Under these terms, the petitioners are members of the appropriate
bargaining unit because they are regular rank-and-file employees and do not
belong to any of the excluded categories. Specifically, nothing in the records
shows that they are supervisory or confidential employees; neither are they
casual nor probationary employees. Most importantly, the labor arbiter's
decision of January 17, 2002 — affirmed all the way up to the CA level —
ruled against ABS-CBN's submission that they are independent contractors.
Thus, as regular rank-and-file employees, they fall within CBA coverage under
the CBA's express terms and are entitled to its benefits.
We see no merit in ABS-CBN's arguments that the petitioners are not
entitled to CBA benefits because: (1) they did not claim these benefits in their
position paper; (2) the NLRC did not categorically rule that the petitioners
were members of the bargaining unit; and (3) there was no evidence of this
membership. To further clarify what we stated above, CBA coverage is not
only a question of fact, but of law and contract. The factual issue is whether
the petitioners are regular rank-and-file employees of ABS-CBN. The tribunals
below uniformly answered this question in the affirmative. From this factual
finding flows legal effects touching on the terms and conditions of the
petitioners' regular employment. This was what the labor arbiter meant when
he stated in his decision that "henceforth they are entitled to the benefits and
privileges attached to regular status of their employment." Significantly, ABS-
CBN itself posited before this Court that "the Court of Appeals did not gravely
err nor gravely abuse its discretion when it affirmed the resolution of the
NLRC dated March 24, 2006 reinstating and adopting in toto the decision of
the Labor Arbiter dated January 17, 2002 . . . . " 30 This representation alone
fully resolves all the objections — procedural or otherwise — ABS-CBN raised
on the regularization issue. ADaECI
 The Dismissal of Fulache, Jabonero,
Castillo and Lagunzad
The termination of employment of the four drivers occurred under highly
questionable circumstances and with plain and unadulterated bad faith.
The records show that the regularization case was in fact the root of the
resulting bad faith as this case gave rise and led to the dismissal
case. First, the regularization case was filed leading to the labor arbiter's
decision 31 declaring the petitioners, including Fulache, Jabonero, Castillo and
Lagunzad, to be regular employees. ABS-CBN appealed the decision and
maintained its position that the petitioners were independent contractors.
In the course of this appeal, ABS-CBN took matters into its own hands
and terminated the petitioners' services, clearly disregarding its own appeal
then pending with the NLRC. Notably, this appeal posited that the petitioners
were not employees (whose services therefore could be terminated through
dismissal under the Labor Code); they were independent contractors whose
services could be terminated at will, subject only to the terms of their
contracts. To justify the termination of service, the company cited redundancy
as its authorized cause but offered no justificatory supporting evidence. It
merely claimed that it was contracting out the petitioners' activities in the
exercise of its management prerogative.
ABS-CBN's intent, of course, based on the records, was to transfer the
petitioners and their activities to a service contractor without paying any
attention to the requirements of our labor laws; hence, ABS-CBN dismissed
the petitioners when they refused to sign up with late service contractor. 32 In
this manner, ABS-CBN fell into a downward spiral of irreconcilable legal
positions, all undertaken in the hope of saving itself from the decision
declaring its "talents" to be regular employees.
By doing all these, ABS-CBN forgot labor law and its realities.
It forgot that by claiming redundancy as authorized cause for dismissal,
it impliedly admitted that the petitioners were regular employees whose
services, by law, can only be terminated for the just and authorized causes
defined under the Labor Code.
Likewise ABS-CBN forgot that it had an existing CBA with a union,
which agreement must be respected in any move affecting the security of
tenure of affected employees; otherwise, it ran the risk of committing unfair
labor practice — both a criminal and an administrative offense. 33 It similarly
forgot that an exercise of management prerogative can be valid only if it is
undertaken in good faith and with no intent to defeat or circumvent the rights
of its employees under the laws or under valid agreements. 34
 Lastly, it forgot that there was a standing labor arbiter's decision that,
while not yet final because of its own pending appeal, cannot simply be
disregarded. By implementing the dismissal action at the time the labor
arbiter's ruling was under review, the company unilaterally negated the effects
of the labor arbiter's ruling while at the same time appealing the same ruling to
the NLRC. This unilateral move is a direct affront to the NLRC's authority and
an abuse of the appeal process.  AICDSa

All these go to show that ABS-CBN acted with patent bad faith. A close

parallel we can draw to characterize this bad faith is the prohibition against
forum-shopping under the Rules of Court. In forum-shopping, the Rules
characterize as bad faith the act of filing similar and repetitive actions for the
same cause with the intent of somehow finding a favorable ruling in one of the
actions filed. 35 ABS-CBN's actions in the two cases, as described above, are
of the same character, since its obvious intent was to defeat and render
useless, in a roundabout way and other than through the appeal it had taken,
the labor arbiter's decision in the regularization case. Forum-shopping is
penalized by the dismissal of the actions involved. The penalty against ABS-
CBN for its bad faith in the present case should be no less.
The errors and omissions do not belong to ABS-CBN alone. The labor
arbiter himself who handled both cases did not see the totality of the
company's actions for what they were. He appeared to have blindly allowed
what he granted the petitioners with his left hand, to be taken away with his
right hand, unmindful that the company already exhibited a badge of bad faith
in seeking to terminate the services of the petitioners whose regular status
had just been recognized. He should have recognized the bad faith from the
timing alone of ABS-CBN's conscious and purposeful moves to secure the
ultimate aim of avoiding the regularization of its so-called "talents." 
The NLRC, for its part, initially recognized the presence of bad faith
where it originally ruled that:
While notice has been made to the employees whose positions
were declared redundant, the element of good faith in abolishing the
positions of the complainants appear to be wanting. In fact, it remains
undisputed that herein complainants were terminated when they refused
to sign an employment contract with Able Services which would make
them appear as employees of the agency and not of ABS-CBN. Such act
by * clearly demonstrates bad faith on the part of the respondent in
carrying out the company's redundancy program . . . . 36
On motion for reconsideration by both parties, the NLRC reiterated its
"pronouncement that complainants were illegally terminated as extensively
discussed in our Joint Decision dated December 15, 2004." 37 Yet, in an
inexplicable turnaround, it reconsidered its joint decision and reinstated not
only the labor arbiter's decision of January 17, 2002 in the regularization case,
but also his illegal dismissal decision of April 21, 2003. 38 Thus, the NLRC
joined the labor arbiter in his error that we cannot but characterize as grave
abuse of discretion.
The Court cannot leave unchecked the labor tribunals' patent grave
abuse of discretion that resulted, without doubt, in a grave injustice to the
petitioners who were claiming regular employment status and were
unceremoniously deprived of their employment soon after their regular status
was recognized. Unfortunately, the CA failed to detect the labor tribunals'
gross errors in the disposition of the dismissal issue. Thus, the CA itself joined
the same errors the labor tribunals committed.  ATCEIc

The injustice committed on the petitioners/drivers requires rectification.

Their dismissal was not only unjust and in bad faith as the above discussions
abundantly show. The bad faith in ABS-CBN's move toward its illegitimate
goal was not even hidden; it dismissed the petitioners — already recognized
as regular employees — for refusing to sign up with its service contractor.
Thus, from every perspective, the petitioners were illegally dismissed.
By law, 39 illegally dismissed employees are entitled to reinstatement
without loss of seniority rights and other privileges and to full backwages,
inclusive of allowances, and to other benefits or their monetary equivalent
from the time their compensation was withheld from them up to the time of
their actual reinstatement. The four dismissed drivers deserve no less.
Moreover, they are also entitled to moral damages since their dismissal
was attended by bad faith. 40 For having been compelled to litigate and to
incur expenses to protect their rights and interest, the petitioners are likewise
entitled to attorney's fees. 41
WHEREFORE, premises considered, we hereby GRANT the petition.
The decision dated March 25, 2008 and the resolution dated July 8, 2008 of
the Court of Appeals in CA G.R. SP No. 01838 are
hereby REVERSED and SET ASIDE. Accordingly, judgment is hereby
rendered as follows:
1. Confirming that petitioners FARLEY FULACHE, MANOLO
JABONERO, DAVID CASTILLO, JEFFREY LAGUNZAD,
MAGDALENA MALIG-ON BIGNO, FRANCISCO CABAS,
JR., HARVEY PONCE and ALAN C. ALMENDRAS are
regular employees of ABS-CBN BROADCASTING
CORPORATION, and declaring them entitled to all the
rights, benefits and privileges, including CBA benefits, from
the time they became regular employees in accordance with
existing company practice and the Labor Code;
 2. Declaring illegal the dismissal of Fulache, Jabonero, Castillo and
Lagunzad, and ordering ABS-CBN to immediately reinstate
them to their former positions without loss of seniority rights
with full backwages and all other monetary benefits, from the
time they were dismissed up to the date of their actual
reinstatement;
3. Awarding moral damages of P100,000.00 each to Fulache,
Jabonero, Castillo and Lagunzad; and,
4. Awarding attorney's fees of 10% of the total monetary award
decreed in this Decision.
Costs against the respondent.
SO ORDERED.  TAESDH

Carpio, Del Castillo, Abad and Perez, JJ., concur.

 
Footnotes
1.Rollo, pp. 38-78; Filed pursuant to Rule 45 of the Rules of Court.
2.Id. at 9-22; penned by Associate Justice Amy C. Lazaro-Javier and concurred in by
Associate Justice Pampio A. Abarintos and Associate Justice Francisco P.
Acosta.
3.Id. at pp. 32-33.
4.Farley Fulache, et al. v. NLRC, et al.
5.Id. at 127-130: Petition, Annex "E."
6.Id. at 131-173; Petition, Annex "F."
7.Id. at 183-191; Petition, Annex "H."
8.LABOR CODE, Article 283.
9.Rollo, pp. 284-299; Petition, Annex "J."
10.Id. at 300-310; Petition, Annex "K."
11.Supra note 5.
12.Supra note 7.
13.Rollo, pp. 311-312; Petition, Annex "L."
14.Id. at 313-361.
15.Supra note 2.
16.The 2005 Revised Rules of Procedure of the National Labor Relations
Commission, Rule VII, Section 15.
17.Supra note 7.
18.Supra note 3.
19.Supra note 10.
20.Supra note 9.
21.Dated January 17, 2002 and April 21, 2003.
22.Rollo, pp. 193-284; Petition, Annex "I."
23.G.R. No. 164156, September 26, 2006, 503 SCRA 204.
24.G.R. No. 124224, March 17, 2000, 328 SCRA 404.
25.Rollo, pp. 392-446.
26.SECTION 1. Filing of petition with Supreme Court. — A party desiring to appeal
by certiorari from a judgment or final order or resolution of the Court of
Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever
authorized by law, may file with the Supreme Court a verified petition for review
on certiorari. The petition shall raise only questions of law which must be
distinctly set forth.
27.G.R. No. 161818, August 20, 2008, 562 SCRA 503.
28.Supra note 19.
29.Rollo, p. 247.
30.Comment, p. 2, Ground No. III, rollo, p. 393.
31.Supra note 5.
32.Rollo, p. 14; CA Decision, p. 6, last paragraph.
33.LABOR CODE, Article 247.
34.San Miguel Brewery Sales Force Union-PTGWO v. Ople, G.R. No. 53515,
February 8, 1989, 170 SCRA 25.
35.First Philippine International Bank v. Court of Appeals, G.R. No. 115849, January
24, 1996, 252 SCRA 259.
36.Rollo, p. 292; MRC Joint Decision, p. 9, paragraph 1.
37.Id. at 309, NLRC resolution dated March 24, 2006, p. 10, par. 1.
38.Id. at 309, NLRC resolution dated March 24, 2006, p. 10, dispositive portion.
39.LABOR CODE, Article 279.
40.Kay Products, Inc. v. CA, G.R. No. 162472, July 28, 2005, 464 SCRA 544.
 41.Litonjua Group of Companies v. Vigan, G.R. No. 143723, June 28, 2001, 360
SCRA 194. 
 (Fulache v. ABS-CBN Broadcasting Corp., G.R. No. 183810, [January 21,
|||

2010], 624 PHIL 562-587)

[G.R. No. 164652. June 8, 2007.]

THELMA DUMPIT-MURILLO, petitioner, vs. COURT OF APPEA
LS, ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER
AND EDWARD TAN, respondents.

DECISION

QUISUMBING, Acting C.J  : p

This petition seeks to reverse and set aside both the Decision 1 dated
January 30, 2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its
Resolution 2 dated June 23, 2004 denying the motion for reconsideration.
The Court of Appeals had overturned the Resolution 3 dated August 30,
2000 of the National Labor Relations Commission (NLRC) ruling that petitioner
was illegally dismissed.
The facts of the case are as follows:
On October 2, 1995, under Talent Contract No. NT95-1805, 4 private
respondent Associated Broadcasting Company (ABC) hired petitioner
Thelma Dumpit-Murillo as a newscaster and co-anchor for Balitang-Balita, an
early evening news program. The contract was for a period of three months. It
was renewed under Talent Contracts Nos. NT95-1915, NT96-3002, NT98-4984
and NT99-5649. 5 In addition, petitioner's services were engaged for the program
"Live on Five." On September 30, 1999, after four years of repeated renewals,
petitioner's talent contract expired. Two weeks after the expiration of the last
contract, petitioner sent a letter to Mr. Jose Javier, Vice President for News and
Public Affairs of ABC, informing the latter that she was still interested in renewing
her contract subject to a salary increase. Thereafter, petitioner stopped reporting
for work. On November 5, 1999, she wrote Mr. Javier another letter, 6 which we
quote verbatim:  DEICaA

xxx xxx xxx

Dear Mr. Javier:
 On October 20, 1999, I wrote you a letter in answer to your query by
way of a marginal note "what terms and conditions" in response to my
first letter dated October 13, 1999. To date, or for more than fifteen (15)
days since then, I have not received any formal written reply . . .
In view hereof, should I not receive any formal response from you until
Monday, November 8, 1999, I will deem it as a constructive
dismissal of my services.
xxx xxx xxx
A month later, petitioner sent a demand letter 7 to ABC, demanding: (a)
reinstatement to her former position; (b) payment of unpaid wages for services
rendered from September 1 to October 20, 1999 and full backwages; (c)
payment of 13th month pay, vacation/sick/service incentive leaves and other
monetary benefits due to a regular employee starting March 31, 1996. ABC
replied that a check covering petitioner's talent fees for September 16 to October
20, 1999 had been processed and prepared, but that the other
claims of petitioner had no basis in fact or in law.
On December 20, 1999, petitioner filed a complaint 8 against ABC, Mr.
Javier and Mr. Edward Tan, for illegal constructive dismissal,
nonpayment of salaries, overtime pay, premium pay, separation pay, holiday pay,
service incentive leave pay, vacation/sick leaves and 13th month pay in NLRC-
NCR Case No. 30-12-00985-99. She likewise demanded payment for moral,
exemplary and actual damages, as well as for attorney's fees.
The parties agreed to submit the case for resolution after settlement failed
during the mandatory conference/conciliation. On March 29, 2000, the Labor
Arbiter dismissed the complaint. 9
On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated
August 30, 2000. The NLRC held that an employer-employee relationship existed
between petitioner and ABC; that the subject talent contract was void; that the
petitioner was a regular employee illegally dismissed; and that she was entitled
to reinstatement and backwages or separation pay, aside from 13th month pay
and service incentive leave pay, moral and exemplary damages and attorney's
fees. It held as follows: 
ADEacC

WHEREFORE, the Decision of the Arbiter dated 29 March 2000

is hereby REVERSED/SET ASIDE and a NEW ONE promulgated:
1) declaring respondents to have illegally dismissed complainant
from her regular work therein and thus, ordering them to reinstate her in
her former position without loss of seniority right[s] and other privileges
and to pay her full backwages, inclusive of allowances and other
benefits, including 13th month pay based on her said latest
rate of P28,000.00/mo. from the date of her illegal dismissal on 21
 October 1999 up to finality hereof, or at complainant's option, to pay her
separation pay of one (1) month pay per year of service based on said
latest monthly rate, reckoned from date of hire on 30 September 1995
until finality hereof;
2) to pay complainant's accrued SILP [Service Incentive Leave
Pay] of 5 days pay per year and 13th month pay for the years 1999,
1998 and 1997 of P19,236.00 and P84,000.00, respectively and her
accrued salary from 16 September 1999 to 20 October
1999 of P32,760.00 plus legal interest at 12% from date of judicial
demand on 20 December 1999 until finality hereof;
3) to pay complainant moral damages of P500,000.00, exemplary
damages of P350,000.00 and 10% of the total of the adjudged monetary
awards as attorney's fees.
Other monetary claims of complainant are dismissed for
lack of merit. 
TEcADS

SO ORDERED. 10
After its motion for reconsideration was denied, ABC elevated the case to
the Court of Appeals in a petition for certiorari under Rule 65. The petition was
first dismissed for failure to attach particular documents, 11 but was reinstated on
grounds of the higher interest of justice. 12
Thereafter, the appellate court ruled that the NLRC committed grave
abuse of discretion, and reversed the decision of the NLRC. 13 The
appellate court reasoned that petitioner should not be allowed to renege from the
stipulations she had voluntarily and knowingly executed by invoking the
security of tenure under the Labor Code. According to the appellate court,
petitioner was a fixed-term employee and not a regular employee within the
ambit of Article 280 14 of the Labor Code because her job, as anticipated and
agreed upon, was only for a specified time. 15
Aggrieved, petitioner now comes to this Court on a petition for review,
raising issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE
HONORABLE COURT OF APPEALS, THE DECISION OF WHICH IS
NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND
BY THE NLRC — FIRST DIVISION, ARE "ANTI-REGULARIZATION
 DEVICES" WHICH MUST BE STRUCK DOWN FOR
REASONS OF PUBLIC POLICY[;]
III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE
RENEWALS OF THE THREE-MONTH TALENT CONTRACTS, AN
EMPLOYER-EMPLOYEE RELATIONSHIP WAS CREATED AS
PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A
REGULAR EMPLOYEE, THERE WAS A DENIAL OF PETITIONER'S
RIGHT TO DUE PROCESS THUS ENTITLING HER TO THE MONEY
CLAIMS AS STATED IN THE COMPLAINT[.] 16
The issues for our disposition are: (1) whether or not this Court can review
the findings of the Court of Appeals; and (2) whether or not under Rule
45 of the Rules of Court the Court of Appeals committed a reversible error in its
Decision. SITCEA

On the first issue, private respondents contend that the issues raised in the
instant petition are mainly factual and that there is no showing that the said
issues have been resolved arbitrarily and without basis. They add that the
findings of the Court of Appeals are supported by overwhelming
wealth of evidence on record as well as prevailing jurisprudence on the matter. 17
Petitioner however contends that this Court can review the
findings of the Court of Appeals, since the appellate court erred in deciding a
question of substance in a way which is not in accord with law or with applicable
decisions of this Court. 18
We agree with petitioner. Decisions, final orders or
resolutions of the Court of Appeals in any case — regardless of the nature of the
action or proceeding involved — may be appealed to this Court through a petition
for review. This remedy is a continuation of the appellate process over the
original case, 19 and considering there is no congruence in the findings of the
NLRC and the Court of Appeals regarding the status of employment of petitioner,
an exception to the general rule that this Court is bound by the
findings of facts of the appellate court, 20 we can review such findings.
On the second issue, private respondents contend that
the Court of Appeals did not err when it upheld the validity of the talent contracts
voluntarily entered into by petitioner. It further stated that prevailing jurisprudence
has recognized and sustained the absence of employer-employee relationship
between a talent and the media entity which engaged the talent's services on a
per talent contract basis, citing the case of Sonza v. ABS-CBN Broadcasting
Corporation. 21
Petitioner avers however that an employer-employee relationship was
created when the private respondents started to merely renew the contracts
repeatedly fifteen times or for four consecutive years. 22
Again, we agree with petitioner. The Court of Appeals committed reversible
error when it held that petitioner was a fixed-term employee. Petitioner was a
regular employee under contemplation of law. The practice of having fixed-term
contracts in the industry does not automatically make all talent contracts valid
and compliant with labor law. The assertion that a talent contract exists does not
necessarily prevent a regular employment status. 23
Further, the Sonza case is not applicable. In Sonza, the television station
did not instruct Sonza how to perform his job. How Sonza delivered his lines,
appeared on television, and sounded on radio were outside the television
station's control. Sonza had a free hand on what to say or discuss in his shows
provided he did not attack the television station or its interests. Clearly, the
television station did not exercise control over the means and methods of the
performance of Sonza's work. 24 In the case at bar, ABC had control over the
performance of petitioner's work. Noteworthy too, is the comparatively low
P28,000 monthly pay of petitioner 25 vis the P300,000 a month
salary of Sonza, 26 that all the more bolsters the conclusion that petitioner was
not in the same situation as Sonza.  HCEcAa

The contract of employment of petitioner with ABC had the following

stipulations:
xxx xxx xxx
1. SCOPE OF SERVICES — TALENT agrees to devote his/her
talent, time, attention and best efforts in the performance of his/her
duties and responsibilities as Anchor/Program Host/Newscaster of the
Program, in accordance with the direction of ABC and/or its authorized
representatives.
1.1. DUTIES AND RESPONSIBILITIES — TALENT shall:
a. Render his/her services as a newscaster on the
Program;
b. Be involved in news-gathering operations by
conducting interviews on- and off-the-air;
c. Participate in live remote coverages when called
upon;
 d. Be available for any other news assignment, such
as writing, research or camera work;
e. Attend production meetings;
f. On assigned days, be at the studios at least one
(1) hour before the live telecasts;
g. Be present promptly at the studios and/or other
place of assignment at the time designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and its duly
authorized representatives in the production and
promotion of the Program; and
j. Perform such other functions as may be assigned
to him/her from time to time.  HTCSDE

xxx xxx xxx

1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS
AND OTHER RULES AND REGULATIONS — TALENT agrees
that he/she will promptly and faithfully comply with the requests
and instructions, as well as the program standards, policies, rules
and regulations of ABC, the KBP and the government or any of its
agencies and instrumentalities. 27
xxx xxx xxx
In Manila Water Company, Inc. v. Pena, 28 we said that the elements to
determine the existence of an employment relationship are: (a) the selection and
engagement of the employee, (b) the payment of wages, (c) the
power of dismissal, and (d) the employer's power to control. The most important
element is the employer's control of the employee's conduct, not only as to the
result of the work to be done, but also as to the means and methods to
accomplish it. 29
The duties of petitioner as enumerated in her employment contract indicate
that ABC had control over the work of petitioner. Aside from control, ABC also
dictated the work assignments and payment of petitioner's wages. ABC also had
power to dismiss her. All these being present, clearly, there existed an
employment relationship between petitioner and ABC.
Concerning regular employment, the law provides for two
kinds of employees, namely: (1) those who are engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which they are
employed. 30 In other words, regular status arises from either the
nature of work of the employee or the duration of his
employment. 31 In Benares v. Pancho, 32 we very succinctly said:  IHaCDE

. . . [T]he primary standard for determining regular employment is the

reasonable connection between the particular activity performed by the
employee vis-à-vis the usual trade or business of the employer. This
connection can be determined by considering the nature of the work
performed and its relation to the scheme of the particular business or
trade in its entirety. If the employee has been performing the job for at
least a year, even if the performance is not continuous and merely
intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment
is considered regular, but only with respect to such activity and while
such activity exists. 33
In our view, the requisites for regularity of employment have been met in
the instant case. Gleaned from the description of the scope of services
aforementioned, petitioner's work was necessary or desirable in the usual
business or trade of the employer which includes, as a pre-condition for its
enfranchisement, its participation in the government's news and public
information dissemination. In addition, her work was continuous for a
period of four years. This repeated engagement under contract of hire is
indicative of the necessity and desirability of the petitioner's work in private
respondent ABC's business. 34
The contention of the appellate court that the contract was characterized
by a valid fixed-period employment is untenable. For such contract to be valid, it
should be shown that the fixed period was knowingly and voluntarily agreed upon
by the parties. There should have been no force, duress or improper pressure
brought to bear upon the employee; neither should there be any other
circumstance that vitiates the employee's consent. 35 It should satisfactorily
appear that the employer and the employee dealt with each other on more or
less equal terms with no moral dominance being exercised by the employer over
the employee. 36 Moreover, fixed-term employment will not be considered valid
where, from the circumstances, it is apparent that periods have been imposed to
preclude acquisition of tenurial security by the employee. 37
In the case at bar, it does not appear that the employer and employee
dealt with each other on equal terms. Understandably, the petitioner could not
object to the terms of her employment contract because she did not want to lose
the job that she loved and the workplace that she had grown accustomed
to, 38 which is exactly what happened when she finally manifested her intention to
negotiate. Being one of the numerous newscasters/broadcasters of ABC and
desiring to keep her job as a broadcasting practitioner, petitioner was left with no
choice but to affix her signature of conformity on each renewal of her contract as
already prepared by private respondents; otherwise, private respondents would
have simply refused to renew her contract. Patently, the petitioner occupied a
position of weakness vis-à-vis the employer. Moreover, private respondents'
practice of repeatedly extending petitioner's 3-month contract for four years is a
circumvention of the acquisition of regular status. Hence, there was no valid
fixed-term employment between petitioner and private respondents.
While this Court has recognized the validity of fixed-term employment
contracts in a number of cases, it has consistently emphasized that when the
circumstances of a case show that the periods were imposed to block the
acquisition of security of tenure, they should be struck down for being contrary to
law, morals, good customs, public order or public policy. 39
As a regular employee, petitioner is entitled to security of tenure and can
be dismissed only for just cause and after due compliance with procedural due
process. Since private respondents did not observe due process in constructively
dismissing the petitioner, we hold that there was an illegal dismissal.
WHEREFORE, the challenged Decision dated January 30, 2004 and
Resolution dated June 23, 2004 of the Court of Appeals in CA-G.R. SP No.
63125, which held that the petitioner was a fixed-term employee, are
REVERSED and SET ASIDE. The NLRC decision is AFFIRMED.
Costs against private respondents.
SO ORDERED.  acCDSH

Carpio, Carpio-Morales, Tinga and Velasco, Jr., JJ., concur.

 
Footnotes
1.Rollo, pp. 207-220. Penned by Associate Justice Edgardo F. Sundiam, with
Associate Justices Eubulo G. Verzola and Remedios Salazar-Fernando
concurring.
2.Id. at 246. Penned by Associate Justice Edgardo F. Sundiam, with Associate
Justices Remedios Salazar-Fernando and Mariano C. Del Castillo concurring.
3.Id. at 90-125.
4.CA rollo, pp. 105-107.
5.Id. at 108-112.
6.Id. at 121.
7.Id. at 123.
8.Id. at 213-214.
9.Id. at 155-169.
10.Id. at 124-125.
11.Rollo, p. 180.
12.Id. at 195.
13.Id. at 220.
14.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.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists.
15.Rollo, p. 217.
16.Id. at 382.
17.Id. at 335.
18.Id. at 387.
19.Pagoda Philippines, Inc. v. Universal Canning, Inc., G.R. No. 160966, October 11,
2005, 472 SCRA 355, 359.
20.Cirelos v. Hernandez, G.R. No. 146523, June 15, 2006, 490 SCRA 625, 635.
21.G.R. No. 138051, June 10, 2004, 431 SCRA 583.
22.Rollo, pp. 420-421.
23.See ABS-CBN Broadcasting Corporation v. Marquez, G.R. No. 167638, June 22,
2005, pp. 5-6 (Unsigned Resolution), where the Court held what petitioner
ABS-CBN called "talents" as regular employees. The Court declared: "It may
be so that respondents were assigned to a particular tele-series. However,
petitioner can and did immediately reassign them to a new production upon
completion of a previous one. Hence, they were continuously employed, the
tele-series being a regular feature in petitioner's network programs. Petitioner's
continuous engagement of respondents from one production after another, for
more than five years, made the latter part of petitioner's workpool who cannot
be separated from the service without cause as they are considered regular. A
 project employee or a member of a workpool may acquire the status of a
regular employee when the following concur: there is continuous
rehiring of project employees even after the cessation of the project and the
tasks performed by the alleged "project employee" are vital, necessary, and
indispensable to the usual business or trade of his employer. It cannot be
denied that the services of respondents as members of a crew in the
production of a tele-series are undoubtedly connected with the business of the
petitioner. This Court has held that the primary standard in determining regular
employment is the reasonable connection between the particular activity
performed by the employee in relation to the business or trade of his employer.
Here, the activity performed by respondents is, without doubt, vital to
petitioner's trade or business."
24.See Sonza v. ABS-CBN Broadcasting Corporation, supra note 21, at 599, which
also held that in the United States, aside from the right of control test, there are
the "economic reality" test and the "multi-factor test." The tests are drawn from
statutes, regulations, rules, policies, rulings, case law and the like. The
"right of control" test applies under the Federal Internal Revenue Code ("IRC").
The "economic reality" test applies to the Federal Fair Labor Standards Act
("FLSA"). The California Division of Labor Standards Enforcement ("DLSE")
uses a hybrid of these two tests often referred to as the "multi-factor test" in
determining who an employee is.
25.Rollo, p. 95.
26.Supra note 21, at 596.
27.CA rollo, p. 113.
28.G.R. No. 158255, July 8, 2004, 434 SCRA 53.
29.Id. at 61, 62.
30.Philippine Fruit & Vegetable Industries, Inc. v. NLRC, G.R. No. 122122, July 20,
1999, 310 SCRA 673, 681.
31.Bernardo v. National Labor Relations Commission, G.R. No. 122917, July 12,
1999, 310 SCRA 186, 204-205.
32.G.R. No. 151827, April 29, 2005, 457 SCRA 652.
33.Id. at 660.
34.Samson v. National Labor Relations Commission, G.R. No. 113166, February 1,
1996, 253 SCRA 112, 123.
35.Brent School, Inc. v. Zamora, G.R. No. 48494, February 5, 1990, 181 SCRA 702,
716 cited in Pangilinan v. General Milling Corporation, G.R. No. 149329, July
12, 2004, 434 SCRA 159, 170.
36.Pangilinan v. General Milling Corporation, id.
 37.Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations
Commission, G.R. No. 152427, August 9, 2005, 466 SCRA 265, 273.
38.Rollo, p. 425.
39.Innodata Philippines, Inc. v. Quejada-Lopez, G.R. No. 162839, October 12, 2006,
504 SCRA 253, 258-259.
 (Dumpit-Murillo v. Court of Appeals, G.R. No. 164652, [June 8, 2007], 551 PHIL
|||

725-741)
[G.R. Nos. 204944-45. December 3, 2014.]

FUJI TELEVISION NETWORK, INC., petitioner, vs. ARLENE

S. ESPIRITU, respondent.

DECISION

LEONEN, J  : p

It is the burden of the employer to prove that a person whose services it

pays for is an independent contractor rather than a regular employee with or
without a fixed term. That a person has a disease does not per se entitle the
employer to terminate his or her services. Termination is the last resort. At the
very least, a competent public health authority must certify that the disease
cannot be cured within six (6) months, even with appropriate treatment.
We decide this petition for review 1 on certiorari filed
by Fuji Television Network, Inc., seeking the reversal of the Court of Appeals'
decision 2 dated June 25, 2012, affirming with modification the decision 3 of the
National Labor Relations Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged
by Fuji Television Network, Inc. ("Fuji") as a news
correspondent/producer 4 "tasked to report Philippine news to Fuji through its
Manila Bureau field office." 5 Arlene's employment contract initially provided for a
term of one (1) year but was successively renewed on a yearly basis with salary
adjustment upon every renewal. 6
Sometime in January 2009, Arlene was diagnosed with lung cancer. 7 She
informed Fuji about her condition. In turn, the Chief of News Agency of Fuji,
Yoshiki Aoki, informed Arlene "that the company will have a problem renewing
her contract" 8 since it would be difficult for her to perform her job. 9 She "insisted
that she was still fit to work as certified by her attending physician." 10
 After several verbal and written communications, 11 Arlene and Fuji signed
a non-renewal contract on May 5, 2009 where it was stipulated that her contract
would no longer be renewed after its expiration on May 31, 2009. The contract
also provided that the parties release each other from liabilities and
responsibilities under the employment contract. 12  SDTIaE

In consideration of the non-renewal contract, Arlene "acknowledged receipt

of the total amount of US$18,050.00 representing her monthly salary from March
2009 to May 2009, year-end bonus, mid-year bonus, and separation
pay." 13 However, Arlene affixed her signature on the non-renewal contract with
the initials "U.P." for "under protest." 14
On May 6, 2009, the day after Arlene signed the non-renewal contract, she
filed a complaint for illegal dismissal and attorney's fees with the National Capital
Region Arbitration Branch of the National Labor Relations Commission. She
alleged that she was forced to sign the non-renewal contract when Fuji came to
know of her illness and that Fuji withheld her salaries and other benefits for
March and April 2009 when she refused to sign. 15
Arlene claimed that she was left with no other recourse but to sign the non-
renewal contract, and it was only upon signing that she was given her salaries
and bonuses, in addition to separation pay equivalent to four (4) years. 16
In the decision 17 dated September 10, 2009, Labor Arbiter Corazon C.
Borbolla dismissed Arlene's complaint. 18 Citing Sonza v. ABS-CBN 19 and
applying the four-fold test, the Labor Arbiter held that Arlene was not Fuji's
employee but an independent contractor. 20
Arlene appealed before the National Labor Relations Commission. In its
decision dated March 5, 2010, the National Labor Relations Commission
reversed the Labor Arbiter's decision. 21 It held that Arlene was a regular
employee with respect to the activities for which she was employed since she
continuously rendered services that were deemed necessary and desirable
to Fuji's business. 22 The National Labor Relations Commission ordered Fuji to
pay Arlene backwages, computed from the date of her illegal dismissal. 23 The
dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered GRANTING the instant appeal. The Decision of the Labor
Arbiter dated 19 September 2009 is hereby REVERSED and SET
ASIDE, and a new one is issued ordering respondents-appellees to pay
complainant-appellant backwages computed from the date of her illegal
dismissal until finality of this Decision.
SO ORDERED. 24
 Arlene and Fuji filed separate motions for reconsideration. 25 Both motions
were denied by the National Labor Relations Commission for lack of merit in the
resolution dated April 26, 2010. 26
From the decision of the National Labor Relations Commission, both
parties filed separate petitions for certiorari 27 before the Court of Appeals. The
Court of Appeals consolidated the petitions and considered the following issues
for resolution:
1) Whether or not Espiritu is a regular employee or a fixed-term
contractual employee;
2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espiritu is entitled to damages and attorney's
fees. 28
In the assailed decision, the Court of Appeals affirmed the National Labor
Relations Commission with the modification that Fuji immediately reinstate
Arlene to her position as News Producer without loss of seniority rights, and pay
her backwages, 13th-month pay, mid-year and year-end bonuses, sick leave and
vacation leave with pay until reinstated, moral damages, exemplary damages,
attorney's fees, and legal interest of 12% per annum of the total monetary
awards. 29
The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition
of Fuji Television Network, Inc. and Yoshiki Aoki is DENIED and the
petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision
dated March 5, 2010 of the National Labor Relations Commission, 6th
Division in NLRC NCR Case No. 05-06811-09 and its subsequent
Resolution dated April 26, 2010 are
hereby AFFIRMED with MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to
immediately REINSTATE Arlene S. Espiritu to her position as News
Producer without loss of seniority rights and privileges and to pay her the
following:
1. Backwages at the rate of $1,900.00 per month
computed from May 5, 2009 (the date of dismissal), until
reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from
the date of dismissal, until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as
midyear bonus per year from the date of dismissal, until
reinstated;
 4. One and a half (1 1/2) months pay or $2,850.00 as year-
end bonus per year from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year
from the date of dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or
$1,425.00 per annum from date of dismissal, until reinstated.
7. The amount of P100,000.00 as moral damages;
8. The amount of P50,000.00 as exemplary damages;
9. Attorney's fees equivalent to 10% of the total monetary
awards herein stated; and
10. Legal interest of twelve percent (12%) per annum of
the total monetary awards computed from May 5, 2009, until their
full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another re-
computation of the above monetary awards consistent with the above
directives.
SO ORDERED. 30
In arriving at the decision, the Court of Appeals held that Arlene was a
regular employee because she was engaged to perform work that was necessary
or desirable in the business of Fuji, 31 and the successive renewals of her fixed-
term contract resulted in regular employment. 32
According to the Court of Appeals, Sonza does not apply in order to
establish that Arlene was an independent contractor because she was not
contracted on account of any peculiar ability, special talent, or skill. 33 The fact
that everything used by Arlene in her work was owned by Fuji negated the idea
of job contracting. 34
The Court of Appeals also held that Arlene was illegally dismissed
because Fuji failed to comply with the requirements of substantive and
procedural due process necessary for her dismissal since she was a regular
employee. 35
The Court of Appeals found that Arlene did not sign the non-renewal
contract voluntarily and that the contract was a mere subterfuge by Fuji to secure
its position that it was her choice not to renew her contract. She was left with no
choice since Fuji was decided on severing her employment. 36
Fuji filed a motion for reconsideration that was denied in the
resolution 37 dated December 7, 2012 for failure to raise new matters. 38  EASIHa
 Aggrieved, Fuji filed this petition for review and argued that the Court of
Appeals erred in affirming with modification the National Labor Relations
Commission's decision, holding that Arlene was a regular employee and that she
was illegally dismissed. Fuji also questioned the award of monetary claims,
benefits, and damages. 39
Fuji points out that Arlene was hired as a stringer, and it informed her that
she would remain one. 40 She was hired as an independent contractor as defined
in Sonza. 41 Fuji had no control over her work. 42 The employment contracts were
executed and renewed annually upon Arlene's insistence to which Fuji relented
because she had skills that distinguished her from ordinary employees. 43 Arlene
and Fuji dealt on equal terms when they negotiated and entered into the
employment contracts. 44 There was no illegal dismissal because she freely
agreed not to renew her fixed-term contract as evidenced by her e-mail
correspondences with Yoshiki Aoki. 45 In fact, the signing of the non-renewal
contract was not necessary to terminate her employment since "such
employment terminated upon expiration of her contract." 46 Finally, Fuji had dealt
with Arlene in good faith, thus, she should not have been awarded damages. 47
Fuji alleges that it did not need a permanent reporter since the news
reported by Arlene could easily be secured from other entities or from the
internet. 48 Fuji "never controlled the manner by which she performed her
functions." 49 It was Arlene who insisted that Fuji execute yearly fixed-term
contracts so that she could negotiate for annual increases in her pay. 50
Fuji points out that Arlene reported for work for only five (5) days in
February 2009, three (3) days in March 2009, and one (1) day in April
2009. 51 Despite the provision in her employment contract that sick leaves in
excess of 30 days shall not be paid, Fuji paid Arlene her entire salary for the
months of March, April, and May; four (4) months of separation pay; and a bonus
for two and a half months for a total of US$18,050.00. 52 Despite having received
the amount of US$18,050.00, Arlene still filed a case for illegal dismissal. 53
Fuji further argues that the circumstances would show that Arlene was not
illegally dismissed. The decision to not renew her contract was mutually agreed
upon by the parties as indicated in Arlene's e-mail 54 dated March 11, 2009
where she consented to the non-renewal of her contract but refused to sign
anything. 55 Aoki informed Arlene in an e-mail 56 dated March 12, 2009 that she
did not need to sign a resignation letter and that Fuji would pay Arlene's salary
and bonus until May 2009 as well as separation pay. 57
Arlene sent an e-mail dated March 18, 2009 with her version of the non-
renewal agreement that she agreed to sign this time. 58 This attached version
contained a provision that Fuji shall re-hire her if she was still interested to work
for Fuji. 59 For Fuji, Arlene's e-mail showed that she had the power to bargain. 60
 Fuji then posits that the Court of Appeals erred when it held that the
elements of an employer-employee relationship are present, particularly that of
control; 61 that Arlene's separation from employment upon the expiration of her
contract constitutes illegal dismissal; 62 that Arlene is entitled to
reinstatement; 63 and that Fuji is liable to Arlene for damages and attorney's
fees. 64
This petition for review on certiorari under Rule 45 was filed on February 8,
2013. 65 On February 27, 2013, Arlene filed a manifestation 66 stating that this
court may not take jurisdiction over the case since Fuji failed to authorize
Corazon E. Acerden to sign the verification. 67 Fuji filed a comment on the
manifestation 68 on March 9, 2013.
Based on the arguments of the parties, there are procedural and
substantive issues for resolution:
I. Whether the petition for review should be dismissed as Corazon
E. Acerden, the signatory of the verification and certification
of non-forum shopping of the petition, had no authority to
sign the verification and certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave
abuse of discretion was committed by the National Labor
Relations Commission when it ruled that Arlene was a
regular employee, not an independent contractor, and that
she was illegally dismissed; and
III. Whether the Court of Appeals properly modified the National
Labor Relations Commission's decision by awarding
reinstatement, damages, and attorney's fees.
The petition should be dismissed.  HSTAcI

I
Validity of the verification and certification against forum shopping
In its comment on Arlene's manifestation, Fuji alleges that Corazon was
authorized to sign the verification and certification of non-forum shopping
because Mr. Shuji Yano was empowered under the secretary's certificate to
delegate his authority to sign the necessary pleadings, including the verification
and certification against forum shopping. 69
On the other hand, Arlene points out that the authority given to Mr. Shuji
Yano and Mr. Jin Eto in the secretary's certificate is only for the petition
for certiorari before the Court of Appeals. 70 Fuji did not attach any board
resolution authorizing Corazon or any other person to file a petition for review
on certiorari with this court. 71 Shuji Yano and Jin Eto could not re-delegate the
power that was delegated to them. 72 In addition, the special power of attorney
executed by Shuji Yano in favor of Corazon indicated that she was empowered
to sign on behalf of Shuji Yano, and not on behalf of Fuji. 73
The Rules of Court requires the
submission of verification and
certification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the
requirement of verification, while Section 5 of the same rule provides the
requirement of certification against forum shopping. These sections state:
SEC. 4. Verification. — Except when otherwise specifically
required by law or rule, pleadings need not be under oath, verified or
accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the
pleading and that the allegations therein are true and correct of his
knowledge and belief.
A pleading required to be verified which contains a verification
based on "information and belief," or upon "knowledge, information and
belief," or lacks a proper verification, shall be treated as an unsigned
pleading.
SEC. 5. Certification against forum shopping. — The plaintiff
or principal party shall certify under oath in the complaint or other
initiatory pleading asserting a claim for relief or in a sworn certification
annexed thereto and simultaneously filed therewith: (a) that he has not
theretofore commenced any action or filed any claim involving the same
issues in any court, tribunal or quasi-judicial agency and, to the best of
his knowledge, no such other action or claim is pending therein; (b) if
there is such other pending action or claim, a complete statement of the
present status thereof; and (c) if he should thereafter learn that the same
or similar action or claim has been filed or is pending, he shall report that
fact within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be
curable by mere amendment of the complaint or other initiatory pleading
but shall be cause for the dismissal of the case without prejudice, unless
otherwise provided, upon motion and after hearing. The submission of a
false certification or non-compliance with any of the undertakings therein
shall constitute indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of the party
or his counsel clearly constitute willful and deliberate forum shopping,
the same shall be ground for summary dismissal with prejudice and shall
constitute direct contempt, as well as a cause for administrative
sanctions.
 Section 4 (e) of Rule 45 74 requires that petitions for review should "contain
a sworn certification against forum shopping as provided in the last paragraph of
section 2, Rule 42." Section 5 of the same rule provides that failure to comply
with any requirement in Section 4 is sufficient ground to dismiss the petition.
Effects of non-compliance
Uy v. Landbank 75 discussed the effect of non-compliance with regard to
verification and stated that:
[t]he requirement regarding verification of a pleading is formal, not
jurisdictional. Such requirement is simply a condition affecting the form
of pleading, the non-compliance of which does not necessarily render
the pleading fatally defective. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and
not the product of the imagination or a matter of speculation, and that the
pleading is filed in good faith. The court may order the correction of the
pleading if the verification is lacking or act on the pleading although it is
not verified, if the attending circumstances are such that strict
compliance with the rules may be dispensed with in order that the ends
of justice may thereby be served. 76 (Citations omitted)
Shipside Incorporated v. Court of Appeals 77 cited the discussion in Uy and
differentiated its effect from non-compliance with the requirement of certification
against forum shopping:
On the other hand, the lack of certification against forum shopping
is generally not curable by the submission thereof after the filing of the
petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure
provides that the failure of the petitioner to submit the required
documents that should accompany the petition, including the certification
against forum shopping, shall be sufficient ground for the dismissal
thereof. The same rule applies to certifications against forum shopping
signed by a person on behalf of a corporation which are unaccompanied
by proof that said signatory is authorized to file a petition on behalf of the
corporation. 78 (Emphasis supplied)
Effects of substantial compliance
with the requirement of verification
and certification against forum shopping
Although the general rule is that failure to attach a verification and
certification against forum shopping is a ground for dismissal, there are cases
where this court allowed substantial compliance.
In Loyola v. Court of Appeals, 79 petitioner Alan Loyola submitted the
required certification one day after filing his electoral protest. 80 This court
considered the subsequent filing as substantial compliance since the purpose of
filing the certification is to curtail forum shopping. 81
 In LDP Marketing, Inc. v. Monter, 82 Ma. Lourdes Dela Peña signed the
verification and certification against forum shopping but failed to attach the board
resolution indicating her authority to sign. 83 In a motion for reconsideration, LDP
Marketing attached the secretary's certificate quoting the board resolution that
authorized Dela Peña. 84 Citing Shipside, this court deemed the belated
submission as substantial compliance since LDP Marketing complied with the
requirement; what it failed to do was to attach proof of Dela Peña's authority to
sign. 85
Havtor Management Phils., Inc. v. National Labor Relations
Commission 86 and General Milling Corporation v. National Labor Relations
Commission 87 involved petitions that were dismissed for failure to attach any
document showing that the signatory on the verification and certification against
forum-shopping was authorized. 88 In both cases, the secretary's certificate was
attached to the motion for reconsideration. 89 This court considered the
subsequent submission of proof indicating authority to sign as substantial
compliance. 90
Altres v. Empleo 91 summarized the rules on verification and certification
against forum shopping in this manner:
For the guidance of the bench and bar, the Court restates in
capsule form the jurisprudential pronouncements . . . respecting non-
compliance with the requirement on, or submission of defective,
verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the
requirement on or submission of defective verification, and non-
compliance with the requirement on or submission of defective
certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does
not necessarily render the pleading fatally defective. The court
may order its submission or correction or act on the pleading if the
attending circumstances are such that strict compliance with the
Rule may be dispensed with in order that the ends of justice may
be served thereby.
3) Verification is deemed substantially complied with when one who has
ample knowledge to swear to the truth of the allegations in the
complaint or petition signs the verification, and when matters
alleged in the petition have been made in good faith or are true
and correct.
4) As to certification against forum shopping, non-compliance therewith
or a defect therein, unlike in verification, is generally not curable
by its subsequent submission or correction thereof, unless there
is a need to relax the Rule on the ground of "substantial
 compliance" or presence of "special circumstances or compelling
reasons."  HSDIaC

5) The certification against forum shopping must be signed by all the

plaintiffs or petitioners in a case; otherwise, those who did not
sign will be dropped as parties to the case. Under reasonable or
justifiable circumstances, however, as when all the plaintiffs or
petitioners share a common interest and invoke a common cause
of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with
the Rule.
6) Finally, the certification against forum shopping must be executed by
the party-pleader, not by his counsel. If, however, for reasonable
or justifiable reasons, the party-pleader is unable to sign, he must
execute a Special Power of Attorney designating his counsel of
record to sign on his behalf. 92
There was substantial compliance
by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through
its board of directors or duly authorized officers and agents. Thus, the physical
act of signing the verification and certification against forum shopping can only be
done by natural persons duly authorized either by the corporate by-laws or a
board resolution. 93
In its petition for review on certiorari, Fuji attached Hideaki Ota's
secretary's certificate, 94 authorizing Shuji Yano and Jin Eto to represent and sign
for and on behalf of Fuji. 95 The secretary's certificate was duly
authenticated 96 by Sulpicio Confiado, Consul-General of the Philippines in
Japan. Likewise attached to the petition is the special power of attorney executed
by Shuji Yano, authorizing Corazon to sign on his behalf. 97 The verification and
certification against forum shopping was signed by Corazon. 98
Arlene filed the manifestation dated February 27, 2013, arguing that the
petition for review should be dismissed because Corazon was not duly
authorized to sign the verification and certification against forum shopping.
Fuji filed a comment on Arlene's manifestation, stating that Corazon was
properly authorized to sign. On the basis of the secretary's certificate, Shuji Yano
was empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's
certificate states:
(a) The Corporation shall file a Petition for Certiorari with the
Court of Appeals, against Philippines' National Labor Relations
Commission ("NLRC") and Arlene S. Espiritu, pertaining to NLRC-NCR
 Case No. LAC 00-002697-09, RAB No. 05-06811-00 and
entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki
Aoki", and participate in any other subsequent proceeding that may
necessarily arise therefrom, including but not limited to the filing of
appeals in the appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are
hereby authorized, to verify and execute the certification against non-
forum shopping which may be necessary or required to be attached to
any pleading to [sic] submitted to the Court of Appeals; and the authority
to so verify and certify for the Corporation in favor of the said persons
shall subsist and remain effective until the termination of the said case;
xxx xxx xxx
(d) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are
hereby authorized, to represent and appear on behalf
the [sic] Corporation in all stages of the [sic] this case and in any other
proceeding that may necessarily arise thereform [sic], and to act in the
Corporation's name, place and stead to determine, propose, agree,
decide, do, and perform any and all of the following:
1. The possibility of amicable settlement or of submission to
alternative mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and
documents; and
5. Such other matters as may aid in the prompt disposition of the
action. 99 (Emphasis in the original; Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms. Ma.
Corazon E. Acerden and Mr. Moises A. Rollera as his attorneys-in-fact. 100 The
special power of attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with office
address at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-8088 Japan, and being
the representative of Fuji TV, INc., [sic] (evidenced by the attached
Secretary's Certificate) one of the respondents in NLRC-NCR Case No.
05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki", and subsequently docketed before the Court of
Appeals as C.A. G.R. S.P. No. 114867 (Consolidated with SP No.
114889) do hereby make, constitute and appoint Ms. Ma. Corazon E.
Acerden and Mr. Moises A. Rollera as my true and lawful attorneys-in-
fact for me and my name, place and stead to act and represent me in the
above-mentioned case, with special power to make admission/s and
stipulations and/or to make and submit as well as to accept and approve
 compromise proposals upon such terms and conditions and under such
covenants as my attorney-in-fact may deem fit, and to engage the
services of Villa Judan and Cruz Law Offices as the legal counsel to
represent the Company in the Supreme Court;  IcHEaA

The said Attorneys-in-Fact are hereby further authorized to make,

sign, execute and deliver such papers or documents as may be
necessary in furtherance of the power thus granted, particularly to sign
and execute the verification and certification of non-forum shopping
needed to be filed. 101 (Emphasis in the original)
In its comment 102 on Arlene's manifestation, Fuji argues that Shuji Yano
could further delegate his authority because the board resolution empowered him
to "act in the Corporation's name, place and stead to determine, propose, agree,
decided [sic], do and perform any and all of the following: . . . such other matters
as may aid in the prompt disposition of the action." 103
To clarify, Fuji attached a verification and certification against forum
shopping, but Arlene questions Corazon's authority to sign. Arlene argues that
the secretary's certificate empowered Shuji Yano to file a petition
for certiorari before the Court of Appeals, and not a petition for review before this
court, and that since Shuji Yano's authority was delegated to him, he could not
further delegate such power. Moreover, Corazon was representing Shuji Yano in
his personal capacity, and not in his capacity as representative of Fuji.
A review of the board resolution quoted in the secretary's certificate shows
that Fuji shall "file a Petition for Certiorari with the Court of
Appeals" 104 and "participate in any other subsequent proceeding that may
necessarily arise therefrom, including but not limited to the filing of appeals in the
appropriate venue," 105 and that Shuji Yano and Jin Eto are authorized to
represent Fuji "in any other proceeding that may necessarily arise thereform
[sic]." 106 As pointed out by Fuji, Shuji Yano and Jin Eto were also authorized
to "act in the Corporation's name, place and stead to determine, propose, agree,
decide, do, and perform any and all of the following: . . . 5. Such other matters as
may aid in the prompt disposition of the action." 107
Considering that the subsequent proceeding that may arise from the
petition for certiorari with the Court of Appeals is the filing of a petition for review
with this court, Fuji substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to
Corazon, Article 1892 of the Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal
has not prohibited him from doing so; but he shall be responsible for the
acts of the substitute:
(1) When he was not given the power to appoint one;
 (2) When he was given such power, but without designating the
person, and the person appointed was notoriously incompetent or
insolvent.
All acts of the substitute appointed against the prohibition of the
principal shall be void.
The secretary's certificate does not state that Shuji Yano is prohibited from
appointing a substitute. In fact, he is empowered to do acts that will aid in the
resolution of this case.
This court has recognized that there are instances when officials or
employees of a corporation can sign the verification and certification against
forum shopping without a board resolution. In Cagayan Valley Drug
Corporation v. CIR, 108 it was held that:
In sum, we have held that the following officials or employees of
the company can sign the verification and certification without need of a
board resolution: (1) the Chairperson of the Board of Directors, (2) the
President of a corporation, (3) the General Manager or Acting General
Manager, (4) Personnel Officer, and (5) an Employment Specialist in a
labor case.
While the above cases 109 do not provide a complete listing of
authorized signatories to the verification and certification required by the
rules, the determination of the sufficiency of the authority was done on a
case to case basis. The rationale applied in the foregoing cases is to
justify the authority of corporate officers or representatives of the
corporation to sign the verification or certificate against forum shopping,
being 'in a position to verify the truthfulness and correctness of the
allegations in the petition.' 110
Corazon's affidavit 111 states that she is the "office manager and resident
interpreter of the Manila Bureau of Fuji Television Network, Inc." 112 and that she
has "held the position for the last twenty-three years." 113
As the office manager for 23 years, Corazon can be considered as having
knowledge of all matters in Fuji's Manila Bureau Office and is in a position to
verify "the truthfulness and the correctness of the allegations in the Petition." 114
Thus, Fuji substantially complied with the requirements of verification and
certification against forum shopping.
Before resolving the substantive issues in this case, this court will discuss
the procedural parameters of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
 Article 223 of the Labor Code 115 does not provide any mode of appeal for
decisions of the National Labor Relations Commission. It merely states that "[t]he
decision of the Commission shall be final and executory after ten (10) calendar
days from receipt thereof by the parties." Being final, it is no longer appealable.
However, the finality of the National Labor Relations Commission's decisions
does not mean that there is no more recourse for the parties.
In St. Martin Funeral Home v. National Labor Relations
Commission, 116 this court cited several cases 117 and rejected the notion that this
court had no jurisdiction to review decisions of the National Labor Relations
Commission. It stated that this court had the power to review the acts of the
National Labor Relations Commission to see if it kept within its jurisdiction in
deciding cases and also as a form of check and balance. 118 This court then
clarified that judicial review of National Labor Relations Commission decisions
shall be by way of a petition for certiorari under Rule 65. Citing the doctrine of
hierarchy of courts, it further ruled that such petitions shall be filed before the
Court of Appeals. From the Court of Appeals, an aggrieved party may file a
petition for review on certiorari under Rule 45.
A petition for certiorari under Rule 65 is an original action where the issue
is limited to grave abuse of discretion. As an original action, it cannot be
considered as a continuation of the proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a
mode of appeal where the issue is limited to questions of law. In labor cases, a
Rule 45 petition is limited to reviewing whether the Court of Appeals correctly
determined the presence or absence of grave abuse of discretion and deciding
other jurisdictional errors of the National Labor Relations Commission. 119
In Odango v. National Labor Relations Commission, 120 this court
explained that a petition for certiorari is an extraordinary remedy that is "available
only and restrictively in truly exceptional cases" 121 and that its sole office "is the
correction of errors of jurisdiction including commission of grave abuse of
discretion amounting to lack or excess of jurisdiction." 122 A petition
for certiorari does not include a review of findings of fact since the findings of the
National Labor Relations Commission are accorded finality. 123 In cases where
the aggrieved party assails the National Labor Relations Commission's findings,
he or she must be able to show that the Commission "acted capriciously and
whimsically or in total disregard of evidence material to the controversy." 124
When a decision of the Court of Appeals under a Rule 65 petition is
brought to this court by way of a petition for review under Rule 45, only questions
of law may be decided upon. As held in Meralco Industrial v. National Labor
Relations Commission: 125
 This Court is not a trier of facts. Well-settled is the rule that the
jurisdiction of this Court in a petition for review on certiorari under Rule
45 of the Revised Rules of Court is limited to reviewing only errors of
law, not of fact, unless the factual findings complained of are completely
devoid of support from the evidence on record, or the assailed judgment
is based on a gross misapprehension of facts. Besides, factual findings
of quasi-judicial agencies like the NLRC, when affirmed by the Court of
Appeals, are conclusive upon the parties and binding on this Court. 126
Career Philippines v. Serna, 127 citing Montoya v. Transmed, 128 is
instructive on the parameters of judicial review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45
petition. In one case, we discussed the particular parameters of a Rule
45 appeal from the CA's Rule 65 decision on a labor case, as follows:
In a Rule 45 review, we consider the correctness of the
assailed CA decision, in contrast with the review for jurisdictional
error that we undertake under Rule 65. Furthermore, Rule 45
limits us to the review of questions of law raised against the
assailed CA decision. In ruling for legal correctness, we have to
view the CA decision in the same context that the petition
for certiorari it ruled upon was presented to it; we have to
examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion
in the NLRC decision before it, not on the basis of whether the
NLRC decision on the merits of the case was correct. In other
words, we have to be keenly aware that the CA undertook a Rule
65 review, not a review on appeal, of the NLRC decision
challenged before it. 129 (Emphasis in the original)
Justice Brion's dissenting opinion in Abbott Laboratories, Philippines v.
Alcaraz 130 discussed that in petitions for review under Rule 45, "the Court simply
determines whether the legal correctness of the CA's finding that the NLRC
ruling . . . had basis in fact and in law." 131 In this kind of petition, the proper
question to be raised is, "Did the CA correctly determine whether the NLRC
committed grave abuse of discretion in ruling on the case?" 132
Justice Brion's dissenting opinion also laid down the following
guidelines: aATEDS

If the NLRC ruling has basis in the evidence and the applicable
law and jurisprudence, then no grave abuse of discretion exists and the
CA should so declare and, accordingly, dismiss the petition. If grave
abuse of discretion exists, then the CA must grant the petition and nullify
the NLRC ruling, entering at the same time the ruling that is justified
under the evidence and the governing law, rules and jurisprudence. In
 our Rule 45 review, this Court must deny the petition if it finds that the
CA correctly acted. 133 (Emphasis in the original)
These parameters shall be used in resolving the substantive issues in this
petition.
III
Determination of employment status; burden of proof
In this case, there is no question that Arlene rendered services to Fuji.
However, Fuji alleges that Arlene was an independent contractor, while Arlene
alleges that she was a regular employee. To resolve this issue, we ascertain
whether an employer-employee relationship existed between Fuji and Arlene.
This court has often used the four-fold test to determine the existence of
an employer-employee relationship. Under the four-fold test, the "control test" is
the most important. 134 As to how the elements in the four-fold test are proven,
this court has discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid
elements. Any competent and relevant evidence to prove the
relationship may be admitted. Identification cards, cash vouchers, social
security registration, appointment letters or employment contracts,
payrolls, organization charts, and personnel lists, serve as evidence of
employee status. 135
If the facts of this case vis-à-vis the four-fold test show that an employer-
employee relationship existed, we then determine the status of Arlene's
employment, i.e., whether she was a regular employee. Relative to this, we shall
analyze Arlene's fixed-term contract and determine whether it supports her
argument that she was a regular employee, or the argument of Fuji that she was
an independent contractor. We shall scrutinize whether the nature of Arlene's
work was necessary and desirable to Fuji's business or whether Fuji only needed
the output of her work. If the circumstances show that Arlene's work was
necessary and desirable to Fuji, then she is presumed to be a regular employee.
The burden of proving that she was an independent contractor lies with Fuji.
In labor cases, the quantum of proof required is substantial
evidence. 136 "Substantial evidence" has been defined as "such amount of
relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion." 137
If Arlene was a regular employee, we then determine whether she was
illegally dismissed. In complaints for illegal dismissal, the burden of proof is on
the employee to prove the fact of dismissal. 138 Once the employee establishes
the fact of dismissal, supported by substantial evidence, the burden of proof
shifts to the employer to show that there was a just or authorized cause for the
dismissal and that due process was observed. 139
IV
Whether the Court of Appeals correctly affirmed the National Labor
Relations Commission's finding that Arlene was a regular employee
Fuji alleges that Arlene was an independent contractor, citing Sonza v.
ABS-CBN and relying on the following facts: (1) she was hired because of her
skills; (2) her salary was US$1,900.00, which is higher than the normal rate; (3)
she had the power to bargain with her employer; and (4) her contract was for a
fixed term. According to Fuji, the Court of Appeals erred when it ruled that Arlene
was forced to sign the non-renewal agreement, considering that she sent an
email with another version of the non-renewal agreement. 140 Further, she is not
entitled to moral damages and attorney's fees because she acted in bad faith
when she filed a labor complaint against Fuji after receiving US$18,050.00
representing her salary and other benefits. 141
Arlene argues that she was a regular employee because Fuji had control
and supervision over her work. The news events that she covered were all based
on the instructions of Fuji. 142 She maintains that the successive renewal of her
employment contracts for four (4) years indicates that her work was necessary
and desirable. 143 In addition, Fuji's payment of separation pay equivalent to one
(1) month's pay per year of service indicates that she was a regular
employee. 144 To further support her argument that she was not an independent
contractor, she states that Fuji owns the laptop computer and mini-camera that
she used for work. 145
Arlene also argues that Sonza is not applicable because she was a plain
reporter for Fuji, unlike Jay Sonza who was a news anchor, talk show host, and
who enjoyed a celebrity status. 146
On her illness, Arlene points out that it was not a ground for her dismissal
because her attending physician certified that she was fit to work. 147
Arlene admits that she signed the non-renewal agreement with quitclaim,
not because she agreed to its terms, but because she was not in a position to
reject the non-renewal agreement. Further, she badly needed the salary withheld
for her sustenance and medication. 148 She posits that her acceptance of
separation pay does not bar filing of a complaint for illegal dismissal. 149
Article 280 of the Labor Code provides that:
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.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph; Provided, That, any employee who has
rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall
continue while such activity exist.
This provision classifies employees into regular, project, seasonal, and
casual. It further classifies regular employees into two kinds: (1) those "engaged
to perform activities which are usually necessary or desirable in the usual
business or trade of the employer"; and (2) casual employees who
have "rendered at least one year of service, whether such service is continuous
or broken."
Another classification of employees, i.e., employees with fixed-term
contracts, was recognized in Brent School, Inc. v. Zamora 150 where this court
discussed that:
Logically, the decisive determinant in the term employment should
not be the activities that the employee is called upon to perform, but
the day certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being
understood to be "that which must necessarily come, although it may not
be known when." 151 (Emphasis in the original)
This court further discussed that there are employment contracts where "a
fixed term is an essential and natural appurtenance" 152 such as overseas
employment contracts and officers in educational institutions. 153
Distinctions among fixed-term
employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga 154 expounded the doctrine on fixed-term
contracts laid down in Brent in the following manner:  TSDHCc

Cognizant of the possibility of abuse in the utilization of fixed-term

employment contracts, we emphasized in Brent that where from the
circumstances it is apparent that the periods have been imposed to
preclude acquisition of tenurial security by the employee, they should be
struck down as contrary to public policy or morals. We thus laid down
 indications or criteria under which "term employment" cannot be said to
be in circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and
voluntarily agreed upon by the parties without any force, duress,
or improper pressure being brought to bear upon the employee
and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the
employee dealt with each other on more or less equal terms with
no moral dominance exercised by the former or the latter.
These indications, which must be read together, make
the Brent doctrine applicable only in a few special cases wherein the
employer and employee are on more or less in equal footing in entering
into the contract. The reason for this is evident: when a prospective
employee, on account of special skills or market forces, is in a position to
make demands upon the prospective employer, such prospective
employee needs less protection than the ordinary worker. Lesser
limitations on the parties' freedom of contract are thus required for the
protection of the employee. 155 (Citations omitted)
For as long as the guidelines laid down in Brent are satisfied, this court will
recognize the validity of the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc., 156 this court upheld the fixed-term
employment of petitioners because from the time they were hired, they were
informed that their engagement was for a specific period. This court stated that:
[s]imply put, petitioners were not regular employees. While their
employment as mixers, packers and machine operators was necessary
and desirable in the usual business of respondent company, they were
employed temporarily only, during periods when there was heightened
demand for production. Consequently, there could have been no illegal
dismissal when their services were terminated on expiration of their
contracts. There was even no need for notice of termination because
they knew exactly when their contracts would end. Contracts of
employment for a fixed period terminate on their own at the end of such
period.
Contracts of employment for a fixed period are not unlawful. What
is objectionable is the practice of some scrupulous employers who try to
circumvent the law protecting workers from the capricious termination of
employment. 157 (Citation omitted)
Caparoso v. Court of Appeals 158 upheld the validity of the fixed-term
contract of employment. Caparoso and Quindipan were hired as delivery men for
three (3) months. At the end of the third month, they were hired on a monthly
basis. In total, they were hired for five (5) months. They filed a complaint for
illegal dismissal. 159 This court ruled that there was no evidence indicating that
they were pressured into signing the fixed-term contracts. There was likewise no
proof that their employer was engaged in hiring workers for five (5) months only
to prevent regularization. In the absence of these facts, the fixed-term contracts
were upheld as valid. 160
On the other hand, an independent contractor is defined as:
. . . one who carries on a distinct and independent business and
undertakes to perform the job, work, or service on its own account and
under one's own responsibility according to one's own manner and
method, free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results
thereof. 161
In view of the "distinct and independent business" of independent
contractors, no employer-employee relationship exists between independent
contractors and their principals.
Independent contractors are recognized under Article 106 of the Labor
Code:
Art. 106. Contractor or subcontractor. — Whenever an
employer enters into a contract with another person for the performance
of the former's work, the employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the provisions of
this Code.
xxx xxx xxx
The Secretary of Labor and Employment may, by appropriate
regulations, restrict or prohibit the contracting-out of labor to protect the
rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or investment
in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were
directly employed by him.
 In Department Order No. 18-A, Series of 2011, of the Department of Labor
and Employment, a contractor is defined as having:
Section 3. . . .
xxx xxx xxx
(c) . . . an arrangement whereby a principal agrees to put out or
farm out with a contractor the performance or completion of a specific
job, work or service within a definite or predetermined period, regardless
of whether such job, work or service is to be performed or completed
within or outside the premises of the principal.
This department order also states that there is a trilateral relationship in
legitimate job contracting and subcontracting arrangements among the principal,
contractor, and employees of the contractor. There is no employer-employee
relationship between the contractor and principal who engages the contractor's
services, but there is an employer-employee relationship between the contractor
and workers hired to accomplish the work for the principal. 162
Jurisprudence has recognized another kind of independent contractor:
individuals with unique skills and talents that set them apart from ordinary
employees. There is no trilateral relationship in this case because the
independent contractor himself or herself performs the work for the principal. In
other words, the relationship is bilateral.
In Orozco v. Court of Appeals, 163 Wilhelmina Orozco was a columnist for
the Philippine Daily Inquirer. This court ruled that she was an independent
contractor because of her "talent, skill, experience, and her unique viewpoint as a
feminist advocate." 164 In addition, the Philippine Daily Inquirer did not have the
power of control over Orozco, and she worked at her own pleasure. 165
Semblante v. Court of Appeals 166 involved a masiador 167 and
a sentenciador. 168 This court ruled that "petitioners performed their functions
as masiador and sentenciador free from the direction and control of
respondents" 169 and that the masiador and sentenciador "relied mainly on their
'expertise that is characteristic of the cockfight gambling.'" 170 Hence, no
employer-employee relationship existed.
Bernarte v. Philippine Basketball Association 171 involved a basketball
referee. This court ruled that "a referee is an independent contractor, whose
special skills and independent judgment are required specifically for such
position and cannot possibly be controlled by the hiring party." 172
In these cases, the workers were found to be independent contractors
because of their unique skills and talents and the lack of control over the means
and methods in the performance of their work.
 In other words, there are different kinds of independent contractors: those
engaged in legitimate job contracting and those who have unique skills and
talents that set them apart from ordinary employees.
Since no employer-employee relationship exists between independent
contractors and their principals, their contracts are governed by the Civil
Code provisions on contracts and other applicable laws. 173
A contract is defined as "a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something or to
render some service." 174 Parties are free to stipulate on terms and conditions in
contracts as long as these "are not contrary to law, morals, good customs, public
order, or public policy." 175 This presupposes that the parties to a contract are on
equal footing. They can bargain on terms and conditions until they are able to
reach an agreement.
On the other hand, contracts of employment are different and have a
higher level of regulation because they are impressed with public interest. Article
XIII, Section 3 of the 1987 Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS. —
xxx xxx xxx
LABOR
Section 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment and
equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted activities,
including the right to strike in accordance with law. They shall be entitled
to security of tenure, humane conditions of work, and a living wage.
They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility
between workers and employers and the preferential use of voluntary
modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and
employers, recognizing the right of labor to its just share in the fruits of
production and the right of enterprises to reasonable returns on
investments, and to expansion and growth.
Apart from the constitutional guarantee of protection to labor, Article 1700
of the Civil Code states:
 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.
In contracts of employment, the employer and the employee are not on
equal footing. Thus, it is subject to regulatory review by the labor tribunals and
courts of law. The law serves to equalize the unequal. The labor force is a
special class that is constitutionally protected because of the inequality between
capital and labor. 176 This presupposes that the labor force is weak.
However, the level of protection to labor should vary from case to case;
otherwise, the state might appear to be too paternalistic in affording protection to
labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in Brent applies in
cases where it appears that the employer and employee are on equal
footing. 177 This recognizes the fact that not all workers are weak. To reiterate the
discussion in GMA Network v. Pabriga:
The reason for this is evident: when a prospective employee, on
account of special skills or market forces, is in a position to make
demands upon the prospective employer, such prospective employee
needs less protection than the ordinary worker. Lesser limitations on the
parties' freedom of contract are thus required for the protection of the
employee. 178
The level of protection to labor must be determined on the basis of the
nature of the work, qualifications of the employee, and other relevant
circumstances.
For example, a prospective employee with a bachelor's degree cannot be
said to be on equal footing with a grocery bagger with a high school diploma.
Employees who qualify for jobs requiring special qualifications such as "[having]
a Master's degree" or "[having] passed the licensure exam" are different from
employees who qualify for jobs that require "[being a] high school graduate; with
pleasing personality." In these situations, it is clear that those with special
qualifications can bargain with the employer on equal footing. Thus, the level of
protection afforded to these employees should be different.
Fuji's argument that Arlene was an independent contractor under a fixed-
term contract is contradictory. Employees under fixed-term contracts cannot be
independent contractors because in fixed-term contracts, an employer-employee
relationship exists. The test in this kind of contract is not the necessity grid
desirability of the employee's activities, "but the day certain agreed upon by the
parties for the commencement and termination of the employment
relationship." 179 For regular employees, the necessity and desirability of their
work in the usual course of the employer's business are the determining factors.
On the other hand, independent contractors do not have employer-employee
relationships with their principals.
Hence, before the status of employment can be determined, the existence
of an employer-employee relationship must be established.
The four-fold test 180 can be used in determining whether an employer-
employee relationship exists. The elements of the four-fold test are the following:
(1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power of control, which is the most important
element. 181
The "power of control" was explained by this court in Corporal, Sr. v.
National Labor Relations Commission: 182  ETIDaH

The power to control refers to the existence of the power and not
necessarily to the actual exercise thereof, nor is it essential for the
employer to actually supervise the performance of duties of the
employee. It is enough that the employer has the right to wield that
power. 183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the meaning of "power of
control" and stated the following:
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim
only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to
achieve it. . . . 184 (Citation omitted)
In Locsin, et al. v. Philippine Long Distance Telephone Company, 185 the
"power of control" was defined as "[the] right to control not only the end to be
achieved but also the means to be used in reaching such end." 186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit-
Murillo v. Court of Appeals 187 in determining whether Arlene was an
independent contractor or a regular employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test.
Both cases involved newscasters and anchors. However, Sonza was held to be
an independent contractor, while Dumpit-Murillo was held to be a regular
employee.
 Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and
celebrity status not possessed by ordinary employees." 188 His work was for radio
and television programs. 189 On the other hand, Dumpit-Murillo was hired by ABC
as a newscaster and co-anchor. 190
Sonza's talent fee amounted to P317,000.00 per month, which this court
found to be a substantial amount that indicated he was an independent
contractor rather than a regular employee. 191 Meanwhile, Dumpit-Murillo's
monthly salary was P28,000.00, a very low amount compared to
what Sonza received. 192
Sonza was unable to prove that ABS-CBN could terminate his services
apart from breach of contract. There was no indication that he could be
terminated based on just or authorized causes under the Labor Code. In addition,
ABS-CBN continued to pay his talent fee under their agreement, even though his
programs were no longer broadcasted. 193 Dumpit-Murillo was found to have
been illegally dismissed by her employer when they did not renew her contract
on her fourth year with ABC. 194
In Sonza, this court ruled that ABS-CBN did not control
how Sonza delivered his lines, how he appeared on television, or how he
sounded on radio. 195 All that Sonza needed was his talent. 196 Further, "ABS-
CBN could not terminate or discipline SONZA even if the means and methods of
performance of his work . . . did not meet ABS-CBN's approval." 197 In Dumpit-
Murillo, the duties and responsibilities enumerated in her contract was a clear
indication that ABC had control over her work. 198
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in Dumpit-
Murillo and affirmed the ruling of the National Labor Relations Commission
finding that Arlene was a regular employee. Arlene was hired by Fuji as a news
producer, but there was no showing that she was hired because of unique skills
that would distinguish her from ordinary employees. Neither was there any
showing that she had a celebrity status. Her monthly salary amounting to
US$1,900.00 appears to be a substantial sum, especially if compared to her
salary when she was still connected with GMA. 199 Indeed, wages may indicate
whether one is an independent contractor. Wages may also indicate that an
employee is able to bargain with the employer for better pay. However, wages
should not be the conclusive factor in determining whether one is an employee or
an independent contractor.
 Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her
professional employment contract. 200 Her contract also indicated that Fuji had
control over her work because she was required to work for eight (8) hours from
Monday to Friday, although on flexible time. 201 Sonza was not required to work
for eight (8) hours, while Dumpit-Murillo had to be in ABC to do both on-air and
off-air tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on
what to report. 202 Even the mode of transportation in carrying out her functions
was controlled by Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or
change of place of work, the train, bus, or public transport shall be
used for the trip. If the Employee uses the private car during the
work and there is an accident the Employer shall not be
responsible for the damage, which may be caused to the
Employee. 203
Thus, the Court of Appeals did not err when it upheld the findings of the
National Labor Relations Commission that Arlene was not an independent
contractor.
Having established that an employer-employee relationship existed
between Fuji and Arlene, the next questions for resolution are the following: Did
the Court of Appeals correctly affirm the National Labor Relations Commission
that Arlene had become a regular employee? Was the nature of Arlene's work
necessary and desirable for Fuji's usual course of business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is a
reasonable connection between the employee's activities and the usual business
of the employer. Article 280 provides that the nature of work must be "necessary
or desirable in the usual business or trade of the employer" as the test for
determining regular employment. As stated in ABS-CBN Broadcasting
Corporation v. Nazareno: 204
In determining whether an employment should be considered
regular or non-regular, the applicable test is the reasonable connection
between the particular activity performed by the employee in relation to
the usual business or trade of the employer. The standard, supplied by
the law itself, is whether the work undertaken is necessary or desirable
in the usual business or trade of the employer, a fact that can be
assessed by looking into the nature of the services rendered and its
relation to the general scheme under which the business or trade is
pursued in the usual course. It is distinguished from a specific
 undertaking that is divorced from the normal activities required in
carrying on the particular business or trade. 205
However, there may be a situation where an employee's work is necessary
but is not always desirable in the usual course of business of the employer. In
this situation, there is no regular employment.
In San Miguel Corporation v. National Labor Relations
Commission, 206 Francisco de Guzman was hired to repair furnaces at San
Miguel Corporation's Manila glass plant. He had a separate contract for every
furnace that he repaired. He filed a complaint for illegal dismissal three (3) years
after the end of his last contract. 207 In ruling that de Guzman did not attain the
status of a regular employee, this court explained:  DaIACS

Note that the plant where private respondent was employed for
only seven months is engaged in the manufacture of glass, an integral
component of the packaging and manufacturing business of petitioner.
The process of manufacturing glass requires a furnace, which has a
limited operating life. Petitioner resorted to hiring project or fixed term
employees in having said furnaces repaired since said activity is not
regularly performed. Said furnaces are to be repaired or overhauled only
in case of need and after being used continuously for a varying period of
five (5) to ten (10) years.
In 1990, one of the furnaces of petitioner required repair and
upgrading. This was an undertaking distinct and separate from
petitioner's business of manufacturing glass. For this purpose, petitioner
must hire workers to undertake the said repair and upgrading. . . .
xxx xxx xxx
Clearly, private respondent was hired for a specific project that
was not within the regular business of the corporation. For petitioner is
not engaged in the business of repairing furnaces. Although the activity
was necessary to enable petitioner to continue manufacturing glass, the
necessity therefor arose only when a particular furnace reached the end
of its life or operating cycle. Or, as in the second undertaking, when a
particular furnace required an emergency repair. In other words, the
undertakings where private respondent was hired primarily as
helper/bricklayer have specified goals and purposes which are fulfilled
once the designated work was completed. Moreover, such undertakings
were also identifiably separate and distinct from the usual, ordinary or
regular business operations of petitioner, which is glass manufacturing.
These undertakings, the duration and scope of which had been
determined and made known to private respondent at the time of his
employment, clearly indicated the nature of his employment as a project
employee. 208
 Fuji is engaged in the business of broadcasting, 209 including news
programming. 210 It is based in Japan 211 and has overseas offices to cover
international news. 212
Based on the record, Fuji's Manila Bureau Office is a small unit 213 and has
a few employees. 214 As such, Arlene had to do all activities related to news
gathering. Although Fuji insists that Arlene was a stringer, it alleges that her
designation was "News Talent/Reporter/Producer." 215
A news producer "plans and supervises newscast . . . [and] work[s] with
reporters in the field planning and gathering information. . . ." 216 Arlene's tasks
included "[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting interviewing
subjects in front of a video camera," 217 "the timely submission of news and
current events reports pertaining to the Philippines[,] and traveling [sic] to [Fuji's]
regional office in Thailand." 218 She also had to report for work in Fuji's office in
Manila from Mondays to Fridays, eight (8) hours per day. 219 She had no
equipment and had to use the facilities of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the National Labor Relations
Commission that the successive renewals of Arlene's contract indicated the
necessity and desirability of her work in the usual course of Fuji's business.
Because of this, Arlene had become a regular employee with the right to security
of tenure. 220 The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or news
producer for its Manila Bureau. She was hired for the primary purpose of
news gathering and reporting to the television network's
headquarters. Espiritu was not contracted on account of any peculiar
ability or special talent and skill that she may possess which the network
desires to make use of. Parenthetically, if it were true that Espiritu is an
independent contractor, as claimed by Fuji, the fact that everything that
she uses to perform her job is owned by the company including the
laptop computer and mini camera discounts the idea of job
contracting. 221
Moreover, the Court of Appeals explained that Fuji's argument that no
employer-employee relationship existed in view of the fixed-term contract does
not persuade because fixed-term contracts of employment are strictly
construed. 222 Further, the pieces of equipment Arlene used were all owned
by Fuji, showing that she was a regular employee and not an independent
contractor. 223
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-
term contracts that were successively renewed for four (4) years. 224 This court
held that "[t]his repeated engagement under contract of hire is indicative of the
necessity and desirability of the petitioner's work in private respondent ABC's
business." 225
 With regard to Fuji's argument that Arlene's contract was for a fixed term,
the Court of Appeals cited Philips Semiconductors, Inc. v. Fadriquela 226 and
held that where an employee's contract "had been continuously extended or
renewed to the same position, with the same duties and remained in the employ
without any interruption," 227 then such employee is a regular employee. The
continuous renewal is a scheme to prevent regularization. On this basis, the
Court of Appeals ruled in favor of Arlene.
As stated in Price, et al. v. Innodata Corp., et al.: 228
The employment status of a person is defined and prescribed by
law and not by what the parties say it should be. Equally important to
consider is that a contract of employment is impressed with public
interest such that labor contracts must yield to the common good. Thus,
provisions of applicable statutes are deemed written into the contract,
and the parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply
contracting with each other. 229 (Citations omitted)
Arlene's contract indicating a fixed term did not automatically mean that
she could never be a regular employee. This is precisely what Article 280 seeks
to avoid. The ruling in Brent remains as the exception rather than the general
rule.
Further, an employee can be a regular employee with a fixed-term
contract. The law does not preclude the possibility that a regular employee may
opt to have a fixed-term contract for valid reasons. This was recognized in Brent:
For as long as it was the employee who requested, or bargained, that the
contract have a "definite date of termination," or that the fixed-term contract be
freely entered into by the employer and the employee, then the validity of the
fixed-term contract will be upheld. 230
V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission's finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was
illegally dismissed, in view of the non-renewal contract voluntarily executed by
the parties. Fuji also argues that Arlene's contract merely expired; hence, she
was not illegally dismissed. 231
Arlene alleges that she had no choice but to sign the non-renewal contract
because Fuji withheld her salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji's assertion that Espiritu's contract
merely expired and that she voluntarily agreed not to renew the same.
 Even a cursory perusal of the subject Non-Renewal Contract readily
shows that the same was signed by Espiritu under protest. What is
apparent is that the Non-Renewal Contract was crafted merely as a
subterfuge to secure Fuji's position that it was Espiritu's choice not to
renew her contract. 232
As a regular employee, Arlene was entitled to security of tenure and could
be dismissed only for just or authorized causes and after the observance of due
process.
The right to security of tenure is guaranteed under Article XIII, Section 3 of
the 1987 Constitution:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS. —
xxx xxx xxx
LABOR
xxx xxx xxx
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted activities,
including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living
wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by law.
Article 279 of the Labor Code also provides for the right to security of
tenure and states the following:
Art. 279. Security of tenure. — In cases of regular employment,
the employer shall not terminate the services of an employee except for
a just cause of when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed,
unless there are just or authorized causes and only after compliance with
procedural and substantive due process is conducted.
Even probationary employees are entitled to the right to security of tenure.
This was explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr. 233
Within the limited legal six-month probationary period,
probationary employees are still entitled to security of tenure. It is
expressly provided in the afore-quoted Article 281 that a probationary
employee may be terminated only on two grounds: (a) for just cause, or
 (b) when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at
the time of his engagement. 234 (Citation omitted)  aSCHcA

The expiration of Arlene's contract does not negate the finding of illegal
dismissal by Fuji. The manner by which Fuji informed Arlene that her contract
would no longer be renewed is tantamount to constructive dismissal. To make
matters worse, Arlene was asked to sign a letter of resignation prepared
by Fuji. 235 The existence of a fixed-term contract should not mean that there can
be no illegal dismissal. Due process must still be observed in the pre-termination
of fixed-term contracts of employment.
In addition, the Court of Appeals and the National Labor Relations
Commission found that Arlene was dismissed because of her health condition. In
the non-renewal agreement executed by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy
which prevents her from continuing to effectively perform her
functions under the said Contract such as the timely submission of news
and current events reports pertaining to the Philippines and
travelling [sic] to the FIRST PARTY's regional office in
Thailand. 236 (Emphasis supplied)
Disease as a ground for termination is recognized under Article 284 of
the Labor Code:
Art. 284. Disease as ground for termination. — An employer
may terminate the services of an employee who has been found to be
suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as to the health of
his co-employees: Provided, That he is paid separation pay equivalent to
at least one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six (6) months
being considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor
Code provides:
Sec. 8. Disease as a ground for dismissal. — Where the
employee suffers from a disease and his continued employment is
prohibited by law or prejudicial to his health or to the health of his co-
employees, the employer shall not terminate his employment unless
there is a certification by a competent public health authority that the
disease is of such nature or at such a stage that it cannot be cured
within a period of six (6) months even with proper medical treatment. If
the disease or ailment can be cured within the period, the employer shall
not terminate the employee but shall ask the employee to take a leave.
 The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.
For dismissal under Article 284 to be valid, two requirements must be
complied with: (1) the employee's disease cannot be cured within six (6) months
and his "continued employment is prohibited by law or prejudicial to his health as
well as to the health of his co-employees"; and (2) certification issued by a
competent public health authority that even with proper medical treatment, the
disease cannot be cured within six (6) months. 237 The burden of proving
compliance with these requisites is on the employer. 238 Non-compliance leads to
the conclusion that the dismissal was illegal. 239
There is no evidence showing that Arlene was accorded due process. After
informing her employer of her lung cancer, she was not given the chance to
present medical certificates. Fuji immediately concluded that Arlene could no
longer perform her duties because of chemotherapy. It did not ask her how her
condition would affect her work. Neither did it suggest for her to take a leave,
even though she was entitled to sick leaves. Worse, it did not present any
certificate from a competent public health authority. What Fuji did was to inform
her that her contract would no longer be renewed, and when she did not agree,
her salary was withheld. Thus, the Court of Appeals correctly upheld the finding
of the National Labor Relations Commission that for failure of Fuji to comply with
due process, Arlene was illegally dismissed. 240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission's decision
when it awarded reinstatement, damages, and attorney's fees
The National Labor Relations Commission awarded separation pay in lieu
of reinstatement, on the ground that the filing of the complaint for illegal dismissal
may have seriously strained relations between the parties. Backwages were also
awarded, to be computed from date of dismissal until the finality of the National
Labor Relations Commission's decision. However, only backwages were
included in the dispositive portion because the National Labor Relations
Commission recognized that Arlene had received separation pay in the amount
of US$7,600.00.
The Court of Appeals affirmed the National Labor Relations Commission's
decision but modified it by awarding moral and exemplary damages and
attorney's fees, and all other benefits Arlene was entitled to under her contract
with Fuji. The Court of Appeals also ordered reinstatement, reasoning that the
grounds when separation pay was awarded in lieu of reinstatement were not
proven. 241
Article 279 of the Labor Code provides:
 Art. 279. Security of tenure. — In cases of regular employment,
the employer shall not terminate the services of an employee except for
a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement. (Emphasis supplied)
The Court of Appeals' modification of the National Labor Relations
Commission's decision was proper because the law itself provides that illegally
dismissed employees are entitled to reinstatement, backwages including
allowances, and all other benefits.
On reinstatement, the National Labor Relations Commission ordered
payment of separation pay in lieu of reinstatement, reasoning "that the filing of
the instant suit may have seriously abraded the relationship of the parties so as
to render reinstatement impractical." 242 The Court of Appeals reversed this and
ordered reinstatement on the ground that separation pay in lieu of reinstatement
is allowed only in several instances such as (1) when the employer has ceased
operations; (2) when the employee's position is no longer available; (3) strained
relations; and (4) a substantial period has lapsed from date of filing to date of
finality. 243
On this matter, Quijano v. Mercury Drug Corp. 244 is instructive:
Well-entrenched is the rule that an illegally dismissed employee is
entitled to reinstatement as a matter of right. . . .
To protect labor's security of tenure, we emphasize that the
doctrine of "strained relations" should be strictly applied so as not to
deprive an illegally dismissed employee of his right to reinstatement.
Every labor dispute almost always results in "strained relations" and the
phrase cannot be given an overarching interpretation, otherwise, an
unjustly dismissed employee can never be reinstated. 245 (Citations
omitted)
The Court of Appeals reasoned that strained relations are a question of
fact that must be supported by evidence. 246 No evidence was presented
by Fuji to prove that reinstatement was no longer feasible. Fuji did not allege that
it ceased operations or that Arlene's position, was no longer available. Nothing in
the records shows that Arlene's reinstatement would cause an atmosphere of
antagonism in the workplace. Arlene filed her complaint in 2009. Five (5) years
are not yet a substantial period 247 to bar reinstatement.
On the award of damages, Fuji argues that Arlene is not entitled to the
award of damages and attorney's fees because the non-renewal agreement
contained a quitclaim, which Arlene signed.
 Quitclaims in labor cases do not bar illegally dismissed employees from
filing labor complaints and money claim. As explained by Arlene, she signed the
non-renewal agreement out of necessity. In Land and Housing Development
Corporation v. Esquillo, 248 this court explained:  TADaES

We have heretofore explained that the reason why quitclaims are

commonly frowned upon as contrary to public policy, and why they are
held to be ineffective to bar claims for the full measure of the workers'
legal rights, is the fact that the employer and the employee obviously do
not stand on the same footing. The employer drove the employee to the
wall. The latter must have to get hold of money. Because, out of a job,
he had to face the harsh necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a case of adherence, not
of choice. 249
With regard to the Court of Appeals' award of moral and exemplary
damages and attorney's fees, this court has recognized in several cases that
moral damages are awarded "when the dismissal is attended by bad faith or
fraud or constitutes an act oppressive to labor, or is done in a manner contrary to
good morals, good customs or public policy." 250 On the other hand, exemplary
damages may be awarded when the dismissal was effected "in a wanton,
oppressive or malevolent manner." 251
The Court of Appeals and National Labor Relations Commission found that
after Arlene had informed Fuji of her cancer, she was informed that there would
be problems in renewing her contract on account of her condition. This
information caused Arlene mental anguish, serious anxiety, and wounded
feelings that can be gleaned from the tenor of her email dated March 11, 2009. A
portion of her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my
lowest, being sick and very weak, you suddenly came to deliver to me
the NEWS that you will no longer renew my contract. I knew this will
come but I never thought that you will be so 'heartless' and insensitive to
deliver that news just a month after I informed you that I am sick. I was
asking for patience and understanding and your response was not to
RENEW my contract. 252
Apart from Arlene's illegal dismissal, the manner of her dismissal was
effected in an oppressive approach with her salary and other benefits being
withheld until May 5, 2009, when she had no other choice but to sign the non-
renewal contract. Thus, there was legal basis for the Court of Appeals to modify
the National Labor Relations Commission's decision.
However, Arlene received her salary for May 2009. 253 Considering that the
date of her illegal dismissal was May 5, 2009, 254 this amount may be subtracted
from the total monetary award.
 With regard to the award of attorney's fees, Article 111 of the Labor
Code states that "[i]n cases of unlawful withholding of wages, the culpable party
may be assessed attorney's fees equivalent to ten percent of the amount of
wages recovered." Likewise, this court has recognized that "in actions for
recovery of wages or where an employee was forced to litigate and, thus, incur
expenses to protect his rights and interest, the award of attorney's fees is legally
and morally justifiable." 255 Due to her illegal dismissal, Arlene was forced to
litigate.
In the dispositive portion of its decision, the Court of Appeals awarded
legal interest at the rate of 12% per annum. 256 In view of this court's ruling
in Nacar v. Gallery Frames, 257 the legal interest shall be reduced to a rate of 6%
per annum.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals
decision dated June 25, 2012 is AFFIRMED with the modification that
backwages shall be computed from June 2009. Legal interest shall be computed
at the rate of 6% per annum of the total monetary award from date of finality of
this decision until full satisfaction.
SO ORDERED.
Carpio, Del Castillo, Villarama, Jr. * and Mendoza, JJ., concur.
 
Footnotes
*Designated Acting Member per Special Order No. 1888 dated November 28,
2014.
1.Rollo, pp. 16-97.
2.Id. at 111-126. The decision was penned by Associate Justice Edwin D. Sorongon
and concurred in by Associate Justices Noel G. Tijam (Chair) and Romeo F.
Barza.
3.Id. at 202-220.
4.The National Labor Relations Commission's decision (rollo, p. 204) referred to
Arlene as a "news correspondent" and "journalist/news producer" while the
Court of Appeals' decision (rollo, p. 112) referred to Arlene as a "news
correspondent/producer." In the "Certification of Employment and
Compensation" (rollo, p. 429), Fuji indicated that Arlene holds the position of
"news producer." Photocopies of Arlene's IDs also indicate that she is
connected with Fuji Television Network, Inc. with the position of "news
producer" (rollo, p. 431).
5.Rollo, p. 112.
6.Id. at 112 and 204.
7.Id. at 27 and 722.
8.Id. at 113.
9.Id. at 112-113.
10.Id. at 113.
11.The records show that Arlene and Fuji, through Mr. Yoshiki Aoki, had several e-
mail exchanges. The parties also admitted that they communicated with each
other verbally.
12.Rollo, p. 113.
13.Id.
14.Id. at 209.
15.Id. at 113.
16.Id.
17.Id. at 225-235.
18.Id. at 235.
19.G.R. No. 138051, June 10, 2004, 431 SCRA 583 [Per J. Carpio, First Division].
20.Rollo, pp. 228-232.
21.Id. at 219.
22.Id. at 213-216.
23.Id. at 219.
24.Id.
25.Id. at 222.
26.Id. at 222-224.
27.Id. at 112 and 130-188.
28.Id. at 116.
29.Id. at 125-126.
30.Id.
31.Id. at 121.
32.Id. at 119.
33.Id. at 119-120.
34.Id. at 120.
35.Id. at 122.
36.Id. at 122-123.
37.Id. at 127-129.
38.Id. at 128.
39.Id. at 36-37.
40.Id. at 23.
41.Id. at 39.
42.Id. at 24.
43.Id. at 23.
44.Id. at 39.
45.Id. at 30.
46.Id. at 40.
47.Id.
48.Id. at 22.
49.Id. at 24.
50.Id. at 22-23.
51.Id. at 94.
52.Id. at 32-33.
53.Id. at 33.
54.Id. at 26-29.
55.Id. at 26.
56.Id. at 30-31.
57.Id. at 31.
58.Id.
59.Id.
60.Id. at 32.
61.Id. at 36.
62.Id. at 37.
63.Id.
64.Id.
65.Id. at 16.
66.Id. at 689-694.
67.Id. at 691.
68.Id. at 695-705.
69.Id. at 695-696.
70.Id. at 718.
71.Id.
72.Id. at 719.
73.Id.
74.RULES OF CIVIL PROCEDURE (1997).
75.Uy v. Landbank, 391 Phil. 303 (2000) [Per J. Kapunan, First Division].
76.Id. at 312.
77.404 Phil. 981 (2001) [Per J. Melo, Third Division].
78.Id. at 995.
79.315 Phil. 529 (1995) [Per J. Davide, Jr., En Banc]. Note that this case involved an
electoral protest for barangay elections.
80.Id. at 532.
81.Id. at 537-538.
82.515 Phil. 768 (2006) [Per J. Carpio Morales, Third Division].
83.Id. at 772-773.
84.Id. at 773.
85.Id. at 776-778.
86.423 Phil. 509 (2001) [Per J. Kapunan, First Division].
87.442 Phil. 425 (2002) [Per J. Vitug, First Division].
88.Havtor Management Phils., Inc. v. National Labor Relations Commission, 423 Phil.
509, 512 (2001) [Per J. Kapunan, First Division]; General Milling Corporation v.
National Labor Relations Commission, 442 Phil. 425, 426 (2002) [Per J. Vitug,
First Division].
89.Havtor Management Phils., Inc. v. National Labor Relations Commission, 423 Phil.
509, 513 (2001) [Per J. Kapunan, First Division]; General Milling Corporation v.
National Labor Relations Commission, 442 Phil. 425, 427 (2002) [Per J. Vitug,
First Division].
90.Havtor Management Phils., Inc. v. National Labor Relations Commission, 423 Phil.
509, 513 (2001) [Per J. Kapunan, First Division]; General Milling Corporation v.
National Labor Relations Commission, 442 Phil. 425, 427 (2002) [Per J. Vitug,
First Division].
91.594 Phil. 246 (2008) [Per J. Carpio Morales, En Banc].
92.Id. at 261-262.
93.Chinese Young Men's Christian Association of the Philippine Islands, doing
business under the name of Manila Downtown YMCA v. Remington Steel
Corporation, 573 Phil. 320 (2008) [Per J. Austria-Martinez, Third Division].
94.Rollo, pp. 102-103.
95.Id. at 102.
96.Id. at 101.
97.Id. at 100.
98.Id. at 98.
99.Id. at 102-103.
100.Id. at 100.
101.Id.
102.Id. at 695-705.
103.Id. at 696.
104.Id. at 102.
105.Id.
106.Id.
107.Id. at 102-103.
108.568 Phil. 572 (2008) [Per J. Velasco, Jr., Second Division].
109.The ponencia cited the cases of Mactan-Cebu International Airport Authority v.
CA, 399 Phil. 695 (2000) [Per J. Gonzaga-Reyes, Third Division]; Pfizer, Inc. v.
Galan, 410 Phil. 483 (2001) [Per J. Davide, Jr., First Division]; Novelty
Philippines, Inc. v. CA, 458 Phil. 36 (2003) [Per J. Panganiban, Third
Division]; Lepanto Consolidated Mining Company v. WMC Resources
International Pty. Ltd., 458 Phil. 701 (2003) [Per J. Carpio Morales, Third
Division].
110.Cagayan Valley Drug Corporation v. CIR, 568 Phil. 572, 581-582 (2008) [Per J.
Velasco, Jr., Second Division].
111.Rollo, pp. 602-603.
112.Id.
113.Id.
114.Id. at 697.
115.Pres. Decree No. 442, as amended.
116.356 Phil. 811 (1998) [Per J. Regalado, En Banc].
117.San Miguel Corporation v. Secretary of Labor, 159-A Phil. 346 (1975) [Per J.
Aquino, Second Division]; Scott v. Inciong, et al., 160-A Phil. 1107 (1975) [Per
J. Fernando, Second Division]; Bordeos v. National Labor Relations
Commission, 330 Phil. 1003 (1996) [Per J. Panganiban, Third Division].
118.St. Martin Funeral Home v. National Labor Relations Commission, 356 Phil. 811,
816 (1998) [Per J. Regalado, En Banc].
119.J. Brion, dissenting opinion in Abott Laboratories, Philippines v. Alcaraz, G.R. No.
192571, July 23, 2013, 701 SCRA 682, 723-724 [Per J. Perlas-Bernabe, En
Banc].
120.G.R. No. 147420, June 10, 2004, 431 SCRA 633 [Per J. Carpio, First Division].
121.Id. at 639.
122.Id.
123.Id. at 640.
124.Id.
125.572 Phil. 94 (2008) [Per J. Chico-Nazario, Third Division].
126.Id. at 117.
127.G.R. No. 172086, December 3, 2012, 686 SCRA 676 [Per J. Brion, Second
Division].
128.613 Phil. 696 (2009) [Per J. Brion, Second Division].
129.Career Philippines v. Serna, G.R. No. 172086, December 3, 2012, 686 SCRA
676, 683-684 [Per J. Brion, Second Division], citing Montoya v. Transmed
Manila Corporation, 613 Phil. 696, 706-707 (2009) [Per J. Brion, Second
Division].
130.G.R. No. 192571, July 23, 2013, 701 SCRA 682 [Per J. Perlas-Bernabe, En
Banc].
131.J. Brion, dissenting opinion in Abott Laboratories, Philippines v. Alcaraz, G.R. No.
192571, July 23, 2013, 701 SCRA 682, 723-724 [Per J. Perlas-Bernabe, En
Banc].
132.Id. at 723, citing Montoya v. Transmed Manila Corporation, 613 Phil. 696, 707
(2009) [Per J. Brion, Second Division].
133.Id. at 724-725.
134.Consulta v. Court of Appeals, 493 Phil. 842, 847 (2005) [Per J. Carpio, First
Division].
135.Tenazas v. R. Villegas Taxi Transport, G.R. No. 192998, April 2, 2014
<http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/
april2014/192998.pdf> [Per J. Reyes, First Division], citing Meteoro v. Creative
Creatures, Inc., 610 Phil. 150, 161 (2009) [Per J. Nachura, Third Division].
136.Tenazas v. R. Villegas Taxi Transport, G.R. No. 192998, April 2, 2014
<http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/
april2014/192998.pdf> [Per J. Reyes, First Division].
137.Id.
138.MZR Industries v. Colambot, G.R. No. 179001, August 28, 2013, 704 SCRA 150,
157 [Per J. Peralta, Third Division]. See also Exodus International Construction
Corporation v. Biscocho, G.R. No. 166109, February 23, 2011, 644 SCRA 76,
86 [Per J. Del Castillo, First Division].
139.LABOR CODE, art. 277 (b). See also Samar-Med Distribution v. National Labor
Relations Commission, G.R. No. 162385, July 15, 2013, 701 SCRA 148, 160
[Per J. Bersamin, First Division].
140.Rollo, p. 80.
141.Id. at 83.
142.Id. at 726 and 728.
143.Id. at 729.
144.Id. at 733.
145.Id. at 719 and 725.
146.Id. at 719.
147.Id. at 752.
148.Id. at 736.
149.Id. at 768.
150.260 Phil. 747 (1990) [Per J. Narvasa, En Banc].
151.Id. at 757, citing CIVIL CODE, art. 1193, par. 3.
152.Id. at 761.
153.Id.
154.G.R. No. 176419, November 27, 2013, 710 SCRA 690 [Per J. Leonardo-de
Castro, First Division].
155.Id. at 709-710.
156.527 Phil. 67 (2006) [Per J. Corona, Second Division].
157.Id. at 72-73.
158.544 Phil. 721 (2007) [Per J. Carpio, Second Division].
159.Id. at 724.
160.Id. at 728.
161.Orozco v. Fifth Division, Court of Appeals, 584 Phil. 35, 54 (2008) [Per J.
Nachura, Third Division], citing Chavez v. National Labor Relations
Commission, 489 Phil. 444, 457-458 [Per J. Callejo, Sr., Second Division].
162.DOLE Dept. Order No. 18-A (2011), secs. 3 (m) and 5.
163.584 Phil. 35 (2008) [Per J. Nachura, Third Division].
164.Id. at 56.
165.Id.
166.G.R. No. 196426, August 15, 2011, 655 SCRA 444 [Per J. Velasco, Jr., Third
Division].
167.Id. at 446. Semblante v. Court of Appeals defined "masiador" as the person who
"calls and takes the bets from the gamecock owners and other bettors and
orders the start of the cockfight. He also distributes the winnings after deducting
the arriba, or the commission for the cockpit."
168.Id. A "sentenciador" is defined as the person who "oversees the proper gaffing of
fighting cocks, determines the fighting cocks' physical condition and capabilities
to continue the cockfight, and eventually declares the result of the cockfight."
169.Id. at 452.
170.Id.
171.G.R. No. 192084, September 14, 2011, 657 SCRA 745 [Per J. Carpio, Second
Division].
172.Id. at 757.
173.DOLE Dept. Order No. 18-A (2011), sec. 5 (b). See also Sonza v. ABS-CBN
Broadcasting Corporation, G.R. No. 138051, June 10, 2004, 431 SCRA 583,
592 [Per J. Carpio, First Division].
174.CIVIL CODE, art. 1305.
175.CIVIL CODE, art. 1306.
176.In Jaculbe v. Silliman University, 547 Phil. 352, 359 (2007) [Per J. Corona, First
Division], citing Mercury Drug Co., Inc. v. CIR, 155 Phil. 636 (1974), [Per J.
Makasiar, En Banc], this court stated that: "it is axiomatic that employer and
employee do not stand on equal footing, a situation which often causes an
employee to act out of need instead of any genuine acquiescence to the
employer." In Philippine Association of Service Exporters, Inc. v. Hon. Drilon,
 246 Phil. 393, 405 (1988) [Per J. Sarmiento, En Banc], this court stated that:
"'Protection to labor' does not signify the promotion of employment alone. What
concerns the Constitution more paramountly is that such an employment may
be above all, decent, just, and humane."
177.GMA Network, Inc. v. Pabriga, G.R. No. 176419, November 27, 2013, 710 SCRA
690, 710 [Per J. Leonardo-de Castro, First Division].
178.Id.
179.Id. at 709.
180.The case of Consulta v. Court of Appeals, 493 Phil. 842, 847 (2005) [Per J.
Carpio, First Division] cited Viaña v. Al-Lagadan, 99 Phil. 408, 411-412 (1956)
[Per J. Concepcion, En Banc] as the case where the four-fold test was first
applied. Viaña held: "In determining the existence of employer-employee
relationship, the following elements are generally considered, namely: (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 employees' conduct —
although the latter is the most important element."
181.Cesar C. Lirio, doing business under the name and style of Celkor Ad Sonicmix v.
Wilmer D. Genovia, G.R. No. 169757, November 23, 2011, 661 SCRA 126, 139
[Per J. Peralta, Third Division].
182.395 Phil. 890 (2000) [Per J. Quisumbing, Second Division].
183.Id. at 900.
184.Orozco v. Fifth Division, Court of Appeals, 584 Phil. 35, 49 (2008) [Per J.
Nachura, Third Division].
185.617 Phil. 955 (2009) [Per J. Velasco, Jr., Third Division].
186.Id. at 964.
187.551 Phil. 725 (2007) [Per J. Quisumbing, Second Division].
188.Sonza v. ABS-CBN Broadcasting Corporation, G.R. No. 138051, June 10, 2004,
431 SCRA 583, 595 [Per J. Carpio, First Division].
189.Id.
190.Dumpit-Murillo v. Court of Appeals, 551 Phil. 725, 730 (2007) [Per J. Quisumbing,
Second Division].
191.Sonza v. ABS-CBN Broadcasting Corporation, G.R. No. 138051, June 10, 2004,
431 SCRA 583, 596 [Per J. Carpio, First Division].
192.Dumpit-Murillo v. Court of Appeals, 551 Phil. 725, 736 (2007) [Per J. Quisumbing,
Second Division].
193.Sonza v. ABS-CBN Broadcasting Corporation, G.R. No. 138051, June 10, 2004,
431 SCRA 583, 601 [Per J. Carpio, First Division].
194.Dumpit-Murillo v. Court of Appeals, 551 Phil. 725, 730, and 740 (2007) [Per J.
Quisumbing, Second Division].
195.Sonza v. ABS-CBN Broadcasting Corporation, G.R. No. 138051, June 10, 2004,
431 SCRA 583, 600 [Per J. Carpio, First Division].
196.Id. at 600.
197.Id. at 601.
198.Dumpit-Murillo v. Court of Appeals, 551 Phil. 725, 737-738 (2007) [Per J.
Quisumbing, Second Division].
199.Rollo, p. 722.
200.Id. at 205-206. The National Labor Relations Commission's decision quoted
paragraph 5 of Arlene's "Professional Employment Contract," stating the
following:
     5. It shall be lawful for the Employer to dismiss the Employee or terminate the
contract without notice and any compensation which may occur including but
not limit (sic) to the severance pay, for the acts of misconduct:
      5.1 performing duties dishonestly or intentionally committing a criminal act;
      5.2 intentionally causing damage to the Employee;
      5.3 causing serious damage to the Employer as the result of negligence;
      5.4 violating work rules or regulations or orders of the Employer which are lawful
and just after warning has been given by the Employer, except in a serious
case, for which the Employer is not required to give warning. Such written
warning shall be valid for not more than one year from the date the Employee
committed the offense;
      5.5 neglecting duties without justifiable reason for three consecutive working days
regardless of whether there is holiday in between or not;
      5.6 being imprisoned by a final judgment of imprisonment with the exception of a
penalty for negligence or petty offence.
     In this regard, the Employee shall receive wages of the last day of work (by
calculating the work per day).
201.Id. at 205.
202.Id. at 728.
203.Id. at 206.
204.534 Phil. 306 (2006) [Per J. Callejo, Sr., First Division].
205.Id. at 330-331, citing Magsalin v. National Organization of Working Men, 451 Phil.
254, 261 (2003) [Per J. Vitug, First Division].
206.357 Phil. 954 (1998) [Per J. Quisumbing, First Division].
207.Id. at 958.
208.Id. at 963-964.
209.Rollo, p. 259.
210.Fuji Television Network, Inc.'s official website
<http://www.fujitv.co.jp/en/greeting.html> (visited January 5, 2015).
211.Rollo, p. 21.
212.Fuji Television Network, Inc.'s official website
<http://www.fujitv.co.jp/en/overseas_offices.html> (visited January 5, 2015).
213.Rollo, p. 24. Fuji's Manila Bureau Office is in Diamond Hotel, Manila.
214.In the records of this case, the only employees mentioned by Fuji and Arlene are
Ms. Corazon Acerden and Mr. Yoshiki Aoki.
215.Rollo, p. 59.
216.University of Wisconsin-Eau Claire, Glossary of Broadcasting/Broadcast News
Terms
<http://www.uwec.edu/kapferja/02-Fall08/335/GlossaryofBroadcastNewsTerms.
htm> (visited January 5, 2015).
217.Rollo, p. 59.
218.Id. at 208.
219.Id. at 205.
220.Id. at 119.
221.Id. at 120.
222.Id. at 118-119.
223.Id. at 120.
224.Id.
225.Dumpit-Murillo v. Court of Appeals, 551 Phil. 725, 739 (2007) [Per J. Quisumbing,
Second Division].
226.471 Phil. 355 (2004) [Per J. Callejo, Sr., Second Division].
227.Rollo, p. 119.
228.588 Phil. 568 (2008) [Per J. Chico-Nazario, Third Division].
229.Id. at 580.
230.Brent School, Inc. v. Zamora, 260 Phil. 747, 760-762 (1990) [Per J. Narvasa, En
Banc].
231.Rollo, p. 81.
232.Id. at 122-123.
233.555 Phil. 326 (2007) [Per J. Garcia, First Division].
234.Id. at 334.
235.Rollo, p. 27.
236.Id. at 208.
237.Solis v. National Labor Relations Commission, 331 Phil. 928, 933-934 (1996) [Per
J. Francisco, Third Division]; Manly Express, Inc. v. Payong, Jr., 510 Phil. 818,
823-824 (2005) [Per J. Ynares-Santiago, First Division].
238.Crayons Processing, Inc. v. Pula, 555 Phil. 527, 537 (2007) [Per J. Tinga, Second
Division].
239.Id.
240.Rollo, p. 122.
241.Id. at 123-124. The Court of Appeals decision states: "By law, separation pay in
lieu of reinstatement is proper only under the following circumstances: 1) When
company operations have ceased; 2) When the employee's position or an
equivalent thereof is no longer available; 3) When the illegal dismissal case has
engendered strained relations between the parties, in cases of just causes and
usually when the position involved requires the trust and confidence of the
employer; and, 4) When a substantial amount of years have lapsed from the
filing of the case to its finality. In this case, it was not amply shown that
reinstatement is no longer possible as none of the situations contemplated by
law obtains."
242.Id. at 219.
243.Id. at 124.
244.354 Phil. 112 (1998) [Per J. Puno, Second Division].
245.Id. at 121-122.
246.Rollo, p. 123.
247.In Association of Independent Unions in the Philippines v. National Labor
Relations Commission (364 Phil. 697, 713 (1999) [Per J. Purisima, Third
Division]), this court considered "more than eight (8) years" as substantial.
In San Miguel Properties Philippines, Inc. v. Gucaban (G.R. No. 153982, July
18, 2011, 654 SCRA 18, 34 [Per J. Peralta, Third Division]), more than 10 years
had lapsed. In G & S Transport Corporation v. Infante (559 Phil. 701, 716
(2007) [Per J. Tinga, Second Division]), 17 years had lapsed from the time of
illegal dismissal. In these cases, this court deemed it proper to award
separation pay in lieu of reinstatement.
248.508 Phil. 478 (2005) [Per J. Panganiban, Third Division].
249.Id. at 487, citing Marcos v. National Labor Relations Commission, G.R. No.
111744, September 8, 1995, 248 SCRA 146, 152 [Per J. Regalado, Second
Division].
250.Quadra v. Court of Appeals, 529 Phil. 218, 223 (2006) [Per J. Puno, Second
Division]. See also San Miguel Properties Philippines, Inc. v. Gucaban, G.R.
No. 153982, July 18, 2011, 654 SCRA 18, 33 [Per J. Peralta, Third
Division]; Culili v. Eastern Telecommunications Philippines, Inc., G.R. No.
165381, February 9, 2011, 642 SCRA 338, 365 [Per J. Leonardo-de Castro,
First Division].
251.Quadra v. Court of Appeals, 529 Phil. 218, 223-224 (2006) [Per J. Puno, Second
Division]. See also Culili v. Eastern Telecommunications Philippines, Inc., G.R.
No. 165381, February 9, 2011, 642 SCRA 338, 365 [Per J. Leonardo-de
Castro, First Division].
252.Rollo, p. 27.
253.Id. at 208 and 779. The National Labor Relations Commission's decision quoted
the entire non-renewal agreement, where it is shown that Arlene received
US$1,900.00 as salary for May 2009. In the comment, Arlene attached a copy
of the non-renewal agreement as Annex "E-27," showing that she received
US$1,900.00 as salary for May 2009.
254.Id. at 208-209. The first paragraph of the non-renewal agreement, executed on
May 5, 2009, states:
     1. RELEASE FROM CONTRACTUAL OBLIGATION
      The FIRST PARTY hereby releases the SECOND PARTY from all of her
employment responsibilities under the Contract upon the execution of this
Agreement. Likewise, the SECOND PARTY hereby releases the FIRST PARTY
from all its responsibilities as an employer. Upon the execution of this
Agreement, the SECOND PARTY shall no longer be connected, in whatever
nature or capacity, with the FIRST PARTY.
255.Aliling v. Feliciano, G.R. No. 185829, April 25, 2012, 671 SCRA 186, 220 [Per J.
Velasco, Jr., Third Division], citing Rutaquio v. National Labor Relations
Commission, 375 Phil. 405, 418 (1999) [Per J. Purisima, Third Division].
256.Rollo, p. 126.
257.G.R. No. 189871, August 13, 2013, 703 SCRA 439, 457-458 [Per J. Peralta, En
Banc]. In Nacar, this court held:
     To recapitulate and for future guidance, the guidelines laid down in the case
of Eastern Shipping Lines are accordingly modified to embody BSP-MB
Circular No. 799, as follows:
     I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for
 damages. The provisions under Title XVIII on "Damages" of the Civil
Code govern in determining the measure of recoverable damages.
     II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
      1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence
of stipulation, the rate of interest shall be 6% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
      2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages, except when or until the
demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code), but when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may
be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.
      3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.
     And, in addition to the above, judgments that have become final and executory
prior to July 1, 2013, shall not be disturbed and shall continue to be
implemented applying the rate of interest fixed therein.
 (Fuji Television Network, Inc. v. Espiritu, G.R. Nos. 204944-45, [December 3,
|||

2014], 749 PHIL 388-450)

[G.R. No. 192084. September 14, 2011.]

JOSE MEL BERNARTE, petitioner, vs.

PHILIPPINE BASKETBALL ASSOCIATION (PBA),
JOSE EMMANUEL M. EALA, and PERRY
MARTINEZ,respondents.
 DECISION

CARPIO, J  :
p

The Case
This is a petition for review 1 of the 17 December 2009
Decision 2 and 5 April 2010 Resolution 3 of the Court of Appeals
in CA-G.R. SP No. 105406. The Court of Appeals set aside the
decision of the National Labor Relations Commission (NLRC),
which affirmed the decision of the Labor Arbiter, and held that
petitioner Jose Mel Bernarte is an independent contractor, and
not an employee of respondents Philippine Basketball
Association (PBA), Jose Emmanuel M. Eala, and Perry
Martinez. The Court of Appeals denied the motion for
reconsideration.
The Facts
The facts, as summarized by the NLRC and quoted by
the Court of Appeals, are as follows:
Complainants (Jose Mel Bernarte and Renato
Guevarra) aver that they were invited to join the PBA as
referees. During the leadership of Commissioner Emilio
Bernardino, they were made to sign contracts on a year-
to-year basis. During the term of Commissioner Eala,
however, changes were made on the terms of their
employment.
Complainant Bernarte, for instance, was not made
to sign a contract during the first conference of the All-
Filipino Cup which was from February 23, 2003 to June
2003. It was only during the second conference when he
was made to sign a one and a half month contract for the
period July 1 to August 5, 2003. ITESAc

On January 15, 2004, Bernarte received a letter

from the Office of the Commissioner advising him that his
contract would not be renewed citing his unsatisfactory
performance on and off the court. It was a total shock for
Bernarte who was awarded Referee of the year in 2003.
He felt that the dismissal was caused by his refusal to fix
a game upon order of Ernie De Leon.
 On the other hand, complainant Guevarra alleges
that he was invited to join the PBA pool of referees in
February 2001. On March 1, 2001, he signed a contract
as trainee. Beginning 2002, he signed a yearly contract
as Regular Class C referee. On May 6, 2003, respondent
Martinez issued a memorandum to Guevarra expressing
dissatisfaction over his questioning on the assignment of
referees officiating out-of-town games. Beginning
February 2004, he was no longer made to sign a
contract.
Respondents aver, on the other hand, that
complainants entered into two contracts of retainer with
the PBA in the year 2003. The first contract was for the
period January 1, 2003 to July 15, 2003; and the second
was for September 1 to December 2003. After the lapse
of the latter period, PBA decided not to renew their
contracts.
Complainants were not illegally dismissed
because they were not employees of the PBA. Their
respective contracts of retainer were simply not renewed.
PBA had the prerogative of whether or not to renew their
contracts, which they knew were fixed. 4
In her 31 March 2005 Decision, 5 the Labor
Arbiter 6 declared petitioner an employee whose dismissal by
respondents was illegal. Accordingly, the Labor Arbiter ordered
the reinstatement of petitioner and the payment of backwages,
moral and exemplary damages and attorney's fees, to wit:
WHEREFORE, premises considered all
respondents who are here found to have illegally
dismissed complainants are hereby ordered to (a)
reinstate complainants within thirty (30) days from the
date of receipt of this decision and to solidarily pay
complainants:  AEDHST

    JOSE MEL RENATO

    BERNARTE GUEVARRA
1. backwages from January 1,    
  2004 up to the finality of this    
  Decision, which to date is P536,250.00 P211,250.00
2. moral damages 100,000.00 100,000.00
3. exemplary damages 50,000.00 50,000.00
4. 10% attorney's fees 68,625.00 36,125.00
    ––––––––––– –––––––––––
  TOTAL P754,875.00 P397,375.00
    ======== ========

 or a total of P1,152,250.00

The rest of the claims are hereby dismissed for
lack of merit or basis.
SO ORDERED. 7
In its 28 January 2008 Decision, 8 the NLRC affirmed the
Labor Arbiter's judgment. The dispositive portion of the NLRC's
decision reads:
WHEREFORE, the appeal is hereby DISMISSED.
The Decision of Labor Arbiter Teresita D. Castillon-Lora
dated March 31, 2005 is AFFIRMED.
SO ORDERED. 9
Respondents filed a petition for certiorari with the Court
of Appeals, which overturned the decisions of the NLRC and
Labor Arbiter. The dispositive portion of the Court of Appeals'
decision reads:
WHEREFORE, the petition is hereby GRANTED.
The assailed Decision dated January 28, 2008
and Resolution dated August 26, 2008 of the National
Labor Relations Commission are ANNULLED and SET
ASIDE. Private respondents' complaint before the Labor
Arbiter is DISMISSED. TDAHCS

SO ORDERED. 10
The Court of Appeals' Ruling
The Court of Appeals found petitioner an independent
contractor since respondents did not exercise any form of
control over the means and methods by which petitioner
performed his work as a basketball referee. The Court of
Appeals held:
While the NLRC agreed that the PBA
has no control over the referees' acts of blowing the
whistle and making calls during basketball games, it,
nevertheless, theorized that the said acts refer to the
means and methods employed by the referees in
 officiating basketball games for the illogical reason that
said acts refer only to the referees' skills. How could a
skilled referee perform his job without blowing a whistle
and making calls? Worse, how can the PBA control the
performance of work of a referee without controlling his
acts of blowing the whistle and making calls?
Moreover, this Court disagrees with the Labor
Arbiter's finding (as affirmed by the NLRC) that the
Contracts of Retainer show that petitioners have control
over private respondents.
xxx xxx xxx
Neither do We agree with the NLRC's affirmance
of the Labor Arbiter's conclusion that private
respondents' repeated hiring made them regular
employees by operation of law. 11  STDEcA

The Issues
The main issue in this case is whether petitioner is an
employee of respondents, which in turn determines whether
petitioner was illegally dismissed.
Petitioner raises the procedural issue of whether the
Labor Arbiter's decision has become final and executory for
failure of respondents to appeal with the NLRC within the
reglementary period.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed
by petitioner.
Petitioner contends that the Labor Arbiter's Decision of
31 March 2005 became final and executory for failure of
respondents to appeal with the NLRC within the prescribed
period. Petitioner claims that the Labor Arbiter's decision was
constructively served on respondents as early as August 2005
while respondents appealed the Arbiter's decision only on 31
March 2006, way beyond the reglementary period to appeal.
Petitioner points out that service of an unclaimed registered
mail is deemed complete five days from the date of first notice
of the post master. In this case three notices were issued by the
post office, the last being on 1 August 2005. The unclaimed
registered mail was consequently returned to sender. Petitioner
presents the Postmaster's Certification to prove constructive
service of the Labor Arbiter's decision on respondents. The
Postmaster certified:
xxx xxx xxx
That upon receipt of said registered mail matter,
our registry in charge, Vicente Asis, Jr., immediately
issued the first registry notice to claim on July 12, 2005
by the addressee. The second and third notices were
issued on July 21 and August 1, 2005, respectively.  DSATCI

That the subject registered letter was returned to

the sender (RTS) because the addressee failed to claim
it after our one month retention period elapsed. Said
registered letter was dispatched from this office to Manila
CPO (RTS) under bill #6, line 7, page 1, column 1, on
September 8, 2005. 12
Section 10, Rule 13 of the Rules of Court provides:
SEC. 10. Completeness of service. — Personal
service is complete upon actual delivery. Service by
ordinary mail is complete upon the expiration of ten (10)
days after mailing, unless the court otherwise provides.
Service by registered mail is complete upon actual
receipt by the addressee, or after five (5) days from the
date he received the first notice of the postmaster,
whichever date is earlier.
The rule on service by registered mail contemplates two
situations: (1) actual service the completeness of which is
determined upon receipt by the addressee of the registered
mail; and (2) constructive service the completeness of which is
determined upon expiration of five days from the date the
addressee received the first notice of the postmaster. 13
Insofar as constructive service is concerned, there must
be conclusive proof that a first notice was duly sent by the
postmaster to the addressee. 14 Not only is it required that
notice of the registered mail be issued but that it should also be
delivered to and received by the addressee. 15 Notably, the
presumption that official duty has been regularly performed is
not applicable in this situation. It is incumbent upon a party who
relies on constructive service to prove that the notice was sent
to, and received by, the addressee. 16
 The best evidence to prove that notice was sent would be
a certification from the postmaster, who should certify not only
that the notice was issued or sent but also as to how, when and
to whom the delivery and receipt was made. The mailman may
also testify that the notice was actually delivered. 17
In this case, petitioner failed to present any concrete
proof as to how, when and to whom the delivery and receipt of
the three notices issued by the post office was made. There
is no conclusive evidence showing that the post office notices
were actually received by respondents, negating petitioner's
claim of constructive service of the Labor Arbiter's decision on
respondents. The Postmaster's Certification does not
sufficiently prove that the three notices were delivered to and
received by respondents; it only indicates that the post office
issued the three notices. Simply put, the issuance of the notices
by the post office is not equivalent to delivery to and receipt by
the addressee of the registered mail. Thus, there is no proof of
completed constructive service of the Labor Arbiter's decision
on respondents.  CSIcTa 

At any rate, the NLRC declared the issue on the finality of

the Labor Arbiter's decision moot as respondents' appeal was
considered in the interest of substantial justice. We agree with
the NLRC. The ends of justice will be better served if we
resolve the instant case on the merits rather than allowing the
substantial issue of whether petitioner is an independent
contractor or an employee linger and remain unsettled due to
procedural technicalities.
The existence of an employer-employee relationship is
ultimately a question of fact. As a general rule, factual issues
are beyond the province of this Court. However, this rule admits
of exceptions, one of which is where there are conflicting
findings of fact between the Court of Appeals, on one hand, and
the NLRC and Labor Arbiter, on the other, such as in the
present case. 18
To determine the existence of an employer-employee
relationship, case law has consistently applied the four-fold test,
to wit: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee on the means and
methods by which the work is accomplished. The so-
called "control test" is the most important indicator of the
presence or absence of an employer-employee relationship. 19
In this case, PBA admits repeatedly engaging petitioner's
services, as shown in the retainer contracts. PBA pays
petitioner a retainer fee, exclusive of per diem or allowances, as
stipulated in the retainer contract. PBA can terminate the
retainer contract for petitioner's violation of its terms and
conditions.
However, respondents argue that the all-important
element of control is lacking in this case, making petitioner an
independent contractor and not an employee of respondents.
Petitioner contends otherwise. Petitioner asserts that he
is an employee of respondents since the latter exercise control
over the performance of his work. Petitioner cites the following
stipulations in the retainer contract which evidence control: (1)
respondents classify or rate a referee; (2) respondents require
referees to attend all basketball games organized or authorized
by the PBA, at least one hour before the start of the first game
of each day; (3) respondents assign petitioner to officiate
ballgames, or to act as alternate referee or substitute; (4)
referee agrees to observe and comply with all the requirements
of the PBA governing the conduct of the referees whether on or
off the court; (5) referee agrees (a) to keep himself in good
physical, mental, and emotional condition during the life of the
contract; (b) to give always his best effort and service, and
loyalty to the PBA, and not to officiate as referee in any
basketball game outside of the PBA, without written prior
consent of the Commissioner; (c) always to conduct himself on
and off the court according to the highest standards of honesty
or morality; and (6) imposition of various sanctions for violation
of the terms and conditions of the contract.
The foregoing stipulations hardly demonstrate control
over the means and methods by which petitioner performs his
work as a referee officiating a PBA basketball game. The
contractual stipulations do not pertain to, much less dictate,
how and when petitioner will blow the whistle and make calls.
On the contrary, they merely serve as rules of conduct or
guidelines in order to maintain the integrity of the professional
basketball league. As correctly observed by the Court of
Appeals, "how could a skilled referee perform his job without
blowing a whistle and making calls? . . . [H]ow can the PBA
control the performance of work of a referee without controlling
his acts of blowing the whistle and making calls?" 20  CHaDIT

In Sonza v. ABS-CBN Broadcasting

Corporation, 21 which determined the relationship between a
television and radio station and one of its talents, the Court held
that not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former. The Court
held:
We find that these general rules are merely
guidelines towards the achievement of the mutually
desired result, which are top-rating television and radio
programs that comply with standards of the industry. We
have ruled that:
Further, not every form of control that a
party reserves to himself over the conduct of the
other party in relation to the services being
rendered may be accorded the effect of
establishing an employer-employee relationship.
The facts of this case fall squarely with the case
of Insular Life Assurance Co., Ltd. v. NLRC. In
said case, we held that:
Logically, the line should be drawn
between rules that merely serve as
guidelines towards the achievement of the
mutually desired result without dictating the
means or methods to be employed in
attaining it, and those that control or fix the
methodology and bind or restrict the party
hired to the use of such means. The first,
which aim only to promote the result,
create no employer-employee relationship
unlike the second, which address both the
result and the means used to achieve it. 22
We agree with respondents that once in the playing
court, the referees exercise their own independent judgment,
based on the rules of the game, as to when and how a call or
decision is to be made. The referees decide whether an
infraction was committed, and the PBA cannot overrule them
once the decision is made on the playing court. The referees
are the only, absolute, and final authority on the playing court.
Respondents or any of the PBA officers cannot and do not
determine which calls to make or not to make and cannot
control the referee when he blows the whistle because such
authority exclusively belongs to the referees. The very nature of
petitioner's job of officiating a professional basketball game
undoubtedly calls for freedom of control by respondents.
Moreover, the following circumstances indicate that
petitioner is an independent contractor: (1) the referees are
required to report for work only when PBA games are
scheduled, which is three times a week spread over an average
of only 105 playing days a year, and they officiate games at an
average of two hours per game; and (2) the only deductions
from the fees received by the referees are withholding taxes.  IaAEHD

In other words, unlike regular employees who ordinarily

report for work eight hours per day for five days a week,
petitioner is required to report for work only when PBA games
are scheduled or three times a week at two hours per game. In
addition, there are no deductions for contributions to the Social
Security System, PhilHealth or Pag-Ibig, which are the usual
deductions from employees' salaries. These undisputed
circumstances buttress the fact that petitioner is an
independent contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares
that a referee is an independent contractor, whose special skills
and independent judgment are required specifically for such
position and cannot possibly be controlled by the hiring party.
In Yonan v. United States Soccer Federation, Inc., 23 the
United States District Court of Illinois held that plaintiff, a soccer
referee, is an independent contractor, and not an employee of
defendant which is the statutory body that governs soccer in the
United States. As such, plaintiff was not entitled to protection by
the Age Discrimination in Employment Act. The U.S. District
Court ruled:
Generally, "if an employer has the right to control
and direct the work of an individual, not only as to the
result to be achieved, but also as to details by which the
result is achieved, an employer/employee relationship is
likely to exist." The Court must be careful to distinguish
between "control[ling] the conduct of another party
contracting party by setting out in detail his obligations"
consistent with the freedom of contract, on the one hand,
 and "the discretionary control an employer daily
exercises over its employee's conduct" on the other.
Yonan asserts that the Federation "closely
supervised" his performance at each soccer game he
officiated by giving him an assessor, discussing his
performance, and controlling what clothes he wore while
on the field and traveling. Putting aside that the
Federation did not, for the most part, control what clothes
he wore, the Federation did not supervise Yonan, but
rather evaluated his performance after matches. That the
Federation evaluated Yonan as a referee does not mean
that he was an employee. There is no question that
parties retaining independent contractors may judge the
performance of those contractors to determine if the
contractual relationship should continue. . . .
It is undisputed that the Federation did not control
the way Yonan refereed his games. He had full discretion
and authority, under the Laws of the Game, to call the
game as he saw fit. . . . In a similar vein, subjecting
Yonan to qualification standards and procedures like the
Federation's registration and training requirements does
not create an employer/employee relationship. . . .
A position that requires special skills and
independent judgment weights in favor of independent
contractor status. . . . Unskilled work, on the other hand,
suggests an employment relationship. . . . Here, it is
undisputed that soccer refereeing, especially at the
professional and international level, requires "a great
deal of skill and natural ability." Yonan asserts that it was
the Federation's training that made him a top referee,
and that suggests he was an employee. Though
substantial training supports an employment inference,
that inference is dulled significantly or negated when the
putative employer's activity is the result of a statutory
requirement, not the employer's choice. . . . ECDAcS

In McInturff v. Battle Ground Academy of Franklin, 24 it

was held that the umpire was not an agent of the Tennessee
Secondary School Athletic Association (TSSAA), so the player's
vicarious liability claim against the association should be
dismissed. In finding that the umpire is an independent
contractor, the Court of Appeals of Tennesse ruled: 
 The TSSAA deals with umpires to achieve a
result-uniform rules for all baseball games played
between TSSAA member schools. The TSSAA does not
supervise regular season games. It does not tell an
official how to conduct the game beyond the framework
established by the rules. The TSSAA does not, in the
vernacular of the case law, control the means and
method by which the umpires work.
In addition, the fact that PBA repeatedly hired petitioner
does not by itself prove that petitioner is an employee of the
former. For a hired party to be considered an employee, the
hiring party must have control over the means and methods by
which the hired party is to perform his work, which is absent in
this case. The continuous rehiring by PBA of petitioner simply
signifies the renewal of the contract between PBA and
petitioner, and highlights the satisfactory services rendered by
petitioner warranting such contract renewal. Conversely, if PBA
decides to discontinue petitioner's services at the end of the
term fixed in the contract, whether for unsatisfactory services,
or violation of the terms and conditions of the contract, or for
whatever other reason, the same merely results in the non-
renewal of the contract, as in the present case. The non-
renewal of the contract between the parties does not constitute
illegal dismissal of petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the
assailed decision of the Court of Appeals. THaAEC

SO ORDERED.
Brion, Del Castillo,  * Perez and Sereno, JJ., concur.
 

Footnotes

*Designated Acting Member per Special Order No. 1077 dated 12

September 2011.
1.Under Rule 45 of the Rules of Court.
2.Rollo, pp. 73-83. Penned by Associate Justice Magdangal M. De Leon
with Associate Justices Jose C. Reyes, Jr. and Ricardo R. Rosario,
concurring.
3.Id. at 85-86. In the same resolution, the Court of Appeals granted the
Motion to Withdraw motion for reconsideration filed by Renato
 Guevarra, another referee and petitioner's co-respondent in the Court
of Appeals, rendering the decision of the Court of Appeals final as to
him.
4.Id. at 74-75.
5.Id. at 111-147.
6.Teresita D. Castillon-Lora.
7.Rollo, p. 147.
8.Id. at 87-94. Penned by Presiding Commissioner Gerardo C. Nograles
with Commissioners Perlita B. Velasco and Romeo L. Go, concurring.
9.Id. at 93.
10.Id. at 83.
11.Id. at 78-79, 81.
12.Id. at 150.
13.Philemploy Services and Resources, Inc. v. Rodriguez, G.R. No. 152616,
31 March 2006, 486 SCRA 302, 321.
14.Id.; Spouses Aguilar v. Court of Appeals, 369 Phil. 655, 661 (1999).
15.Spouses Aguilar v. Court of Appeals, supra at 662, citing De la Cruz v.
De la Cruz, 160 SCRA 361 (1988).
16.Spouses Aguilar v. Court of Appeals, supra at 662, citing Barrameda v.
Castillo, 168 Phil. 170, (1977).
17.Barrameda v. Castillo, 168 Phil. 170, 173 (1977).
18.Sycip Gorres Velayo & Company v. De Raedt, G.R. No. 161366, 16 June
2009, 589 SCRA 160, 167.
19.Id.; Sonza v. ABS-CBN Broadcasting Corporation, G.R. No. 138051, 10
June 2004, 431 SCRA 583, 594-595.
20.Rollo, p. 78.
21.Supra note 19.
22.Id. at 603-604.
23.Case No. 09 C 4280, 22 June 2011 (citations omitted).
24.Not Reported in S.W.3d, 2009 WL 4878614 Tenn.Ct.App., 2009. No.
M2009-00504-COA-R3-CV, 16 December 2009. 
 (Bernarte v. Philippine Basketball Association, G.R. No. 192084, [September
|||

14, 2011], 673 PHIL 384-399)

[G.R. No. 159469. June 8, 2005.]

ZALDY G. ABELLA AND THE MEMBERS OF

THE PLDT SECURITY PERSONNEL UNION LISTED IN ANNEX
"D" OF THIS PETITION, petitioners, vs. PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY (PLDT CO.) and
PEOPLE'S SECURITY INC. (PSI), respondents.

RESOLUTION

CHICO-NAZARIO, J  : p

This case stemmed from a complaint for regularization filed by

petitioners 1 against respondents before the Arbitration Branch of the National
Labor Relations Commission (NLRC). The petition for review at bar assails the
decision 2 of the Court of Appeals, affirming the decision 3 of the NLRC,
sustaining the earlier Decision 4 of the Labor Arbiter dismissing petitioners'
complaint against the Philippine Long Distance Telephone Company (PLDT) and
herein respondent People's Security Incorporated (PSI).
The dispute arose from the following factual milieu:
Respondent PSI entered into an agreement with the PLDT to provide the
latter with such number of qualified uniformed and properly armed security
guards for the purpose of guarding and protecting PLDT's installations and
properties from theft, pilferage, intentional damage, trespass or other unlawful
acts. Under the agreement, it was expressly provided that there shall be no
employer-employee relationship between the PLDT and the security guards,
which may be supplied to it by PSI, and that the latter shall have the entire
charge, control and supervision over the work and services of the supplied
security guards. It was likewise stipulated therein that PSI shall also have the
exclusive authority to select, engage, and discharge its security guards, with full
control over their wages, salaries or compensation.
Consequently, respondent PSI deployed security guards to
the PLDT. PLDT's Security Division interviewed these security guards and asked
them to fill out personal data sheets. Those who did not meet the height
requirements were sent back by PLDT to PSI.  aDICET
 On 05 June 1995, sixty-five (65) security guards supplied by respondent
PSI filed a Complaint 5 for regularization against the PLDT with the Labor Arbiter.
The Complaint alleged inter alia that petitioner security guards have been
employed by the company through the years commencing from 1982 and that all
of them served PLDT directly for more than 1 year. It was further alleged that PSI
or other agencies supply security to PLDT, which entity controls and supervises
the complainants' work through its Security Department. Petitioners likewise
alleged that PSI acted as the middleman in the payment of the minimum pay to
the security guards, but no premium for work rendered beyond eight hours was
paid to them nor were they paid their 13th month pay. In sum, the Complaint
states that inasmuch as the complainants are under the direct control and
supervision of PLDT, they should be considered as regular employees by the
latter with compensation and benefits equivalent to ordinary rank-and-file
employees of the same job grade.
Forthwith, after filing the complaint, the security guards formed
the PLDT Company Security Personnel Union with petitioner Zaldy Abella as
union president. A month later, PLDT allegedly ordered PSI to terminate about
25 members of said union who participated in a protest picket in front of
the PLDT Office at the Ramon Cojuangco Building in Makati City.
The Labor Arbiter dismissed the complaint for lack of merit. On appeal, the
NLRC affirmed in toto the Labor Arbiter's decision.
The Court of Appeals, in turn, affirmed the NLRC's disquisition. 6 According
to the Court of Appeals, evidence demonstrates that it is respondent PSI which is
petitioners' employer, not the PLDT inasmuch as the power of selection over the
guards lies with the former. The Court of Appeals also took cognizance of the
fact that petitioners have collected their wages from PSI. 7
On 29 September 2003, this Court denied the petition for review filed by
petitioners assailing the Court of Appeals' Decision for lack of verified statement
of material date of receipt of the assailed judgment. On 16 March 2005, the Court
resolved to deny the motion for reconsideration for lack of merit and sufficient
showing that the Court of Appeals had committed any reversible error in the
questioned judgment to warrant the exercise by this Court of its discretionary
appellate jurisdiction.
Undaunted, petitioners moved for reconsideration of our Resolution dated
16 March 2005. Petitioners now urge this Court to ignore technicalities and brush
aside the procedural requirements so this case may be decided "on the merits."
On the postulate that dismissal of appeals based on mere technicalities is
frowned upon, we take another look at this petition for review to quell all doubts
that the Court is impervious to petitioners' cause. Cautious as we are against
rendering a decision that may well be a "blow on the breadbasket of our lowly
employees," 8 we are hence rendering a complete adjudication of this case at
bar.
Crucial to the resolution of this case is a determination whether or not an
employer-employee relationship exists between petitioners and
respondent PLDT.  SacTAC

Philippine Airlines, Inc.  v. National Labor Relations Commission  9  provides

the legal yardstick in addressing this issue. In that case, Unicorn Security
Services, Inc. (USSI) and Philippine Airlines, Inc. (PAL) executed a security
service agreement where USSI was designated therein as the contractor. In
determining which between PAL and USSI is the employer of the security
guards, we considered the following factors in considering the existence of an
employer-employee relationship: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power to dismiss; and (4) the power
to control the employee's conduct. Considering these elements, we held in the
said case that the security guards of PAL were the employees of the security
agency, not PAL. We explained why —
In the instant case, the security service agreement between PAL
and USSI provides the key to such consideration. A careful perusal
thereof, especially the terms and conditions embodied in paragraphs 4,
6, 7, 8, 9, 10, 13 and 20 quoted earlier in this ponencia, demonstrates
beyond doubt that USSI — and not PAL — was the employer of the
security guards. It was USSI which (a) selected, engaged or hired and
discharged the security guards; (b) assigned them to PAL according to
the number agreed upon; (c) provided, at its own expense, the security
guards with firearms and ammunitions; (d) disciplined and supervised
them or controlled their conduct; (e) determined their wages, salaries,
and compensation; and (f) paid them salaries or wages. Even if we
disregard the explicit covenant in said agreement that "there exists no
employer-employee relationship between CONTRACTOR and/or his
guards on the one hand, and PAL on the other" all other considerations
confirm the fact that PAL was not the security guards' employer.
(Emphasis supplied)
On the first factor, applying PAL  v. NLRC as our guidepost in the case
before us, the Labor Arbiter, the NLRC and the Court of Appeals rendered a
consistent finding based on the evidence adduced that it was the PSI, the
security provider of the PLDT, which selected, engaged or hired and discharged
the security guards. The Labor Arbiter was no less emphatic —
It is not disputed that complainants applied for work with PSI,
submitted the necessary employment documentary requirement with PSI
and executed employment contracts with PSI. Complainants, however,
contend that their referral by the PSI to PLDT for further interview and
 evaluation falls under the context of "selection and engagement" thereby
making them employees of PLDT.
We are not convinced.
Testimonies during the trial reveal that interviews and evaluation
were conducted by PLDT to ensure that the standards it set are met by
the security guards. In fact, PLDT rarely failed to accept security guards
referred to by PSI but on account of height deficiency. The referral is
nothing but for possible assignment in a designated client which has the
inherent prerogative to accept and reject the assignee for justifiable
grounds or even arbitrarily. We are thus convinced that the employer-
employee relationship is deemed perfected even before the posting of
the complainants with the PLDT, as assignment only comes after
employment. 10
We hasten to add on this score that the Labor Arbiter as well as the NLRC
and the Court of Appeals found that PSI is a legitimate job contractor pursuant
to Section 8, Rule VII, Book II of the Omnibus Rules Implementing the Labor
Code. It is a registered corporation duly licensed by the Philippine National Police
to engage in security business. It has substantial capital and investment in the
form of guns, ammunitions, communication equipments, vehicles, office
equipments like computer, typewriters, photocopying machines, etc., and above
all, it is servicing clients other than PLDT like PCIBank, Crown Triumph, and
Philippine Cable, among others. 11 Here, the security guards which PSI had
assigned to PLDT are already the former's employees prior to assignment and if
the assigned guards to PLDT are rejected by PLDT for reasons germane to the
security agreement, then the rejected or terminated guard may still be assigned
to other clients of PSI as in the case of Jonathan Daguno who was posted
at PLDT on 21 February 1996 but was subsequently relieved therefrom and
assigned at PCIBank Makati Square effective 10 May 1996. 12 Therefore, the
evidence as it stands is at odds with petitioners' assertion that PSI is an "in-
house" agency of PLDT so as to call for a piercing of veil of corporate identity as
what the Court has done in De leon, et al.  vs. NLRC and Fortune Tobacco
Corporation, et al. 13
On the second factor, the Labor Arbiter as well as the NLRC and the Court
of Appeals are all in agreement that it is PSI that determined and paid the
petitioners' wages, salaries, and compensation. As elucidated by the Labor
Arbiter, petitioners' witness testified that his wages were collected and withdrawn
at the office of PSI and PLDT pays PSI for the security services on a lump-sum
basis and that the wages of complainants are only a portion of the total sum. The
signature of the PLDT supervisor in the Daily Time Records does not ipso
facto make PLDT the employer of complainants inasmuch as the Labor Arbiter
had found that the record is replete with evidence showing that some of the Daily
Time Records do not bear the signature of a PLDT supervisor yet no complaint
was lodged for nonpayment of the guard's wages evidencing that the signature of
the PLDT's supervisor is not a condition precedent for the payment of wages of
the guards. Notably, it was not disputed that complainants enjoy the benefits and
incentives of employees of PSI and that they are reported as employees of PSI
with the SSS. 14
 
Anent the third and fourth factors, petitioners capitalize on the delinquency
reports prepared by PLDT personnel against some of the security guards as well
as certificates of participation in civil disturbance course, certificates of
attendance in first aid training, certificate of completion in fire brigade training
seminar and certificate of completion on restricted land mobile radio telephone
operation to show that the petitioners are under the direct control and supervision
of PLDT and that the latter has, in fact, the power to dismiss them. acCITS

The Labor Arbiter found from the evidence that the delinquency reports
were nothing but reminders of the infractions committed by the petitioners while
on duty which serve as basis for PLDT to recommend the termination of the
concerned security guard from PLDT. As already adverted to earlier, termination
of services from PLDT did not ipso facto mean dismissal from PSI inasmuch as
some of those pulled out from PLDT were merely detailed at the other clients of
PSI as in the case of Jonathan Daguno, who was merely transferred to PCIBank
Makati.
We are likewise in agreement with the Labor Arbiter's reasoning that said
delinquency reports merely served as justifiable, not arbitrary, basis for PLDT to
demand replacement of guards found to have committed infractions while on
their tours of duty at PLDT's premises. In Citytrust Banking Corporation  v.
NLRC, 15 we upheld the validity of the contract between ADAMS and ESSI to
provide security guards to Citytrust and held that the security guards were the
employees of the security agencies, not Citytrust. Specifically we held as valid
and controlling the stipulation that the bank has the option to ask for replacement
of the guards or personnel assigned to the bank who, in its judgment, are
unsatisfactory, wanting in the performance of their duties or for any reason at the
discretion of the bank. Thus —
In substantially identical language, the contracts between
CITYTRUST, on the one hand, and ADAMS and ESSI, on the other,
unequivocally declare that any person that may be assigned by the
"CARRIER" (agency) to carry out its obligation under the Agreement
should in no sense be considered an employee of the bank and shall
always remain an employee of the CARRIER. The contracts moreover
require the CARRIER to give the bank a list of personnel assigned to
render security services to the bank, and make clear that:
 1) the CARRIER shall maintain efficient and effective discipline,
control and supervision over any and all guards or personnel it may
utilize in performing its obligations under the Agreement;
2) the BANK has the option to ask for the replacement of the
CARRIER's guards or personnel assigned to the BANK who, in its
judgment, are unsatisfactory, wanting in the performance of their duties
or for any reason at the discretion of the Bank;. . . . 16 (Emphasis
supplied)
As regards the seminars, we defer to the findings of the Labor Arbiter as
affirmed by the NLRC and the Court of Appeals that while said seminars were
conducted at the premises of PLDT, it also remains uncontroverted that
complainants' participation was done with the approval and at the expense of
PSI. 17 To be sure, it is not uncommon, specially for big aggressive corporations
like PLDT, to align or integrate their corporate visions and policies externally or
with that of other entities they deal with such as their suppliers, consultants, or
contractors, for that matter. As a case in point, manufacturing companies usually
hold suppliers' conferences to integrate their suppliers' corporate goals and
visions with their own so that the manufacturing companies are ensured of the
quality and timing of their supplies of materials or services, as the case may be. It
is therefore not surprising that PLDT would demand that security guards
assigned to its premises undergo seminars and trainings on certain areas of
concern which are unique to PLDT.  CITDES

In the same way, it is in the ordinary course of things for big companies
such as PLDT to assign their own security personnel and supervisors to monitor
the performance of the security guards as part of the company's internal check,
monitoring and control system in order to rate whether the security agency it
hired is performing at par with PLDT's set standards.
Furthermore, petitioners' logic that the certificates of appreciation and/or
commendations for good performance issued by PLDT to select security guards
are proof that the latter are under the control and supervision of PLDT is
indeed non sequitur. As the Labor Arbiter has found, similar certificates are also
issued as a matter of practice to non-PLDT personnel like members of the
Philippine National Police (PNP) and military officers who have rendered
exemplary support and assistance to PLDT. 18
The Labor Arbiter likewise rendered the distinct finding as regards
petitioner Zaldy Abella that documentary evidence belies his claim
that PLDT directs and supervises him. These documents include his application
for employment with PSI, employment contract with PSI, Special Orders of
assignment at the different detachments of PLDT issued by a certain Joreim
Aguilar of PSI, his request to PSI for sick leaves and/or vacation leaves, authority
to deduct from his salary death contributions pursuant to the policy of PSI and
Order of Relief from PLDT Marikina for AWOL issued by said Joreim Aguilar of
PSI per Special Order dated 12 June 1995. 19 Similarly, as found by the Labor
Arbiter in the case of petitioner Roberto Basilides, his 201 file reflects PSI Orders
on his assignment to PLDT installations and subsequent reassignment to another
PCIB client. 20
All told, there being no showing that neither the Labor Arbiter nor the
NLRC nor the Court of Appeals gravely abused its discretion or otherwise acted
without jurisdiction or in excess of the same, 21 this Court is bound by their
findings of facts. Indeed, the records reveal that the questioned decision is duly
supported by evidence. 22
In fine, while the Constitution is committed to the policy of social justice
and the protection of the working class, it should not be supposed that every
labor dispute will be automatically decided in favor of labor. The partiality for
labor has not in any way diminished our belief that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable
law and doctrine. 23
WHEREFORE, petitioners' motion for reconsideration of our Resolution
dated 16 March 2005 is hereby DENIED with FINALITY no compelling reason
having been adduced by petitioners to warrant the reversal thereof. Accordingly,
the Decision dated 31 January 2003 and the Resolution dated 06 August 2003 of
the Court of Appeals are hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.
Puno, J., is on official leave.
 
Footnotes
1.Annex D consists of the following: Rogelio Abbariao, Zaldy G. Abella, Leodegario
Aborde, Wilson A. Abuyabor, Edralin Acacio, Federico Acelo, Restituto Acelo,
Rolando S. Acosta, Enrico Adalla, Abdul Khair Adapun, Candidato Adapun,
Ricardo L. Adarayan, Franklin Adelante, Danilo Adrao, Macario B. Afable, Alipio
Aguila, Rogelio A. Agustin, Leonardo Ajero, Jose Alafriz, Dioscoro O.
Alcanzado, Mario O. Alcanzado, Wheno Alcanzado, Federico Alcrates, James
Alejandro, Baltazar Allayban, Ronnie Almanza, William S. Alicante, Wilfredo
Alicio, Justo J. Albay, Ricardo Altarejos, Clodualdo Altea, Wilfredo Alzona,
James Amar, Sarsenito Amarillo, Glicerio Ambas, Nasser S. Amil, Reynaldo
Ancheta, Alfredo Andrade, Diomedes Andrade, Noel Andrade, Sabiniano
Andrade, Carlos C. Angeles, Joven Antang, Severino Antonio, Alfredo Aquino,
Andres Aquino, Jr., Raneo B. Aquino, Rodolfo C. Aquino, Mario V. Arel,
Alexander A. Armas, Jose Arly L. Artus, Vicente V. Atining, Canuto Ausa,
Rolando P. Avecilla, Pedro C. Aviles, Edgar Ayento, Diosdado B. Azeta,
Ronnie L. Baccay, Martin Bacea, Alden C. Bactat, Julio D. Badahos, Antonio
Badal, Maxwell Bagsican, Manito Baguno, Eduardo Bailon, Cesar Bairoy, Noel
M. Bianes, Dante D. Bajaro, Danilo L. Baladhay, Joseph L. Balahadia, Cesar
Balano, Ulmar Baldevieso, Dominador M. Balicha, Ferdinand C. Balingit, Pio
Balladares, Felino M. Baluan, Orlineo A. Balunes, Simeon Baraero, Marion R.
Barbero, Ronnie Barbero, Felix U. Barsana, Jr., Renato P. Basa, Magno P.
Battung, Armin A. Bausa, Gumercindo S. Bayonla, Urbanito M. Bayonla,
Herbert N. Bazon, Rodrigo B. Belleza, Jr., Loreto M. Benavidez, Edmundo B.
Berces, Henry A. Bernas, Julardo G. Bernal, Noel M. Bianes, Arnel Billones,
Vicente Blanquera, Darlo B. Bitara, Fernando Bobijes, Augusto N. Bolo, Lemuel
M. Bongcales, Wilfredo M. Boquiren, Rogelio A. Borbon, Antonio Borden,
Herman Borras, Geronimo B. Bosque, Gregorio T. Buenaflor, Emmanuel A.
Bueta, Lope S. Bugawan, Oscar Bulatao, Elmer C. Bunag, Mario B. Bunag,
Gorgonio D. Buslon, Bonifacio A. Cabbaccan, Danilo Cabajes, Efren O.
Cabatan, Abelardo Cabias, Napoleon Cabigon, Arnulfo V. Cabojoc, Renan
Cadiz, Orlando P. Calauad, Rodolfo N. Cainap, Leodegario Camacam,
Reynaldo Camero, Generoso P. Canillo, Rey R. Cano, Edgardo Capasalan,
Gilbert Capuchino, Silverio A. Carabit, Renelito Caracas, Josefino G. Cardona,
Ramon P. Cartagena, Arturo O. Casaclang, Francisco Casiao, Roderick
Casiano, William Casimiro, Crisanto Castillo, Jimmy Castillo, Juanito M.
Castillo, Ramon Castillo, Mateo P. Castro, Sabas F. Cataluna, Eudardo F.
Catapia, Francisco F. Catapia, Renato B. Cawile, Ronald B. Cayao, Alfredo S.
Cerda, Roberto A. Clemente, Alejandro M. Codelana, Enrique P. Collado,
Antonino M. Concepcion, Randy Concigna, Elizalde R. Concina, Jose
Constante, Joselito Constante, Calixto Cornelia, Henry A. Corpuz, Eduardo
Corpuz, Rodolfo N. Cortillo, Pablo P. Crizaldo, Rolando V. Cruz, Nestor M.
Dacanay, Villamor M. Dacumos, Rolando B. Dadap, Pedro P. Daguno, Jr.,
Reynaldo D. Dalipe, Ruel R. Dalumpines, Orlando A. Damnay, Jeorge
Daquioag, Jerry Daquioag, Jhonny Dawang, Albert B. De Guzman, Florentino
De Guzman, Marlon B. De Guzman, Prudencio Degracia, Paolo R. De Jesus,
Serafin P. De Jesus, Rey C. De Leon, Jerry D. De La Cruz, Loreto L. De La
Cruz, Aquilino De La Puz, Ruel V. Del Campo, Edgardo Del Perdon, Arnel Del
Prado, Jeremias Delima, Ramonito Delluba, Romeo R. Deplomo, Vicente
Deza, Jose D. Diaz, Remy P. Dichosa, Charles Diestro, Generoso Dilapdilap,
Henry Discartin, Nelson D. Doble, Bernardo Donayre, Jr., Romeo Dugam,
Randy Dugayo, Rodrigo V. Dumael, Bernardo Dumlao, Cipriano C. Dumo, Jose
Durana, Jr., Eduardo D. Ebe, Florente Ellacer, Ruben C. Emillano, Joselito T.
Empeo, Ruben E. Emperio, Orlando A. Encarguez, Fermin G. Escanilla, Edwin
P. Escobar, Cesario S. Escueta, Samuel G. Esmeria, Nelson S. Espa, Elmer E.
Espano, Lorde G. Espanola, Danny D. Espilico, Ariel Esperancilla, Ricardo B.
Espiritu, Romeo Estrella, Romeo Estoya, Filnandino Evangelista, Joel T.
Evardo, Bobby Factularin, Benjamin Fadullo, Rosito V. Fajardo, Edgardo E.
Faller, Manuel G. Ferrer, Simeon P. Filarca, Danilo S. Flojemon, Esidro
Florendo, Gilmore Flores, Julius S. Flores, Rex Fernando, Ramon G. Fortuny,
Rodel M. France, Arturo G. Francisco, Ramon Juan P. Frando, Roberto L.
Fulgencio, Edilberto B. Gabion, Feliciano T. Gabrieles, Jr., Millanio G. Gallano,
Romeo Galpo, Louie Galvez, Valento Ganaban, Gerardo G. Gamboa, Stanley
I. Gandeza, Marvin G. Gatacelo, Owen S. Gatan, Lamberto Geli, Nelson M.
Gellido, Levy Rustom Gedrano, Angelito C. Gepulla, Felipe W. Gesulga,
Jeoffrey B. Gloriane, Joselito A. Go, Nestor R. Gonzale, Aurelio L. Gregas,
Emilio L. Gregas, Thelmo L. Gregas, Dante C. Guab, Pacifico G. Guab, Oscar
Guden, Erwin A. Gualter, Elizalde Gualter, Nelson S. Guevarra, Bonifacio
Gumal, Noel Hillana, Fresco M. Hombrebueno, Pablito O. Ibale, Emil O.
Ibanez, Luisito C. Indicio, Ramuel C. Indicio, Redentor Indicio, Jose P. Ilo,
Rodolfo C. Jaravata, Margarito Jerusalem, Venerando Jocson, Alfonso Joseph,
Crisencio Joseph, Ramon M. Julagting, Joel B. Justo, Apolinario A. Labastida,
Renato Latoza, Alexander C. Laurista, Felix Laurenciana, Crisanto S. Lave,
Richard D. Ledesma, Pepito Leonardo, Benjie C. Lobiano, Raul G. Locsin,
Jaime R. Loyola, Rey Lucrecio, Jesus Luna, Rosano C. Luy, Rolando Maban,
Ronaldo U. Mabelin, Edgardo S. Macalalad, Pascual A. Macawile, Rico A.
Madrigal, Jessie Maglantay, Henry G. Maglantay, Edgar L. Mahinay, Joel P.
Maines, Reynaldo Malaque, Saturnino C. Mamba, Felimon Mamotos, Leo
Magbanua, Leopoldo Mangilog, Jr., Felix B. Mangubat, Rolando A.
Mangurnong, Oscar Manio, Victor S. Manlangit, Cesario G. Mansueto, Joselito
Manzano, Danilo C. Maputol, Danilo M. Mara, Levy B. Marcaida, Abraham S.
Mariano, Bienvenido A. Margarito, Robert D. Matriano, Florencio M. Mateo,
Rolando S. Matulac, Leopoldo S. Mego, Crisostomo M. Mendoza, Jake A.
Mendoza, Efren Mercado, Edwin P. Merluza, Dieter E. Miana, Isidro Miole,
Elvin E. Mina, Jacinto Monteon, Jr., Julian Montemayor, Jr., Juan L. Montero,
Willie C. Morada, Ronaldo C. Morales, Enrico Moratin, Ronilo Morcoso, Edwin
R. Mosqueda, Wilfredo Motril, Bienvenido Mundoc, Alberto Mutia, Lamberto R.
Nalangan, Rodolfo O. Nantiza, Eriberto S. Narvato, James R. Natividad,
Jonathan Navarrete, Edgar M. Navarro, Jessie Nelmida, Ricardo S.
Nepomuceno, Constancio Nicolas, Agerico U. Nilo, Jose N. Nobleza, Abdon D.
Nofies, Guelberto Obina, Jr., Anatalio R. Obra, Lyndon F. Orisma, Ernesto C.
Odonel, Marcelino Olifernes, Dario B. Oliva, Jovito R. Oliva, Renato Oliva, Raul
R. Olmoguez, Voltaire Omas-as, Jonathan Onanad, Benito L. Ong, Alfredo A.
Onato, Rene A. Onato, Cesar D. Orcajada, Tirso C. Otable, Dante O. Pacheco,
Ernie Pacheco, Lito A. Padilla, Arnel C. Padillo, Shirylyne P. Pador, Gerrado
Pagaduan, Benito S. Pagauisan, Arturo I. Pales, Crisanto Parcasio, Adolfo
Reymundo Pascua, Leo M. Pascua, Lito M. Pascua, Roland Pasion, Cirpriano
Pasquin, Victor E. Patac, Angelito Patagan, Crispin Patdu, Renato T. Patiluna,
Ricardo M. Peligrino, Quirico Pelobueno, Manuel Penalosa, Jr., Wilfredo
Penalosa, Rodelio Penamante, Dominador Perez, Pablo Piad, Condrado
Pichay, Angelito Pigad, Macario E. Pigao, Joel M. Pila, Artemio Pilla, Cesar
Pinero, Erwin P. Ponciano, Benjamin Pontipiedra, Arnel Porras, Rey L. Porras,
Ernesto D. Pradas, Rene Praile, Dominador P. Primo, Placido Protacio,
Aquilino C. Puedan, Carlito B. Pulma, Joseph M. Punongbayan, Ulysses
Quebec, Martin S. Quilino, Noel G. Quinlat, Arcadio Rabago, Michael D.
Rabang, George B. RAganit, Johnson P. Ramallosa, Roger Ramallosa,
Rolando Ramos, Elmo A. Rebancos, Augusto R. Red, Romulo G. Redito,
 Bienvenido Reyes, Juanito T. Reyes, Eduarto Rio, Miguel Rios, Armando L.
Rivera, Nestor N. Rivera, Orlando O. Rodriguez, Ginny Rom, Crispin D.
Romero, Winnie R. Romero, Jess T. Rosalia, Antonio S. Roxas, Noel M.
Ricafort, Nestor M. Rubang, Jessie P. Rufo, Crispin R. Sabaldan, Felix R.
Sabaldan, Ramil N. Sacares, Domingo B. Sagot, Eduardo D. Salango, Arnold
San Juan, Nataniel Sanchez, Jesus Santilices, Francisco D. Santos, Jr.,
Manolito Santos, Val C. Sto. Tomas, Toribio H. Sarmiento, Arnel H.
Satumbaga, Dante S. Sauro, Pablo Sauro, Jr., Rolando S. Sauro, Federico D.
Seredio, Simplicio I. Siaga, Jr., Jonatahan J. Sira, Eliseo V. Siriban, Jesus
Soliman, Eduardo A. Solamillo, Dante C. Soriano, Pedro A. Soriano, Ariel Sta.
Cruz, Robert C. Sullesta, Aldino F. Tabaquero, Leonido R. Tabilog, Dante
Tabud, Domingo Tacdol, Harry P. Tagana, Roseller V. Tanglao, Bertuldo
Tanudra, Esteban S. Tapiru, Emilio N. Tarcy, Jr., Ruel A. Tashim, Jennifer
Telan, Rita C. Tio, Jose T. Togores, Albert N. Toledo, Clemente M. Tolentino,
Eddie Tomaquin, Irineo A. Torres, Robert M. Torres, Joe T. Tulod, Edwin
Tuliao, Elpedio A. Tuliao, Edgar M. Tumala, Gavino P. Uddon, Jr., Ignacio G.
Umapas, Roland Uyan, Sanny C. Valde, Carlito B. Valdez, Allan B. Valencia,
Jr., Diolito A. Valencia, Manuel B. Valida, Juvy Venteroso, Sanny Venteroso,
Frego Verdera, Glicerio M. Vicedo, Vincent S. Vicedo, Mariano J. Vico, Ramon
Villaflor, Segundino L. Villaflor, Pepito Villanueva, Jimmy Villarosa, Andres
Villaraza, Daniel T. Villarey, Danilo Villarma, Thor B. Villasana, Juanito V. Viray,
Larry Villedo, Epifanio F. Yakiy, Pablo Yepes, Norberto Ymalay, Julius C.
Yuson, Winnie Ybalane, Glen Zeque.
 
2.Dated 31 January 2003; Penned by then Court of Appeals now Supreme Court
Associate Justice Cancio C. Garcia, with Associate Justices Eloy R. Bello, Jr.
and Sergio L. Pestaño concurring. Rollo, pp. 121-133.
3.Dated 31 July 2001; Penned by Presiding Commissioner Lourdes C. Javier, with
Commissioner Tito F. Genilo, concurring, and Commissioner Ireneo B.
Bernardo, on leave. Rollo, pp. 73-85.
4.Dated 27 July 1999; Penned by Labor Arbiter Geobel A. Bartolabac. Rollo, pp. 38-
50.
5.Rollo, pp. 34-35.
6.Rollo, pp. 121-133.
7.Rollo, pp. 132-133.
8.J. Puno, Dissenting Opinion, Asia Brewery, Inc.  v. NLRC, G.R. No. 110241, 24 July
1996, 259 SCRA 185.
9.G.R. No. 120506, 28 October 1996, 263 SCRA 638.
10.Rollo, pp. 39-40.
11.Rollo, pp. 48-49.
 12.Rollo, p. 45, citing 201 file of Jonathan Daguno.
13.G.R. No. 112661, 30 May 2001.
14.Rollo, pp. 40-41.
15.G.R. No. 123318, 20 August 1998, 294 SCRA 496.
16.Id., p. 502.
17.Rollo, p. 46.
18.Rollo, p. 47.
19.Rollo, p. 46.
20.Rollo, p. 47.
21.Wyeth-Suaco Laboratories, Inc.  v. NLRC, G.R. No. 100658, 02 March 1993, 219
SCRA 356.
22.Asia Brewery, Inc.  v. NLRC, supra, note 8.
23.Lawin Security Services, Inc.  v. NLRC, G.R. No. 118536, 09 June 1997, 273
SCRA 132.
 (Abella v. Philippine Long Distance Telephone Co., G.R. No. 159469
|||

(Resolution), [June 8, 2005], 498 PHIL 762-775)

[G.R. No. 145443. March 18, 2005.]

RAQUEL P. CONSULTA, petitioner, vs. COURT OF APPEALS,
PAMANA PHILIPPINES, INC., RAZUL Z. REQUESTO, and
ALETA TOLENTINO,respondents.

DECISION

CARPIO, J  : p

The Case
This is a petition for review 1 assailing the Decision of 28 April 2000 and
Resolution of 9 October 2000 promulgated by
the Court of Appeals ("appellate court") 2 in CA-G.R. SP No. 50462. The
appellate court reversed the Resolution of the National Labor Relations
Commission ("NLRC") which in turn affirmed the Labor Arbiter's Decision.
The Antecedent Facts
 Pamana Philippines, Inc. ("Pamana") is engaged in health care business.
Raquel P. Consulta ("Consulta") was a Managing
Associate of Pamana. Consulta's appointment dated 1 December 1987 states:
We are pleased to formally confirm your appointment and confer upon
you the authority as MANAGING ASSOCIATE (MA) effective on
December 1, 1987 up to January 2, 1988. Your area of operation shall
be within Metro Manila. HATEDC

In this capacity, your principal responsibility is to organize, develop,

manage, and maintain a sales division and a full
complement of agencies and Health Consultants (HealthCons) and to
submit such number of enrollments and revenue attainments as may be
required of your position in accordance with pertinent Company policies
and guidelines. In pursuit of this objective, you are hereby tasked with
the responsibilities of recruiting, training and directing your Supervising
Associates (SAs) and the Health Consultants under their respective
agencies, for the purpose of promoting our corporate Love Mission.
In the performance of such duties, you are expected to uphold and
promote the Company's interests and good image and to abide by its
principles and established norms of conduct necessary and appropriate
in the discharge of your functions. The authority as MA likewise vests
upon you command responsibility for the actions of your SAs and
HealthCons; the Company therefore reserves the right to debit your
account for any accountabilities/financial obligations arising therefrom.
By your acceptance of this appointment, it is understood that you must
represent the Company on an exclusive basis, and must not engage
directly or indirectly in activities, nor become affiliated in official or
unofficial capacity with companies or organizations which compete or
have the same business as Pamana. It is further understood that his [sic]
self-inhibition shall be effective for a period of one year from
date of official termination with the Company arising from any cause
whatsoever.
In consideration of your undertaking the assignment and the
accompanying duties and responsibilities, you shall be entitled to
compensation computed as follows:
On Initial Membership Fee Entrance Fee 5%
  Medical Fee 6%
On Subsequent Membership Fee   6%
You are likewise entitled to participate in sales contests and such other
incentives that may be implemented by the Company.
This appointment is on a non-employer-employee relationship basis, and
shall be in accordance with the Company Guidelines on Appointment,
Reclassification and Transfer of Sales Associates. 3
 Sometime in 1987, Consulta negotiated with the Federation of Filipino
Civilian Employees Association ("FFCEA") working at the United States Subic
Naval Base for a Health Care Plan for the FFCEA members. Pamana
issued Consulta a Certification 4 dated 23 November 1987, as follows:
This certifies that the Emerald Group under Ms. Raquel
P. Consulta, as Managing Consultant, is duly authorized to negotiate for
and in behalf of PAMANA with the Federation of Filipino Civilian
Employees Association covering all U.S. facilities in the Philippines, the
coverage of FFCEA members under the Pamana Golden Care Health
Plans.  TaDSCA

Upon such negotiation and eventual execution of the contract

agreements, entitlements of all benefits due the Emerald Group in it's
[sic] entirely including it's [sic] Supervising Consultants and Health
Consultants, by of commissions, over-rides and other
package of benefits is hereby affirmed, obligated and confirmed as long
as the contracts negotiated and executed are in full force and effect,
including any and all renewals made. And provided further that the
herein authorized consultants remain in active status with the Pamana
Golden Care sales group. 5
On 4 March 1988, Pamana and the U.S. Naval Supply Depot signed the
FFCEA account. Consulta, claiming that Pamana did not pay her commission for
the FFCEA account, filed a complaint for unpaid wages or commission against
Pamana, its President Razul Z. Requesto ("Requesto"), and its Executive Vice-
President Aleta Tolentino ("Tolentino").
The Rulings of the Labor Arbiter and the NLRC
In a Decision promulgated on 23 June 1993, Labor Arbiter Alex Arcadio
Lopez ruled, as follows:
ACCORDINGLY, respondent is hereby ordered to pay
complainant her unpaid commission to be computed as against actual
transactions between respondent PAMANA and the contracting
Department of U.S. Naval Supply Depot upon presentation of pertinent
document.
Respondent is further ordered to pay ten (10%) percent attorney's
fees.
SO ORDERED. 6
Pamana, Requesto and Tolentino ("Pamana et al.") appealed the
Decision of the Labor Arbiter.  jur2005cda

In a Resolution 7 promulgated on 22 July 1994, the NLRC dismissed the

appeal and affirmed the Decision of the Labor Arbiter. In its Order promulgated
on 3 October 1994, the NLRC denied the motion for
reconsideration of Pamana et al.  CDAHIT

Pamana et al. filed a petition for certiorari before this Court. In compliance

with this Court's resolution dated 6 February 1995, the Office of the Solicitor
General submitted a Manifestation in Lieu of Comment praying to grant the
petition on the ground that Consulta was not an employee of Pamana. On 23
November 1998, this Court referred the case to the appellate court pursuant
to St. Martin Funeral Home v. NLRC.  8
The Decision of the Appellate Court
In its Decision promulgated on 28 April 2000, the appellate court reversed
the NLRC Decision. The appellate court ruled that Consulta was a commission
agent, not an employee of Pamana. The appellate court also ruled
that Consulta should have litigated her claim for unpaid commission in an
ordinary civil action.
Hence, Consulta's recourse to this Court.
The Issues
The issues are:
1. Whether Consulta was an employee of Pamana.
2. Whether the Labor Arbiter had jurisdiction over Consulta's claim
for unpaid commission.
The Ruling of the Court
We affirm the Decision of the appellate court. Consulta was an
independent agent and not an employee of Pamana.  IEHSDA

The Four-Fold Test

In Viaña v. Al-Lagadan,  9 the Court first laid down the four-fold test to
determine the existence of an employer-employee relationship. The four
elements of an employer-employee relationship, which have since been adopted
in subsequent jurisprudence,  10 are (1) the power to hire; (2) the
payment of wages; (3) the power to dismiss; and (4) the power to control. The
power to control is the most important of the four elements.
In Insular Life Assurance Co., Ltd. v. NLRC,  11 the Court explained the
scope of the power to control, thus:
. . . It should, however, be obvious that not every form of control that the
hiring party reserves to himself over the conduct of the party hired in
relation to the services rendered may be accorded the
effect of establishing an employer-employee relationship between them
in the legal or technical sense of the term. A line must be drawn
 somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would be
a rare contract of service that gives untrammelled freedom to the party
hired and eschews any intervention whatsoever in his
performance of the engagement.
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it,
and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the
second, which address both the result and the means used to achieve it.
In the present case, the power to control is missing. Pamana
tasked Consulta to organize, develop, manage, and maintain a sales division,
submit a number of enrollments and revenue attainments in accordance with
company policies and guidelines, and to recruit, train and direct her Supervising
Associates and Health Consultants. 12 However, the manner in
which Consulta was to pursue these activities was not subject to the
control of Pamana. Consulta failed to show that she had to report for work at
definite hours. The amount of time she devoted to soliciting clients was left
entirely to her discretion. The means and methods of recruiting and training her
sales associates, as well as the development, management and
maintenance of her sales division, were left to her sound judgment.
Consulta claims that the documents she submitted show that Pamana had
control on the conduct of her work and the means and methods to accomplish
the work. However, the documents only prove the absence of the power to
control. The Minutes of the meeting on 31 May 1988 of the Managing Associates
with Fely Whitfield, Vice-President for Sales of Pamana, reflect the following:
At this point Mrs. Whitfield gave some pointers on recruitment
and selling techniques and reminded the group that the success of an
agency is still people. The more recruits you have the better is your
chance to achieve your quota.
She also announced June be made a recruitment month, and told
the MAs to remind their associates that if you cannot sell to a prospect
then recruit him or her.
She also discussed extensively the survey method of selling and
recruitment and that the sales associates should be more aggressive in
their day to day sales activity. She reminded the MAs to fill up their
recruitment requirements to be able to participate in the monthly and
quarterly contest.
 
 xxx xxx xxx
4. Recruitment Campaign
In connection with the Recruitment Campaign for June, Mr. R.
Canon 13 requested for Management support. He suggested that a
recruitment Advertisement be placed in a leading Metropolitan daily
Newspaper. The cost of which was unanimously suggested by MAs that
Management should share at least 50%.  CITcSH

5. MAs agreed to pay in advance their share for the salary of the MAs
Secretary. 14 (Emphasis supplied)
The Minutes of the 7 June 1988 meeting reflect the following:
III. PRODUCTION & RECRUITMENT INCENTIVES
To help the MAs in their recruitment drive Mrs. Whitfield
suggested some incentives to be undertaken by the MAs like (1) cash
incentives for associates that bring in a recruit, (2) cash incentives based
on production brought in by these new recruits.
She said that MAs, as businessm[e]n should invest time, effort &
money to their work, because it will redown [sic] to their own good
anyway, that the success of their agency should not depend solely on
what management could give as incentives but also on
incentives of MAs within their agencies. It should be a concerted
effort. 
EHTCAa

After a thorough discussion on the pros & cons of the suggestions

it was agreed that a P10.00 per recruit be given to the associate that will
recruit and an additional cash prize based on production of these new
recruits. 15
Clearly, the Managing Associates only received suggestions from Pamana
on how to go about their recruitment and sales activities. They could adopt the
suggestions but the suggestions were not binding on them. They could adopt
other methods that they deemed more effective.
Further, the Managing Associates had to ask the Management of Pamana
to shoulder half of the advertisement cost for their recruitment campaign. They
shelled out their own resources to bolster their recruitment. They shared in the
payment of the salaries of their secretaries. They gave cash incentives to their
sales associates from their own pocket. These circumstances show that the
Managing Associates were independent contractors, not employees, of Pamana.
Finally, Pamana paid Consulta not for labor she performed but only for the
results of her labor. 16 Without results, Consulta's labor was her own burden and
loss. Her right to compensation, or to commission, depended on the tangible
results of her work 17 — whether she brought in paying recruits. Consulta's
appointment paper provides:
In consideration of your undertaking the assignment and the
accompanying duties and responsibilities, you shall be entitled to
compensation computed as follows:
On Initial Membership Fee Entrance Fee 5%
  Medical Fee 6%
On Subsequent Membership Fee   6%
You are likewise entitled to participation in sales contests and
such other incentives that may be implemented by the Company. 18
The Guidelines on Appointment of Associates show that a Managing
Associate received the following commissions and bonuses:
3. Compensation Package of Regular MAs
Regular MAs shall be entitled to the following compensation and
benefits:
         
3.1 Compensation    
         
  a) Personal Production    
         
      Individual/Family Institutional Acct.
    commission 30% 30%
    bonus 40% –
         
  b) Group Production    
    overriding commission 6% 6%
    bonus 5% –
       
3.2 Benefits    
Participation in all sales contests corresponding to the MA
position plus any such other benefits as may be provided for the MA on
regular status. 19
Aside from commissions, bonuses and other benefits that depended solely
on actual sales, Pamana did not pay Consulta any compensation for managing
her sales division, or for recruiting and training her sales consultants. As a
Managing Associate, she was only entitled to commissions, bonuses and other
benefits, which depended solely on her sales and on the sales of her group.
The Exclusivity Provision
 Consulta's appointment had an exclusivity provision. The appointment
provided that Consulta must represent Pamana on an exclusive basis. She must
not engage directly or indirectly in activities of other companies that compete with
the business of Pamana. However, the fact that the appointment
required Consulta to solicit business exclusively for Pamana did not mean that
Pamana exercised control over the means and methods of Consulta’s work as
the term control is understood in labor jurisprudence. 20 Neither did it
make Consulta an employee of Pamana. Pamana did not prohibit Consulta from
engaging in any other business, or from being connected with any other
company, for as long as the business or company did not compete with
Pamana's business.
The prohibition applied for one year after the termination of the contract
with Pamana. In one of their meetings, one of the Managing Associates reported
that he was transferring his sales force and account from another company to
Pamana. 21 The exclusivity provision was a reasonable restriction designed to
prevent similar acts prejudicial to Pamana's business interest. Article
1306 of the Civil Code provides that "[t]he contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order, or
public policy." 
EDISTc

Jurisdiction over Claim for Unpaid Commission

There being no employer-employee relationship between Pamana
and Consulta, the Labor Arbiter and the NLRC had no jurisdiction to entertain
and rule on Consulta's money claim.
Article 217 of the Labor Code provides:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. —
(a) Except as otherwise provided under this Code the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the case by the parties
for decision without extension, even in the absence of stenographic
notes, the following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay,
hours of work and other terms and
conditions of employment;
 4. Claims for actual, moral, exemplary and other
forms of damages arising from the employer-employee
relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts; and  DHSACT

6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising
from employer-employee relations, including
those of persons in domestic or household service,
involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a
claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction
over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or
implementation of collective bargaining agreements and those arising
from the interpretation or enforcement of company personnel policies
shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in
said agreements.
Consulta filed her action under Article 217(a)(6) of the Labor
Code.However, since there was no employer-employee relationship between
Pamana and Consulta, the Labor Arbiter should have dismissed Consulta’s claim
for unpaid commission. Consulta’s remedy is to file an ordinary civil action to
litigate her claim.
WHEREFORE, the petition is DISMISSED and the
Decision of the Court of Appeals in CA-G.R. SP No. 50462 is AFFIRMED in toto.
SO ORDERED.
Davide, Jr., C.J., Quisumbing, Ynares-Santiago and Azcuna, JJ., concur.
 
Footnotes
1.Under Rule 45 of the 1997 Rules of Civil Procedure.
2.Penned by Associate Justice Andres B. Reyes, Jr., with Associate Justices Fermin
A. Martin, Jr. and Romeo A. Brawner, concurring.
3.Rollo, p. 73.
4.Signed by its President Razul Z. Requesto.
 5.Rollo, p. 75.
6.Ibid., p. 64.
7.Penned by Commissioner Alberto R. Quimpo, with Presiding Commissioner
Bartolome S. Carale and Commissioner Vicente S.E. Veloso, concurring.
8.356 Phil. 811 (1998). CA Records, p. 193.
9.99 Phil. 408 (1956).
10.Sonza v. ABS-CBN Broadcasting Corporation, G.R. No. 138051, 10 June
2004; Abante v. Lamadrid, G.R. No. 159890, 28 May
2004; Sy v. Court of Appeals, 446 Phil. 404 (2003); Tiu v. NLRC, 324 Phil. 202
(1996).
11.G.R. No. 84484, 15 November 1989, 179 SCRA 459.
12.Rollo, p. 73.
13.Raul P. Canon is one of the Managing Associates.
14.Rollo, pp. 103, 105.
15.Ibid., p. 109.
16.See Investment Planning Corp. of the Phil. v. SSS, 129 Phil 143 (1967).
17.Ibid.
18.Rollo, p. 73.
19.Ibid., p. 79.
20.See AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January
1997, 267 SCRA 47.
21.Rollo, p. 99.
 (Consulta v. Court of Appeals, G.R. No. 145443, [March 18, 2005], 493 PHIL
|||

842-853)
[G.R. No. 165881. April 19, 2006.]

OSCAR VILLAMARIA,
JR., petitioner, vs. COURT OF APPEALS and JERRY V.
BUSTAMANTE, respondents.

DECISION

CALLEJO, SR., J  : p
 Before us is a Petition for Review on Certiorari under Rule
65 of the Revised Rules of Court assailing the Decision 1 and
Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set
aside the Resolution 3 of the National Labor Relations Commission (NLRC) in
NCR-30-08-03247-00, which in turn affirmed the Decision 4 of the Labor
Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a
sole proprietorship engaged in assembling passenger jeepneys with a public
utility franchise to operate along the Baclaran-Sucat route. By
1995, Villamaria stopped assembling jeepneys and retained only nine,
four of which he operated by employing drivers on a "boundary basis."
One of those drivers was respondent Bustamante who drove the jeepney with
Plate No. PVU-660. Bustamante remitted P450.00 a day to Villamaria as
boundary and kept the residue of his daily earnings as compensation for
driving the vehicle. In August 1997, Villamaria verbally agreed to sell the
jeepney to Bustamante under the "boundary-hulog scheme," where
Bustamante would remit to Villarama P550.00 a day for a period of four years;
Bustamante would then become the owner of the vehicle and continue to
drive the same under Villamaria's franchise. It was also agreed that
Bustamante would make a downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled "Kasunduan
ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog" 5 over the
passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C
and Motor No. SL-26647. The parties agreed that if Bustamante failed to pay
the boundary-hulog for three days, Villamaria Motors would hold on to the
vehicle until Bustamante paid his arrears, including a penalty of P50.00 a day;
in case Bustamante failed to remit the daily boundary-hulog for a
period of one week, the Kasunduan would cease to have legal effect and
Bustamante would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the
vehicle without prior authority from Villamaria Motors. Thus, Bustamante was
authorized to operate the vehicle to transport passengers only and not for
other purposes. He was also required to display an identification card in
front of the windshield of the vehicle; in case of failure to do so, any fine that
may be imposed by government authorities would be charged against his
account. Bustamante further obliged himself to pay for the cost of replacing
any parts of the vehicle that would be lost or damaged due to his negligence.
In case the vehicle sustained serious damage, Bustamante was obliged to
notify Villamaria Motors before commencing repairs. Bustamante was not
allowed to wear slippers, short pants or undershirts while driving. He was
required to be polite and respectful towards the passengers. He was also
obliged to notify Villamaria Motors in case the vehicle was leased for two or
more days and was required to attend any meetings which may be called from
time to time. Aside from the boundary-hulog, Bustamante was also obliged to
pay for the annual registration fees of the vehicle and the premium for the
vehicle's comprehensive insurance. Bustamante promised to strictly comply
with the rules and regulations imposed by Villamaria for the upkeep and
maintenance of the jeepney.  CTDacA

Bustamante continued driving the jeepney under the supervision and

control of Villamaria. As agreed upon, he made daily remittances of P550.00
in payment of the purchase price of the vehicle. Bustamante failed to pay for
the annual registration fees of the vehicle, but Villamaria allowed him to
continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same
arrangement with Villamaria Motors failed to pay their respective boundary-
hulog. This prompted Villamaria to serve a "Paalala," 6 reminding them that
under the Kasunduan, failure to pay the daily boundary-hulog for one week,
would mean their respective jeepneys would be returned to him without any
complaints. He warned the drivers that the Kasunduan would henceforth be
strictly enforced and urged them to comply with their obligation to avoid
litigation.
On July 24, 2000, Villamaria took back the jeepney driven by
Bustamante and barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint 7 for Illegal
Dismissal against Villamaria and his wife Teresita. In his Position
Paper, 8 Bustamante alleged that he was employed by Villamaria in July 1996
under the boundary system, where he was required to remit P450.00 a day.
After one year of continuously working for them, the
spouses Villamaria presented the Kasunduan for his signature, with the
assurance that he (Bustamante) would own the jeepney by March 2001 after
paying P550.00 in daily installments and that he would thereafter continue
driving the vehicle along the same route under the same franchise. He further
narrated that in July 2000, he informed the Villamaria spouses that the surplus
engine of the jeepney needed to be replaced, and was assured that it would
be done. However, he was later arrested and his driver's license was
confiscated because apparently, the replacement engine that was installed
was taken from a stolen vehicle. Due to negotiations with the apprehending
authorities, the jeepney was not impounded. The Villamaria spouses took the
jeepney from him on July 24, 2000, and he was no longer allowed to drive the
vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
 WHEREFORE, in the light of the foregoing, it is most respectfully
prayed that judgment be rendered ordering the respondents, jointly and
severally, the following:
1. Reinstate complainant to his former position without
loss of seniority rights and execute a Deed of Sale in favor of the
complainant relative to the PUJ with Plate No. PVU-660;
2. Ordering the respondents to pay backwages in the
amount of P400.00 a day and other benefits computed from July 24,
2000 up to the time of his actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00 and
P180,000.00 for the expenses incurred by the complainant in the repair
and maintenance of the subject jeep;
4. Ordering the respondents to refund the amount of One
Hundred (P100.00) Pesos per day counted from August 7, 1997 up to
June 2000 or a total of P91,200.00;
5. To pay moral and exemplary damages of not less than
P200,000.00;
6. Attorney's fee[s] of not less than 10% of the monetary award.
Other just and equitable reliefs under the premises are also being
prayed for. 9
In their Position Paper, 10 the spouses Villamaria admitted the
existence of the Kasunduan, but alleged that Bustamante failed to pay the
P10,000.00 downpayment and the vehicle's annual registration fees. They
further alleged that Bustamante eventually failed to remit the requisite
boundary-hulog of P550.00 a day, which prompted them to issue
the Paalaala. Instead of complying with his obligations, Bustamante stopped
making his remittances despite his daily trips and even brought the jeepney to
the province without permission. Worse, the jeepney figured in an accident
and its license plate was confiscated; Bustamante even abandoned the
vehicle in a gasoline station in Sucat, Parañaque City for two weeks. When
the security guard at the gasoline station requested that the vehicle be
retrieved and Teresita Villamaria asked Bustamante for the keys, Bustamante
told her: "Di kunin ninyo." When the vehicle was finally retrieved, the tires
were worn, the alternator was gone, and the battery was no longer
working. cIEHAC

Citing the cases of Cathedral School of Technology v.

NLRC 11 and Canlubang Security Agency Corporation v. NLRC, 12 the
spouses Villamaria argued that Bustamante was not illegally dismissed since
the Kasunduan executed on August 7, 1997 transformed the employer-
employee relationship into that of vendor-vendee. Hence, the spouses
concluded, there was no legal basis to hold them liable for illegal dismissal.
They prayed that the case be dismissed for lack of jurisdiction and patent
lack of merit.
In his Reply, 13 Bustamante claimed that Villamaria exercised control
and supervision over the conduct of his employment. He maintained that the
rulings of the Court in National Labor Union v. Dinglasan, 14 Magboo v.
Bernardo, 15 and Citizen's League of Free Workers v. Abbas 16 are germane
to the issue as they define the nature of the owner/operator-driver relationship
under the boundary system. He further reiterated that it was
the Villamaria spouses who presented the Kasunduan to him and that he
conformed thereto only upon their representation that he would own the
vehicle after four years. Moreover, it appeared that the Paalala was duly
received by him, as he, together with other drivers, was made to affix his
signature on a blank piece of paper purporting to be an "attendance sheet."
On March 15, 2002, the Labor Arbiter rendered judgment 17 in
favor of the spouses Villamaria and ordered the complaint dismissed on the
following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well
as the PAALALA, to prove their claim that complainant violated the
terms of their contract and afterwards abandoned the vehicle assigned
to him. As against the foregoing, [the] complaint's (sic) mere allegations
to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to
damages and attorney's fees. 18
Bustamante appealed the decision to the NLRC, 19 insisting that
the Kasunduan did not extinguish the employer-employee relationship
between him and Villamaria. While he did not receive fixed wages, he kept
only the excess of the boundary-hulog which he was required to remit daily
to Villamaria under the agreement. Bustamante maintained that he remained
an employee because he was engaged to perform activities which were
necessary or desirable to Villamaria's trade or business.
 

The NLRC rendered judgment 20 dismissing the appeal for lack of merit,

thus:
WHEREFORE, premises considered, complainant's appeal is
hereby DISMISSED for reasons not stated in the Labor Arbiter's decision
but mainly on a jurisdictional issue, there being none over the subject
matter of the controversy. 21
The NLRC ruled that under the Kasunduan, the juridical relationship
between Bustamante and Villamaria was that of vendor and vendee, hence,
the Labor Arbiter had no jurisdiction over the complaint. Bustamante filed a
Motion for Reconsideration, which the NLRC resolved to deny on May 30,
2003. 22
Bustamante elevated the matter to the CA via Petition for Certiorari,
alleging that the NLRC erred
I
IN DISMISSING PETITIONER'S APPEAL "FOR REASON NOT
STATED IN THE LABOR ARBITER'S DECISION, BUT MAINLY ON
JURISDICTIONAL ISSUE;"
II
IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE
WHEN IT DECLARED THAT THE RELATIONSHIP WHICH WAS
ESTABLISHED BETWEEN PETITIONER AND THE PRIVATE
RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND
THE PROTECTIVE MANTLE OF OUR LABOR LAWS. 23
Bustamante insisted that despite the Kasunduan, the relationship
between him and Villamaria continued to be that of employer-employee and
as such, the Labor Arbiter had jurisdiction over his complaint. He further
alleged that it is common knowledge that operators of passenger jeepneys
(including taxis) pay their drivers not on a regular monthly basis but on
commission or boundary basis, or even the boundary-hulog system.
Bustamante asserted that he was dismissed from employment without any
lawful or just cause and without due notice. STcDIE

For his part, Villamaria averred that Bustamante failed to adduce

proof of their employer-employee relationship. He further pointed out that
the Dinglasan case pertains to the boundary system and not the boundary-
hulog system, hence inapplicable in the instant case. He argued that upon the
execution of the Kasunduan, the juridical tie between him and Bustamante
was transformed into a vendor-vendee relationship. Noting that he was
engaged in the manufacture and sale of jeepneys and not in the
business of transporting passengers for consideration, Villamaria contended
that the daily fees which Bustmante paid were actually periodic installments
for the the vehicle and were not the same fees as understood in the boundary
system. He added that the boundary-hulog plan was basically a scheme to
help the driver-buyer earn money and eventually pay for the unit in full, and
for the owner to profit not from the daily earnings of the driver-buyer but from
the purchase price of the unit sold. Villamaria further asserted that the
apparently restrictive conditions in the Kasunduan did not mean that the
means and method of driver-buyer's conduct was controlled, but were mere
ways to preserve the vehicle for the benefit of both parties: Villamaria would
be able to collect the agreed purchase price, while Bustamante would be
assured that the vehicle would still be in good running condition even after
four years. Moreover, the right of vendor to impose certain conditions on the
buyer should be respected until full ownership of the property is vested on the
latter. Villamaria insisted that the parallel circumstances obtaining in Singer
Sewing Machine Company v. Drilon 24 has analogous application to the
instant issue.
In its Decision 25 dated August 30, 2004, the CA reversed and set aside
the NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the
impugned resolutions of the NLRC must be, as they are hereby
are, REVERSED AND SET ASIDE, and judgment entered in
favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to
pay petitioner Jerry Bustamante separation pay computed from
the time of his employment up to the time of termination based on
the prevailing minimum wage at the time of termination; and,
2. Condemning private respondent Oscar Villamaria, Jr. to
pay petitioner Jerry Bustamante back wages computed from the
time of his dismissal up to March 2001 based on the prevailing
minimum wage at the time of his dismissal.
Without Costs.
SO ORDERED. 26
The appellate court ruled that the Labor Arbiter had jurisdiction over
Bustamante's complaint. Under the Kasunduan, the relationship between him
and Villamaria was dual: that of vendor-vendee and employer-employee.
The CA ratiocinated that Villamaria's exercise of control over Bustamante's
conduct in operating the jeepney is inconsistent with the former's claim that he
was not engaged in the transportation business. There was no evidence that
petitioner was allowed to let some other person drive the jeepney.
The CA further held that, while the power to dismiss was not mentioned
in the Kasunduan, it did not mean that Villamaria could not exercise it. It
explained that the existence of an employment relationship did not depend on
how the worker was paid but on the presence or absence of control over the
means and method of the employee's work. In this case, Villamaria's
directives (to drive carefully, wear an identification card, don decent attire,
park the vehicle in his garage, and to inform him about provincial trips, etc.)
was a means to control the way in which Bustamante was to go about his
work. In view of Villamaria's supervision and control as employer, the fact that
the "boundary" represented installment payments of the purchase price on the
jeepney did not remove the parties' employer-employee relationship.
While the appellate court recognized that a week's default in paying the
boundary-hulog constituted an additional cause for terminating Bustamante's
employment, it held that the latter was illegally dismissed. According to
the CA, assuming that Bustamante failed to make the required payments as
claimed by Villamaria, the latter nevertheless failed to take steps to recover
the unit and waited for Bustamante to abandon it. It also pointed out
that Villamaria neither submitted any police report to support his claim that the
vehicle figured in a mishap nor presented the affidavit of the gas station guard
to substantiate the claim that Bustamante abandoned the unit.  SDTIaE

Villamaria received a copy of the decision on September 8, 2004, and

filed, on September 17, 2004, a motion for reconsideration thereof.
The CA denied the motion in a Resolution 27 dated November 2, 2004,
and Villamaria received a copy thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for
review on certiorari under Rule 65 of the Rules of Court, alleging that
the CA committed grave abuse of its discretion amounting to excess or
lack of jurisdiction in reversing the decision of the Labor Arbiter and the
NLRC. He claims that the CA erred in ruling that the juridical relationship
between him and respondent under the Kasunduan was a
combination of employer-employee and vendor-vendee relationships. The
terms and conditions of the Kasunduan clearly state that he and respondent
Bustamante had entered into a conditional deed of sale over the jeepney; as
such, their employer-employee relationship had been transformed into
that of vendor-vendee. Petitioner insists that he had the right to reserve his
title on the jeepney until after the purchase price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate
remedy of petitioner was an appeal via a petition for review on certiorari under
Rule 45 of the Rules of Court and not a special civil action of certiorari under
Rule 65. He argues that petitioner failed to establish that the CA committed
grave abuse of its discretion amounting to excess or lack of jurisdiction in its
decision, as the said ruling is in accord with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by
petitioner which provides for a boundary-hulog scheme was a devious
circumvention of the Labor Code of the Philippines. Respondent insists that
his juridical relationship with petitioner is that of employer-employee because
he was engaged to perform activities which were necessary or desirable in
the usual business of petitioner, his employer.
 In his Reply, petitioner avers that the Rules of Procedure should be
liberally construed in his favor; hence, it behooves the Court to resolve the
merits of his petition.
We agree with respondent's contention that the remedy of petitioner
from the CA decision was to file a petition for review on certiorari under Rule
45 of the Rules of Court and not the independent action of certiorari under
Rule 65. Petitioner had 15 days from receipt of the CA resolution denying his
motion for the reconsideration within which to file the petition under Rule
45. 28 But instead of doing so, he filed a petition for certiorari under Rule
65 on November 22, 2004, which did not, however, suspend the
running of the 15-day reglementary period; consequently, the CA decision
became final and executory upon the lapse of the reglementary period for
appeal. Thus, on this procedural lapse, the instant petition stands to be
dismissed. 29
It must be stressed that the recourse to a special civil action under Rule
65 of the Rules of Court is proscribed by the remedy of appeal under Rule 45.
As the Court elaborated in Tomas Claudio Memorial College,
Inc. v. Court of Appeals:  30
We agree that the remedy of the aggrieved party from a decision
or final resolution of the CA is to file a petition for review
on certiorari under Rule 45 of the Rules of Court, as amended, on
questions of facts or issues of law within fifteen days from notice of the
said resolution. Otherwise, the decision of the CA shall become final and
executory. The remedy under Rule 45 of the Rules of Court is a
mode of appeal to this Court from the decision of the CA. It is a
continuation of the appellate process over the original case. A review is
not a matter of right but is a matter of judicial discretion. The aggrieved
party may, however, assail the decision of the CA via a petition
for certiorari under Rule 65 of the Rules of Court within sixty days from
notice of the decision of the CA or its resolution denying the motion for
reconsideration of the same. This is based on the premise that in issuing
the assailed decision and resolution, the CA acted with grave
abuse of discretion, amounting to excess or lack of jurisdiction and there
is no plain, speedy and adequate remedy in the ordinary course of law.
A remedy is considered plain, speedy and adequate if it will promptly
relieve the petitioner from the injurious effect of the judgment and the
acts of the lower court. 
SDEHCc

The aggrieved party is proscribed from filing a petition

for certiorari if appeal is available, for the remedies of appeal
and certiorari are mutually exclusive and not alternative or successive.
The aggrieved party is, likewise, barred from filing a petition
for certiorari if the remedy of appeal is lost through his negligence. A
petition for certiorari is an original action and does not interrupt the
 course of the principal case unless a temporary restraining order or a
writ of preliminary injunction has been issued against the public
respondent from further proceeding. A petition for certiorari must be
based on jurisdictional grounds because, as long as the
respondent court acted within its jurisdiction, any error committed by it
will amount to nothing more than an error of judgment which may be
corrected or reviewed only by appeal. 31
However, we have also ruled that a petition for certiorari under Rule 65
may be considered as filed under Rule 45, conformably with the principle that
rules of procedure are to be construed liberally, provided that the petition is
filed within the reglementary period under Section 2, Rule
45 of the Rules of Court, and where valid and compelling circumstances
warrant that the petition be resolved on its merits. 32 In this case, the petition
was filed within the reglementary period and petitioner has raised an
issue of substance: whether the existence of a boundary-hulog agreement
negates the employer-employee relationship between the vendor and vendee,
and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint
for illegal dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof,
as well as, which court or agency of the government has jurisdiction over the
same, are determined by the material allegations of the complaint in relation
to the law involved and the character of the reliefs prayed for, whether or not
the complainant/plaintiff is entitled to any or all of such reliefs. 33 A prayer or
demand for relief is not part of the petition of the cause of action; nor does it
enlarge the cause of action stated or change the legal effect of what is
alleged. 34 In determining which body has jurisdiction over a case, the better
policy is to consider not only the status or relationship of the parties but also
the nature of the action that is the subject of their controversy. 35
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter
exclusive original jurisdiction only over the following:
. . . (a) Except as otherwise provided under this Code, the Labor
Arbiters shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case by the
parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
 3. If accompanied with a claim for reinstatement, those
cases that workers may file involving wage, rates of pay,
hours of work, and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other
forms of damages arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts;
and
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims, arising
from employer-employee relationship, including those of persons
in domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction
over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or
implementation of collective bargaining agreements, and those arising
from the interpretation or enforcement of company personnel policies
shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in
said agreements.
In the foregoing cases, an employer-employee relationship is an
indispensable jurisdictional requisite. 36 The jurisdiction of Labor Arbiters and
the NLRC under Article 217 of the Labor Code is limited to disputes arising
from an employer-employee relationship which can only be resolved by
reference to the Labor Code, other labor statutes or their collective bargaining
agreement. 37 Not every dispute between an employer and employee involves
matters that only the Labor Arbiter and the NLRC can resolve in the
exercise of their adjudicatory or quasi-judicial powers. Actions between
employers and employees where the employer-employee relationship is
merely incidental is within the exclusive original jurisdiction of the regular
courts. 38 When the principal relief is to be granted under labor legislation or a
collective bargaining agreement, the case falls within the exclusive
jurisdiction of the Labor Arbiter and the NLRC even though a claim for
damages might be asserted as an incident to such claim. 39
We agree with the ruling of the CA that, under the boundary-
hulog scheme incorporated in the Kasunduan, a dual juridical relationship was
created between petitioner and respondent: that of employer-employee and
vendor-vendee. The Kasunduan did not extinguish the employer-employee
relationship of the parties extant before the execution of said deed.  cSHIaA
 As early as 1956, the Court ruled in National Labor Union v.
Dinglasan 40 that the jeepney owner/operator-driver relationship under the
boundary system is that of employer-employee and not lessor-lessee. This
doctrine was affirmed, under similar factual settings, in Magboo v.
Bernardo 41 and Lantaco, Sr. v. Llamas, 42 and was analogously applied to
govern the relationships between auto-calesa owner/operator and
driver, 43 bus owner/operator and conductor, 44 and taxi owner/operator and
driver. 45
The boundary system is a scheme by an owner/operator engaged in
transporting passengers as a common carrier to primarily govern the
compensation of the driver, that is, the latter's daily earnings are remitted to
the owner/operator less the excess of the boundary which represents the
driver's compensation. Under this system, the owner/operator exercises
control and supervision over the driver. It is unlike in lease of chattels where
the lessor loses complete control over the chattel leased but the lessee is still
ultimately responsible for the consequences of its use. The
management of the business is still in the hands of the owner/operator, who,
being the holder of the certificate of public convenience, must see to it that the
driver follows the route prescribed by the franchising and regulatory authority,
and the rules promulgated with regard to the business operations. The fact
that the driver does not receive fixed wages but only the excess of the
"boundary" given to the owner/operator is not sufficient to change the
relationship between them. Indubitably, the driver performs activities which
are usually necessary or desirable in the usual business or trade of the
owner/operator. 46
Under the Kasunduan, respondent was required to remit P550.00 daily
to petitioner, an amount which represented the boundary of petitioner as well
as respondent's partial payment (hulog) of the purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his daily
wage. Thus, the daily remittances also had a dual purpose: that of petitioner's
boundary and respondent's partial payment (hulog) for the vehicle. This dual
purpose was expressly stated in the Kasunduan. The well-settled rule is that
an obligation is not novated by an instrument that expressly recognizes the
old one, changes only the terms of payment, and adds other obligations not
incompatible with the old provisions or where the new contract merely
supplements the previous one. 47 The two obligations of the respondent to
remit to petitioner the boundary-hulog can stand together.
In resolving an issue based on contract, this Court must first examine
the contract itself, keeping in mind that when the terms of the agreement are
clear and leave no doubt as to the intention of the contracting parties, the
literal meaning of its stipulations shall prevail. 48 The intention of the
contracting parties should be ascertained by looking at the words used to
project their intention, that is, all the words, not just a particular word or two or
more words standing alone. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may
result from all of them taken jointly. 49 The parts and clauses must be
interpreted in relation to one another to give effect to the whole. The legal
effect of a contract is to be determined from the whole read together. 50
Under the Kasunduan, petitioner retained supervision and control over
the conduct of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng
boundary hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG
IKALAWANG PANIG ang sasakyan ipinagkatiwala sa kanya ng
TAUHAN NG UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN
NG IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o
pangangalakal sa malinis at maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN
NG IKALAWANG PANIG sa mga bagay na makapagdudulot ng
kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng
UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang
maglagay ng ID Card sa harap ng windshield upang sa pamamagitan
nito ay madaliang malaman kung ang nagmamaneho ay awtorisado
ng VILLAMARIA MOTORS o hindi.  AcISTE

6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang

[halaga ng] multa kung sakaling mahuli ang sasakyang ito na hindi
nakakabit ang ID card sa wastong lugar o anuman kasalanan o
kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang
materyales o piyesa na papalitan ng nasira o nawala ito dahil sa
kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe
habang hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang
nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang
ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG
IKALAWANG PANIG ay obligadong itawag ito muna
sa VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na
awtorisado ng VILLAMARIA MOTORS.
 10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG
sa panahon ng pamamasada na ang nagmamaneho ay naka-tsinelas,
naka short pants at nakasando lamang. Dapat ang nagmamaneho ay
laging nasa maayos ang kasuotan upang igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado
niyang driver ay magpapakita ng magandang asal sa mga pasaheros at
hindi dapat magsasalita ng masama kung sakali man may pasaherong
pilosopo upang maiwasan ang anumang kaguluhan na maaaring
kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY
HULOG ang TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3)
araw ay ang opisina ng VILLAMARIA MOTORS ang may karapatang
mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng
responsibilidad. Ang halagang dapat bayaran sa opisina ay may
karagdagang multa ng P50.00 sa araw-araw na ito ay nasa
pangangasiwa ng VILLAMARIA MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay
nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang
ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan
sa TAUHAN NG UNANG PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad
sa rehistro, comprehensive insurance taon-taon at kahit anong uri ng
aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG
PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong
dumalo sa pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa
tuwing tatawag ang mga tagapangasiwa nito upang maipaabot ang
anumang mungkahi sa ikasusulong ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa
lahat ng mga patakaran na magkakaroon ng pagbabago o karagdagan
sa mga darating na panahon at hindi magiging hadlang sa lahat ng mga
balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at
ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging
buwaya sa pasahero upang hindi kainisan ng kapwa driver at maiwasan
ang pagkakasangkot sa anumang gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang
kalagayan lalo na sa umaga bago pumasada, at sa hapon o gabi naman
ay sisikapin mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila at
aabutin ng dalawa o higit pang araw sa lalawigan ay dapat lamang na
 ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan
ang mga anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang
pakikipag-unahan sa kaninumang sasakyan upang maiwasan ang
aksidente. AHSaTI

21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon

sasabihin sa VILLAMARIA MOTORS mabuti man or masama ay
iparating agad ito sa kinauukulan at iwasan na iparating ito kung [kani-
kanino] lamang upang maiwasan ang anumang usapin. Magsadya agad
sa opisina ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at
puso kong sinasang-ayunan at buong sikap na pangangalagaan ng
TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at gagamitin
lamang ito sa paghahanapbuhay at wala nang iba pa. 51
The parties expressly agreed that petitioner, as vendor, and
respondent, as vendee, entered into a contract to sell the jeepney on a daily
installment basis of P550.00 payable in four years and that petitioner would
thereafter become its owner. A contract is one of conditional sale, oftentimes
referred to as contract to sell, if the ownership or title over the property sold is
retained by the vendor, and is not passed to the vendee unless and until there
is full payment of the purchase price and/or upon faithful compliance with the
other terms and conditions that may lawfully be stipulated. 52 Such payment or
satisfaction of other preconditions, as the case may be, is a positive
suspensive condition, the failure of which is not a breach of contract, casual or
serious, but simply an event that would prevent the obligation of the vendor to
convey title from acquiring binding force. 53 Stated differently, the efficacy or
obligatory force of the vendor's obligation to transfer title is subordinated to
the happening of a future and uncertain event so that if the suspensive
condition does not take place, the parties would stand as if the conditional
obligation had never existed. 54 The vendor may extrajudicially terminate the
operation of the contract, refuse conveyance, and retain the sums or
installments already received, where such rights are expressly provided for. 55
Under the boundary-hulog scheme, petitioner retained ownership of the
jeepney although its material possession was vested in respondent as its
driver. In case respondent failed to make his P550.00 daily installment
payment for a week, the agreement would be of no force and effect and
respondent would have to return the jeepney to petitioner; the employer-
employee relationship would likewise be terminated unless petitioner would
allow respondent to continue driving the jeepney on a boundary
basis of P550.00 daily despite the termination of their vendor-vendee
relationship.
 The juridical relationship of employer-employee between petitioner and
respondent was not negated by the foregoing stipulation in the Kasunduan,
considering that petitioner retained control of respondent's conduct as
driver of the vehicle. As correctly ruled by the CA:
The exercise of control by private respondent over petitioner's
conduct in operating the jeepney he was driving is inconsistent with
private respondent's claim that he is, or was, not engaged in the
transportation business; that, even if petitioner was allowed to let some
other person drive the unit, it was not shown that he did so; that the
existence of an employment relation is not dependent on how the worker
is paid but on the presence or absence of control over the means and
method of the work; that the amount earned in excess of the
"boundary hulog" is equivalent to wages; and that the fact that the
power of dismissal was not mentioned in the Kasunduan did not mean
that private respondent never exercised such power, or could not
exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use,
or to wear an identification card, or to don a decent attire, or to park the
vehicle in Villamaria Motors garage, or to inform Villamaria Motors about
the fact that the unit would be going out to the province for two
days of more, or to drive the unit carefully, etc. necessarily related to
control over the means by which the petitioner was to go about his work;
that the ruling applicable here is not Singer Sewing Machine
but National Labor Union since the latter case involved jeepney
owners/operators and jeepney drivers, and that the fact that the
"boundary" here represented installment payment of the purchase price
on the jeepney did not withdraw the relationship from that of employer-
employee, in view of the overt presence of supervision and control by
the employer. 56
Neither is such juridical relationship negated by petitioner's claim that
the terms and conditions in the Kasunduan relative to respondent's behavior
and deportment as driver was for his and respondent's benefit: to insure that
respondent would be able to pay the requisite daily installment of P550.00,
and that the vehicle would still be in good condition despite the lapse of four
years. What is primordial is that petitioner retained control over the
conduct of the respondent as driver of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the
franchise, is entitled to exercise supervision and control over the respondent,
by seeing to it that the route provided in his franchise, and the rules and
regulations of the Land Transportation Regulatory Board are duly complied
with. Moreover, in a business establishment, an identification card is usually
provided not just as a security measure but to mainly identify the holder
thereof as a bona fide employee of the firm who issues it. 57
 As respondent's employer, it was the burden of petitioner to prove that
respondent's termination from employment was for a lawful or just cause, or,
at the very least, that respondent failed to make his daily
remittances of P550.00 as boundary. However, petitioner failed to do so. As
correctly ruled by the appellate court:
It is basic of course that termination of employment must be
effected in accordance with law. The just and authorized causes for
termination of employment are enumerated under Articles 282, 283 and
284 of the Labor Code.
Parenthetically, given the peculiarity of the situation of the parties
here, the default in the remittance of the boundary hulog for one week or
longer may be considered an additional cause for
termination of employment. The reason is because
the Kasunduan would be of no force and effect in the event that the
purchaser failed to remit the boundary hulog for one week.
The Kasunduan in this case pertinently stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay
hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang
linggo ay NANGANGAHULUGAN na ang kasunduang ito ay wala
ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG
ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na wala
ng paghahabol pa.  CacEIS

Moreover, well-settled is the rule that, the employer has the

burden of proving that the dismissal of an employee is for a just cause.
The failure of the employer to discharge this burden means that the
dismissal is not justified and that the employee is entitled to
reinstatement and back wages.
In the case at bench, private respondent in his position paper
before the Labor Arbiter, alleged that petitioner failed to pay the
miscellaneous fee of P10,000.00 and the yearly registration of the unit;
that petitioner also stopped remitting the "boundary hulog," prompting
him (private respondent) to issue a "Paalala," which petitioner however
ignored; that petitioner even brought the unit to his (petitioner's) province
without informing him (private respondent) about it; and that petitioner
eventually abandoned the vehicle at a gasoline station after figuring in
an accident. But private respondent failed to substantiate these
allegations with solid, sufficient proof. Notably, private respondent's
allegation viz, that he retrieved the vehicle from the gas station, where
petitioner abandoned it, contradicted his statement in the Paalala that he
would enforce the provision (in the Kasunduan) to the effect that default
in the remittance of the boundary hulog for one week would result in the
forfeiture of the unit. The Paalala reads as follows:
"Sa lahat ng mga kumukuha ng sasakyan
 "Sa pamamagitan ng ‘BOUNDARY HULOG'
"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong
pinirmahan particular na ang paragrapo 13 na nagsasaad na kung hindi
kayo makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa
ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala
ng paghahabol pa.
"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay
akin na pong ipatutupad ang nasabing Kasunduan kaya't aking
pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa kasunduan
upang maiwasan natin ito.
"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito
upang hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo
isasauli ang inyong sasakyan na hinuhulugan na ang mga magagastos
ay kayo pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa
kasunduan ang naging dahilan ng pagsampa ng kaso.
"Sumasainyo
"Attendance: 8/27/99
"(The Signatures appearing herein
include (sic) that of petitioner's) (Sgd.)
 OSCAR VILLAMARIA, JR."
If it were true that petitioner did not remit the boundary hulog for
one week or more, why did private respondent not forthwith take steps to
recover the unit, and why did he have to wait for petitioner to abandon it?
On another point, private respondent did not submit any police
report to support his claim that petitioner really figured in a vehicular
mishap. Neither did he present the affidavit of the guard from the gas
station to substantiate his claim that petitioner abandoned the unit
there. 58
Petitioner's claim that he opted not to terminate the
employment of respondent because of magnanimity is negated by his
(petitioner's) own evidence that he took the jeepney from the respondent only
on July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The
decision of the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED.
Costs against petitioner. cETDIA

SO ORDERED.
Panganiban, C.J., Ynares-Santiago, Austria-Martinez and Chico-
Nazario, JJ., concur.
  
Footnotes
1.Penned by Associate Justice Renato C. Dacudao, with Associate Justices Lucas P.
Bersamin and Celia C. Librea-Leagogo, concurring; rollo, pp. 20-36.
2.Rollo, p. 38.
3.Penned by Presiding Commissioner Raul T. Aquino, with Commissioners Victoriano
R. Calaycay and Angelita A. Gacutan, concurring.
4.Penned by Labor Arbiter Edgardo M. Madriaga.
5.CA rollo, pp. 68-70.
6.Id. at 71.
7.Id. at 52.
8.Id. at 53-62.
9.Id. at 59-60.
10.Id. at 63-67.
11.G.R. No. 101438, October 13, 1992, 214 SCRA 551.
12.G.R. No. 97492, December 8, 1992, 216 SCRA 280.
13.CA rollo, pp. 73-78.
14.98 Phil. 649 (1956).
15.117 Phil. 966 (1963).
16.124 Phil. 638 (1966).
17.CA rollo, pp. 46-50.
18.Id. at 50.
19.Id. at 81-95.
20.Id. at 30-42.
21.Id. at 41-42.
22.Id. at 44-45.
23.Id. at 15.
24.G.R. No. 91307, January 24, 1991, 193 SCRA 270.
25.CA rollo, pp. 175-191.
26.Id. at 190.
27.Rollo, p. 38.
28.SECTION 2, RULE 45, RULES OF COURT.
29.Nippon Paint Employees Union-Olalia v. Court of Appeals, G.R. No. 159010,
November 19, 2004, 443 SCRA 286, 292.
30.G.R. No. 152568, February 16, 2004, 423 SCRA 122.
31.Id. at 132.
32.Nippon Paint Employees Union-Olalia v. Court of Appeals, supra note 29.
33.Capiral v. Valenzuela, 440 Phil. 458, 465 (2002); Herrera v. Bollos, 424 Phil. 850,
856 (2002).
34.Regalado, REMEDIAL LAW COMPENDIUM, Vol. I, 6th ed., 141.
35.Bernardo, Sr. v. Court of Appeals, 331 Phil. 962, 980 (1996).
36.Philippine Airlines, Inc. v. NLRC, 331 Phil. 937, 958 (1996).
37.Georg Grotjahn GMBH & Co. v. Isnani, G.R. No. 109272, August 10, 1994, 235
SCRA 216, 221.
38.Eviota v. Court of Appeals, 455 Phil. 118, 129 (2003).
39.Tolosa v. NLRC, 449 Phil. 271, 282 (2003).
40.Supra note 14.
41.Supra note 15.
42.195 Phil. 325 (1981).
43.Citizens' League of Freeworkers v. Abbas, 124 Phil. 638 (1966).
44.Doce v. Workmen's Compensation Commission, 104 Phil. 946 (1958).
45.Jardin v. NLRC, 383 Phil. 187 (2000); Paguio Transport Corporation v. NLRC,
G.R. No. 119500. August 28, 1998, 294 SCRA 657; Martinez vs. NLRC, G.R.
No. 117495, May 29, 1997, 272 SCRA 793.
46.Jardin vs. NLRC, supra, at 197-198.
47.California Bus Lines, Inc. v. State Investment House, Inc., G.R. No. 147950,
December 11, 2003, 418 SCRA 297, 309-310.
48.Milwaukee Industries Corporation v. Pampanga III Electric Cooperative, Inc., G.R.
No. 152569, May 31, 2004, 430 SCRA 389, 396.
49.ARTICLE 1374, NEW CIVIL CODE.
50.Rivera v. Espiritu, 425 Phil. 169, 184 (2002).
51.CA rollo, pp. 68-70.
 52.Republic v. David, G.R. No. 155634, August 16, 2004, 436 SCRA 577, 590-
591; Philippine National Bank v. Court of Appeals, 330 Phil. 1048, 1065-1066
(1996).
53.Laforteza v. Machuca, 389 Phil. 167, 180 (2000); Heirs of Pedro
Escanlar v. Court of Appeals, 346 Phil. 158, 171 (1997); Odyssey Park,
Inc. v. Court of Appeals, 345 Phil. 475, 484 (1997); Philippine National
Bank v. Court of Appeals, supra; Adelfa Properties, Inc. v. Court of Appeals,
310 Phil. 623, 637 (1995); Pingol v. Court of Appeals, G.R. No. 102909,
September 6, 1993, 226 SCRA 118; Luzon Brokerage Co., Inc. v. Maritime
Building Co., Inc., 150 Phil. 114, 125-126 (1972).
54.Philippine National Bank v. Court of Appeals, supra.
55.Valarao v. Court of Appeals, G.R. No. 130347, March 3, 1999, 304 SCRA 155,
162-165; Heirs of Pedro Escanlar v. Court of Appeals, supra; Odyssey Park,
Inc. v. Court of Appeals, supra, at 485; Luzon Brokerage Co., Inc. v. Maritime
Building Co., Inc., supra, at 130.
56.Rollo, pp. 31-32.
57.Domasig v. National Labor Relations Commission, 330 Phil. 518, 524 (1996).
58.Rollo, pp. 32-33.
 (Villamaria, Jr. v. Court of Appeals, G.R. No. 165881, [April 19, 2006], 521 PHIL
|||

682-710)
[G.R. NO. 172101. November 23, 2007.]

REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL

SECURITY COMMISSION and SOCIAL SECURITY
SYSTEM, petitioners, vs. ASIAPRO COOPERATIVE, respondent
.

DECISION

CHICO-NAZARIO, J  : p

Before this Court is a Petition for Review on Certiorari under Rule

45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set
aside the Decision 1 and Resolution 2 of the Court of Appeals in CA-G.R. SP
No. 87236, dated 5 January 2006 and 20 March 2006, respectively, which
annulled and set aside the Orders of the Social Security Commission (SSC) in
SSC Case No. 6-15507-03, dated 17 February 2004 3 and 16 September
2004, 4 respectively, thereby dismissing the petition-complaint dated 12 June
2003 filed by herein petitioner Social Security System (SSS) against herein
respondent.
Herein petitioner Republic of the Philippines is represented by the SSC,
a quasi-judicial body authorized by law to resolve disputes arising
under Republic Act No. 1161, as amended by Republic Act No.
8282. 5 Petitioner SSS is a government corporation created by
virtue of Republic Act No. 1161, as amended. On the other hand, herein
respondent Asiapro Cooperative (Asiapro) is a multi-purpose cooperative
created pursuant to Republic Act No. 6938 6 and duly registered
with the Cooperative Development Authority (CDA) on 23 November 1999
with Registration Certificate No. 0-623-2460. 7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-
members. Under its by-laws, owners-members are of two categories, to wit:
(1) regular member, who is entitled to all the rights and
privileges of membership; and (2) associate member, who has no right to vote
and be voted upon and shall be entitled only to such rights and privileges
provided in its by-laws. 8 Its primary objectives are to provide savings and
credit facilities and to develop other livelihood services for its owners-
members. In the discharge of the aforesaid primary objectives, respondent
cooperative entered into several Service Contracts 9 with Stanfilco — a
division of DOLE Philippines, Inc. and a company based in
Bukidnon. The owners-members do not receive compensation or wages
from the respondent cooperative. Instead, they receive a share in the service
surplus 10 which the respondent cooperative earns from different
areas of trade it engages in, such as the income derived from the said Service
Contracts with Stanfilco. The owners-members get their income
from the service surplus generated by the quality and amount of services they
rendered, which is determined by the Board of Directors of the respondent
cooperative. DaTHAc

In order to enjoy the benefits under the Social Security

Law of 1997, the owners-members of the respondent cooperative, who were
assigned to Stanfilco requested the services of the latter to register them with
petitioner SSS as self-employed and to remit their contributions as such. Also,
to comply with Section 19-A of Republic Act No. 1161, as amended
by Republic Act No. 8282, the SSS contributions of the said owners-members
were equal to the share of both the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-
President for Mindanao Division, Atty. Eddie A. Jara, sent a
letter 11 to the respondent cooperative, addressed to its Chief Executive
Officer (CEO) and General Manager Leo G. Parma, informing the latter that
based on the Service Contracts it executed with Stanfilco, respondent
cooperative is actually a manpower contractor supplying employees to
Stanfilco and for that reason, it is an employer of its owners-members working
with Stanfilco. Thus, respondent cooperative should register itself with
petitioner SSS as an employer and make the corresponding report and
remittance of premium contributions in accordance with the Social Security
Law of 1997. On 9 October 2002, 12 respondent cooperative, through its
counsel, sent a reply to petitioner SSS's letter asserting that it is not an
employer because its owners-members are the cooperative itself; hence, it
cannot be its own employer. Again, on 21 October 2002, 13 petitioner SSS
sent a letter to respondent cooperative ordering the latter to register as an
employer and report its owners-members as employees for compulsory
coverage with the petitioner SSS. Respondent cooperative continuously
ignored the demand of petitioner SSS.  IAETDc

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition 14 before

petitioner SSC against the respondent cooperative and Stanfilco praying
that the respondent cooperative or, in the alternative, Stanfilco be directed to
register as an employer and to report respondent cooperative's owners-
members as covered employees under the compulsory coverage of SSS and
to remit the necessary contributions in accordance with the Social Security
Law of 1997. The same was docketed as SSC Case No. 6-15507-03.
Respondent cooperative filed its Answer with Motion to Dismiss alleging that
no employer-employee relationship exists between it and its owners-
members, thus, petitioner SSC has no jurisdiction over the respondent
cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim
against the respondent cooperative.
On 17 February 2004, petitioner SSC issued an Order
denying the Motion to Dismiss filed by the respondent
cooperative. The respondent cooperative moved
for the reconsideration of the said Order, but it was likewise denied in another
Order issued by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a
Motion for Extension of Time to File a Petition for Review
before the Court of Appeals. Subsequently, respondent cooperative filed a
Manifestation stating that it was no longer filing a Petition for Review. In its
place, respondent cooperative filed a Petition
for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No.
87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September
2004 of [herein petitioner] SSC were issued with grave
 abuse of discretion amounting to a (sic) lack or
excess of jurisdiction in that: SITCEA

A. [Petitioner] SSC arbitrarily proceeded with the case as if it has

jurisdiction over the petition a quo, considering that it failed
to first resolve the issue of the existence of an employer-
employee relationship between [respondent] cooperative
and its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all
disputes arising under the SSS Law with respect to
coverage, benefits, contributions, and related matters, it is
respectfully submitted that [petitioner] SSC may only
assume jurisdiction in cases where there is no dispute as
to the existence of an employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal
issue of employer-employee relationship raised in
[respondent's] Motion to Dismiss can be preliminarily
resolved through summary hearings prior to the hearing
on the merits. However, any inquiry beyond a preliminary
determination, as what [petitioner SSC] wants to
accomplish, would be to encroach
on the jurisdiction of the National Labor Relations
Commission [NLRC], which is the more competent body
clothed with power to resolve issues relating
to the existence of an employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take
cognizance of the petition a quo.
A. [Respondent] is not an employer
within the contemplation of the Labor Law but is a multi-
purpose cooperative created pursuant to Republic Act
No. 6938 and composed of owners-members, not
employees.
B. The rights and obligations of the owners-
members of [respondent] cooperative are derived from
their Membership Agreements, the Cooperatives By-Laws,
and Republic Act No. 6938, and not from any
contract of employment or from the Labor Laws. Moreover,
said owners-members enjoy rights that are not consistent
with being mere employees of a company, such
as the right to participate and vote in decision-making
for the cooperative.  aCcEHS

C. As found by the Bureau of Internal Revenue [BIR], the owners-

members of [respondent] cooperative are not paid any
compensation income. 15 (Emphasis supplied.)
 On 5 January 2006, the Court of Appeals rendered a Decision
granting the petition filed by the respondent cooperative. The decretal
portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17
February 2004] and [16 September 2004], are ANNULLED and SET ASIDE and a
new one is entered DISMISSING the petition-complaint dated [12 June
2003] of [herein petitioner] Social Security System. 16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a
reconsideration, but it was denied by the appellate court in its Resolution
dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or
not the Court of Appeals erred in not finding that the SSC has
jurisdiction over the subject matter and it has a valid basis in denying
respondent's Motion to Dismiss. The said issue is supported
by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint
filed before it by the [petitioner SSS] under R.A. No. 8282.
II. Respondent [cooperative] is estopped from
questioning the jurisdiction of petitioner SSC after invoking
its jurisdiction by filing an [A]nswer with [M]otion to
[D]ismiss before it. 
IEDHAT

III. The [petitioner SSC] did not act with grave abuse of discretion in

denying respondent [cooperative's] [M]otion to [D]ismiss.
IV. The existence of an employer-employee relationship is a
question of fact where presentation of evidence is necessary.
V. There is an employer-employee relationship between
[respondent cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint
filed before it by petitioner SSS as it involved an issue of whether or not a
worker is entitled to compulsory coverage under the SSS Law. Petitioners
avow that Section 5 of Republic Act No. 1161, as amended by Republic Act
No. 8282, expressly confers upon petitioner SSC the power to settle disputes
on compulsory coverage, benefits, contributions and penalties thereon or any
other matter related thereto. Likewise, Section 9 of the same law clearly
provides that SSS coverage is compulsory upon all employees. Thus, when
petitioner SSS filed a petition-complaint against the respondent cooperative
and Stanfilco before the petitioner SSC for the compulsory
coverage of respondent cooperative's owners-members as well as for
collection of unpaid SSS contributions, it was very obvious that the subject
matter of the aforesaid petition-complaint was within the expertise and
jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior
need to determine the existence of an employer-employee relationship
between the respondent cooperative and its owners-members, said issue
does not preclude petitioner SSC from taking cognizance of the aforesaid
petition-complaint. Considering that the principal relief sought in the said
petition-complaint has to be resolved by reference to the Social Security
Law and not to the Labor Code or other labor relations statutes, therefore,
jurisdiction over the same solely belongs to petitioner SSC.  DEIHSa

Petitioners further claim that the denial of the respondent cooperative's

Motion to Dismiss grounded on the alleged lack of employer-employee
relationship does not constitute grave abuse of discretion
on the part of petitioner SSC because the latter has the authority and power to
deny the same. Moreover, the existence of an employer-employee
relationship is a question of fact where presentation of evidence is necessary.
Petitioners also maintain that the respondent cooperative is already estopped
from assailing the jurisdiction of the petitioner SSC because it has already
filed its Answer before it, thus, respondent cooperative has already submitted
itself to the jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee
relationship between the respondent cooperative and its owners-
members. The respondent cooperative is the employer of its owners-
members considering that it undertook to provide services to
Stanfilco, the performance of which is under the full and sole
control of the respondent cooperative.
On the other hand, respondent cooperative alleges that its owners-
members own the cooperative, thus, no employer-employee relationship can
arise between them. The persons of the employer and the employee are
merged in the owners-members themselves. Likewise, respondent
cooperative's owners-members even requested the respondent cooperative to
register them with the petitioner SSS as self-employed individuals. Hence,
petitioner SSC has no jurisdiction over the petition-complaint filed before it by
petitioner SSS.
Respondent cooperative further avers that the Court of Appeals
correctly ruled that petitioner SSC acted with grave abuse of discretion when
it assumed jurisdiction over the petition-complaint without determining first if
there was an employer-employee relationship between the respondent
cooperative and its owners-members. Respondent cooperative claims
that the question of whether an employer-employee relationship exists
between it and its owners-members is a legal and not a factual issue
as the facts are undisputed and need only to be interpreted by the applicable
law and jurisprudence.  IDATCE

Lastly, respondent cooperative asserts that it cannot be considered

estopped from assailing the jurisdiction of petitioner SSC simply because it
filed an Answer with Motion to Dismiss, especially
where the issue of jurisdiction is raised at the very first instance and
where the only relief being sought is the dismissal of the petition-complaint for
lack of jurisdiction.
From the foregoing arguments of the parties, the issues may be
summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-
complaint filed before it by petitioner SSS
against the respondent cooperative.
II. Whether the respondent cooperative is estopped from
assailing the jurisdiction of petitioner SSC since it had
already filed an Answer with Motion to Dismiss
before the said body.
Petitioner SSC's jurisdiction is clearly stated in Section
5 of Republic Act No. 8282 as well as in Section 1, Rule III of the 1997 SSS
Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. — (a) Any dispute arising under this Act with
respect to coverage, benefits, contributions and penalties thereon or any other
matter related thereto, shall be cognizable by the Commission, . . . . (Emphasis
supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised
Rules of Procedure states:
Section 1. Jurisdiction. — Any dispute arising
under the Social Security Act with respect to coverage, entitlement of benefits,
collection and settlement of contributions and penalties thereon, or any other
matter related thereto, shall be cognizable by the Commission after the SSS
through its President, Manager or Officer-in-
charge of the Department/Branch/Representative Office concerned had first taken
action thereon in writing. (Emphasis supplied.) 
cSCADE

It is clear then from the aforesaid provisions that any issue

regarding the compulsory coverage of the SSS is well within the exclusive
domain of the petitioner SSC. It is important to note, though,
that the mandatory coverage under the SSS Law is premised
on the existence of an employer-employee relationship 17 except in
cases of compulsory coverage of the self-employed.
It is axiomatic that the allegations in the complaint,
not the defenses set up in the Answer or in the Motion to Dismiss,
determine which court has jurisdiction over an action;
otherwise, the question of jurisdiction would depend almost entirely
upon the defendant. 18 Moreover, it is well-settled that once jurisdiction is
acquired by the court, it remains with it until the full
termination of the case. 19 The said principle may be applied even to quasi-
judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS
before the petitioner SSC against the respondent cooperative and Stanfilco
alleges that the owners-members of the respondent cooperative are subject
to the compulsory coverage of the SSS because they are
employees of the respondent cooperative. Consequently, the respondent
cooperative being the employer of its owners-members must register as
employer and report its owners-members as covered members of the SSS
and remit the necessary premium contributions in accordance with the Social
Security Law of 1997. Accordingly, based on the aforesaid allegations
in the petition-complaint filed before the petitioner SSC, the case clearly falls
within its jurisdiction. Although the Answer with Motion to Dismiss filed
by the respondent cooperative challenged the jurisdiction of the petitioner
SSC on the alleged lack of employer-employee relationship between itself and
its owners-members, the same is not enough to deprive the petitioner
SSC of its jurisdiction over the petition-complaint filed before it.
Thus, the petitioner SSC cannot be faulted for initially assuming jurisdiction
over the petition-complaint of the petitioner SSS. IaHAcT

Nonetheless, since the existence of an employer-employee relationship

between the respondent cooperative and its owners-members was put in
issue and considering that the compulsory coverage of the SSS Law is
predicated on the existence of such relationship, it behooves the petitioner
SSC to determine if there is really an employer-employee relationship that
exists between the respondent cooperative and its owners-members.
The question on the existence of an employer-employee relationship is
not within the exclusive jurisdiction of the National Labor Relations
Commission (NLRC). Article 217 of the Labor Code
enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS
AND THE COMMISSION. — (a) . . . .
xxx xxx xxx
 6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including
those of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for
reinstatement. 20
Although the aforesaid provision speaks merely of claims for Social
Security, it would necessarily include issues on the coverage thereof, because
claims are undeniably rooted in the coverage by the system.
Hence, the question on the existence of an employer-employee
relationship for the purpose of determining the coverage of the Social
Security System is explicitly excluded from the jurisdiction of the NLRC and
falls within the jurisdiction of the SSC which is primarily charged
with the duty of settling disputes arising under the Social Security
Law of 1997.
On the basis thereof, considering that the petition-
complaint of the petitioner SSS involved the issue of compulsory
coverage of the owners-members of the respondent cooperative, this Court
agrees with the petitioner SSC when it declared in its Order dated 17
February 2004 that as an incident to the issue of compulsory coverage, it may
inquire into the presence or absence of an employer-employee relationship
without need of waiting for a prior pronouncement or submitting the issue
to the NLRC for prior determination. Since both the petitioner SSC
and the NLRC are independent bodies and their jurisdiction are well-defined
by the separate statutes creating them, petitioner SSC has the authority to
inquire into the relationship existing between the worker and the person or
entity to whom he renders service to determine if the employment, indeed, is
one that is excepted by the Social Security Law of 1997 from compulsory
coverage. 21
Even before the petitioner SSC could make a
determination of the existence of an employer-employee relationship,
however, the respondent cooperative already
elevated the Order of the petitioner SSC, denying its Motion to Dismiss,
to the Court of Appeals by filing a Petition for Certiorari. As a consequence
thereof, the petitioner SSC became a party to the said Petition
for Certiorari pursuant to Section 5 (b) 22 of Republic Act No.
8282. The appellate court ruled in favor of the respondent cooperative by
declaring that the petitioner SSC has no jurisdiction over the petition-
complaint filed before it because there was no employer-employee
relationship between the respondent cooperative and its owners-members.
Resultantly, the petitioners SSS and SSC,
representing the Republic of the Philippines, filed a Petition for Review before
this Court.
Although as a rule, in the exercise of the Supreme Court's
power of review, the Court is not a trier of facts
and the findings of fact of the Court of Appeals are conclusive and binding
on the Court, 23 said rule is not without exceptions. There are several
recognized exceptions 24 in which factual issues may be resolved by this
Court. One of these exceptions finds application in this present case which is,
when the findings of fact are conflicting. There are, indeed, conflicting findings
espoused by the petitioner SSC and the appellate court relative
to the existence of employer-employee relationship between the respondent
cooperative and its owners-members, which necessitates a departure
from the oft-repeated rule that factual issues may not
be the subject of appeals to this Court.  cECaHA

In determining the existence of an employer-employee
relationship, the following elements are considered: (1) the selection and
engagement of the workers; (2) the payment of wages by whatever means;
(3) the power of dismissal; and (4) the power to control the worker's conduct,
with the latter assuming primacy in the overall consideration. 25 The most
important element is the employer's control of the employee's conduct,
not only as to the result of the work to be done, but also as to the means
and methods to accomplish. 26 The power of control refers
to the existence of the power and not necessarily to the actual exercise
thereof. It is not essential for the employer to actually
supervise the performance of duties of the employee; it is enough
that the employer has the right to wield that power. 27 All the aforesaid
elements are present in this case.
First. It is expressly provided in the Service Contracts that it
is the respondent cooperative which has the exclusive discretion
in the selection and engagement of the owners-members as well as its
team leaders who will be assigned at Stanfilco. 28 Second. Wages are
defined as "remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained,
on a time, task, piece or commission basis, or other
method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work
done or to be done, or for service rendered or to be rendered." 29 In this
case, the weekly stipends or the so-called shares in the service surplus given
by the respondent cooperative to its owners-members were in reality wages,
as the same were equivalent to an amount not lower than that prescribed by
existing labor laws, rules and regulations, including the wage order applicable
to the area and industry; or the same shall not be lower than the prevailing
rates of wages. 30 It cannot be doubted then that those stipends or shares
in the service surplus are indeed wages, because these are given
to the owners-members as compensation in rendering services to respondent
cooperative's client, Stanfilco. Third. It is also stated in the above-mentioned
Service Contracts that it is the respondent cooperative which has the power
to investigate, discipline and remove the owners-members and its team
leaders who were rendering services at Stanfilco. 31 Fourth. As earlier
opined, of the four elements of the employer-employee
relationship, the "control test" is the most important. In the case at bar, it
is the respondent cooperative which has the sole control
over the manner and means of performing the services
under the Service Contracts with Stanfilco as well as the means and
methods of work. 32 Also, the respondent cooperative is solely and entirely
responsible for its owners-members, team leaders and other representatives
at Stanfilco. 33 All these clearly prove that, indeed, there is an employer-
employee relationship between the respondent cooperative and its owners-
members.  DIETHS

It is true that the Service Contracts executed between the respondent

cooperative and Stanfilco expressly provide that there shall be no employer-
employee relationship between the respondent cooperative and its owners-
members. 34 This Court, however, cannot give the said provision force and
effect.
As previously pointed out by this Court, an employee-employer
relationship actually exists between the respondent cooperative and its
owners-members. The four elements in the four-fold test
for the existence of an employment relationship have been complied
with. The respondent cooperative must not be allowed to deny its employment
relationship with its owners-members by invoking the questionable Service
Contracts provision, when in actuality, it does exist. The existence of an
employer-employee relationship cannot be negated by expressly
repudiating it in a contract, when the terms and surrounding
circumstances show otherwise. The employment status of a person is
defined and prescribed by law and not by what the parties say it should
be. 35
It is settled that the contracting parties may establish such stipulations,
clauses, terms and conditions as they want, and their agreement would
have the force of law between them. However, the agreed terms and
conditions must not be contrary to law, morals, customs, public policy
or public order. 36 The Service Contract provision in question must be struck
down for being contrary to law and public policy since it is apparently being
used by the respondent cooperative merely to circumvent the compulsory
coverage of its employees, who are also its owners-members, by the Social
Security Law.  AIHTEa

This Court is not unmindful of the pronouncement it made

in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja 37 wherein it
held that:
A cooperative, therefore, is by its nature different from an ordinary business
concern, being run either by persons, partnerships, or corporations. Its owners
and/or members are the ones who run and operate the business while the others are
its employees . . . .
An employee therefore of such a cooperative who is a member and co-
owner thereof cannot invoke the right to collective bargaining for certainly an
owner cannot bargain with himself or his co-owners. In the opinion of August 14,
1981 of the Solicitor General he correctly opined that employees of cooperatives
who are themselves members of the cooperative have no right to form or join labor
organizations for purposes of collective bargaining for being themselves co-
owners of the cooperative.
However, in so far as it involves cooperatives with employees who are not
members or co-owners thereof, certainly such employees are entitled to
exercise the rights of all workers to organization, collective bargaining, negotiations
and others as are enshrined in the Constitution and existing laws of the country.
The situation in the aforesaid case is very much different
from the present case. The declaration made by the Court in the aforesaid
case was made in the context of whether an employee who is also an owner-
member of a cooperative can exercise the right to bargain collectively
with the employer who is the cooperative wherein he is an owner-member.
Obviously, an owner-member cannot bargain collectively
with the cooperative of which he is also the owner because an owner cannot
bargain with himself. In the instant case, there is no issue regarding an owner-
member's right to bargain collectively with the cooperative. The question
involved here is whether an employer-employee relationship can exist
between the cooperative and an owner-member. In fact, a closer look
at Cooperative Rural Bank of Davao City, Inc. will show that it actually
recognized that an owner-member of a cooperative can be its own
employee.  TIHCcA

It bears stressing, too, that a cooperative acquires juridical personality

upon its registration with the Cooperative Development Authority. 38 It has its
Board of Directors, which directs and supervises its business; meaning, its
Board of Directors is the one in charge in the conduct and management of its
affairs. 39 With that, a cooperative can be likened to a corporation with a
personality separate and distinct from its owners-members. Consequently, an
owner-member of a cooperative can be an employee of the latter and an
employer-employee relationship can exist between them.
 In the present case, it is not disputed that the respondent cooperative
had registered itself with the Cooperative Development Authority, as
evidenced by its Certificate of Registration No. 0-623-2460. 40 In its by-
laws, 41 its Board of Directors directs, controls, and supervises the business
and manages the property of the respondent cooperative. Clearly
then, the management of the affairs of the respondent cooperative is vested in
its Board of Directors and not in its owners-members as a whole. Therefore, it
is completely logical that the respondent cooperative, as a juridical person
represented by its Board of Directors, can enter into an employment with its
owners-members.
In sum, having declared that there is an employer-employee
relationship between the respondent cooperative and its owners-member, we
conclude that the petitioner SSC has jurisdiction over the petition-complaint
filed before it by the petitioner SSS. This being our conclusion, it is no longer
necessary to discuss the issue of whether the respondent cooperative was
estopped from assailing the jurisdiction of the petitioner SSC when it filed its
Answer with Motion to Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby
GRANTED. The Decision and the Resolution of the Court of Appeals in CA-
G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively,
are hereby REVERSED and SET ASIDE. The Orders of the petitioner SSC
dated 17 February 2004 and 16 September 2004 are hereby
REINSTATED. The petitioner SSC is hereby DIRECTED to continue
hearing the petition-complaint filed before it by the petitioner SSS as
regards the compulsory coverage of the respondent cooperative and its
owners-members. No costs.  IAcTaC

SO ORDERED.
Ynares-Santiago, Austria-Martinez, Azcuna and Reyes, JJ., concur.
 
Footnotes
1.Penned by Associate Justice Juan Q. Enriquez, Jr. with Associate Justices Godardo
A. Jacinto and Vicente Q. Roxas, concurring; rollo, pp. 63-74.
2.Id. at 61-62.
3.Penned by Commissioner Sergio R. Ortiz-Luis, Jr.; id. at 116-119.
4.Id. at 146-149.
5.Otherwise known as "Social Security Act of 1997," which was approved on 1 May
1997.
6.Otherwise known as "Cooperative Code of the Philippines," which was enacted on
10 March 1990.
7.CA rollo, p. 63.
8.Section 2, Asiapro Cooperative Amended By-Laws, CA rollo, p. 68.
9.Id. at 126-130, 444-449.
10.It represents the amount given to respondent cooperative's owners-members for
rendering services to the client of respondent cooperative, like Stanfilco. Such
amount shall not be lower than the prevailing rates of wages.
11.Rollo, pp. 75-76.
12.Id. at 82-86.
13.Id. at 87-88.
14.Id. at 89-97.
15.Rollo, pp. 66-68.
16.Id. at 74.
17.Social Security System v. Court of Appeals, 401 Phil. 132, 141 (2000).
18.Abacus Securities Corporation v. Ampil, G.R. No. 160016, 27 February 2006, 483
SCRA 315, 339.
19.Philrock, Inc. v. Construction Industry Arbitration Commission, 412 Phil. 236, 246
(2001).
20.Article 217 (a) (6) of the Labor Code of the Philippines.
21.Rollo, p. 117.
22.SEC. 5. Settlement of Disputes. — (a) . . . .
(b) . . . . The Commission shall be deemed to be a party to any judicial action
involving any such decision, and may be represented by an attorney employed
by the Commission, by the Solicitor General or any public prosecutor.
23.Almendrala v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322.
24.Recognized exceptions to this rule are: (1) when the findings are grounded entirely
on speculation, surmises or conjectures; (2) when the inference made is
manifestly mistaken, absurd or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when
in making its findings the Court of Appeals went beyond the issues of the case,
or its findings are contrary to the admissions of both the appellee
and the appellant; (7) when the findings are contrary to the trial court; (8)
when the findings are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as
 in the petitioner's main and reply briefs are not disputed by the respondent; (10)
when the findings of fact are premised on the supposed absence of evidence
and contradicted by the evidence on record; or (11) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties, which,
if properly considered, would justify a different conclusion (Langkaan Realty
Development, Inc. v. United Coconut Planters Bank, 400 Phil. 1349, 1356
(2000); Nokom v. National Labor Relations Commissions, 390 Phil. 1228, 1243
(2000); Commissioner of Internal Revenue v. Embroidery and Garments
Industries (Phils.), Inc., 364 Phil. 541, 546-547 (1999); Sta. Maria v.
Court of Appeals, 349 Phil. 275, 282-283 (1998); Almendrala v. Ngo, G.R. No.
142408, 30 September 2005, 471 SCRA 311, 322.)
25.Jo v. National Labor Relations Commission, 381 Phil. 428, 435 (2000).
26.Chavez v. National Labor Relations Commission, G.R. No. 146530, 17 January
2005, 448 SCRA 478, 490.
27.Jo v. National Labor Relations Commission, supra note 25.
28.7. SELECTION, ENGAGEMENT, DISCHARGE. The Cooperative shall
have the exclusive discretion in the acceptance, engagement, investigation and
discipline and removal of its owner-members and team leaders. (Service
Contract, CA rollo, p. 458).
29.ART. 97 (f) of the Labor Code.
30.4. COOPERATIVE'S RESPONSIBILITIES. The Cooperative shall
have the following responsibilities:
xxx xxx xxx
4.3. The Cooperative shall pay the share of the service surplus due to its
owner-members assigned to the Client . . . .
However, the amount of the share of the service surplus of the owner-members
. . . shall be in an amount not lower than existing labor laws, rules and
regulations, including the wage order applicable to the area and industry. . . . .
(CA rollo, pp. 457-458).
31.Id.
32.1. SCOPE OF SERVICE. . . . .
. . . . The Cooperative shall have sole control over the manner and
means of performing the subject services under this Contract and shall
complete the services in accordance with its own means and methods of work,
in keeping with the Client's standards. (Id. at 456).
33.3. RELATIONSHIP OF THE PARTIES. . . . . The Cooperative shall be solely and
entirely responsible for its owner-members, team leaders and other
representatives. (Id. at 457).
 34.3. RELATIONSHIP OF THE PARTIES. It is hereby agreed that there shall be no
employer-employee relationship between the Cooperative and its owners-
members . . . . (Id).
35.Chavez v. National Labor Relations Commission, supra note 26 at 493; Lopez v.
Metropolitan Waterworks and Sewerage System, G.R. No. 154472, 30 June
2005, 462 SCRA 428, 445-446.
36.Art. 1306, Civil Code of the Philippines; Philippine National Bank v. Cabansag,
G.R. No. 157010, 21 June 2005, 460 SCRA 514, 533.
37.G.R. No. L-77951, 26 September 1988, 165 SCRA 725, 732-733.
38.ART. 16. Registration. — A cooperative formed or organized under this Code
acquires juridical personality from the date the Cooperative Development
Authority issues a certificate of registration under its official seal. . . . .
(Republic Act No. 6938).
39.ART. 38. Composition of the Board of Directors. — The conduct and
management of the affairs of a cooperative shall be vested in a
board of directors . . . .
ART. 39. Powers of the Board of Directors. — The board of directors shall
direct and supervise the business, manage the property of the cooperative and
may, by resolution, exercise all such powers of the cooperative as are not
reserved for the general assembly under this Code and the by-laws. (Id.).
40.CA rollo, p. 63.
41.Id. at 68-78.
 (Republic v. Asiapro Cooperative, G.R. No. 172101, [November 23, 2007], 563
|||

PHIL 979-1003)
[G.R. No. 157214. June 7, 2005.]

PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, vs.
RICARDO DE VERA, respondent.

DECISION

GARCIA, J  : p

Before us is this appeal by way of a petition for review on certiorari from

the 12 September 2002 Decision 1 and the 13 February 2003 Resolution 2 of the
Court of Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal
dismissal by the National Labor Relations Commission against petitioner.
 As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a
corporation engaged in the business of communication services and allied
activities, while respondent Ricardo De Vera is a physician by profession whom
petitioner enlisted to attend to the medical needs of its employees. At the crux of
the controversy is Dr. De Vera's status vis a vis petitioner when the latter
terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May
1981, 3 offered his services to the petitioner, therein proposing his plan of works
required of a practitioner in industrial medicine, to include the following:
1. Application of preventive medicine including periodic check-up of
employees;
2. Holding of clinic hours in the morning and afternoon for a total of five
(5) hours daily for consultation services to employees;
3. Management and treatment of employees that may necessitate
hospitalization including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees
with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as
accomplishing medical forms, evaluating conditions of employees
applying for sick leave of absence and subsequently issuing
proper certification, and all matters referred which are medical in
nature. 
CcSEIH

The parties agreed and formalized respondent's proposal in a document

denominated as RETAINERSHIP CONTRACT 4 which will be for a period of one
year subject to renewal, it being made clear therein that respondent will cover
"the retainership the Company previously had with Dr. K. Eulau" and that
respondent's "retainer fee" will be at P4,000.00 a month. Said contract was
renewed yearly. 5 The retainership arrangement went on from 1981 to 1994 with
changes in the retainer's fee. However, for the years 1995 and 1996, renewal of
the contract was only made verbally.
The turning point in the parties' relationship surfaced in December 1996
when Philcom, thru a letter 6 bearing on the subject boldly written as
"TERMINATION — RETAINERSHIP CONTRACT", informed De Vera of its
decision to discontinue the latter's "retainer's contract with the Company effective
at the close of business hours of December 31, 1996" because management has
decided that it would be more practical to provide medical services to its
employees through accredited hospitals near the company premises.  jurcd2005
 On 22 January 1997, De Vera filed a complaint for illegal dismissal before
the National Labor Relations Commission (NLRC), alleging that that he had been
actually employed by Philcom as its company physician since 1981 and was
dismissed without due process. He averred that he was designated as a
"company physician on retainer basis" for reasons allegedly known only to
Philcom. He likewise professed that since he was not conversant with labor laws,
he did not give much attention to the designation as anyway he worked on a full-
time basis and was paid a basic monthly salary plus fringe benefits, like any
other regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out
with a decision 7 dismissing De Vera's complaint for lack of merit, on the rationale
that as a "retained physician" under a valid contract mutually agreed upon by the
parties, De Vera was an "independent contractor" and that he "was not dismissed
but rather his contract with [PHILCOM] ended when said contract was not
renewed after December 31, 1996".
On De Vera's appeal to the NLRC, the latter, in a decision 8 dated 23
October 2000, reversed (the word used is "modified") that of the Labor Arbiter, on
a finding that De Vera is Philcom's "regular employee" and accordingly directed
the company to reinstate him to his former position without loss of seniority rights
and privileges and with full backwages from the date of his dismissal until actual
reinstatement. We quote the dispositive portion of the decision:
WHEREFORE, the assailed decision is modified in that
respondent is ordered to reinstate complainant to his former position
without loss of seniority rights and privileges with full backwages from
the date of his dismissal until his actual reinstatement computed as
follows:
Backwages:  
     
a) Basic Salary  
  From Dec. 31, 1996 to Apr. 10, 2000 =  
  39.33 mos. P44,400.00 x 39.33 mos. P1,750,185.00
     
b) 13th Month Pay:  
  1/12 of P1,750,185.00 145,848.75
     
c) Travelling allowance:  
  P1,000.00 x 39.33 mos. 39,330.00
  GRAND TOTAL P1,935,363.75
    ––––––––––––
The decision stands in other aspects.
SO ORDERED.
 With its motion for reconsideration having been denied by the NLRC in its
order of 27 February 2001, 9 Philcom then went to the Court of Appeals on a
petition for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the
NLRC when it reversed the findings of the labor arbiter and awarded thirteenth
month pay and traveling allowance to De Vera even as such award had no basis
in fact and in law. 
DaCTcA

On 12 September 2002, the Court of Appeals rendered a

decision, 10 modifying that of the NLRC by deleting the award of traveling
allowance, and ordering payment of separation pay to De Vera in lieu of
reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of
public respondent, dated 23 October 2000, is MODIFIED. The award of
traveling allowance is deleted as the same is hereby DELETED. Instead
of reinstatement, private respondent shall be paid separation pay
computed at one (1) month salary for every year of service computed
from the time private respondent commenced his employment in 1981
up to the actual payment of the backwages and separation pay. The
awards of backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the
appellate court in its resolution of 13 February 2003. 11
Hence, Philcom's present recourse on its main submission that —
THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION
OF THE NATIONAL LABOR RELATIONS COMMISSION AND
RENDERING THE QUESTIONED DECISION AND RESOLUTION IN A
WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE
LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE
JOB CONTRACTING AGREEMENTS FROM THE EMPLOYER-
EMPLOYEE RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be
reviewed by this Court in decisions rendered by the Court of Appeals. There are
instances, however, where the Court departs from this rule and reviews findings
of fact so that substantial justice may be served. The exceptional instances are
where:
". . . (1) the conclusion is a finding grounded entirely on
speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings of fact
 are conflicting; (6) the Court of Appeals went beyond the issues of the
case and its findings are contrary to the admissions of both appellant
and appellees; (7) the findings of fact of the Court of Appeals are
contrary to those of the trial court; (8) said findings of facts are
conclusions without citation of specific evidence on which they are
based; (9) the facts set forth in the petition as well as in the petitioner's
main and reply briefs are not disputed by the respondents; and (10) the
findings of fact of the Court of Appeals are premised on the supposed
absence of evidence and contradicted by the evidence on record." 12
As we see it, the parties' respective submissions revolve on the primordial
issue of whether an employer-employee relationship exists between petitioner
and respondent, the existence of which is, in itself, a question of fact 13 well
within the province of the NLRC. Nonetheless, given the reality that the NLRC's
findings are at odds with those of the labor arbiter, the Court, consistent with its
ruling in Jimenez vs. National Labor Relations Commission, 14 is constrained to
look deeper into the attendant circumstances obtaining in this case, as appearing
on record.
In a long line of decisions, 15 the Court, in determining the existence of an
employer-employee relationship, has invariably adhered to the four-fold test, to
wit: [1] the selection and engagement of the employee; [2] the payment of wages;
[3] the power of dismissal; and [4] the power to control the employee's conduct,
or the so-called "control test", considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was
respondent himself who sets the parameters of what his duties would be in
offering his services to petitioner. This is borne by no less than his 15 May 1981
letter 16 which, in full, reads:
"May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company
physician with your corporation if you deemed it necessary. I have the
necessary qualifications, training and experience required by such
position and I am confident that I can serve the best interests of your
employees, medically.
My plan of works and targets shall cover the duties and
responsibilities required of a practitioner in industrial medicine which
includes the following:
 1 Application of preventive medicine including periodic check-up
of employees;
2. Holding of clinic hours in the morning and afternoon for a total
of five (5) hours daily for consultation services to
employees;
3. Management and treatment of employees that may necessitate
hospitalization including emergency cases and
accidents; AIDcTE

4. Conduct pre-employment physical check-up of prospective

employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as
accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters
referred which are medical in nature.
On the subject of compensation for the services that I propose to
render to the corporation, you may state an offer based on your belief
that I can very well qualify for the job having worked with your
organization for sometime now.
I shall be very grateful for whatever kind attention you may extend
on this matter and hoping that it will merit acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D."
Significantly, the foregoing letter was substantially the basis of the labor
arbiter's finding that there existed no employer-employee relationship between
petitioner and respondent, in addition to the following factual settings:
The fact that the complainant was not considered an employee
was recognized by the complainant himself in a signed letter to the
respondent dated April 21, 1982 attached as Annex G to the
respondent's Reply and Rejoinder. Quoting the pertinent portion of said
letter:
'To carry out your memo effectively and to provide a
systematic and workable time schedule which will serve the best
interests of both the present and absent employee, may I propose
an extended two-hour service (1:00-3:00 P.M.) during which
period I can devote ample time to both groups depending upon
the urgency of the situation. I shall readjust my private schedule
 to be available for the herein proposed extended hours, should
you consider this proposal.
As regards compensation for the additional time and
services that I shall render to the employees, it is dependent on
your evaluation of the merit of my proposal and your confidence
on my ability to carry out efficiently said proposal.'
The tenor of this letter indicates that the complainant was
proposing to extend his time with the respondent and seeking additional
compensation for said extension. This shows that the respondent
PHILCOM did not have control over the schedule of the complainant as
it [is] the complainant who is proposing his own schedule and asking to
be paid for the same. This is proof that the complainant understood that
his relationship with the respondent 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.
The complainant is a Doctor of Medicine, and presumably, a well-
educated person. Yet, the complainant, in his position paper, is claiming
that he is not conversant with the law and did not give much attention to
his job title- on a 'retainer basis'. But the same complainant admits in his
affidavit that his service for the respondent was covered by a
retainership contract [which] was renewed every year from 1982 to 1994.
Upon reading the contract dated September 6, 1982, signed by the
complainant himself (Annex 'C' of Respondent's Position Paper), it
clearly states that is a retainership contract. The retainer fee is indicated
thereon and the duration of the contract for one year is also clearly
indicated in paragraph 5 of the Retainership Contract. The complainant
cannot claim that he was unaware that the 'contract' was good only for
one year, as he signed the same without any objections. The
complainant also accepted its renewal every year thereafter until 1994.
As a literate person and educated person, the complainant cannot claim
that he does not know what contract he signed and that it was renewed
on a year to year basis. 17
The labor arbiter added the indicia, not disputed by respondent, that from
the time he started to work with petitioner, he never was included in its payroll;
was never deducted any contribution for remittance to the Social Security System
(SSS); and was in fact subjected by petitioner to the ten (10%) percent
withholding tax for his professional fee, in accordance with the National Internal
Revenue Code, matters which are simply inconsistent with an employer-
employee relationship. In the precise words of the labor arbiter:
". . . After more than ten years of services to PHILCOM, the
complainant would have noticed that no SSS deductions were made on
his remuneration or that the respondent was deducting the 10% tax for
his fees and he surely would have complained about them if he had
 considered himself an employee of PHILCOM. But he never raised those
issues. An ordinary employee would consider the SSS payments
important and thus make sure they would be paid. The complainant
never bothered to ask the respondent to remit his SSS contributions.
This clearly shows that the complainant never considered himself an
employee of PHILCOM and thus, respondent need not remit anything to
the SSS in favor of the complainant." 18
Clearly, the elements of an employer-employee relationship are wanting in
this case. We may add that the records are replete with evidence showing that
respondent had to bill petitioner for his monthly professional fees. 19 It simply
runs against the grain of common experience to imagine that an ordinary
employee has yet to bill his employer to receive his salary.  aSTAIH

We note, too, that the power to terminate the parties' relationship was
mutually vested on both. Either may terminate the arrangement at will, with or
without cause. 20
Finally, remarkably absent from the parties' arrangement is the element of
control, whereby the employer 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 to be accomplished. 21
Here, petitioner had no control over the means and methods by which
respondent 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
respondent's work hours and the additional compensation therefor were
negotiated upon by the parties. 22 In fine, the parties themselves practically
agreed on every terms and conditions of respondent's engagement, which
thereby negates the element of control in their relationship. For sure, respondent
has never cited even a single instance when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the
NLRC and the Court of Appeals ruled that respondent is petitioner's regular
employee at the time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondent's written
'retainer contract' was renewed annually from 1981 to 1994 and the
alleged 'renewal' for 1995 and 1996, when it was allegedly terminated,
was verbal.
Article 280 of the Labor code (sic) provides:
'The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreements of
the parties, an employment shall be deemed to be regular where
 the employee has been engaged to perform 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.'
'An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one (1) year of service,
whether such is continuous or broken, shall be considered a
regular with respect to the activity in which he is employed and his
employment shall continue while such activity exists.'
Parenthetically, the position of company physician, in the case of
petitioner, is usually necessary and desirable because the need for
medical attention of employees cannot be foreseen, hence, it is
necessary to have a physician at hand. In fact, the importance and
desirability of a physician in a company premises is recognized by Art.
157 of the Labor Code,which requires the presence of a physician
depending on the number of employees and in the case at bench, in
petitioner's case, as found by public respondent, petitioner employs
more than 500 employees.
Going back to Art. 280 of the Labor Code,it was made therein
clear that the provisions of a written agreement to the contrary
notwithstanding or the existence of a mere oral agreement, if the
employee is engaged in the usual business or trade of the employer,
more so, that he rendered service for at least one year, such employee
shall be considered as a regular employee. Private respondent herein
has been with petitioner since 1981 and his employment was not for a
specific project or undertaking, the period of which was pre-determined
and neither the work or service of private respondent seasonal.
(Emphasis by the CA itself). HDTcEI

We disagree to the foregoing ratiocination.

The appellate court's premise that regular employees are those who
perform activities which are desirable and necessary for the business of the
employer is not determinative in this case. For, we take it that any agreement
may provide that one party shall render services for and in behalf of another, no
matter how necessary for the latter's business, even without being hired as an
employee. This set-up is precisely true in the case of an independent
contractorship as well as in an agency agreement. Indeed, Article 280 of
the Labor Code, quoted by the appellate court, is not the yardstick for
determining the existence of an employment relationship. As it is, the provision
merely distinguishes between two (2) kinds of employees, i.e., regular and
casual. It does not apply where, as here, the very existence of an employment
relationship is in dispute. 23
Buttressing his contention that he is a regular employee of petitioner,
respondent invokes Article 157 of the Labor Code,and argues that he satisfies all
the requirements thereunder. The provision relied upon reads:
ART. 157. Emergency medical and dental services. — It shall be
the duty of every employer to furnish his employees in any locality with
free medical and dental attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number
of employees exceeds fifty (50) but not more than two
hundred (200) except when the employer does not
maintain hazardous workplaces, in which case the services
of a graduate first-aider shall be provided for the protection
of the workers, where no registered nurse is available. The
Secretary of Labor shall provide by appropriate regulations
the services that shall be required where the number of
employees does not exceed fifty (50) and shall determine
by appropriate order hazardous workplaces for purposes of
this Article;
(b) The services of a full-time registered nurse, a part-time
physician and dentist, and an emergency clinic, when the
number of employees exceeds two hundred (200) but not
more than three hundred (300); and
(c) The services of a full-time physician, dentist and full-time
registered nurse as well as a dental clinic, and an infirmary
or emergency hospital with one bed capacity for every one
hundred (100) employees when the number of employees
exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the
services of a physician or dentist who cannot stay in the premises of the
establishment for at least two (2) hours, in the case of those engaged on
part-time basis, and not less than eight (8) hours in the case of those
employed on full-time basis. Where the undertaking is nonhazardous in
nature, the physician and dentist may be engaged on retained basis,
subject to such regulations as the Secretary of Labor may prescribe to
insure immediate availability of medical and dental treatment and
attendance in case of emergency.
Had only respondent read carefully the very statutory provision invoked by
him, he would have noticed that in non-hazardous workplaces, the employer may
engage the services of a physician "on retained basis." As correctly observed by
the petitioner, while it is true that the provision requires employers to engage the
services of medical practitioners in certain establishments depending on the
number of their employees, nothing is there in the law which says that medical
practitioners so engaged be actually hired as employees, 24 adding that the law,
as written, only requires the employer "to retain", not employ, a part-time
physician who needed to stay in the premises of the non-hazardous workplace
for two (2) hours. 25
Respondent takes no issue on the fact that petitioner's business of
telecommunications is not hazardous in nature. As such, what applies here is the
last paragraph of Article 157 which, to stress, provides that the employer may
engage the services of a physician and dentist "on retained basis", subject to
such regulations as the Secretary of Labor may prescribe. The successive
"retainership" agreements of the parties definitely hue to the very statutory
provision relied upon by respondent. 
HCETDS

Deeply embedded in our jurisprudence is the rule that courts may not
construe a statute that is free from doubt. Where the law is clear and
unambiguous, it must be taken to mean exactly what it says, and courts have no
choice but to see to it that the mandate is obeyed. 26 As it is, Article 157 of
the Labor Code clearly and unequivocally allows employers in non-hazardous
establishments to engage "on retained basis" the service of a dentist or
physician. Nowhere does the law provide that the physician or dentist so
engaged thereby becomes a regular employee. The very phrase that they may
be engaged "on retained basis", revolts against the idea that this engagement
gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently engaged the
services of respondent on a retainer basis, as shown by their various
"retainership contracts", so can petitioner put an end, with or without cause, to
their retainership agreement as therein provided. 27
We note, however, that even as the contracts entered into by the parties
invariably provide for a 60-day notice requirement prior to termination, the same
was not complied with by petitioner when it terminated on 17 December 1996 the
verbally-renewed retainership agreement, effective at the close of business hours
of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both
parties, 28 that execution of the NLRC decision had already been made at the
NLRC despite the pendency of the present recourse. For sure, accounts of
petitioner had already been garnished and released to respondent despite the
previous Status Quo Order 29 issued by this Court. To all intents and purposes,
therefore, the 60-day notice requirement has become moot and academic if not
waived by the respondent himself.
 WHEREFORE, the petition is GRANTED and the challenged decision of
the Court of Appeals REVERSED and SET ASIDE. The 21 December 1998
decision of the labor arbiter is REINSTATED.  TESDcA

No pronouncement as to costs.
SO ORDERED.
Panganiban, Corona and Carpio Morales, JJ., concur.
Sandoval-Gutierrez, J., is on official leave.
 
Footnotes
1.Penned by Associate Justice Edgardo F. Sundiam, and concurred in by Associate
Justices Bennie A. Adefuin-De La Cruz (ret.) and Wenceslao I. Agnir, Jr. (ret.).
2.Rollo at p. 62.
3.Id. at p. 98.
4.Id. at p. 100.
5.Id. at pp. 101-112.
6.Id. at p. 116.
7.Id. at pp. 276-285.
8.Id. at pp. 327-333.
9.Id. at pp. 360-363.
10.Id. at pp. 735-743.
11.Id. at p. 746.
12.Bautista v. Mangaldan Rural Bank, Inc., 230 SCRA 16 [1994] citing De la
Puerta v. Court of Appeals, 181 SCRA 861 [1990].
13.Mainland Construction Company, Inc. v. Movilla, 250 SCRA 290 [1995].
14.256 SCRA 84 [1996].
15.MAM Realty Development Corporation v. National Labor Relations Commission,
244 SCRA 797 [1995]; Zanotte Shoes v. National Labor Relations Commission,
241 SCRA 261 [1995]; Singer Sewing Machine Company v. Drilon, 193 SCRA
270 [1991]; Development Bank of the Philippines v. National Labor Relations
Commission 175 SCRA 537 [1989]; Broadway Motors, Inc. v. National Labor
Relations Commission, 156 SCRA 522 [1987]; Brotherhood Labor Unity
Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]; Rosario
Brothers, Inc. v. Ople, 131 SCRA 72 [1984]; SSS v. Cosmos Aerated Water
 Factory, Inc., 112 SCRA 47 [1982] and Mafinco Trading Corporation v. Ople,
70 SCRA 139 [1976].
16.Rollo, p. 98.
17.Rollo, at pp. 279-280.
18.Id. at pp. 280-281.
19.Id. at pp. 181-187.
20.Item No. 5 of the Retainership Contract which reads: 5. This contract will be for a
period of one year subject to renewal between you and the Company. If either
you or the Company will terminate this Agreement at anytime before its expiry
date, an advance notice of 60 days is required to be served by the concerned
party to the other to avoid unnecessary adjustment problems.
21.Sara v. Agarrado, 166 SCRA 625 [1988] citing LVN Pictures, Inc. v. Phil.
Musicians Guild, 1 SCRA 312 [1961]; Investment Planning Corp. v. SSS, 21
SCRA 924 [1967]; SSS v. Court of Appeals, 30 SCRA 210 [1968];
and Philippine Refining Co., Inc. v. Court of Appeals, 117 SCRA 84 [1982].
22.Rollo, at p. 191.
23.Singer Sewing Machine Company v. Drilon, 193 SCRA 270 [1991].
24.Rollo, at p. 774.
25.Id., at p. 777.
26.Ramos v. Court of Appeals, 108 SCRA 728 [1981]; Banawa v. Mirano, 97 SCRA
517 [1980]; Espiritu v. Cipriano, 55 SCRA 533 [1974] and Republic Flour Mills,
Inc. v. Commissioner of Customs, 39 SCRA 269 [1971].
27.Supra, See footnote 21.
28.Philcom's Memorandum, Rollo at p. 779 and De Vera's Memorandum, Rollo at p.
708.
29.Dated 09 June 2003, Rollo at pp. 576-578.
 (Philippine Global Communications, Inc. v. De Vera, G.R. No. 157214, [June 7,
|||

2005], 498 PHIL 301-317)

[G.R. No. 146881. February 5, 2007.]

COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA,

Manager, petitioners, vs. DR. DEAN N. CLIMACO, respondent.

DECISION
AZCUNA, J  :p

This is a petition for review on certiorari of the Decision of the Court of

Appeals 1 promulgated on July 7, 2000, and its Resolution promulgated on
January 30, 2001, denying petitioner's motion for reconsideration. The Court of
Appeals ruled that an employer-employee relationship exists between
respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc.
(Coca-Cola), and that respondent was illegally dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by
petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer Agreement that
stated:
WHEREAS, the COMPANY desires to engage on a retainer basis
the services of a physician and the said DOCTOR is accepting such
engagement upon terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual agreement hereinafter contained, the parties agree as follows:
1. This Agreement shall only be for a period of one (1) year
beginning January 1, 1988 up to December 31, 1988. The said
term notwithstanding, either party may terminate the contract
upon giving a thirty (30)-day written notice to the other. 
HIACac

2. The compensation to be paid by the company for the services of the

DOCTOR is hereby fixed at PESOS: Three Thousand Eight
Hundred (P3,800.00) per month. The DOCTOR may charge
professional fee for hospital services rendered in line with his
specialization. All payments in connection with the Retainer
Agreement shall be subject to a withholding tax of ten percent
(10%) to be withheld by the COMPANY under the Expanded
Withholding Tax System. In the event the withholding tax rate
shall be increased or decreased by appropriate laws, then the
rate herein stipulated shall accordingly be increased or decreased
pursuant to such laws.
3. That in consideration of the above mentioned retainer's fee, the
DOCTOR agrees to perform the duties and obligations
enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto
attached as Annex "A" and made an integral part of this Retainer
Agreement.
4. That the applicable provisions in the Occupational Safety and Health
Standards, Ministry of Labor and Employment shall be followed.
5. That the DOCTOR shall be directly responsible to the employee
concerned and their dependents for any injury inflicted on, harm
done against or damage caused upon the employee of the
 COMPANY or their dependents during the course of his
examination, treatment or consultation, if such injury, harm or
damage was committed through professional negligence or
incompetence or due to the other valid causes for action.
6. That the DOCTOR shall observe clinic hours at the COMPANY'S
premises from Monday to Saturday of a minimum of two (2) hours
each day or a maximum of TWO (2) hours each day or treatment
from 7:30 a.m. to 8:30 a.m. and 3:00 p.m. to 4:00 p.m.,
respectively unless such schedule is otherwise changed by the
COMPANY as [the] situation so warrants, subject to the Labor
Code provisions on Occupational Safety and Health Standards as
the COMPANY may determine. It is understood that the DOCTOR
shall stay at least two (2) hours a day in the COMPANY clinic and
that such two (2) hours be devoted to the workshifts with the most
number of employees. It is further understood that the DOCTOR
shall be on call at all times during the other workshifts to attend to
emergency case[s];
7. That no employee-employer relationship shall exist between the
COMPANY and the DOCTOR whilst this contract is in effect, and
in case of its termination, the DOCTOR shall be entitled only to
such retainer fee as may be due him at the time of termination. 2
The Comprehensive Medical Plan, 3 which contains the duties and
responsibilities of respondent, adverted to in the Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the]
employees' and dependents' health:
1. Prompt and adequate treatment of occupational and non-
occupational injuries and diseases.
2. To protect employees from any occupational health hazard by
evaluating health factors related to working conditions.
3. To encourage employees [to] maintain good personal health by
setting up employee orientation and education on health,
hygiene and sanitation, nutrition, physical fitness, first aid
training, accident prevention and personnel safety.
4. To evaluate other matters relating to health such as
absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this
program.
 2. The health program shall cover pre-employment and annual
p.e., hygiene and sanitation, immunizations, family
planning, physical fitness and athletic programs and other
activities such as group health education program, safety
and first aid classes, organization of health and safety
committees.
3. Periodically, this program will be reviewed and adjusted based
on employees' needs.  ECHSDc

C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and
non-occupational illnesses and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education
materials.
6. Coordinate with Safety Committee in developing specific
studies and program to minimize environmental health
hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical
fitness and athletic programs.
9. Visiting and follow-up treatment of Company employees and
their dependents confined in the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed
annually. The last one expired on December 31, 1993. Despite the non-renewal
of the Retainer Agreement, respondent continued to perform his functions as
company doctor to Coca-Cola until he received a letter 4 dated March 9, 1995
from petitioner company concluding their retainership agreement effective 30
days from receipt thereof.
It is noted that as early as September 1992, petitioner was already making
inquiries regarding his status with petitioner company. First, he wrote a letter
addressed to Dr. Willie Sy, the Acting President and Chairperson of the
Committee on Membership, Philippine College of Occupational Medicine. In
response, Dr. Sy wrote a letter 5 to the Personnel Officer of Coca-
Cola Bottlers Phils., Bacolod City, stating that respondent should be considered
as a regular part-time physician, having served the company continuously for
four (4) years. He likewise stated that respondent must receive all the benefits
and privileges of an employee under Article 157 (b) 6 of the Labor Code.
Petitioner company, however, did not take any action. Hence, respondent
made another inquiry directed to the Assistant Regional Director, Bacolod City
District Office of the Department of Labor and Employment (DOLE), who referred
the inquiry to the Legal Service of the DOLE, Manila. In his letter 7 dated May 18,
1993, Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed
that an employer-employee relationship existed between petitioner and
respondent based on the Retainer Agreement and the Comprehensive Medical
Plan, and the application of the "four-fold" test. However, Director Ancheta
emphasized that the existence of employer-employee relationship is a question
of fact. Hence, termination disputes or money claims arising from employer-
employee relations exceeding P5,000 may be filed with the National Labor
Relations Commission (NLRC). He stated that their opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS).
Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod City, wrote a
letter 8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing the
latter that the legal staff of his office was of the opinion that the services of
respondent partake of the nature of work of a regular company doctor and that
he was, therefore, subject to social security coverage.
Respondent inquired from the management of petitioner company whether
it was agreeable to recognizing him as a regular employee. The management
refused to do so.
On February 24, 1994, respondent filed a Complaint 9 before the NLRC,
Bacolod City, seeking recognition as a regular employee of petitioner company
and prayed for the payment of all benefits of a regular employee, including 13th
Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay,
and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-
94. 
DSHcTC

While the complaint was pending before the Labor Arbiter, respondent
received a letter dated March 9, 1995 from petitioner company concluding their
retainership agreement effective thirty (30) days from receipt thereof. This
prompted respondent to file a complaint for illegal dismissal against petitioner
company with the NLRC, Bacolod City. The case was docketed as RAB Case
No. 06-04-10177-95.
In a Decision 10 dated November 28, 1996, Labor Arbiter Jesus N.
Rodriguez, Jr. found that petitioner company lacked the power of control over
respondent's performance of his duties, and recognized as valid the Retainer
Agreement between the parties. Thus, the Labor Arbiter dismissed respondent's
complaint in the first case, RAB Case No. 06-02-10138-94. The dispositive
portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered dismissing the instant complaint seeking recognition as a
regular employee.
SO ORDERED. 11
In a Decision 12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez
dismissed the case for illegal dismissal (RAB Case No. 06-04-10177-95) in view
of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No.
06-02-10138-94 that complainant therein, Dr. Dean Climaco, is not an employee
of Coca-Cola Bottlers Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu
City.
In a Decision 13 promulgated on November 28, 1997, the NLRC dismissed
the appeal in both cases for lack of merit. It declared that no employer-employee
relationship existed between petitioner company and respondent based on the
provisions of the Retainer Agreement which contract governed respondent's
employment.
Respondent's motion for reconsideration was denied by the NLRC in a
Resolution 14 promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that
an employer-employee relationship existed between petitioner company and
respondent after applying the four-fold test: (1) the power to hire the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the employer's
power to control the employee with respect to the means and methods by which
the work is to be accomplished.
The Court of Appeals held:
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 the petitioner, would show that all the elements of
the above test are present.
First, the agreements provide that "the COMPANY desires to
engage on a retainer basis the services of a physician and the said
DOCTOR is accepting such engagement . . ." (Rollo, page 25). This
clearly shows that Coca-Cola exercised its power to hire the services of
petitioner.
 Secondly, paragraph (2) of the agreements showed that petitioner
would be entitled to a final compensation of Three Thousand Eight
Hundred Pesos per month, which amount was later raised to Seven
Thousand Five Hundred on the latest contract. This would represent the
element of payment of wages.  SEACTH

Thirdly, it was provided in paragraph (1) of the agreements that

the same shall be valid for a period of one year. "The said term
notwithstanding, either party may terminate the contract upon giving a
thirty (30) day written notice to the other." (Rollo, page 25). This would
show that Coca-Cola had the power of dismissing the petitioner, as it
later on did, and this could be done for no particular reason, the sole
requirement being the former's compliance with the 30-day notice
requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal
that Coca-Cola exercised the most important element of all, that is,
control, over the conduct of petitioner in the latter's performance of his
duties as a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to perform
the duties and obligations enumerated in the Comprehensive Medical
Plan referred to above. In paragraph (6), the fixed and definite hours
during which the petitioner must render service to the company is laid
down.
We say that there exists Coca-Cola's power to control petitioner
because the particular objectives and activities to be observed and
accomplished by the latter are fixed and set under the Comprehensive
Medical Plan which was made an integral part of the retainer agreement.
Moreover, the times for accomplishing these objectives and activities are
likewise controlled and determined by the company. Petitioner is subject
to definite hours of work, and due to this, he performs his duties to Coca-
Cola not at his own pleasure but according to the schedule dictated by
the company.
In addition, petitioner was designated by Coca-Cola to be a
member of its Bacolod Plant's Safety Committee. The minutes of the
meeting of the said committee dated February 16, 1994 included the
name of petitioner, as plant physician, as among those comprising the
committee.
It was averred by Coca-Cola in its comment that they exercised
no control over petitioner for the reason that the latter was not directed
as to the procedure and manner of performing his assigned tasks. It
went as far as saying that "petitioner was not told how to immunize,
inject, treat or diagnose the employees of the respondent (Rollo, page
228). We believe that if the "control test" would be interpreted this
strictly, it would result in an absurd and ridiculous situation wherein we
 could declare that an entity exercises control over another's activities
only in instances where the latter is directed by the former on each and
every stage of performance of the particular activity. Anything less than
that would be tantamount to no control at all.
To our minds, it is sufficient if the task or activity, as well as the
means of accomplishing it, is dictated, as in this case where the
objectives and activities were laid out, and the specific time for
performing them was fixed by the controlling party. 15
Moreover, the Court of Appeals declared that respondent should be
classified as a regular employee having rendered six years of service as plant
physician by virtue of several renewed retainer agreements. It underscored the
provision in Article 280 16 of the Labor Code stating that "any employee who has
rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in
which he is employed, and his employment shall continue while such activity
exists." Further, it held that the termination of respondent's services without any
just or authorized cause constituted illegal dismissal.
In addition, the Court of Appeals found that respondent's dismissal was an
act oppressive to labor and was effected in a wanton, oppressive or malevolent
manner which entitled respondent to moral and exemplary damages.  AEITDH

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing, the Decision of the
National Labor Relations Commission dated November 28, 1997 and its
Resolution dated August 7, 1998 are found to have been issued with
grave abuse of discretion in applying the law to the established facts,
and are hereby REVERSED and SET ASIDE, and private
respondent Coca-Cola Bottlers, Phils., Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of seniority
rights from the time his compensation was withheld up to the time
he is actually reinstated; however, if reinstatement is no longer
possible, to pay the petitioner separation pay equivalent to one (1)
month's salary for every year of service rendered, computed at
the rate of his salary at the time he was dismissed, plus
backwages.
2. Pay petitioner moral damages in the amount of P50,000.00.
3. Pay petitioner exemplary damages in the amount of P50,000.00.
4. Give to petitioner all other benefits to which a regular employee
of Coca-Cola is entitled from the time petitioner became a regular
employee (one year from effectivity date of employment) until the
time of actual payment.
 SO ORDERED. 17
Petitioner company filed a motion for reconsideration of the Decision of the
Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals
stated that petitioner company noted that its Decision failed to mention whether
respondent was a full-time or part-time regular employee. It also questioned how
the benefits under their Collective Bargaining Agreement which the Court
awarded to respondent could be given to him considering that such benefits were
given only to regular employees who render a full day's work of not less than
eight hours. It was admitted that respondent is only required to work for two
hours per day.
The Court of Appeals clarified that respondent was a "regular part-time
employee and should be accorded all the proportionate benefits due to this
category of employees of [petitioner] Corporation under the CBA." It sustained its
decision on all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL
QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, CONTRARY TO THE DECISIONS OF THE
HONORABLE SUPREME COURT ON THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL
QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF
A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE
BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY
TO THE RULINGS OF THE SUPREME COURT IN
ANALOGOUS CASES.  IHCacT

3. THAT THE HONORABLE COURT OF APPEALS COMMITTED

REVERSIBLE ERROR, BASED ON A SUBSTANTIAL
QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND HOLDING INSTEAD THAT THE
PETITIONERS EXERCISED CONTROL OVER THE WORK OF
THE RESPONDENT.
 4. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL
QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THERE IS EMPLOYER-
EMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF
THE LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL
QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL
DISMISSAL WHEN THE EMPLOYMENT OF THE
RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL
QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THE RESPONDENT IS A
REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO
PROPORTIONATE BENEFITS AS A REGULAR PART TIME
EMPLOYEE ACCORDING TO THE PETITIONERS' CBA.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR, BASED ON A SUBSTANTIAL
QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THE RESPONDENT IS
ENTITLED TO MORAL AND EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an employer-
employee relationship between the parties. The resolution of the main issue will
determine whether the termination of respondent's employment is illegal.
The Court, in determining the existence of an employer-employee
relationship, has invariably adhered to the four-fold test: (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," considered to be the most important element. 18
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
petitioner company lacked the power of control over the performance by
respondent of his duties. The Labor Arbiter reasoned that the Comprehensive
Medical Plan, which contains the respondent's objectives, duties and obligations,
does not tell respondent "how to conduct his physical examination, how to
immunize, or how to diagnose and treat his patients, employees of [petitioner]
company, in each case." He likened this case to that of Neri  v. National Labor
Relations Commission, 19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a
job description which detailed her functions as a radio/telex operator.
However, a cursory reading of the job description shows that what was
sought to be controlled by FEBTC was actually the end result of the task,
e.g., that the daily incoming and outgoing telegraphic transfer of funds
received and relayed by her, respectively, tallies with that of the register.
The guidelines were laid down merely to ensure that the desired end
result was achieved. It did not, however, tell Neri how the radio/telex
machine should be operated.  STADIH

In effect, the 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.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is
precisely because the company lacks the power of control that the contract
provides that respondent shall be directly responsible to the employee concerned
and their dependents for any injury, harm or damage caused through
professional negligence, incompetence or other valid causes of action.
The Labor Arbiter also correctly found that the provision in the Retainer
Agreement that respondent was on call during emergency cases did not make
him a regular employee. He explained, thus:
Likewise, the allegation of complainant that since he is on call at
anytime of the day and night makes him a regular employee is off-
tangent. Complainant does not dispute the fact that outside of the two (2)
hours that he is required to be at respondent company'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, complainant maintains his own
private clinic attending to his private practice in the city, where he
services his patients, bills them accordingly — and if it is an employee of
respondent company who is attended to by him for special treatment that
needs hospitalization or operation, this is subject to a special billing.
More often than not, an employee is required to stay in the employer's
workplace or proximately close thereto that he cannot utilize his time
effectively and gainfully for his own purpose. Such is not the prevailing
situation here.
 In addition, the 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 Court also notes that the Retainership Agreement granted to both
parties the power to terminate their relationship upon giving a 30-day notice.
Hence, petitioner company did not wield the sole power of dismissal or
termination.
The Court agrees with the Labor Arbiter and the NLRC that there is
nothing wrong with the employment of respondent as a retained physician of
petitioner company and upholds the validity of the Retainership Agreement which
clearly stated that no employer-employee relationship existed between the
parties. The Agreement also stated that it was only for a period of 1 year
beginning January 1, 1988 to December 31, 1998, but it was renewed on a
yearly basis.
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. Consequently, there is no basis for the moral and exemplary
damages granted by the Court of Appeals to respondent due to his alleged illegal
dismissal.
WHEREFORE, the petition is GRANTED and the Decision and Resolution
of the Court of Appeals are REVERSED and SET ASIDE. The Decision and
Resolution dated November 28, 1997 and August 7, 1998, respectively, of the
National Labor Relations Commission are REINSTATED.  ICcDaA

No costs.
SO ORDERED.
Puno, C.J., Sandoval-Gutierrez, Corona and Garcia, JJ., concur.
 
Footnotes
1.Docketed as CA-G.R. SP No. 50760.
2.Rollo, pp. 86-87.
3.Id. at 88.
4.Id. at 91.
5.CA Rollo, p. 21.
 6.Art. 157. Emergency medical and dental services. — It shall be the duty of every
employer to furnish his employees in any locality with free medical and dental
attendance and facilities consisting of:
xxx xxx xxx
(b) The services of a full-time registered nurse, a part-time physician and
dentist, and an emergency clinic, when the number of employees exceeds two
hundred (200) but not more than three hundred (300).
7.CA Rollo, p. 29.
8.Id. at 34.
9.Id. at 35.
10.Rollo, p. 38.
11.Id. at 46.
12.Id. at 48.
13.Id. at 52.
14.Id. at 61.
15.Id. at 73-75.
16.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.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph; Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists. 
HCcaTS

17.Id. at 78-79.
18.Philippine Global Communications, Inc.  v. De Vera, G.R. No. 157214, June 7,
2005, 459 SCRA 260, 268.
19.G.R. Nos. 97008-09, July 23, 1993, 224 SCRA 7717, 722-723.
 (Coca Cola Bottlers (Phils.), Inc. v. Climaco, G.R. No. 146881, [February 5,
|||

2007], 543 PHIL 151-167)

 [G.R. No. 146530. January 17, 2005.]

PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR RELATION
S COMMISSION, SUPREME PACKAGING, INC. and ALVIN
LEE, Plant Manager, respondents.

DECISION

CALLEJO, SR., J  : p

Before the Court is the petition for review on certiorari of the

Resolution 1 dated December 15, 2000 of the Court of Appeals (CA) reversing its
Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The assailed resolution
reinstated the Decision dated July 10, 1998 of
the National Labor Relations Commission (NLRC), dismissing the complaint for
illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC decision
similarly reversed its earlier Decision dated January 27, 1998 which, affirming
that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by
respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of
manufacturing cartons and other packaging materials for export and distribution.
It engaged the services of the petitioner, Pedro Chavez, as truck driver on
October 25, 1984. As such, the petitioner was tasked to deliver the respondent
company's products from its factory in Mariveles, Bataan, to its various
customers, mostly in Metro Manila. The respondent company furnished the
petitioner with a truck. Most of the petitioner's delivery trips were made at
nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto in the
afternoon two or three days after. The deliveries were made in accordance with
the routing slips issued by respondent company indicating the order, time and
urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per trip.
This was later adjusted to P480.00 per trip and, at the time of his alleged
dismissal, the petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee,
respondent company's plant manager, his (the petitioner's) desire to avail himself
of the benefits that the regular employees were receiving such as overtime pay,
nightshift differential pay, and 13th month pay, among others. Although he
promised to extend these benefits to the petitioner, respondent Lee failed to
actually do so. 
aIETCA
 On February 20, 1995, the petitioner filed a complaint for regularization
with the Regional Arbitration Branch No. III of the NLRC in San Fernando,
Pampanga. Before the case could be heard, respondent company terminated the
services of the petitioner. Consequently, on May 25, 1995, the petitioner filed an
amended complaint against the respondents for illegal dismissal,
unfair labor practice and non-payment of overtime pay, nightshift differential pay,
13th month pay, among others. The case was docketed as NLRC Case No.
RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-
employee relationship between the respondent company and the petitioner. They
averred that the petitioner was an independent contractor as evidenced by the
contract of service which he and the respondent company entered into. The said
contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these
presents, agrees to hire and the Contractor [referring to Pedro Chavez],
by nature of their specialized line or service jobs, accepts the services to
be rendered to the Principal, under the following terms and covenants
heretofore mentioned:
1. That the inland transport delivery/hauling activities to be
performed by the contractor to the principal, shall only
cover travel route from Mariveles to Metro Manila.
Otherwise, any change to this travel route shall be subject
to further agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling
or delivery transport services fully rendered by the
Contractor shall be on a per trip basis depending on the
size or classification of the truck being used in the transport
service, to wit:
a) If the hauling or delivery service shall require a truck of
six wheeler, the payment on a per trip basis from
Mariveles to Metro Manila shall be THREE
HUNDRED PESOS (P300.00) and EFFECTIVE
December 15, 1984.  EHSAaD

b) If the hauling or delivery service require a truck of ten

wheeler, the payment on a per trip basis, following
the same route mentioned, shall be THREE
HUNDRED FIFTY (P350.00) Pesos and Effective
December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic]
provide for [sic] at least two (2) helpers;
 4. The Contractor shall exercise direct control and shall be
responsible to the Principal for the cost of any damage to,
loss of any goods, cargoes, finished products or the like,
while the same are in transit, or due to reckless [sic] of its
men utilized for the purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary
power over its men working for him subject to this
agreement, and that the Contractor shall hold the Principal
free and harmless from any liability or claim that may arise
by virtue of the Contractor's non-compliance to the existing
provisions of the Minimum Wage Law, the Employees
Compensation Act, the Social Security System Act, or any
other such law or decree that may hereafter be enacted, it
being clearly understood that any truck drivers, helpers or
men working with and for the Contractor, are not
employees who will be indemnified by the Principal for any
such claim, including damages incurred in connection
therewith;
6. This contract shall take effect immediately upon the signing by
the parties, subject to renewal on a year-to-year basis. 2
This contract of service was dated December 12, 1984. It was
subsequently renewed twice, on July 10, 1989 and September 28, 1992. Except
for the rates to be paid to the petitioner, the terms of the contracts were
substantially the same. The relationship of the respondent company and the
petitioner was allegedly governed by this contract of service.  aACEID

The respondents insisted that the petitioner had the sole control over the
means and methods by which his work was accomplished. He paid the wages of
his helpers and exercised control over them. As such, the petitioner was not
entitled to regularization because he was not an employee of the respondent
company. The respondents, likewise, maintained that they did not dismiss the
petitioner. Rather, the severance of his contractual relation with the respondent
company was due to his violation of the terms and conditions of their contract.
The petitioner allegedly failed to observe the minimum degree of diligence in the
proper maintenance of the truck he was using, thereby exposing respondent
company to unnecessary significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter
rendered the Decision dated February 3, 1997, finding the respondents guilty of
illegal dismissal. The Labor Arbiter declared that the petitioner was a regular
employee of the respondent company as he was performing a service that was
necessary and desirable to the latter's business. Moreover, it was noted that the
petitioner had discharged his duties as truck driver for the respondent company
for a continuous and uninterrupted period of more than ten years.
 The contract of service invoked by the respondents was declared null and
void as it constituted a circumvention of the constitutional provision affording full
protection to labor and security of tenure. The Labor Arbiter found that the
petitioner's dismissal was anchored on his insistent demand to be regularized.
Hence, for lack of a valid and just cause therefor and for their failure to observe
the due process requirements, the respondents were found guilty of illegal
dismissal. The dispositive portion of the Labor Arbiter's decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby
rendered declaring respondent SUPREME PACKAGING, INC. and/or
MR. ALVIN LEE, Plant Manager, with business address at BEPZ,
Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to
pay complainant his separation pay equivalent to one (1) month pay per
year of service based on the average monthly pay of P10,800.00 in lieu
of reinstatement as his reinstatement back to work will not do any good
between the parties as the employment relationship has already become
strained and full backwages from the time his compensation was
withheld on February 23, 1995 up to January 31, 1997 (cut-off date) until
compliance, otherwise, his backwages shall continue to run. Also to pay
complainant his 13th month pay, night shift differential pay and service
incentive leave pay hereunder computed as follows:  ICASEH

a) Backwages P248,400.00
b) Separation Pay P140,400.00
c) 13th month pay P10,800.00
d) Service Incentive Leave Pay 2,040.00
    ——————
  TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due
the complainant as attorney's fees.
SO ORDERED. 3
The respondents seasonably interposed an appeal with the NLRC.
However, the appeal was dismissed by the NLRC in its Decision 4 dated January
27, 1998, as it affirmed in toto the decision of the Labor Arbiter. In the said
decision, the NLRC characterized the contract of service between the respondent
company and the petitioner as a "scheme" that was resorted to by the
respondents who, taking advantage of the petitioner's unfamiliarity with the
English language and/or legal niceties, wanted to evade the effects and
implications of his becoming a regularized employee. 5
The respondents sought reconsideration of the January 27, 1998 Decision
of the NLRC. Acting thereon, the NLRC rendered another Decision 6 dated July
10, 1998, reversing its earlier decision and, this time, holding that no employer-
employee relationship existed between the respondent company and the
petitioner. In reconsidering its earlier decision, the NLRC stated that the
respondents did not exercise control over the means and methods by which the
petitioner accomplished his delivery services. It upheld the validity of the contract
of service as it pointed out that said contract was silent as to the time by which
the petitioner was to make the deliveries and that the petitioner could hire his
own helpers whose wages would be paid from his own account. These factors
indicated that the petitioner was an independent contractor, not an employee of
the respondent company.
 

The NLRC ruled that the contract of service was not intended to

circumvent Article 280 of the Labor Code on the regularization of employees.
Said contract, including the fixed period of employment contained therein, having
been knowingly and voluntarily entered into by the parties thereto was declared
valid citing Brent School, Inc.  v. Zamora. 7 The NLRC, thus, dismissed the
petitioner's complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it
was denied by the NLRC in its Resolution dated September 7, 1998. He then
filed with this Court a petition for certiorari, which was referred to the CA following
the ruling in St. Martin Funeral Home  v.  NLRC. 8
The appellate court rendered the Decision dated April 28, 2000, reversing
the July 10, 1998 Decision of the NLRC and reinstating the decision of
the Labor Arbiter. In the said decision, the CA ruled that the petitioner was a
regular employee of the respondent company because as its truck driver, he
performed a service that was indispensable to the latter's business. Further, he
had been the respondent company's truck driver for ten continuous years. The
CA also reasoned that the petitioner could not be considered an independent
contractor since he had no substantial capital in the form of tools and machinery.
In fact, the truck that he drove belonged to the respondent company. The CA
also observed that the routing slips that the respondent company issued to the
petitioner showed that it exercised control over the latter. The routing slips
indicated the chronological order and priority of delivery, the urgency of certain
deliveries and the time when the goods were to be delivered to the customers.  IDATCE

The CA, likewise, disbelieved the respondents' claim that the petitioner
abandoned his job noting that he just filed a complaint for regularization. This
actuation of the petitioner negated the respondents' allegation that he abandoned
his job. The CA held that the respondents failed to discharge their burden to
show that the petitioner's dismissal was for a valid and just cause. Accordingly,
the respondents were declared guilty of illegal dismissal and the decision of
the Labor Arbiter was reinstated.
 In its April 28, 2000 Decision, the CA denounced the contract of service
between the respondent company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts
seeking to prevent workers from attaining the status of regular
employment, it is but necessary for the courts to scrutinize with extreme
caution their legality and justness. Where from the circumstances it is
apparent that a contract has been entered into to preclude acquisition of
tenurial security by the employee, they should be struck down and
disregarded as contrary to public policy and morals. In this case, the
"contract of service" is just another attempt to exploit the unwitting
employee and deprive him of the protection of the Labor Code by
making it appear that the stipulations of the parties were governed by the
Civil Code as in ordinary transactions. 9
However, on motion for reconsideration by the respondents, the CA made
a complete turn around as it rendered the assailed Resolution dated December
15, 2000 upholding the contract of service between the petitioner and the
respondent company. In reconsidering its decision, the CA explained that the
extent of control exercised by the respondents over the petitioner was only with
respect to the result but not to the means and methods used by him. The CA
cited the following circumstances: (1) the respondents had no say on how the
goods were to be delivered to the customers; (2) the petitioner had the right to
employ workers who would be under his direct control; and (3) the petitioner had
no working time.
The fact that the petitioner had been with the respondent company for
more than ten years was, according to the CA, of no moment because his status
was determined not by the length of service but by the contract of service. This
contract, not being contrary to morals, good customs, public order or public
policy, should be given the force and effect of law as between the respondent
company and the petitioner. Consequently, the CA reinstated the July 10, 1998
Decision of the NLRC dismissing the petitioner's complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the
December 15, 2000 Resolution of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN
GIVING MORE CONSIDERATION TO THE "CONTRACT OF SERVICE"
ENTERED INTO BY PETITIONER AND PRIVATE RESPONDENT
THAN ARTICLE 280 OF THE LABOR CODE OF THE
PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR
EMPLOYMENT NOTWITHSTANDING ANY WRITTEN AGREEMENT
 TO THE CONTRARY AND REGARDLESS OF THE ORAL
AGREEMENT OF THE PARTIES;  SCETHa

(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN
REVERSING ITS OWN FINDINGS THAT PETITIONER IS A REGULAR
EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE
RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL
TEST" WHICH IS CONSIDERED THE MOST ESSENTIAL CRITERION
IN DETERMINING THE EXISTENCE OF SAID RELATIONSHIP IS NOT
PRESENT. 10
The threshold issue that needs to be resolved is whether there existed an
employer-employee relationship between the respondent company and the
petitioner. We rule in the affirmative.
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; and (4) the employer's power to control the
employee's conduct. 11 The most important element is the employer's control of
the employee's conduct, not only as to the result of the work to be done, but also
as to the means and methods to accomplish it. 12 All the four elements are
present in this case.
First. Undeniably, it was the respondents who engaged the services of the
petitioner without the intervention of a third party.
Second. Wages are defined as "remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
service rendered or to be rendered." 13 That the petitioner was paid on a per trip
basis is not significant. This is merely a method of computing compensation and
not a basis for determining the existence or absence of employer-employee
relationship. One may be paid on the basis of results or time expended on the
work, and may or may not acquire an employment status, depending on whether
the elements of an employer-employee relationship are present or not. 14 In this
case, it cannot be gainsaid that the petitioner received compensation from the
respondent company for the services that he rendered to the latter.  TECcHA

Moreover, under the Rules Implementing the Labor Code, every employer

is required to pay his employees by means of payroll. 15 The payroll should show,
among other things, the employee's rate of pay, deductions made, and the
amount actually paid to the employee. Interestingly, the respondents did not
present the payroll to support their claim that the petitioner was not their
employee, raising speculations whether this omission proves that its presentation
would be adverse to their case. 16
Third. The respondents' power to dismiss the petitioner was inherent in the
fact that they engaged the services of the petitioner as truck driver. They
exercised this power by terminating the petitioner's services albeit in the guise of
"severance of contractual relation" due allegedly to the latter's breach of his
contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee
relationship, the "control test" is the most important. Compared to an employee,
an independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on its own account
and under its own responsibility according to its own manner and method, free
from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof. 17 Hence, while an
independent contractor enjoys independence and freedom from the control and
supervision of his principal, an employee is subject to the employer's power to
control the means and methods by which the employee's work is to be performed
and accomplished. 18
Although the respondents denied that they exercised control over the
manner and methods by which the petitioner accomplished his work, a careful
review of the records shows that the latter performed his work as truck driver
under the respondents' supervision and control. Their right of control was
manifested by the following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent
company;
2. There was an express instruction from the respondents that the
truck shall be used exclusively to deliver respondent company's
goods; 19
3. Respondents directed the petitioner, after completion of each
delivery, to park the truck in either of two specific places only, to wit: at
its office in Metro Manila at 2320 Osmeña Street, Makati City or at
BEPZ, Mariveles, Bataan; 20 and
4. Respondents determined how, where and when the petitioner
would perform his task by issuing to him gate passes and routing
slips. 21
a. The routing slips indicated on the column REMARKS,
the chronological order and priority of delivery such as 1st drop,
2nd drop, 3rd drop, etc. This meant that the petitioner had to
 deliver the same according to the order of priority indicated
therein.  IcSADC

b. The routing slips, likewise, showed whether the goods

were to be delivered urgently or not by the word RUSH printed
thereon.
c. The routing slips also indicated the exact time as to
when the goods were to be delivered to the customers as, for
example, the words "tomorrow morning" was written on slip no.
2776.
These circumstances, to the Court's mind, prove that the respondents
exercised control over the means and methods by which the petitioner
accomplished his work as truck driver of the respondent company. On the other
hand, the Court is hard put to believe the respondents' allegation that the
petitioner was an independent contractor engaged in providing delivery or
hauling services when he did not even own the truck used for such services.
Evidently, he did not possess substantial capitalization or investment in the form
of tools, machinery and work premises. Moreover, the petitioner performed the
delivery services exclusively for the respondent company for a continuous and
uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual
circumstances earlier discussed indubitably establish the existence of an
employer-employee relationship between the respondent company and the
petitioner. It bears stressing that the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a contract and
providing therein that the employee is an independent contractor when, as in this
case, the facts clearly show otherwise. Indeed, the employment status of a
person is defined and prescribed by law and not by what the parties say it should
be. 22
Having established that there existed an employer-employee relationship
between the respondent company and the petitioner, the Court shall now
determine whether the respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was
for a valid and just cause. 23 In this case, the respondents failed to prove any
such cause for the petitioner's dismissal. They insinuated that the petitioner
abandoned his job. To constitute abandonment, these two factors must concur:
(1) the failure to report for work or absence without valid or justifiable reason; and
(2) a clear intention to sever employer-employee relationship. 24 Obviously, the
petitioner did not intend to sever his relationship with the respondent company for
at the time that he allegedly abandoned his job, the petitioner just filed a
complaint for regularization, which was forthwith amended to one for illegal
dismissal. A charge of abandonment is totally inconsistent with the immediate
filing of a complaint for illegal dismissal, more so when it includes a prayer for
reinstatement. 25
Neither can the respondents' claim that the petitioner was guilty of gross
negligence in the proper maintenance of the truck constitute a valid and just
cause for his dismissal. Gross negligence implies a want or absence of or failure
to exercise slight care or diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid
them. 26 The negligence, to warrant removal from service, should not merely
be gross but also habitual. 27 The single and isolated act of the petitioner's
negligence in the proper maintenance of the truck alleged by the respondents
does not amount to "gross and habitual neglect" warranting his dismissal.  ITADaE

The Court agrees with the following findings and conclusion of

the Labor Arbiter:
. . . As against the gratuitous allegation of the respondent that
complainant was not dismissed from the service but due to
complainant's breach of their contractual relation, i.e., his violation of the
terms and conditions of the contract, we are very much inclined to
believe complainant's story that his dismissal from the service was
anchored on his insistent demand that he be considered a regular
employee. Because complainant in his right senses will not just abandon
for that reason alone his work especially so that it is only his job where
he depends chiefly his existence and support for his family if he was not
aggrieved by the respondent when he was told that his services as driver
will be terminated on February 23, 1995.  28
Thus, the lack of a valid and just cause in terminating the services of the
petitioner renders his dismissal illegal. Under Article 279 of the Labor Code, an
employee who is unjustly dismissed is entitled to reinstatement, without loss of
seniority rights and other privileges, and to the payment of full backwages,
inclusive of allowances, and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to the time
of his actual reinstatement. 29 However, as found by the Labor Arbiter, the
circumstances obtaining in this case do not warrant the petitioner's
reinstatement. A more equitable disposition, as held by the Labor Arbiter, would
be an award of separation pay equivalent to one month for every year of service
from the time of his illegal dismissal up to the finality of this judgment in addition
to his full backwages, allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated
December 15, 2000 of the Court of Appeals reversing its Decision dated April 28,
2000 in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE. The Decision
dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-
5, finding the respondents guilty of illegally terminating the employment of
petitioner Pedro Chavez, is REINSTATED.
SO ORDERED.
Puno, Austria-Martinez, Tinga and Chico-Nazario, JJ., concur.
 
Footnotes
1.Penned by Associate Justice Oswaldo D. Agcaoili (retired), with Associate Justices
Renato C. Dacudao and Andres B. Reyes, Jr., concurring.
2.Rollo, pp. 113-114.
3.Id. at 151.
4.Penned by Commissioner Rogelio I. Rayala, with Presiding Commissioner Raul T.
Aquino and Commissioner Victoriano R. Calaycay, concurring; Id. at 177-184.
5.Rollo, pp. 183-184.
6.Penned by Commissioner Angelita A. Gacutan, with Presiding Commissioner Raul
T. Aquino and Commissioner Victoriano R. Calaycay, concurring; Id. at 60-73.
7.181 SCRA 702 (1990).
8.295 SCRA 494 (1998).
9.Rollo, pp. 42-43.
10.Id. at 13-14.
11.Sy  v. Court of Appeals, 398 SCRA 301 (2003).
12.Id. at 307-308.
13.LABOR CODE, ART. 97(f).
14.Tan  v. Lagrama, 387 SCRA 393 (2002).
15.Book III, Rule X, Sec. 6(a).
16.Tan  v. Lagrama, supra.
17.Id. at 399.
18.Id.
19.Annex C of Respondents' Position Paper; Rollo, p. 117.
20.Ibid.
21.Annexes A to C of Petitioner's Reply to Respondents' Position Paper.
22.AZUCENA, I THE LABOR CODE (1999 ed.) 127.
 23.Hacienda Fatima  v.  National  Federation of Sugarcane Workers-Food and General
Trade, 396 SCRA 518 (2003).
  Article 282 of the Labor Code provides: An employer may terminate an employment
for any of the following causes:
 (a) Serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or representative in connection with his work;
 (b) Gross and habitual neglect by the employee of his duties;
 (c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
 (d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative;
 (e) Other causes analogous to the foregoing.
24.Buenviaje  v. Court of Appeals, 391 SCRA 440 (2002).
25.Globe Telecom, Inc.  v. Florendo-Flores, 390 SCRA 201 (2002)
26.Philippine Aeolus Automotive United Corporation  v.  NLRC, 331 SCRA 237 (2000).
27.Id. at 247.
28.Rollo, pp. 149-150.
29.Cebu Marine Beach Resort  v.  NLRC, 414 SCRA 173 (2003).
 (Chavez v. National Labor Relations Commission, G.R. No. 146530, [January
|||

17, 2005], 489 PHIL 444-462)

[G.R. No. 170087. August 31, 2006.]

ANGELINA FRANCISCO, petitioner, vs. NATIONAL LABOR RE
LATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO
TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON
ESCUETA, respondents.

DECISION

YNARES-SANTIAGO, J  : p

This petition for review on certiorari under Rule 45 of the Rules of

Court seeks to annul and set aside the Decision and Resolution of the Court of
Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-
G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by
herein petitioner Angelina Francisco. The appellate court reversed and set aside
the Decision of the National Labor Relations Commission (NLRC) dated April 15,
2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the
decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-
10-0-489-01, finding that private respondents were liable for constructive
dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation
stage. She was designated as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not
entrusted with the corporate documents; neither did she attend any board
meeting nor required to do so. She never prepared any legal document and
never represented the company as its Corporate Secretary. However, on some
occasions, she was prevailed upon to sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also
hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner
was assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government
agencies, especially with the Bureau of Internal Revenue (BIR), Social Security
System (SSS) and in the city government of Makati; and to administer all other
matters pertaining to the operation of Kasei Restaurant which is owned and
operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of
December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.
Petitioner alleged that she was required to sign a prepared resolution for her
replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of
all employees of Kasei Corporation and announced that nothing had changed
and that petitioner was still connected with Kasei Corporation as Technical
Assistant to Seiji Kamura and in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month
beginning January up to September 2001 for a total reduction of P22,500.00 as
of September 2001. Petitioner was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did not
receive her salary from the company. She made repeated follow-ups with the
company cashier but she was advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and the
rest of the officers but she was informed that she is no longer connected with the
company. 11
Since she was no longer paid her salary, petitioner did not report for work
and filed an action for constructive dismissal before the labor arbiter.  EHASaD

Private respondents averred that petitioner is not an employee of Kasei

Corporation. They alleged that petitioner was hired in 1995 as one of its technical
consultants on accounting matters and act concurrently as Corporate Secretary.
As technical consultant, petitioner performed her work at her own discretion
without control and supervision of Kasei Corporation. Petitioner had no daily time
record and she came to the office any time she wanted. The company never
interfered with her work except that from time to time, the management would
ask her opinion on matters relating to her profession. Petitioner did not go
through the usual procedure of selection of employees, but her services were
engaged through a Board Resolution designating her as technical consultant.
The money received by petitioner from the corporation was her professional fee
subject to the 10% expanded withholding tax on professionals, and that she was
not one of those reported to the BIR or SSS as one of the company's
employees. 12
Petitioner's designation as technical consultant depended solely upon the
will of management. As such, her consultancy may be terminated any time
considering that her services were only temporary in nature and dependent on
the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was not among the employees
reported to the BIR, as well as a list of payees subject to expanded withholding
tax which included petitioner. SSS records were also submitted showing that
petitioner's latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant's dismissal as illegal;
3. ordering respondents to reinstate complainant to her former
position without loss of seniority rights and jointly and severally pay
 complainant her money claims in accordance with the following
computation:
a. Backwages 10/2001 — 07/2002 275,000.00
  (27,500 x 10 mos.)  
b. Salary Differentials (01/2001 — 09/2001) 22,500.00
c. Housing Allowance (01/2001 — 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei  
  Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney's fees 87,076.50
  P957,742.50  
If reinstatement is no longer feasible, respondents are ordered to
pay complainant separation pay with additional backwages that would
accrue up to actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of
the Labor Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is
hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay
computed at one month per year of service in addition to full backwages
from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and
10% share in profit in the respective accounts of P100,000.00 and
P361,175.00 are deleted;
3) The award of 10% attorney's fees shall be based on salary
differential award only;
4) The awards representing salary differentials, housing
allowance, mid year bonus and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The
decision of the National Labor Relations Commissions dated April 15,
2003 is hereby REVERSED and SET ASIDE and a new one is hereby
rendered dismissing the complaint filed by private respondent against
Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16
 The appellate court denied petitioner's motion for reconsideration, hence,
the present recourse.
The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent Kasei
Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.
Considering the conflicting findings by the Labor Arbiter and
the National Labor Relations Commission on one hand, and the Court of Appeals
on the other, there is a need to reexamine the records to determine which of the
propositions espoused by the contending parties is supported by substantial
evidence. 17
We held in Sevilla  v. Court of Appeals 18 that in this jurisdiction, there has
been no uniform test to determine the existence of an employer-employee
relation. Generally, courts have relied on the so-called right of control test where
the person for whom the services are performed reserves a right to control not
only the end to be achieved but also the means to be used in reaching such end.
In addition to the standard of right-of-control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls,
can help in determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a
complete picture of the relationship between the parties, owing to the complexity
of such a relationship where several positions have been held by the worker.
There are instances when, aside from the employer's power to control the
employee with respect to the means and methods by which the work is to be
accomplished, economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as
employee, independent contractor, corporate officer or some other capacity.  caIEAD

The better approach would therefore be to adopt 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.
 
This two-tiered test would provide us with a framework of analysis, which
would take into consideration the totality of circumstances surrounding the true
nature of the relationship between the parties. This is especially appropriate in
this case where there is no written agreement or terms of reference to base the
relationship on; and due to the complexity of the relationship based on the
various positions and responsibilities given to the worker over the period of the
latter's employment.
 The control test initially found application in the case of Viaña  v. Al-
Lagadan and Piga, 19 and lately in Leonardo  v. Court of Appeals, 20 where we
held that there is an employer-employee relationship when the person for whom
the services are performed reserves the right to control not only the end achieved
but also the manner and means used to achieve that end.
In Sevilla  v. Court of Appeals, 21 we observed the need to consider the
existing economic conditions prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the employee in the payrolls, to
give a clearer picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic circumstances of the
worker.
Thus, the determination of the relationship between employer and
employee depends upon the circumstances of the whole economic
activity, 22 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. 23
The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that line of
business. 24 In the United States, the touchstone of economic reality in analyzing
possible employment relationships for purposes of the Federal Labor Standards
Act is dependency. 25 By analogy, the benchmark of economic reality in
analyzing possible employment relationships for purposes of
the Labor Code ought to be the economic dependence of the worker on his
employer.
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.
 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. 26 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. 27
It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latter's line of
business.
In Domasig  v.  National Labor Relations Commission,  28 we held that in a
business establishment, an identification card is 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. Together with the cash vouchers covering petitioner's salaries
for the months stated therein, these matters constitute substantial evidence
adequate to support a conclusion that petitioner was an employee of private
respondent.
We likewise ruled in Flores  v. Nuestro 29 that a corporation who registers
its workers with the SSS is proof that the latter were the former's employees. The
coverage of Social Security Law is predicated on the existence of an employer-
employee relationship.
Furthermore, 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. Petitioner
was never entrusted with corporate documents of the company, nor required to
attend the meeting of the corporation. She was never privy to the preparation of
any document for the corporation, although once in a while she was required to
sign prepared documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself
from the records of the case. 31 Regardless of this fact, we are convinced that the
allegations in the first affidavit are sufficient to establish that petitioner is an
employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first
one, courts do not generally look with favor on any retraction or recanted
testimony, for it could have been secured by considerations other than to tell the
truth and would make solemn trials a mockery and place the investigation of the
truth at the mercy of unscrupulous witnesses. 32 A recantation does not
necessarily cancel an earlier declaration, but like any other testimony the same is
subject to the test of credibility and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is
an employee of respondent Kasei Corporation. She was selected and engaged
by the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main job
function involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of engagement.
Respondent corporation hired and engaged petitioner for compensation, with the
power to dismiss her for cause. More importantly, respondent corporation had
the power to control petitioner with the means and methods by which the work is
to be accomplished.  aHTEIA

The corporation constructively dismissed petitioner when it reduced her

salary by P2,500 a month from January to September 2001. This amounts to an
illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and
confidence, and under the principle of strained relations, petitioner is further
entitled to separation pay, in lieu of reinstatement. 34
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 continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to an employee. 35 In Globe Telecom, Inc.  v.
Florendo-Flores, 36 we ruled that where an employee ceases to work due to a
demotion of rank or a diminution of pay, an unreasonable situation arises which
creates an adverse working environment rendering it impossible for such
employee to continue working for her employer. Hence, her severance from the
company was not of her own making and therefore amounted to an illegal
termination of employment.
In affording full protection to labor, this Court must ensure equal work
opportunities regardless of sex, race or creed. Even as we, in every case,
attempt to carefully balance the fragile relationship between employees and
employers, we are mindful of the fact that the policy of the law is to apply
the Labor Code to a greater number of employees. This would enable employees
to avail of the benefits accorded to them by law, in line with the constitutional
mandate giving maximum aid and protection to labor, promoting their welfare and
reaffirming it as a primary social economic force in furtherance of social justice
and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of
the Court of Appeals dated October 29, 2004 and October 7, 2005, respectively,
in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of
the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
No. 032766-02, is REINSTATED. The case is REMANDED to the Labor Arbiter
for the recomputation of petitioner Angelina Francisco's full backwages from the
time she was illegally terminated until the date of finality of this decision, and
separation pay representing one-half month pay for every year of service, where
a fraction of at least six months shall be considered as one whole year.
 
SO ORDERED.
Panganiban, C.J., Austria-Martinez, Callejo, Sr. and Chico-Nazario,
JJ., concur.
 
Footnotes
1.Rollo, pp. 9-22. Penned by Associate Justice Eloy R. Bello, Jr. and concurred in by
Associate Justices Regalado E. Maambong and Lucenito N. Tagle.
2.Id. at 24-25.
3.Id. at 193-198. Penned by Presiding Commissioner Lourdes C. Javier and concurred
in by Commissioner Tito F. Genilo.
4.Id. at 164-173. Penned by Labor Arbiter Eduardo J. Carpio.
5.Id. at 89.
6.Id. at 89-90.
7.Id. at 90.
8.Id.
9.Id. at 91.
10.Id.
11.Id. at 91-92.
12.Id. at 92-93.
13.Id. at 94.
14.Id. at 172-173.
15.Id. at 197-198.
16.Id. at 100.
17.Abante, Jr.  v. Lamadrid Bearing & Parts Corporation, G.R. No. 159890, May 28,
2004, 430 SCRA 368, 379.
18.G.R. Nos. L-41182-3, April 15, 1988, 160 SCRA 171, 179-180, citing Visayan
Stevedore Transportation Company  v. Court of Industrial  Relations, 125 Phil.
817, 820 (1967).
19.99 Phil. 408 (1956).
20.G.R. No. 152459, June 15, 2006.
21.Supra note 18.
22.Rutherford Food Corporation v. McComb, 331 U.S. 722, 727 (1947); 91 L.Ed.
1772, 1777 (1946).
23.See Brock v. Lauritzen, 624 F.Supp. 966 (E.D. Wisc. 1985); Real v. Driscoll
Strawberry Associates, Inc., 603 F.2d 748 (9th Cir. 1979); Goldberg v.
Whitaker House Cooperative, Inc., 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100
(1961); Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947
(1947).
24.Halferty v. Pulse Drug Company, 821 F.2d 261 (5th Cir. 1987).
25.Weisel v. Singapore Joint Venture, Inc., 602 F.2d. 1185 (5th Cir. 1979).
26.Rollo, pp. 305-321.
27.Id. at 264-265.
28.330 Phil. 518, 524 (1996).
29.G.R. No. 66890, April 15, 1988, 160 SCRA 568, 571.
30.Rollo, pp. 120-121.
31.Id. at 57.
32.People  v. Joya, G.R. No. 79090, October 1, 1993, 227 SCRA 9, 26-27.
33.People  v. Davatos, G.R. No. 93322, February 4, 1994, 229 SCRA 647, 651.
34.Globe-Mackay Cable and Radio
Corporation  v.  National Labor Relations Commission, G.R. No. 82511, March
3, 1992, 206 SCRA 701, 711-712.
35.Leonardo  v.  National Labor Relations Commission, 389 Phil. 118, 126 (2000).
36.438 Phil. 756 (2002).
 (Francisco v. National Labor Relations Commission, G.R. No. 170087, [August
|||

31, 2006], 532 PHIL 399-413)

[G.R. No. 167622. June 29, 2010.]

GREGORIO V. TONGKO, petitioner, vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC.
and RENATO A. VERGEL DE DIOS, respondents.

RESOLUTION

BRION, J  : p

This resolves the Motion for Reconsideration 1 dated December 3, 2008

filed by respondent The Manufacturers Life Insurance Co. (Phils.), Inc.
(Manulife) to set aside our Decision of November 7, 2008. In the assailed
decision, we found that an employer-employee relationship existed between
Manulife and petitioner Gregorio Tongko and ordered Manulife to
pay Tongko backwages and separation pay for illegal dismissal.  TAcCDI

The following facts have been stated in our Decision of November 7,

2008, now under reconsideration, but are repeated, simply for purposes of
clarity.
The contractual relationship between Tongko and Manulife had
two basic phases. The first or initial phase began on July 1, 1977, under
a Career Agent's Agreement (Agreement) that provided:
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.
xxx xxx xxx
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 to or 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.
 xxx xxx xxx
The Company may terminate this Agreement for any breach or
violation of any of the provisions hereof by the Agent by giving written
notice to the Agent within fifteen (15) days from the time of the discovery
of the breach. No waiver, extinguishment, abandonment, withdrawal or
cancellation of the right to terminate this Agreement by the Company
shall be construed for any previous failure to exercise its right under any
provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement
at any time without cause, by giving to the other party fifteen (15) days
notice in writing. 2
Tongko additionally agreed (1) to comply with all regulations and
requirements of Manulife, and (2) to maintain a standard of knowledge and
competency in the sale of Manulife's products, satisfactory to Manulife and
sufficient to meet the volume of the new business, required by his Production
Club membership. 3
The second phase started in 1983 when Tongko was named Unit
Manager in Manulife's Sales Agency Organization. In 1990, he became a
Branch Manager. Six years later (or in 1996), Tongko became a Regional
Sales Manager. 4  CAHTIS

Tongko's gross earnings consisted of commissions, persistency

income, and management overrides. Since the
beginning, Tongko consistently declared himself self-employed in his
income tax returns. Thus, under oath, he declared his gross business
income and deducted his business expenses to arrive at his taxable
business income. Manulife withheld the corresponding 10% tax
on Tongko's earnings. 5
In 2001, Manulife instituted manpower development programs at the
regional sales management level. Respondent Renato Vergel de Dios
wrote Tongko a letter dated November 6, 2001 on concerns that were brought
up during the October 18, 2001 Metro North Sales Managers Meeting. De
Dios wrote:
The first step to transforming Manulife into a big league player
has been very clear — to increase the number of agents to at least
1,000 strong for a start. This may seem diametrically opposed to the way
Manulife was run when you first joined the organization. Since then,
however, substantial changes have taken place in the organization, as
these have been influenced by developments both from within and
without the company.
xxx xxx xxx
 The issues around agent recruiting are central to the intended
objectives hence the need for a Senior Managers' meeting earlier last
month when Kevin O'Connor, SVP-Agency, took to the floor to
determine from our senior agency leaders what more could be done to
bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your Region was the lowest
performer (on a per Manager basis) in terms of recruiting in 2000 and, as
of today, continues to remain one of the laggards in this area.
While discussions, in general, were positive other than for certain
comments from your end which were perceived to be uncalled for, it
became clear that a one-on-one meeting with you was necessary to
ensure that you and management, were on the same plane. As gleaned
from some of your previous comments in prior meetings (both in group
and one-on-one), it was not clear that we were proceeding in the same
direction.
Kevin held subsequent series of meetings with you as a result,
one of which I joined briefly. In those subsequent meetings you
reiterated certain views, the validity of which we challenged and
subsequently found as having no basis.  STIHaE

With such views coming from you, I was a bit concerned that the
rest of the Metro North Managers may be a bit confused as to the
directions the company was taking. For this reason, I sought a meeting
with everyone in your management team, including you, to clear the air,
so to speak.
This note is intended to confirm the items that were discussed at
the said Metro North Region's Sales Managers meeting held at the 7/F
Conference room last 18 October.
xxx xxx xxx
Issue # 2: "Some Managers are unhappy with their earnings and
would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with
Kevin. For this reason, I placed the issue on the table before the rest of
your Region's Sales Managers to verify its validity. As you must have
noted, no Sales Manager came forward on their own to confirm your
statement and it took you to name Malou Samson as a source of the
same, an allegation that Malou herself denied at our meeting and in your
very presence.
This only confirms, Greg, that those prior comments have no solid
basis at all. I now believe what I had thought all along, that these
allegations were simply meant to muddle the issues surrounding the
inability of your Region to meet its agency development objectives!
 Issue # 3: "Sales Managers are doing what the company asks
them to do but, in the process, they earn less."
xxx xxx xxx
All the above notwithstanding, we had your own records checked
and we found that you made a lot more money in the Year
2000 versus 1999. In addition, you also volunteered the information to
Kevin when you said that you probably will make more money in the
Year 2001 compared to Year 2000. Obviously, your above statement
about making "less money" did not refer to you but the way you argued
this point had us almost believing that you were spouting the gospel of
truth when you were not. . . .
xxx xxx xxx
All of a sudden, Greg, I have become much more worried about
your ability to lead this group towards the new direction that we have
been discussing these past few weeks, i.e., Manulife's goal to become a
major agency-led distribution company in the Philippines. While as you
claim, you have not stopped anyone from recruiting, I have never heard
you proactively push for greater agency recruiting. You have not been
proactive all these years when it comes to agency growth. DSATCI

xxx xxx xxx

I cannot afford to see a major region fail to deliver on its
developmental goals next year and so, we are making the following
changes in the interim:
1. You will hire at your expense a competent assistant who
can unload you of much of the routine tasks which can be easily
delegated. This assistant should be so chosen as to complement
your skills and help you in the areas where you feel "may not be
your cup of tea."
You have stated, if not implied, that your work as Regional
Manager may be too taxing for you and for your health. The
above could solve this problem.
xxx xxx xxx
2. Effective immediately, Kevin and the rest of the Agency
Operations will deal with the North Star Branch (NSB) in
autonomous fashion. . . .
I have decided to make this change so as to reduce your
span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central
Unit and the rest of the Sales Managers in Metro North. I will hold
 you solely responsible for meeting the objectives of these
remaining groups.
xxx xxx xxx
The above changes can end at this point and they need not go
any further. This, however, is entirely dependent upon you. But you have
to understand that meeting corporate objectives by everyone is primary
and will not be compromised. We are meeting tough challenges next
year, and I would want everybody on board. Any resistance or holding
back by anyone will be dealt with accordingly. 6
Subsequently, de Dios wrote Tongko another letter, dated December
18, 2001, terminating Tongko's services:
It would appear, however, that despite the series of meetings and
communications, both one-on-one meetings between yourself and SVP
Kevin O'Connor, some of them with me, as well as group meetings with
your Sales Managers, all these efforts have failed in helping you align
your directions with Management's avowed agency growth policy.  CaHcET

xxx xxx xxx

On account thereof, Management is exercising its prerogative
under Section 14 of your Agents Contract as we are now issuing
this notice of termination of your Agency Agreement with
us effective fifteen days from the date of this letter. 7  
Tongko responded by filing an illegal dismissal complaint with the
National Labor Relations Commission (NLRC) Arbitration Branch. He
essentially alleged — despite the clear terms of the letter terminating his
Agency Agreement — that he was Manulife's employee before he was
illegally dismissed. 8
Thus, the threshold issue is the existence of an employment
relationship. A finding that none exists renders the question of illegal dismissal
moot; a finding that an employment relationship exists, on the other hand,
necessarily leads to the need to determine the validity of the termination of the
relationship.
A. Tongko's Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-
rider not exceeding P50,000.00, regardless of production levels attained and
exclusive of commissions and bonuses. He also claimed that as Regional
Sales Manager, he was given a travel and entertainment allowance of
P36,000.00 per year in addition to his overriding commissions; he was tasked
with numerous administrative functions and supervisory authority over
Manulife's employees, aside from merely selling policies and recruiting agents
for Manulife; and he recommended and recruited insurance agents subject to
vetting and approval by Manulife. He further alleges that he was assigned a
definite place in the Manulife offices when he was not in the field — at the 3rd
Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village,
Makati City — for which he never paid any rental. Manulife provided the office
equipment he used, including tables, chairs, computers and printers (and
even office stationery), and paid for the electricity, water and telephone bills.
As Regional Sales Manager, Tongko additionally asserts that he was required
to follow at least three codes of conduct. 9 DETACa

B. Manulife's Case — Agency Relationship with Tongko

Manulife argues that Tongko had no fixed wage or salary. Under the
Agreement, Tongko was paid commissions of varying amounts, computed
based on the premium paid in full and actually received by Manulife on
policies obtained through an agent. As sales manager, Tongko was paid
overriding sales commission derived from sales made by agents under his
unit/structure/branch/region. Manulife also points out that it deducted and
withheld a 10% tax from all commissions Tongko received; Tongko even
declared himself to be self-employed and consistently paid taxes as
such — i.e., he availed of tax deductions such as ordinary and necessary
trade, business and professional expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction
over Tongko's claim as he was not its employee as characterized in the four-
fold test and our ruling in Carungcong v. National Labor Relations
Commission. 10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship
existed between the parties. However, the NLRC reversed the labor arbiter's
decision on appeal; it found the existence of an employer-employee
relationship and concluded that Tongko had been illegally dismissed. In the
petition for certiorari with the Court of Appeals (CA), the appellate court found
that the NLRC gravely abused its discretion in its ruling and reverted to the
labor arbiter's decision that no employer-employee relationship existed
between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and
found that an employment relationship existed between Tongko and Manulife.
We concluded that Tongko is Manulife's employee for the following reasons:
1. Our ruling in the first Insular 11 case did not foreclose the possibility
of an insurance agent becoming an employee of an insurance company; if
evidence exists showing that the company promulgated rules or regulations
that effectively controlled or restricted an insurance agent's choice of methods
 or the methods themselves in selling insurance, an employer-employee
relationship would be present. The determination of the existence of an
employer-employee relationship is thus on a case-to-case basis depending on
the evidence on record.  IHCSTE

2. Manulife had the power of control over Tongko, sufficient to

characterize him as an employee, as shown by the following indicators:
2.1 Tongko undertook to comply with Manulife's rules, regulations
and other requirements, i.e., the different codes of conduct such as the
Agent Code of Conduct, the Manulife Financial Code of Conduct, and
the Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife's insurance agents and
managers, who occupied similar positions as Tongko, showed that they
performed administrative duties that established employment with
Manulife; 12 and
2.3 Tongko was tasked to recruit some agents in addition to his
other administrative functions. De Dios' letter harped on the direction
Manulife intended to take, viz., greater agency recruitment as the
primary means to sell more policies; Tongko's alleged failure to follow
this directive led to the termination of his employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for
reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife's right to
due process by: (a) confining the review only to the issue of "control" and
utterly disregarding all the other issues that had been joined in this case;
(b) mischaracterizing the divergence of conclusions between the CA and
the NLRC decisions as confined only to that on "control"; (c) grossly
failing to consider the findings and conclusions of the CA on the majority
of the material evidence, especially [Tongko's] declaration in his income
tax returns that he was a "business person" or "self-employed"; and (d)
allowing [Tongko] to repudiate his sworn statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in
contract law and agency, distorts not only the legal relationships of
agencies to sell but also distributorship and franchising, and ignores the
constitutional and policy context of contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the
CA on the three elements of the four-fold test other than the "control"
test, reverses well-settled doctrines of law on employer-employee
relationships, and grossly misapplies the "control test," by selecting,
without basis, a few items of evidence to the exclusion of more material
evidence to support its conclusion that there is "control." 
TSHIDa
 4. The November 7[, 2008] Decision is judicial legislation, beyond
the scope authorized by Articles 8 and 9 of the Civil Code, beyond the
powers granted to this Court under Article VIII, Section 1 of the
Constitution and contravenes through judicial legislation, the
constitutional prohibition against impairment of contracts under Article III,
Section 10 of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision
made unsustainable and reversible errors, which should be corrected, in
concluding that Respondent Manulife and Petitioner had an employer-
employee relationship, that Respondent Manulife illegally dismissed
Petitioner, and for consequently ordering Respondent Manulife to pay
Petitioner backwages, separation pay, nominal damages and attorney's
fees. 13
THE COURT'S RULING
A. The Insurance and the Civil Codes;
the Parties' Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law
perspective, oblivious that the factual antecedents were set in the insurance
industry so that the Insurance Code primarily governs. Chapter IV, Title 1 of
this Code is wholly devoted to "Insurance Agents and Brokers" and
specifically defines the agents and brokers relationship with the insurance
company and how they are governed by the Code and regulated by the
Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency"
that it speaks of, as agency is a civil law matter governed by the Civil Code.
Thus, at the very least, three sets of laws — namely, the Insurance Code,
the Labor Code and the Civil Code — have to be considered in looking at the
present case. Not to be forgotten, too, is the Agreement (partly reproduced on
page 2 of this Dissent and which no one disputes) that the parties adopted to
govern their relationship for purposes of selling the insurance the company
offers. To forget these other laws is to take a myopic view of the present case
and to add to the uncertainties that now exist in considering the legal
relationship between the insurance company and its "agents."
The main issue of whether an agency or an employment relationship
exists depends on the incidents of the relationship. The Labor Code concept
of "control" has to be compared and distinguished with the "control" that must
necessarily exist in a principal-agent relationship. The principal cannot but
also have his or her say in directing the course of the principal-agent
relationship, especially in cases where the company-representative
relationship in the insurance industry is an agency.  ASTIED
 a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in
the country, in terms particularly of who can be in the insurance business,
who can act for and in behalf of an insurer, and how these parties shall
conduct themselves in the insurance business. Section 186 of the Insurance
Code provides that "No person, partnership, or association of persons shall
transact any insurance business in the Philippines except as agent of a
person or corporation authorized to do the business of insurance in the
Philippines." Sections 299 and 300 of the Insurance Code on Insurance
Agents and Brokers, among other provisions, provide:
Section 299. No insurance company doing business in the
Philippines, nor any agent thereof, shall pay any commission or other
compensation to any person for services in obtaining insurance,
unless such person shall have first procured from the Commissioner a
license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided. 
No person shall act as an insurance agent or as an insurance
broker in the solicitation or procurement of applications for insurance, or
receive for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the
Philippines or any agent thereof, without first procuring a license so to
act from the Commissioner . . . The Commissioner shall satisfy himself
as to the competence and trustworthiness of the applicant and shall
have the right to refuse to issue or renew and to suspend or revoke any
such license in his discretion.
Section 300. Any person who for compensation solicits or obtains
insurance on behalf of any insurance company or transmits for a person
other than himself an application for a policy or contract of insurance to
or from such company or offers or assumes to act in the negotiating of
such insurance shall be an insurance agent within the intent of this
section and shall thereby become liable to all the duties, requirements,
liabilities and penalties to which an insurance agent is subject.
The application for an insurance agent's license requires a written
examination, and the applicant must be of good moral character and must not
have been convicted of a crime involving moral turpitude. 14 The insurance
agent who collects premiums from an insured person for remittance to the
insurance company does so in a fiduciary capacity, and an insurance
company which delivers an insurance policy or contract to an authorized
agent is deemed to have authorized the agent to receive payment on the
company's behalf. 15 Section 361 further prohibits the offer, negotiation, or
collection of any amount other than that specified in the policy and this covers
any rebate from the premium or any special favor or advantage in the
dividends or benefit accruing from the policy.  cAaETS

Thus, under the Insurance Code, the agent must, as a matter of

qualification, be licensed and must also act within the parameters of the
authority granted under the license and under the contract with the principal.
Other than the need for a license, the agent is limited in the way he offers and
negotiates for the sale of the company's insurance products, in his collection
activities, and in the delivery of the insurance contract or policy. Rules
regarding the desired results (e.g., the required volume to continue to qualify
as a company agent, rules to check on the parameters on the authority given
to the agent, and rules to ensure that industry, legal and ethical rules are
followed) are built-in elements of control specific to an insurance agency and
should not and cannot be read as elements of control that attend an
employment relationship governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who]
binds himself to render some service or to do something in representation or
on behalf of another, with the consent or authority of the latter." 16 While this is
a very broad definition that on its face may even encompass an employment
relationship, the distinctions between agency and employment are sufficiently
established by law and jurisprudence.
Generally, the determinative element is the control exercised over the
one rendering service. The employer controls the employee both in the results
and in the means and manner of achieving this result. The principal in an
agency relationship, on the other hand, also has the prerogative to exercise
control over the agent in undertaking the assigned task based on the
parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency
must be express in light of the need for a license and for the designation by
the insurance company. In the present case, the Agreement fully serves as
grant of authority to Tongko as Manulife's insurance agent. 17 This agreement
is supplemented by the company's agency practices and usages, duly
accepted by the agent in carrying out the agency. 18 By authority of
the Insurance Code, an insurance agency is for compensation, 19 a matter
the Civil Code Rules on Agency presumes in the absence of proof to the
contrary. 20 Other than the compensation, the principal is bound to advance
to, or to reimburse, the agent the agreed sums necessary for the execution of
the agency. 21 By implication at least under Article 1994 of the Civil Code, the
principal can appoint two or more agents to carry out the same assigned
tasks, 22 based necessarily on the specific instructions and directives given to
them. HCEISc
 With particular relevance to the present case is the provision that "In the
execution of the agency, the agent shall act in accordance with the
instructions of the principal." 23 This provision is pertinent for purposes of the
necessary control that the principal exercises over the agent in undertaking
the assigned task, and is an area where the instructions can intrude into the
labor law concept of control so that minute consideration of the facts is
necessary. A related article is Article 1891 of the Civil Code which binds the
agent to render an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the
first Insular and Grepalife cases to establish that the company rules and
regulations that an agent has to comply with are indicative of an employer-
employee relationship. 24 The Dissenting Opinions of Justice Presbitero
Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life
Assurance Co. v. National Labor Relations
Commission (second Insular case) 25 to support the view that Tongko is
Manulife's employee. On the other hand, Manulife cites the Carungcong case
and AFP Mutual Benefit Association, Inc. v. National Labor Relations
Commission (AFPMBAI case) 26 to support its allegation that Tongko was not
its employee.
A caveat has been given above with respect to the use of the rulings in
the cited cases because none of them is on all fours with the present case;
the uniqueness of the factual situation of the present case prevents it from
being directly and readily cast in the mold of the cited cases. These cited
cases are themselves different from one another; this difference underscores
the need to read and quote them in the context of their own factual situations.
The present case at first glance appears aligned with the facts in
the Carungcong, the Grepalife, and the second Insular Life cases. A critical
difference, however, exists as these cited cases dealt with the proper legal
characterization of a subsequentmanagement contract that superseded
the original agency contract between the insurance company and its
agent. Carungcong dealt with a subsequent Agreement making Carungcong
a New Business Manager that clearly superseded the Agreement designating
Carungcong as an agent empowered to solicit applications for insurance.
The Grepalife case, on the other hand, dealt with the proper legal
characterization of the appointment of the Ruiz brothers to positions higher
than their original position as insurance agents. Thus, after analyzing the
duties and functions of the Ruiz brothers, as these were enumerated in
their contracts, we concluded that the company practically dictated the
manner by which the Ruiz brothers were to carry out their jobs. Finally,
the second Insular Life case dealt with the implications of de los Reyes'
appointment as acting unit manager which, like the subsequent contracts in
the Carungcong and the Grepalife cases, was clearly defined under a
subsequent contract. In all these cited cases, a determination of the
presence of the Labor Code element of control was made on the basis of
the stipulations of the subsequent contracts.  TaDAHE

In stark contrast with the Carungcong, the Grepalife, and the

second Insular Life cases, the only contract or document extant and
submitted as evidence in the present case is the Agreement — a pure
agency agreement in the Civil Code context similar to the original contract
in the first Insular Life case and the contract in the AFPMBAI case. And
while Tongko was later on designated unit manager in 1983, Branch Manager
in 1990, and Regional Sales Manager in 1996, no formal contract regarding
these undertakings appears in the records of the case. Any such contract or
agreement, had there been any, could have at the very least provided the
bases for properly ascertaining the juridical relationship established between
the parties.
These critical differences, particularly between the present case
and the Grepalife and the second Insular Life cases, should therefore
immediately drive us to be more prudent and cautious in applying the rulings
in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977
Agreement that governed and defined the parties' relations until the
Agreement's termination in 2001. This Agreement stood for more than two
decades and, based on the records of the case, was never modified or
novated. It assumes primacy because it directly dealt with the nature of the
parties' relationship up to the very end; moreover, both parties never disputed
its authenticity or the accuracy of its terms.
By the Agreement's express terms, Tongko served as an "insurance
agent" for Manulife, not as an employee. To be sure, the Agreement's legal
characterization of the nature of the relationship cannot be conclusive and
binding on the courts; as the dissent clearly stated, the characterization of the
juridical relationship the Agreement embodied is a matter of law that is for the
courts to determine. At the same time, though, the characterization the parties
gave to their relationship in the Agreement cannot simply be brushed aside
because it embodies their intent at the time they entered the Agreement, and
they were governed by this understanding throughout their relationship. At the
very least, the provision on the absence of employer-employee relationship
between the parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.  STIcEA 

The parties' legal characterization of their intent, although not

conclusive, is critical in this case because this intent is not illegal or outside
the contemplation of law, particularly of the Insurance and the Civil Codes.
From this perspective, the provisions of the Insurance Code cannot be
disregarded as this Code (as heretofore already noted) expressly envisions a
principal-agent relationship between the insurance company and the
insurance agent in the sale of insurance to the public. For this reason, we
can take judicial notice that as a matter of Insurance Code-based
business practice, an agency relationship prevails in the insurance
industry for the purpose of selling insurance. The Agreement, by its
express terms, is in accordance with the Insurance Code model when it
provided for a principal-agent relationship, and thus cannot lightly be set aside
nor simply be considered as an agreement that does not reflect the parties'
true intent. This intent, incidentally, is reinforced by the system of
compensation the Agreement provides, which likewise is in accordance with
the production-based sales commissions the Insurance Code provides.
Significantly, evidence shows that Tongko's role as an insurance agent
never changed during his relationship with Manulife. If changes occurred at
all, the changes did not appear to be in the nature of their core
relationship. Tongko essentially remained an agent, but moved up in this role
through Manulife's recognition that he could use other agents approved by
Manulife, but operating under his guidance and in whose commissions he had
a share. For want of a better term, Tongko perhaps could be labeled as a
"lead agent" who guided under his wing other Manulife agents similarly tasked
with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated
under their own agency agreements. Thus, if Tongko's compensation scheme
changed at all during his relationship with Manulife, the change was solely for
purposes of crediting him with his share in the commissions the agents under
his wing generated. As an agent who was recruiting and guiding other
insurance agents, Tongko likewise moved up in terms of the reimbursement
of expenses he incurred in the course of his lead agency, a prerogative he
enjoyed pursuant to Article 1912 of the Civil Code.Thus, Tongko received
greater reimbursements for his expenses and was even allowed to use
Manulife facilities in his interactions with the agents, all of whom were, in the
strict sense, Manulife agents approved and certified as such by Manulife with
the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly
remained an agent is the inevitable conclusion that results from the reading of
the Agreement (the only agreement on record in this case) and his continuing
role thereunder as sales agent, from the perspective of the Insurance and the
Civil Codes and in light of what Tongko himself attested to as his role as
Regional Sales Manager. To be sure, this interpretation could have been
contradicted if other agreements had been submitted as evidence of the
relationship between Manulife and Tongko on the latter's expanded
undertakings. In the absence of any such evidence, however, this reading —
based on the available evidence and the applicable insurance and civil law
provisions — must stand, subject only to objective and evidentiary Labor
Code tests on the existence of an employer-employee relationship. CAETcH

In applying such Labor Code tests, however, the enforcement of the

Agreement during the course of the parties' relationship should be noted.
From 1977 until the termination of the Agreement, Tongko's occupation was
to sell Manulife's insurance policies and products. Both parties acquiesced
with the terms and conditions of the Agreement. Tongko, for his part,
accepted all the benefits flowing from the Agreement, particularly the
generous commissions.
Evidence indicates that Tongko consistently clung to the view that he
was an independent agent selling Manulife insurance products since he
invariably declared himself a business or self-employed person in his income
tax returns. This consistency with, and action made pursuant to the
Agreement were pieces of evidence that were never mentioned nor
considered in our Decision of November 7, 2008. Had they been
considered, they could, at the very least, serve as Tongko's admissions
against his interest. Strictly speaking, Tongko's tax returns cannot but be
legally significant because he certified under oath the amount he earned as
gross business income, claimed business deductions, leading to his net
taxable income. This should be evidence of the first order that cannot be
brushed aside by a mere denial. Even on a layman's view that is devoid of
legal considerations, the extent of his annual income alone renders his
claimed employment status doubtful. 27
Hand in hand with the concept of admission against interest in
considering the tax returns, the concept of estoppel — a legal and equitable
concept 28 — necessarily must come into play. Tongko's previous admissions
in several years of tax returns as an independent agent, as against his
belated claim that he was all along an employee, are too diametrically
opposed to be simply dismissed or ignored. Interestingly, Justice Velasco's
dissenting opinion states that Tongko was forced to declare himself a
business or self-employed person by Manulife's persistent refusal to
recognize him as its employee. 29 Regrettably, the dissent has shown no
basis for this conclusion, an understandable omission since no
evidence in fact exists on this point in the records of the case. In fact,
what the evidence shows is Tongko's full conformity with, and action as, an
independent agent until his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the
Agreement is its conclusion that the Agreement negated any employment
relationship between Tongko and Manulife so that the commissions he earned
as a sales agent should not be considered in the determination of the
backwages and separation pay that should be given to him. This part of the
dissent is correct although it went on to twist this conclusion by asserting
that Tongko had dual roles in his relationship with Manulife; he was an agent,
not an employee, in so far as he sold insurance for Manulife, but was an
employee in his capacity as a manager. Thus, the dissent concluded
that Tongko's backwages should only be with respect to his role as Manulife's
manager.  ITESAc

The conclusion with respect to Tongko's employment as a manager is,

of course, unacceptable for the legal, factual and practical reasons discussed
in this Resolution. In brief, the factual reason is grounded on the lack of
evidentiary support of the conclusion that Manulife exercised control
over Tongko in the sense understood in the Labor Code. The legal reason,
partly based on the lack of factual basis, is the erroneous legal conclusion that
Manulife controlled Tongko and was thus its employee. The practical reason,
on the other hand, is the havoc that the dissent's unwarranted conclusion
would cause the insurance industry that, by the law's own design, operated
along the lines of principal-agent relationship in the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence
on record showing that Manulife ever exercised means-and-manner control,
even to a limited extent, over Tongko during his ascent in Manulife's sales
ladder. In 1983, Tongko was appointed unit manager.
Inexplicably, Tongko never bothered to present any evidence at all on what
this designation meant. This also holds true for Tongko's appointment as
branch manager in 1990, and as Regional Sales Manager in 1996. The best
evidence of control — the agreement or directive relating to Tongko's duties
and responsibilities — was never introduced as part of the records of the
case. The reality is, prior to de Dios' letter, Manulife had practically
left Tongko alone not only in doing the business of selling insurance, but also
in guiding the agents under his wing. As discussed below, the alleged
directives covered by de Dios' letter, heretofore quoted in full, were policy
directions and targeted results that the company wanted Tongko and the
other sales groups to realign with in their own selling activities. This is the
reality that the parties' presented evidence consistently tells us.
 What, to Tongko, serve as evidence of labor law control are the codes
of conduct that Manulife imposes on its agents in the sale of insurance. The
mere presentation of codes or of rules and regulations, however, is not per
se indicative of labor law control as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on
both the insurance company and its agents in the performance of their
respective obligations under the Code, particularly on licenses and their
renewals, on the representations to be made to potential customers, the
collection of premiums, on the delivery of insurance policies, on the matter of
compensation, and on measures to ensure ethical business practice in the
industry.
The general law on agency, on the other hand, expressly allows the
principal an element of control over the agent in a manner consistent with an
agency relationship. In this sense, these control measures cannot be read as
indicative of labor law control. Foremost among these are the directives that
the principal may impose on the agent to achieve the assigned tasks, to the
extent that they do not involve the means and manner of undertaking these
tasks. The law likewise obligates the agent to render an account; in this
sense, the principal may impose on the agent specific instructions on how an
account shall be made, particularly on the matter of expenses and
reimbursements. To these extents, control can be imposed through rules and
regulations without intruding into the labor law concept of control for purposes
of employment.  ScaATD 

From jurisprudence, an important lesson that the first Insular Life case

teaches us is that a commitment to abide by the rules and regulations of an
insurance company does not ipso facto make the insurance agent an
employee. Neither do guidelines somehow restrictive of the insurance agent's
conduct necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control," as
the first Insular Life case tells us, should not merely relate to the
mutually desirable result intended by the contractual relationship; they
must have the nature of dictating the means or methods to be employed
in attaining the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means. In fact, results-wise,
the principal can impose production quotas and can determine how many
agents, with specific territories, ought to be employed to achieve the
company's objectives. These are management policy decisions that the labor
law element of control cannot reach. Our ruling in these respects in
the first Insular Life case was practically reiterated in Carungcong. Thus, as
will be shown more fully below, Manulife's codes of conduct, 30 all of which do
not intrude into the insurance agents' means and manner of conducting their
sales and only control them as to the desired results and Insurance
 Code norms, cannot be used as basis for a finding that the labor law concept
of control existed between Manulife and Tongko.
The dissent considers the imposition of administrative and managerial
functions on Tongko as indicative of labor law control; thus, Tongko as
manager, but not as insurance agent, became Manulife's employee. It drew
this conclusion from what the other Manulife managers disclosed in their
affidavits (i.e., their enumerated administrative and managerial functions) and
after comparing these statements with the managers in Grepalife. The dissent
compared the control exercised by Manulife over its managers in the present
case with the control the managers in the Grepalife case exercised over their
employees by presenting the following matrix: 31
Duties of Manulife's Manager Duties of Grepalife's
Managers/Supervisors  
- to render or recommend prospective - train understudies for the position
agents to be licensed, trained and of district manager
contracted to sell Manulife products  
and who will be part of my Unit  
- to coordinate activities of the agents - properly account, record and document
under [the managers'] Unit in [the the company's funds, spot-check and audit
agents'] daily, weekly and monthly the work of the zone supervisors, . . .
selling activities, making sure that follow up the submission of weekly
their respective sales targets are met; remittance reports of the debit agents and
zone supervisors  
- to conduct periodic training sessions - direct and supervise the sales activities
for [the] agents to further enhance of the debit agents under him, . . .
their sales skill; and undertake and discharge the functions of
  absentee debit agents, spot-check the
- to assist [the] agents with their sales record of debit agents, and insure proper
activities by way of joint fieldwork, documentation of sales and collections of
consultations and one-on-one evaluation debit agents.
and analysis of particular accounts      cDTCIA  

Aside from these affidavits however, no other evidence exists regarding the
effects of Tongko's additional roles in Manulife's sales operations on the
contractual relationship between them.
To the dissent, Tongko's administrative functions as recruiter, trainer, or
supervisor of other sales agents constituted a substantive alteration of
Manulife's authority over Tongko and the performance of his end of the
relationship with Manulife. We could not deny though that Tongko remained,
first and foremost, an insurance agent, and that his additional role as Branch
Manager did not lessen his main and dominant role as insurance agent; this
role continued to dominate the relations between Tongko and Manulife even
after Tongko assumed his leadership role among agents. This conclusion
cannot be denied because it proceeds from the undisputed fact
that Tongko and Manulife never altered their July 1, 1977 Agreement, a
distinction the present case has with the contractual changes made in the
second Insular Life case. Tongko's results-based commissions, too, attest to
the primacy he gave to his role as insurance sales agent.
The dissent apparently did not also properly analyze and appreciate the
great qualitative difference that exists between:
• the Manulife managers' role is to coordinate activities of the agents
under the managers' Unit in the agents' daily, weekly, and monthly selling
activities, making sure that their respective sales targets are met.
• the District Manager's duty in Grepalife is to properly account,
record, and document the company's funds, spot-check and audit the work of
the zone supervisors, conserve the company's business in the district through
"reinstatements," follow up the submission of weekly remittance reports of the
debit agents and zone supervisors, preserve company property in good
condition, train understudies for the position of district managers, and
maintain his quota of sales (the failure of which is a ground for termination).
• the Zone Supervisor's (also in Grepalife) has the duty to direct and
supervise the sales activities of the debit agents under him, conserve
company property through "reinstatements," undertake and discharge the
functions of absentee debit agents, spot-check the records of debit agents,
and insure proper documentation of sales and collections by the debit
agents. AHECcT

These job contents are worlds apart in terms of "control." In Grepalife, the
details of how to do the job are specified and pre-determined; in the present
case, the operative words are the "sales target," the methodology being left
undefined except to the extent of being "coordinative." To be sure, a
"coordinative" standard for a manager cannot be indicative of control; the
standard only essentially describes what a Branch Manager is — the person
in the lead who orchestrates activities within the group. To "coordinate," and
thereby to lead and to orchestrate, is not so much a matter of control by
Manulife; it is simply a statement of a branch manager's role in relation with
his agents from the point of view of Manulife whose business Tongko's sales
group carries.
A disturbing note, with respect to the presented affidavits and Tongko's
alleged administrative functions, is the selective citation of the portions
supportive of an employment relationship and the consequent omission of
portions leading to the contrary conclusion. For example, the following
portions of the affidavit of Regional Sales Manager John Chua, with
counterparts in the other affidavits, were not brought out in the Decision of
November 7, 2008, while the other portions suggesting labor law control were
highlighted. Specifically, the following portions of the affidavits were not
brought out: 32
1.a. I have no fixed wages or salary since my services are
compensated by way of commissions based on the computed premiums
paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method in
soliciting insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my daily
work load;
1.d. I use my own facilities, tools, materials and supplies in
carrying out my business of selling insurance;
xxx xxx xxx
6. I have my own staff that handles the day to day operations of
my office;
7. My staff are my own employees and received salaries from me;
xxx xxx xxx
9. My commission and incentives are all reported to the Bureau of
Internal Revenue (BIR) as income by a self-employed individual or
professional with a ten (10) percent creditable withholding tax. I also
remit monthly for professionals. 
ISHaCD

These statements, read with the above comparative analysis of the Manulife
and the Grepalife cases, would have readily yielded the conclusion that no
employer-employee relationship existed between Manulife and Tongko.
Even de Dios' letter is not determinative of control as it indicates the
least amount of intrusion into Tongko's exercise of his role as manager in
guiding the sales agents. Strictly viewed, de Dios' directives are merely
operational guidelines on how Tongko could align his operations with
Manulife's re-directed goal of being a "big league player." The method is to
expand coverage through the use of more agents. This requirement for the
recruitment of more agents is not a means-and-method control as it relates,
more than anything else, and is directly relevant, to Manulife's objective of
expanded business operations through the use of a bigger sales force whose
members are all on a principal-agent relationship. An important point to
note here is that Tongko was not supervising regular full-time
employees of Manulife engaged in the running of the insurance
business; Tongko was effectively guiding his corps of sales agents, who
are bound to Manulife through the same Agreement that he had with
Manulife, all the while sharing in these agents' commissions through his
overrides. This is the lead agent concept mentioned above for want of a
more appropriate term, since the title of Branch Manager used by the parties
is really a misnomer given that what is involved is not a specific regular
branch of the company but a corps of non-employed agents, defined in terms
of covered territory, through which the company sells insurance. Still another
point to consider is that Tongko was not even setting policies in the way a
regular company manager does; company aims and objectives were simply
relayed to him with suggestions on how these objectives can be reached
through the expansion of a non-employee sales force.  
Interestingly, a large part of de Dios' letter focused on income, which
Manulife demonstrated, in Tongko's case, to be unaffected by the new goal
and direction the company had set. Income in insurance agency, of course, is
dependent on results, not on the means and manner of selling — a matter
for Tongko and his agents to determine and an area into which Manulife had
not waded. Undeniably, de Dios' letter contained a directive to secure a
competent assistant at Tongko's own expense. While couched in terms of a
directive, it cannot strictly be understood as an intrusion into Tongko's method
of operating and supervising the group of agents within his delineated
territory. More than anything else, the "directive" was a signal to Tongko that
his results were unsatisfactory, and was a suggestion on how Tongko's
perceived weakness in delivering results could be remedied. It was a solution,
with an eye on results, for a consistently underperforming group; its obvious
intent was to save Tongko from the result that he then failed to grasp — that
he could lose even his own status as an agent, as he in fact eventually did.
The present case must be distinguished from the second Insular Life
case that showed the hallmarks of an employer-employee relationship in the
management system established. These were: exclusivity of service, control
of assignments and removal of agents under the private respondent's unit,
and furnishing of company facilities and materials as well as capital described
as Unit Development Fund. All these are obviously absent in the present
case. If there is a commonality in these cases, it is in the collection of
premiums which is a basic authority that can be delegated to agents under
the Insurance Code.  STaHIC

As previously discussed, what simply happened in Tongko's case was

the grant of an expanded sales agency role that recognized him as leader
amongst agents in an area that Manulife defined. Whether this
consequently resulted in the establishment of an employment
relationship can be answered by concrete evidence that corresponds to
the following questions:
• as lead agent, what were Tongko's specific functions and the
terms of his additional engagement;
 • was he paid additional compensation as a so-called Area Sales
Manager, apart from the commissions he received from the
insurance sales he generated;
• what can be Manulife's basis to terminate his status as lead
agent;
• can Manulife terminate his role as lead agent separately from his
agency contract; and
• to what extent does Manulife control the means and methods
of Tongko's role as lead agent?
The answers to these questions may, to some extent, be deduced from the
evidence at hand, as partly discussed above. But strictly speaking, the
questions cannot definitively and concretely be answered through the
evidence on record. The concrete evidence required to settle these
questions is simply not there, since only the Agreement and the
anecdotal affidavits have been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite
confluence of the factors determinative of the existence of employer-
employee relationship, the Court cannot conclusively find that the relationship
exists in the present case, even if such relationship only refers to Tongko's
additional functions. While a rough deduction can be made, the answer will
not be fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made is that
the absence of evidence showing Manulife's control over Tongko's contractual
duties points to the absence of any employer-employee relationship
between Tongko and Manulife. In the context of the established
evidence, Tongko remained an agent all along; although his subsequent
duties made him a lead agent with leadership role, he was nevertheless only
an agent whose basic contract yields no evidence of means-and-manner
control. 
DEacIT

This conclusion renders unnecessary any further discussion of the

question of whether an agent may simultaneously assume conflicting dual
personalities. But to set the record straight, the concept of a single person
having the dual role of agent and employee while doing the same task is a
novel one in our jurisprudence, which must be viewed with caution especially
when it is devoid of any jurisprudential support or precedent. The quoted
portions in Justice Carpio-Morales' dissent, 33 borrowed from both
the Grepalife and the second Insular Life cases, to support the duality
approach of the Decision of November 7, 2008, are regrettably far removed
from their context — i.e., the cases' factual situations, the issues they decided
and the totality of the rulings in these cases — and cannot yield the
conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz
brothers' appointment as zone supervisor and district manager made them
employees of Grepalife. Indeed, because of the presence of the element of
control in their contract of engagements, they were
considered Grepalife's employees. This did not mean, however, that they
were simultaneously considered agents as well as employees of Grepalife;
the Court's ruling never implied that this situation existed insofar as the Ruiz
brothers were concerned. The Court's statement — the Insurance Code may
govern the licensing requirements and other particular duties of insurance
agents, but it does not bar the application of the Labor Code with regard to
labor standards and labor relations — simply means that when an insurance
company has exercised control over its agents so as to make them their
employees, the relationship between the parties, which was otherwise one for
agency governed by the Civil Code and the Insurance Code, will now be
governed by the Labor Code. The reason for this is simple — the contract of
agency has been transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of
whether the labor bodies have jurisdiction over an illegal termination dispute
involving parties who had two contracts — first, an original contract (agency
contract), which was undoubtedly one for agency, and another subsequent
contract that in turn designated the agent acting unit manager (a management
contract). Both the Insular Life and the labor arbiter were one in the position
that both were agency contracts. The Court disagreed with this conclusion
and held that insofar as the management contract is concerned, the labor
arbiter has jurisdiction. It is in this light that we remanded the case to the labor
arbiter for further proceedings. We never said in this case though that the
insurance agent had effectively assumed dual personalities for the simple
reason that the agency contract has been effectively superseded by the
management contract. The management contract provided that if the
appointment was terminated for any reason other than for cause, the acting
unit manager would be reverted to agent status and assigned to any unit.
The dissent pointed out, as an argument to support its employment
relationship conclusion, that any doubt in the existence of an employer-
employee relationship should be resolved in favor of the existence of the
relationship. 34 This observation, apparently drawn from Article 4 of the Labor
Code,is misplaced, as Article 4 applies only when a doubt exists in the
"implementation and application" of the Labor Code and its implementing
rules; it does not apply where no doubt exists as in a situation where the
claimant clearly failed to substantiate his claim of employment relationship by
the quantum of evidence the Labor Code requires.  STcDIE
 On the dissent's last point regarding the lack of jurisprudential value of
our November 7, 2008 Decision, suffice it to state that, as discussed above,
the Decision was not supported by the evidence adduced and was not in
accordance with controlling jurisprudence. It should, therefore, be
reconsidered and abandoned, but not in the manner the dissent suggests as
the dissenting opinions are as factually and as legally erroneous as the
Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko's failure to
comply with the guidelines of de Dios' letter, as a ground for termination
of Tongko's agency, is a matter that the labor tribunals cannot rule upon in the
absence of an employer-employee relationship. Jurisdiction over the matter
belongs to the courts applying the laws of insurance, agency and contracts.
WHEREFORE, considering the foregoing discussion,
we REVERSE our Decision of November 7, 2008, GRANT Manulife's motion
for reconsideration and, accordingly, DISMISS Tongko's petition. No costs.
SO ORDERED.
Corona, C.J., Carpio, Peralta, Del Castillo, Abad, Perez and Mendoza,
JJ., concur.
Carpio Morales, J., please see my Separate Dissenting Opinion.
Velasco, Jr., J., please see dissenting opinion.
Nachura, Leonardo-de Castro and Bersamin, JJ., join the dissent of J.
Velasco.
Villarama, Jr., J., took no part.

Separate Opinions
CARPIO MORALES, J., dissenting:

Writing for the Court, Justice Arturo Brion grants the Motion for
Reconsideration (Motion) filed by respondent Manufacturer's Life Insurance
Co. (Phils.). The ponente, who concurred in the Court's November 7, 2008
Decision, 1 this time reverses the finding of employer-employee relationship.
The ponencia states that petitioner cannot simultaneously assume the dual or
hybrid role of employee and agent.  cdrep

I dissent.
I submit this Separate Dissenting Opinion, after taking a closer look at
the juxtaposition of five pertinent labor cases bearing on the insurance
industry, three of which ruled in favor of the existence of an employer-
employee relationship.
An agent may, at the same time, be an
employee of a life insurance company
In Great Pacific Life Assurance Corp. v. NLRC 2 (second Grepalife
case), the Court found that an employer-employee relationship existed
between Grepalife and the Ruiz brothers in their capacities as zone
supervisor and district manager. On the relevant point, it elucidated: 
True, it cannot be denied that based on the definition of an
"insurance agent" in the Insurance Code some of the functions
performed by private respondents were those of insurance agents.
Nevertheless, it does not follow that they are not employees of
Grepalife. The Insurance Code may govern the licensing
requirements and other particular duties of insurance agents, but it
does not bar the application of the Labor Code with regard to labor
standards and labor relations. 3 (Citations omitted; emphasis and
underscoring supplied)
This type of hybrid role is not novel. In Insular Life Assurance Co.,
Ltd. v. NLRC (4th Division) 4 (second Insular Life case), the Court ruled that
the therein respondent Pantaleon de los Reyes, acting unit manager, was an
employee of Insular Life only insofar as the management contract is
concerned.
Parenthetically, both petitioner and respondent NLRC treated the
agency contract and the management contract entered into between
petitioner and De los Reyes as contracts of agency. We[,] however[,]
hold otherwise. Unquestionably there exist major distinctions between
the two agreements. While the first has the earmarks of an agency
contract, the second is far removed from the concept of agency in
that provided therein are conditionalities that indicate an employer-
employee relationship. The NLRC therefore was correct in finding
that private respondent was an employee of petitioner, but this
holds true only insofar as the management contract is concerned.
In view thereof, the Labor Arbiter has jurisdiction over the
case. 5 (Emphasis and underscoring supplied)
In the present case, the employer-employee relationship is extant from
petitioner's management functions as Unit Manager in 1983, later as Branch
Manager in 1990, and finally as Regional Sales Manager in 1996,
notwithstanding the absence of written management contracts. Even
assuming that management contracts were executed, the law is deemed
written into them and its application cannot be disavowed by the parties.
 Admittedly, petitioner was allowed to continue selling as an agent
simultaneously with his management functions. Insofar as the termination of
his agency agreement 6 is concerned, the trial court has jurisdiction over such
controversy. SECIcT

The ponencia finds it "conflicting" for petitioner to assume the dual

roles of agent and employer. It agrees, however, that petitioner's "additional
role as Branch Manager did not lessen his main and dominant role as
insurance agent," without explaining how to weigh the dominance of one
function over another.
In the present Motion, there is no reiteration of the invocation of
Insurance Commission (IC) Memorandum Circular 3-93 (June 28, 1993)
which provides that "[n]o official or employee of an insurance brokerage or an
adjustment company and no individual adjuster, shall be licensed to act as an
insurance agent or general agent" and that "[n]o employee with the rank of
manager and above of an insurance company shall be licensed to act as its
insurance agent or general agent." 7
There is no conflict between the 1993 IC Circular and the Court's 1998
Decision in the second Insular Life case. That the regulation says that things
should run in a certain manner does not mean that any determination of facts
should not be contrary to that manner. "He should not" is different from "he did
not." Respondent may assert that the parties herein could not have violated
the Circular, but it does not bar the Court to determine otherwise when facts
glaringly point to the existence of an employer-employee relationship.
Whatever infraction or tolerance committed or exhibited by the parties
in defiance of the Circular or any other regulation or Code, it is for the IC or
the appropriate body to determine. The same holds true with the corollary tax
implications which respondent invites the Court to explore. Reconcilability of
tax returns has never been decisive of the issue of employer-employee
relationship. It never became the business of this Court to thresh out for the
parties the tax consequences arising from every labor dispute where an
alleged "independent contractor" was declared by the Court to be an
employee. Suffice it to state that a party would have to face the
consequences, if any, of his or her actions before the proper forum.
On one hand, respondent proffers petitioner's income tax returns and
documents 8 as an admission that it did not employ petitioner, to which
petitioner replies that the withholding and remittance of taxes were done by
respondent as payor and withholding agent, as indicated in the Certificates of
Creditable Income Tax Withheld at Source.
On the other, petitioner relies as respondent's implied admission that he
is an employee respondent's having offered him a Stock Option that could
only be exercised by "active employees" and would be terminated upon
"termination of employment," 9 respondent's disclaimer to this exceptional
grant solely decided by its Head Office in Canada notwithstanding.  DISEaC

As the conflicting claims effectively cancel each other, a review of the

other array of evidence is in order.
Control over the means and methods
in the attainment of the result
It bears noting that the NLRC Decision of September 27, 2004
judiciously explained why the resolution of the employment status of petitioner
hinges on the "control test" after discussing the three other components of the
four-fold test. 10
Delving into jurisprudence, no employer-employee relationship was
found in Insular Life Assurance Co., Ltd. v. NLRC 11 (first Insular Life case)
because the Court, applying the control test, found that Insular Life neither
controlled nor restricted the choice of methods — or the methods themselves
— of selling insurance by agency manager Melecio Basiao, leaving him free
to exercise his own judgment as to the time, place and means of soliciting
insurance.
In declaring the type of "control" that is necessary for one to be deemed
an employee, the Court explained in the first Insular Life case, viz.:
. . . It should, however, be obvious that not every form of control
that the hiring party reserves to himself over the conduct of the party
hired in relation to the services rendered may be accorded the effect of
establishing an employer-employee relationship between them in the
legal or technical sense of the term. A line must be drawn somewhere, if
the recognized distinction between an employee and an individual
contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired
and eschews any intervention whatsoever in his performance of the
engagement.
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind
or restrict the party hired to the use of such means. The first, which
aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the
means used to achieve it. The distinction acquires particular relevance
in the case of an enterprise affected with public interest, as is the
business of insurance, and is on that account subject to regulation by the
State with respect, not only to the relations between insurer and insured
but also to the internal affairs of the insurance company. Rules and
 regulations governing the conduct of the business are provided for in
the Insurance Code and enforced by the Insurance Commissioner. It is,
therefore, usual and expected for an insurance company to promulgate a
set of rules to guide its commission agents in selling its policies that they
may not run afoul of the law and what it requires or prohibits. Of such a
character are the rules which prescribe the qualifications of persons who
may be insured, subject insurance applications to processing and
approval by the Company, and also reserve to the Company the
determination of the premiums to be paid and the schedules of
payment. None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his
own time and convenience, hence cannot justifiably be said to establish
an employer-employee relationship between him and the
company. 12 (Emphasis and underscoring supplied)  TIAEac

I thus concur with the conclusion that the imposition of the codes of
conduct is not indicative of control on the part of an insurance company.
In Great Pacific Life Assurance Corporation v. Judico 13 (first Grepalife
case), however, the therein respondent Honorato Judico was found to be an
employee because:
. . . the element of control by the petitioner on Judico was very
much present. The record shows that petitioner Judico received a
definite minimum amount per week as his wage known as "sales
reserve" wherein the failure to maintain the same would bring him back
to a beginner's employment with a fixed weekly wage of P200.00 for
thirteen weeks regardless of production. He was assigned a definite
place in the office to work on when he is not in the field; and in addition
to his canvassing work he was burdened with the job of collection. In
both cases he was required to make regular report to the company
regarding these duties, and for which an anemic performance would
mean a dismissal. Conversely[,] faithful and productive service earned
him a promotion to Zone Supervisor with additional supervisor's
allowance, a definite amount of P110.00 aside from the regular P200.00
weekly "allowance". Furthermore, his contract of services with petitioner
is not for a piece of work nor for a definite period. 14 (Underscoring
supplied)
The question on the presence of "control over the means and methods"
must always be taken in relation to the attainment of the result or goal. The
proper query is thus not whether respondent exercised means-and-method
control but whether such control was directed in attaining which result. 
Although the bottomline of any commercial enterprise has always been
sales, the identification of the specific "result or goal" in a particular case can
only be gathered from the nature of one's functions. It is thus imperative to
identify the functions appurtenant to the goal before administering the
control test.
In the first Insular Life case, it was clear that selling or soliciting
insurance was the goal, the attainment of which Insular Life did not exercise
control over the methodology of the agency manager. Insular Life set no
accomplishment quotas and compensated him on the basis of results
obtained. He was not bound to observe any schedule of working hours or
report to any regular station. He could seek and work on his prospects
anywhere and at anytime he chooses.
In the first Grepalife case, however, although the debit agent's goal
of selling was basically identical, Grepalife retained control over the means in
achieving sales. Grepalife assigned him a definite place in the office to work
on when he is not in the field, gave him collection and canvassing jobs,
required him to make regular report regarding these duties, and, in fact,
exercised the power of dismissal for his dismal performance.  cTSDAH

There is no element of control with respect to petitioner's function of

selling insurance as an agent. His managerial function, however, takes
another form.
In the second Insular Life and Grepalife cases, the goal expected from
the managers was different from the first set of cases. The "result or goal" (in
how to accomplish it the company was found to have exercised control) were
specifically aligned to the coordination and supervision of the whole marketing
effort or strategy.
In the second Insular Life case, the acting unit manager was assigned
the task of supervising and coordinating the sales efforts of the underwriters
who were to be recruited and trained within his designated territory.
In the second Grepalife case, the zone supervisor and the district
manager were entrusted with supervisory, sales and administrative
functions to guard Grepalife's business interests, to bring in more clients to
the company, and to ensure that all collections and reports are faithfully
brought to the company.
In both cases, the manner by which those goals were carried out was
dictated by their respective employers. Similarly, in the present case, the
nature of petitioner's job as such called for the exercise of supervisory and
administrative functions, including recruitment and training of agents, which,
when examined in the light of the two cases, were discharged within the close
range of control wielded by respondent. Tersely stated, petitioner's duty of
supervision was under the "control" of respondent.
A comparison of functions with that obtaining in the
second Grepalife case illustrates an intimate similarity:
 Furthermore, it cannot be gainsaid that Grepalife had control over
private respondents' performance as well as the result of their efforts. A
cursory reading of their respective functions as enumerated in their
contracts reveals that the company practically dictates the manner by
which their jobs are to be carried out. For instance, the District Manager
must properly account, record and document the company's funds spot-
check and audit the work of the zone supervisors, conserve the
company's business in the district through 'reinstatements', follow up the
submission of weekly remittance reports of the debit agents and zone
supervisors, preserve company property in good condition, train
understudies for the position of district manager, and maintain his quota
of sales (the failure of which is a ground for termination). On the other
hand, a zone supervisor must direct and supervise the sales activities of
the debit agents under him, conserve company property through
"reinstatements", undertake and discharge the functions of absentee
debit agents, spot-check the records of debit agents, and insure proper
documentation of sales and collections by the debit
agents. 15 (Underscoring supplied)  TECIaH

In contradistinction with Carungcong v. NLRC, 16 which also involves an

insurance manager, the Court found the therein petitioner Susan Carungcong,
a new business manager of Sun Life Assurance Company, to be an
independent contractor. In the absence of restrictive or interfering company
regulations that effectively and actually controlled her choice of methods in
performing her management duties, the Court gave weight to the contractual
disavowals in the management contracts and her admission that she alone
judges the element of time and place and means in the performance of duties.
She patently admitted that she performed "monitoring, training, recruitment
and sales, at her own time and convenience, at however she deemed
convenient, and with whomever she chose." 17
More significantly, in the succeeding Insular Life case, the Court found
the following indicators material in finding the presence of control in cases
involving insurance managers:
Exclusivity of service, control of assignments and removal of
agents under private respondent's unit, collection of premiums,
furnishing of company facilities and materials as well as capital
described as Unit Development Fund are but hallmarks of the
management system in which herein private respondent worked. This
obtaining, there is no escaping the conclusion that private respondent
Pantaleon de los Reyes was an employee of herein
petitioner. 18 (Underscoring supplied)
The ponencia concludes that "[a]ll these are obviously absent" in
petitioner's case. The facts show otherwise, however. On top of
the exclusive service rendered to respondent, which AFP Mutual Benefit
 Association, Inc. v. NLRC 19 instructs to be not controlling, other factors were
present. Petitioner established no agency of his own as the Metro North
Region to which he was assigned remained intact even after his ties with
respondent were severed. 20 Respondent provided and furnished company
facilities, equipments and materials for petitioner at respondent's Makati
office. 21 Respondent's control of assignments was evident from its act of
removing the North Star Branch from petitioner's scope of the Metro North
Region, on which a "memo to spell this matter out in greater detail" was
advised to be issued shortly thereafter. 22 Respondent reserved to impose
other improvements in the region after manifesting its intention to closely
follow the region. 23 Respondent's managers, like petitioner, could only refer
and recommend to respondent prospective agents who would be part of their
respective units. 24 In other words, respondent had the last say on
the composition and structure of the sales unit or region of petitioner.
Respondent, in fact, even devised the deployment of an Agency Development
Officer in the region to "contribute towards the manpower development
work . . . as part of our agency growth campaign." HAICET

Such an arrangement leads to no other conclusion than that respondent

exercised the type of control of an employer, thereby wiping away the
perception that petitioner was only a "lead agent" as viewed by the ponencia.
Even respondent sees otherwise when it rebuked petitioner that "[y]ou
(petitioner) may have excelled in the past as an agent but, to this date, you
still carry the mindset of a senior agent." 25 Insofar as his management
functions were concerned, petitioner was no longer considered a senior
agent.
I vote to DENY respondent's Motion but MODIFY the dispositive portion
of the Court's November 7, 2008 Decision to (a) clarify that petitioner,
Gregorio Tongko, became respondent's employee not when he started as an
agent in 1977 but when he was appointed as unit manager in 1983, thus
moving the reckoning of the computation of separation pay; and (b) remand
the case to the NLRC for the purpose of computing petitioner's proper
backwages as manager.

VELASCO, JR., J., dissenting:

By Decision dated November 7, 2008, the Court, on the finding that

petitioner Gregorio V. Tongko was illegally dismissed as employee of
respondent Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife),
awarded him full backwages and separation benefits, in lieu of reinstatement.
Manulife, via this Motion for Reconsideration, urges the Court to
reconsider and set aside its aforementioned Decision by declaring, in effect,
that Tongko had never been its employee. 1 As Manulife avers, the subject
Decision effectively "converted agency contracts of life insurance agents to
contracts of regular employment." 2 It thus warns that the ruling, if not
reconsidered, would apply to all 41,853 life insurance agents spread across
the country, thrusting in the process the insurance industry in the Philippines
into a crisis. 3
The majority seems to agree with the grim possibilities thus painted by
Manulife.
As was before the National Labor Relations Commission (NLRC), then
the Court of Appeals and as it is before the Court, the critical issue in the
present case is the same: 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 Agent's Agreement (Agreement), and then as unit, branch and
eventually regional sales manager of Manulife's Sales Agency Organization
— was an employee of Manulife. 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. 4 And as stressed in the Decision subject of
this recourse, of the four, 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. And as also there
emphasized, the security of tenure of a regular employee flowing from
employment cannot be defeated by any contract, for the law defines the
employment status of a person. 5 Article 280 of the Labor Code provides that
"[t]he provisions of written agreement to the contrary notwithstanding and
regardless of 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." 
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.  TIEHSA

It cannot be over-emphasized enough that in Great Pacific

Life Assurance Corporation v. NLRC, Ernesto Ruiz and Rodrigo
Ruiz 6 (Grepalife), the Court considered respondents Ruizes, then district
 managers, as employees of Grepalife, taking into account their duties and
undertakings. Some excerpts from Grepalife:
. . . A cursory reading of their respective functions as enumerated
in their contracts reveals that the company practically dictates the
manner by which their jobs are to be carried out. For instance, the
District Manager must properly account, record and document the
company's funds, spot-check and audit the work of the zone
supervisors, conserve the company's business in the district through
'reinstatements', follow up the submission of weekly remittance
reports of the debit agents and zone supervisors, preserve company
property in good condition, train understudies for the position of
district manager, and maintain his quota of sales (the failure of which
is a ground for termination). On the other hand, a zone
supervisor must direct and supervise the sales activities of the debit
agents under him, conserve company property through
"reinstatements", undertake and discharge the functions of absentee
debit agents, spot-check the records of debit agents, and insure
proper documentation of sales and collections by the debit
agents. 7 (Emphasis supplied.)
A comparative look at the duties of the Ruizes, as set forth in the decision
in Grepalife, and those of Tongko, as may be deduced from affidavits 8 of
insurance managers of Manulife, would reveal a striking similarity in their
respective duties as would adequately support a similar finding on the question of
whether the petitioner, like the Ruizes, is an employee of Manulife just as the
Ruizes were Grepalife's. Consider:
Duties of Manulife's Manager Duties of Grepalife's
  Managers/Supervisors
   
- to render or recommend prospective - train understudies for the position
agents to be licensed, trained and of district manager
contracted to sell Manulife products  
and who will be part of my Unit  
- to coordinate activities of the agents - properly account, record and document
under [the managers'] Unit in [the the company's funds, spot-check and audit
agents'] daily, weekly and monthly the work of the zone supervisors, . . .
selling activities, making sure that follow up the submission of weekly
their respective sales targets are met; remittance reports of the debit agents and
  zone supervisors
- to conduct periodic training sessions - direct and supervise the sales activities
for [the] agents to further enhance of the debit agents under him, . . .
their sales skill; and undertake and discharge the functions of
  absentee debit agents, spot-check the
- to assist [the] agents with their sales record of debit agents, and insure proper
activities by way of joint fieldwork, documentation of sales and collections of
consultations and one-on-one evaluation debit agents.
and analysis of particular accounts   

The ponencia would altogether deny Tongko — either while serving as

insurance agent or underwriter pursuant to the Agreement, or as appointed
manager — the status of Manulife's employee. It added the observation that
the factual antecedents in this case were set in the insurance industry and,
hence, the Insurance Code and the industry practices instead of the Labor
Code shall primary govern in determining the element of control and
necessarily whether an employer-employee existed between Tongko and
Manulife. The ponencia also went on to state that the Agreement, which
provided that "the Agent is an independent contractor . . . and nothing herein
shall be construed as creating an employer-employee relationship between
the Company and Agent," embodies the intent of Manulife and Tongko at the
time they executed the Agreement and they were governed by this
understanding throughout their relationship.
I beg to disagree.
First, the suggestion in the ponencia that the characterization the
parties gave their relationship cannot simply be brushed aside runs counter
against established jurisprudence. As it were, the question of the existence of
an employer-employee relationship is a matter of public concern, never left, if
ever, for the parties to peremptorily determine. To borrow from Insular Life
Assurance Co., Ltd. v. NLRC (4th Division) 9 (Insular Life II), neither can such
existence be negated by expressly repudiating it in the management contract
and providing therein, as here, that the employee is an independent
contractor. For, as earlier indicated, the law defines and prescribes the
employment status of a person, not what the clashing parties chose to call it
or say it should be. 10 We said as much in Servidad v. National Labor
Relations Commission: 11
The private agreement of the parties cannot prevail over Article
1700 of the Civil Code, which provides:
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 special laws on labor unions,
collective bargaining, strikes and lockouts, closed shops, wages,
working conditions, hours of labor and similar subjects.
Similarly telling is the case of Pakistan Airlines Corporation vs.
Pole, et al. There, it was said:
 . . . provisions of applicable law, especially provisions
relating to matters affected with public policy, are deemed written
into the contract. Put a little differently, the governing principle is
that the parties may not contract away applicable provisions of
law especially peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and
employment is clearly such an area and parties are not at liberty
to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other. .
.
Of the same tenor is the Court's fairly recent holding in Paguio v.
National Labor Relations Commission: 12  TCASIH

Respondent company cannot seek refuge under the terms of the

agreement it has entered into with petitioner. The law, in defining their
contractual relationship, does so, not necessarily or exclusively upon the
terms of their written or oral contract, but also on the basis of the nature
of the work petitioner has been called upon to perform. The law affords
protection to an employee, and it will not countenance any attempt to
subvert its spirit and intent. A stipulation in an agreement can be
ignored as and when it is utilized to deprive the employee of his
security of tenure. The sheer inequality that characterizes employer-
employee relations, where the scales generally tip against the employee,
often scarcely provides him real and better options. (Emphasis supplied.)
Second, and in relation to the first reason, the fact that
the Agreement was subsisting even after Tongko's appointment as manager
does not militate against a conclusion that Tongko was Manulife's employee,
at least during his stint as such manager. To be sure, an insurance agent may
at the same time be an employee of an insurance company. Or to put it a bit
differently, an employee-manager may be given the privilege of soliciting
insurance, as agent, and earn in the process commission for every contract
concluded as a result of such solicitation. The reality of two personalities —
one as employee and the other as non-employee of an insurance company,
coinciding in one person — was acknowledged in Insular Life II, in which the
Court wrote:
Parenthetically, both petitioner and respondent NLRC treated the
agency contract and the management contract entered into between
[Insular Life] and [respondent] De Los Reyes as contracts of agency. We
however hold otherwise. Unquestionably there exist major distinctions
between the two agreements. While the first has the earmarks of an
agency contract, the second is far removed from the concept of agency
in that provided therein are conditionalities that indicate an employer-
employee relationship. The NLRC therefore was correct in finding that
 private respondent was an employee of petitioner, but this holds true
only insofar the management contract is concerned. 13 . . .
Grepalife may also be cited where we declared:
True, it cannot be denied that based on the definition of an
"insurance agent" in the Insurance Code some of the functions
performed by private respondent were those of insurance agents.
Nevertheless, it does not follow that they are not employees of Grepalife.
The Insurance Code may govern the licensing requirements and other
particular duties of insurance agents, but it does not bar the application
of the Labor Code with regard to labor standards and labor
relations. 14 
CSIHDA

The ponencia points out that Grepalife and Insular Life II factually

differ with the instant case in that: "these cited cases dealt with the proper
legal characterization of a subsequent management contract that superseded
the original agency contract between the insurance company and its agent."
In other words, the majority opinion distinguishes the instant case
from Grepalife and Insular Life II in the lack of a written management contract
between Tongko and Manulife.
The cited difference does not, for that reason alone, pose a plausible
bar to the application of Grepalife and Insular Life II to the instant case. In
fact, the absence of a written agreement to memorialize the naming and
assumption of Tongko as unit and later branch manager is irrelevant to the
issue of the presence of an employer-employee relationship. A management
contract, for purposes of determining the relationship between the worker and
the employer, is simply an evidence to support a conclusion either way. Such
document, or the absence thereof, would not influence the conclusion on the
issue of employment. The presence of a management contract would merely
simplify the issue as to the duties and responsibilities of the employee
concerned as they would then be defined more clearly.  
Manulife's decision not to execute a management contract
with Tongko was well within its discretion. However, the fact of Manulife
and Tongko not having inked a management contract, if this were the case,
did not reduce the petitioner to a mere "lead agent," as the ponencia would
have it. 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. For one, in his letter 15 of November 6, 2001,
respondent de Dios distinctly referred to Tongko as sales manager. For
another, it is well nigh inconceivable that Manulife issued no promotional
appointments to petitioner as unit manager, branch manager and eventually
regional sales manager. Basic and sound management practice simply
requires an appointment for any upward personnel movement, particularly
when additional duties and compensation are involved. Then, too, the
aforementioned affidavits of the managers of Manulife as to the duties and
responsibilities of a unit manager, such as Tongko, point to the conclusion
that these managers were employees of Manulife, applying the four-fold test.
To my mind, Grepalife and Insular Life II bear obvious parallelism to
the instant case vis-à-vis the facts against which they are cast. Too, the
parties are similarly situated in point of positions occupied, the agreed
exclusivity of service and functional profiles to warrant the application of
the stare decisis doctrine. The Latin maxim stare decisis et non quieta
movere, translates "stand by the thing and do not disturb the calm." It requires
that high courts must follow, as a matter of sound policy, its own precedents,
or respect settled jurisprudence absent compelling reason to do
otherwise. 16 Put a bit differently, the doctrine holds that when a court has laid
down a principle of law as applicable to a certain set of facts, it will abide with
that principle in future cases in which the facts are substantially the
same. 17 In the view I take of this case, there is absolutely nothing
in Grepalife and Insular Life II which may be viewed as plainly unreasonable
as to justify withholding from them the stare decisis effect. 
THCSEA

And lest it be overlooked, both Grepalife and Insular Life II appreciated

and applied the element of control — the most crucial and determinative
indicator of an employer-employee relationship — as a labor law concept.
The Labor Code and other labor relations laws, some of which have been
incorporated in the Civil Code, regulate the relationship between labor and
capital or between worker and employer in the private sector. The Insurance
Code, on the other hand, governs the licensing requirements and other
particular duties of insurance agents; 18 it also regulates not only the
relationship between the insurer and the insured but also the internal affairs of
the insurance company. 19 These are the particular areas of operation of the
aforementioned laws. To argue then that the Insurance Code and insurance
industry practice shall determine the existence of an employer-employee
relationship in the case at bench is, it is submitted, simplistic if not downright
erroneous. Both law and jurisprudence do not support the contention on the
primacy of the Insurance Code and insurance usages in determining said
relationship. As a matter of fact, the Court, in a string of cases involving
corporations engaged in non-insurance activities as well as those into the
insurance business, notably in Grepalife, Insular Life I  20 and II, Great Pacific
Life Assurance Corporation v. Judico, 21 and AFP Mutual Benefit
Association v. NLRC, 22 held that the determination of the existence of an
employer-employee relationship lies in the four-fold test. An examination of
these cases yields no indication that a separate law, other than the Labor
Code and labor law concepts, was ever considered by the Court in
determining the existence of an employer-employee relationship.
There can be no quibbling that Tongko, as unit, branch and regional
sales manager, was without a fixed salary, but earned his income strictly on
commission basis. However, how and when he was paid his compensation is,
without more, not an argument against a finding that he was an employee of
Manulife. For, the phrase "wage paid," as a component of employment and as
an element of the four-fold test, is defined under Art. 97 (f) of the Labor
Code as "the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task,
piece or commission basis or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract
of employment for work done or to be done, or for services rendered or to be
rendered." 23 Lazaro v. Social Security Commission 24 is emphatic on this
point:
Lazaro's arguments may be dispensed with by applying
precedents. Suffice it to say, the fact that Laudato was paid by way
of commission does not preclude the establishment of an
employer-employee relationship. In Grepalife v. Judico, the 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 commission received was not paid by
the company but by the investor or the person insured. The relevant
factor remains, as stated earlier, whether the "employer" controls or has
reserved the right to control the "employee" not only as to the result of
the work to be done but also as to the means and methods by which the
same is to be accomplished. (Emphasis supplied.)  SAHaTc

Much has been made in the ponencia, following Manulife's line,

of Tongko's income tax returns (ITRs), in which he described himself to be
"self-employed." It must be stressed in this regard, however, that he had no
other choice but to do so, for the following reasons: (1) Manulife had refused
to consider him as its employee; and (2) Manulife withheld 10% of his income
as an agent as taxes. Tongko had no other viable alternative but to make use
of the withholding tax certificates issued by Manulife in paying his taxes. Thus,
petitioner could not have really been faulted for including in his ITRs an entry
declaring himself as self-employed. While perhaps not on all fours here,
because its issue revolved around estoppel instead of declaration against
interest made in an ITR, Philippine National Construction Corporation v.
NLRC 25 is nonetheless most instructive:
Time honored is the precept that quitclaims are ineffective in
barring recovery for the full measure of the worker's rights and that
 acceptance of benefits therefrom does not amount to estoppel. In Lopez
Sugar Corporation vs. Federation of Free Workers, the Court explained:
Acceptance of those benefits would not amount to
estoppel. The reason is plain. Employer and employee, obviously
do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get hold of money.
Because, out of the job, he has to face harsh necessities of life.
He thus found himself in no position to resist money proffered.
His, then, is a case of adherence, not of choice. One thing sure,
however, is that petitioners did not relent their claim. They
pressed it. They are deemed not to have waived any of their
rights. . . .
It may be noted at this juncture that Manulife has changed its stance on
the issue of illegal dismissal. In its Position Paper with Motion to Dismiss filed
before the Labor Arbiter, in its Motion for Reconsideration (Re: Decision
dated 27 September 2004) dated October 11, 2004 filed before the NLRC,
and in its Comment dated August 5, 2006 filed before the Court, Manulife had
consistently assumed the posture that the dismissal of petitioner was a proper
exercise of termination proviso under the Agreement. 26 In this motion,
however, Manulife, in a virtual acknowledgment of Tongko being its
employee, contends that he was "dismissed for a just and lawful cause — for
gross and habitual neglect of duties, inefficiency and willful disobedience of
the lawful orders." 27 Manulife adds that:
Respondents presented an abundance of evidence demonstrating
how termination happened only after failure to meet company goals,
after all remedial efforts to correct the inefficiency of Petitioner failed and
after Petitioner, as found by the CA, created dissension in Respondent
Manulife when he refused to accept the need for improvement in his
area and continued to spread the bile of discontent and rebellion that he
had generated among the other agents. 28
If Manulife claimed at every possible turn that Tongko was never an
employee of the insurance company, why take a formal action of dismissal
with a statement of the grounds therefor?
No less than the Constitution itself guarantees protection to labor:
ARTICLE XIII
LABOR
Section 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment and
equality of employment opportunities for all.  ITScHa

xxx xxx xxx

 The State shall promote the principle of shared responsibility
between workers and employers and the preferential use of voluntary
modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and
employers, recognizing the right of labor to its just share in the fruits of
production and the right of enterprises to reasonable returns to
investments, and to expansion and growth.
Complementing the foregoing guarantee provisions is Article 1702 of
the Civil Code mandating that, in case of doubt, all labor legislation and all
labor contracts shall be construed in favor of the safety and decent living for
the laborer. Along side with the Civil Code command is Art. 4 of the Labor
Code providing: 
ART. 4. Construction in favor of labor. — All doubts in the
implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in
favor of labor.
The fairly recent Dealco Farms, Inc. v. National Labor Relations
Commission (5th Division) 29 is reflective of the statutory bias in favor of the
working class and the need to give labor the benefit of the doubt, thus:
Having failed to substantiate its allegation on the relationship
between the parties, we stick to the settled rule in controversies between
a laborer and his master that doubts reasonably arising from the
evidence should be resolved in the former's favor. (Emphasis
supplied.)
In the instant case, doubts as to the true relationship
between Tongko and Manulife should be resolved in favor of the former and
for employment.
Lest it be misunderstood, this dissent proposes only to affirm the
underlying Decision of the Court dated November 7, 2008, but only insofar as
it considered Tongko Manulife's employee following his hiring as manager,
first as unit manager, then branch manager and ultimately as regional sales
manager. For, it was only after such engagement that Manulife exercised
effective control not only over the results of his works, but also over the
means and methods by which it is to be accomplished; it was then
that Tongko was tasked to perform administrative duties. As to Tongko's stint
as insurance agent, an employer-employee relationship cannot be posited in
light of the paucity of evidence to support the proposition.  IaTSED

In view of the foregoing, I vote to partially grant the motion for

reconsideration but only in the sense that petitioner Tongko shall only be
considered as employee of respondent Manulife only after his engagement as
manager of the company. Accordingly, his entitlement to backwages and
separation benefits shall be reckoned from that point in time and the amount
shall correspond to his commission earned as such manager only, subject to
the usual accounting requirements.
 
Footnotes
1.Rollo, pp. 772-819.
2.Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., G.R. No. 167622,
November 7, 2008, 570 SCRA 503, 506-507.
3.Rollo, p. 52.
4.Id. at 53.
5.Ibid.
6.Supra note 2, at 508-510.
7.Id. at 511.
8.Rollo, pp. 57-58.
9.Tongko's Petition for Review, id. at 3-46; and Summary of Tongko's Position in the
September 27, 2004 decision of the NLRC (id. at 349-351) and the CA decision
(id. at 57-58).
10.347 Phil. 587 (1997); see Summary of Manulife's Position in the September 27,
2004 decision of the NLRC (rollo, pp. 351-353) and the CA decision (rollo, pp.
58-59).
11.Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989,
179 SCRA 459.
12.In an Affidavit dated April 28, 2003, John D. Chua, a Regional Sales Manager of
Manulife, stated:
4. On September 1, 1996, my services were engaged by Manulife as an
Agency Regional Sales Manager ("RSM") for Metro South Region pursuant to
an Agency Contract. As such RSM, I have the following functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents affiliated to my
region.
While Amanda Toledo, a Branch Manager of Manulife, stated in her Affidavit,
dated April 29, 2003, that:
 3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for
the Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate
activities of other commission agents;
d. Achieve agreed production objectives in terms of Net Annualized
Commissions and Case Count and recruitment goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit,
dated April 28, 2003, that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North
Star Branch, Metro North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed, trained and
contracted to sell Manulife products and who will be part of my Unit.
b. To coordinate activities of the agents under my Unit in their daily, weekly and
monthly selling activities, making sure that their respective sales targets are
met.
c. To conduct periodic training sessions for my agents to further enhance their
sales skills.
d. To assist my agents with their sales activities by way of joint fieldwork,
consultations and one-on-one evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting
promos to increase sales activities and encouraging them to be involved in
company and industry activities.
f. To provide opportunities for professional growth to my agents by encouraging
them to be a member of the LUCAP (Life Underwriters Association of the
Philippines).
13.Rollo, pp. 776-777.
14.Sections 303 and 304, Insurance Code.
15.Section 306, Insurance Code.
16.Article 1868, Civil Code.
17.Article 1869, Civil Code.
18.Article 1870, Civil Code.
19.Section 299, Insurance Code.
20.Article 1875, Civil Code.
21.Articles 1886 and 1918, Civil Code.
22.Article 1894, Civil Code.
23.Article 1887, Civil Code.
24.Supra note 2, at 519-520.
25.G.R. No. 119930, March 12, 1998, 287 SCRA 476.
26.G.R. No. 102199, January 28, 1997, 267 SCRA 47.
27.In 1997, his income was P2,822,620.00; in 1998 — P4,805,166.34; in 1999,
P6,797,814.05; in 2001, P6,214,737.11; and in 2002, P8,003,180.38.
28.Articles 1431 to 1439 of the Civil Code.
29.Justice Velasco's Dissenting Opinion, p. 10. Justice Velasco maintains
that Tongko's declaration in his tax returns that he was self-employed was
forced upon him by Manulife, which refused and still refuses to consider him as
its employee, and withheld 10% of Tongko's income as an agent for
taxes. Tongko therefore had no choice but to use the withholding tax
certificates issued to Manulife in connection with the taxes it paid on his income
as an agent and he could not have been faulted for declaring himself as self-
employed.
30.These include the Agent Code of Conduct, the Manulife Financial Code of
Conduct, and the Manulife Code of Conduct Agreement.
31.Justice Velasco's Dissenting Opinion, pp. 3-4.
32.Motion for Reconsideration dated December 3, 2008; quoting the Affidavit of John
Chua (Regional Sales Manager) dated April 28, 2003, Affidavit of Amanda
Tolentino (Branch Manager) dated April 29, 2003, and Affidavit of Lourdes
Samson (Unit Manager) dated April 28, 2003. Rollo, p. 803.
33.Separate Dissenting Opinion of Justice Conchita Carpio Morales, pp. 1-2. Justice
Carpio Morales asserts that an agent may, at the same time, be an employee
of a life insurance company and quotes the Grepalife case:
True, it cannot be denied that based on the definition of an "insurance agent" in
the Insurance Code some of the functions performed by private respondents
were those of insurance agents. Nevertheless, it does not follow that they are
not employees of Grepalife. The Insurance Code may govern the licensing
requirements and other particular duties of insurance agents, but it does not
bar the application of the Labor Code with regard to labor standards and labor
relations.
 She additionally posits that the hybrid model is not novel — the
second Insular Life case purportedly held that Pantaleon delos Reyes, acting
unit manager, was an employee of Insular Life only insofar as the
management contract is concerned, quoting in support of this assertion the
following discussion in the second Insular Life case:
Parenthetically, both petitioner and respondent NLRC treated the agency
contract and the management contract entered into between petitioner and De
los Reyes as contracts of agency. We, however, hold otherwise.
Unquestionably there exist major distinctions between the two
agreements. While the first has the earmarks of an agency contract, the
second is far removed from the concept of agency in that provided
therein are conditionalities that indicate an employer-employee
relationship. The NLRC therefore was correct in finding that private
respondent was an employee of petitioner, but this holds true only insofar
as the management contract is concerned. In view thereof, the Labor Arbiter
has jurisdiction over the case.
34.Justice Presbitero Velasco, Jr.'s Dissenting Opinion, p. 12.
CARPIO MORALES, J., dissenting:
1.570 SCRA 503, decided by the Court's Second Division, per Velasco, J.
2.G.R. Nos. 80750-51, July 23, 1990, 187 SCRA 694, decided by the Court's Third
Division, per Cortes, J.
3.Id. at 699.
4.G.R. No. 119930, March 12, 1998, 287 SCRA 476, decided by the Court's First
Division, per Bellosillo, J.
5.Id. at 483.
6.Rollo, pp. 451-453.
7.Vide Manulife's Comment, rollo, p. 418.
8.Rollo, pp. 456-462.
9.Id. at 291-294.
10.Vide rollo, pp. 358-360.
11.G.R. No. 84484, November 15, 1989, 179 SCRA 459, decided by the Court's First
Division, per Narvasa, J.
12.Id. at 464-465.
13.G.R. No. 73887, December 21, 1989, 180 SCRA 445, decided by the Court's
Second Division, per Paras, J.
14.Id. at 450.
15.Supra at 698-699.
16.G.R. No. 118086, December 15, 1997, 283 SCRA 308, decided by the Court's
Third Division, per Narvasa, C.J.
17.Id. at 322.
18.Supra at 489.
19.G.R. No. 102199, January 28, 1997, 267 SCRA 47.
20.Rollo, pp. 364-365.
21.Id. at 9, 727; vide rollo, pp. 241-242.
22.Id. at 299.
23.Ibid.
24.Id. at 592-595.
25.Rollo, p. 298.
VELASCO, JR., J., dissenting:
1.Rollo, pp. 2092-2114.
2.Id. at 773.
3.Id. at 772.
4.G.R. No. 166920, February 19, 2007, 516 SCRA 209.
5.Industrial Timber Corp. v. NLRC, G.R. No. 83616, January 20, 1989, 169 SCRA
341. 
6.G.R. Nos. 80750-51, July 23, 1990, 187 SCRA 694.
7.Id. at 698-699.
8.Rollo, pp. 590-594.
9.G.R. No. 119930, March 12, 1998, 287 SCRA 476, 489.
10.Industrial Timber Corp. v. NLRC, supra note 5.
11.G.R. No. 128682, March 18, 1999, 305 SCRA 49, 57-58.
12.G.R. No. 147816, May 9, 2003, 403 SCRA 190, 198.
13.Supra note 9, at 483.
14.Supra note 6, at 699.
15.Rollo, p. 53.
16.Republic v. Nillas, G.R. No. 159595, January 23, 2007, 512 SCRA 286, 297.
17.Uy v. Villanueva, G.R. No. 157851, June 29, 2007, 526 SCRA 73, 90.
18.Grepalife, supra note 6.
 19.Insular Life Insurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989,
179 SCRA 459, 465; citing 43 Am. Jur. 2d. pp. 73-91.
20.Insular Life Insurance Co., Ltd. v. NLRC, supra note 19.
21.G.R. No. 73887, December 21, 1989, 180 SCRA 445.
22.G.R. No. 102199, January 28, 1997, 267 SCRA 47.
23.Iran v. NLRC (Fourth Division), G.R. No. 121927, April 22, 1998, 289 SCRA 433.
24.G.R. No. 138254, July 30, 2004, 435 SCRA 472, 476.
25.G.R. No. 100353, October 22, 1999, 317 SCRA 186, 193.
26.Rollo, pp. 451-453.
27.Id. at 813.
28.Id.
29.G.R. No. 153192, January 30, 2009, 577 SCRA 280, 295. 
 (Tongko v. Manufacturers Life Insurance Co. (Phils.), Inc., G.R. No. 167622
|||

(Resolution), [June 29, 2010], 636 PHIL 57-127)

[G.R. No. 157802. October 13, 2010.]

MATLING INDUSTRIAL AND COMMERCIAL CORPORATION,

RICHARD K. SPENCER, CATHERINE SPENCER, AND ALEX
MANCILLA, petitioners, vs. RICARDO R. COROS, respondent.

DECISION

BERSAMIN, J  : p

This case reprises the jurisdictional conundrum of whether a complaint

for illegal dismissal is cognizable by the Labor Arbiter (LA) or by the Regional
Trial Court (RTC). The determination of whether the dismissed officer was a
regular employee or a corporate officer unravels the conundrum. In the case
of the regular employee, the LA has jurisdiction; otherwise, the RTC exercises
the legal authority to adjudicate.
In this appeal via petition for review on certiorari, the petitioners
challenge the decision dated September 13, 2002 1 and the resolution dated
April 2, 2003, 2 both promulgated in C.A.-G.R. SP No. 65714
entitled Matling Industrial and Commercial Corporation, et al. v. Ricardo
R. Coros and National Labor Relations Commission, whereby by the Court of
Appeals (CA) sustained the ruling of the National Labor Relations
Commission (NLRC) to the effect that the LA had jurisdiction because the
respondent was not a corporate officer of petitioner Matling Industrial and
Commercial Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and
Administration, the respondent filed on August 10, 2000 a complaint for illegal
suspension and illegal dismissal against Matling and some of its corporate
officers (petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan
City. 3
The petitioners moved to dismiss the complaint, 4 raising the ground,
among others, that the complaint pertained to the jurisdiction of the Securities
and Exchange Commission (SEC) due to the controversy being intra-
corporate inasmuch as the respondent was a member of Matling's Board of
Directors aside from being its Vice-President for Finance and Administration
prior to his termination. 
CaDATc

The respondent opposed the petitioners' motion to dismiss, 5 insisting

that his status as a member of Matling's Board of Directors was doubtful,
considering that he had not been formally elected as such; that he did not own
a single share of stock in Matling, considering that he had been made to sign
in blank an undated indorsement of the certificate of stock he had been given
in 1992; that Matling had taken back and retained the certificate of stock in its
custody; and that even assuming that he had been a Director of Matling, he
had been removed as the Vice President for Finance and Administration, not
as a Director, a fact that the notice of his termination dated April 10, 2000
showed.
On October 16, 2000, the LA granted the petitioners' motion to
dismiss, 6 ruling that the respondent was a corporate officer because he was
occupying the position of Vice President for Finance and Administration and
at the same time was a Member of the Board of Directors of Matling; and that,
consequently, his removal was a corporate act of Matling and the controversy
resulting from such removal was under the jurisdiction of the SEC, pursuant to
Section 5, paragraph (c) of Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC, 7 urging that:
I
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE
OF DISCRETION GRANTING APPELLEE'S MOTION TO DISMISS
WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS
 OPPOSITION THERETO THEREBY VIOLATING THE BASIC
PRINCIPLE OF DUE PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN
DISMISSING THE CASE FOR LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that
the respondent's complaint for illegal dismissal was properly cognizable by
the LA, not by the SEC, because he was not a corporate officer by virtue of
his position in Matling, albeit high ranking and managerial, not being among
the positions listed in Matling's Constitution and By-Laws. 8 The NLRC
disposed thuswise:
WHEREFORE, the Order appealed from is SET ASIDE. A new
one is entered declaring and holding that the case at bench does not
involve any intracorporate matter. Hence, jurisdiction to hear and act on
said case is vested with the Labor Arbiter, not the SEC, considering that
the position of Vice-President for Finance and Administration being held
by complainant-appellant is not listed as among respondent's corporate
officers.
Accordingly, let the records of this case be REMANDED to the
Arbitration Branch of origin in order that the Labor Arbiter below could
act on the case at bench, hear both parties, receive their respective
evidence and position papers fully observing the requirements of due
process, and resolve the same with reasonable dispatch.  TSacID

SO ORDERED.
The petitioners sought reconsideration, 9 reiterating that the
respondent, being a member of the Board of Directors, was a corporate officer
whose removal was not within the LA's jurisdiction.
The petitioners later submitted to the NLRC in support of the motion for
reconsideration the certified machine copies of Matling's Amended Articles of
Incorporation and By Laws to prove that the President of Matling was thereby
granted "full power to create new offices and appoint the officers thereto, and
the minutes of special meeting held on June 7, 1999 by Matling's Board of
Directors to prove that the respondent was, indeed, a Member of the Board of
Directors. 10
Nonetheless, on April 30, 2001, the NLRC denied the
petitioners' motion for reconsideration. 11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari,
docketed as C.A.-G.R. No. SP 65714, contending that the NLRC committed
grave abuse of discretion amounting to lack of jurisdiction in reversing the
correct decision of the LA.
In its assailed decision promulgated on September 13, 2002, 12 the CA
dismissed the petition for certiorari, explaining:
For a position to be considered as a corporate office, or, for that
matter, for one to be considered as a corporate officer, the position must,
if not listed in the by-laws, have been created by the corporation's board
of directors, and the occupant thereof appointed or elected by the same
board of directors or stockholders. This is the implication of the ruling
in Tabang v. National Labor Relations Commission, which reads:
"The president, vice president, secretary and treasurer are
commonly regarded as the principal or executive officers of a
corporation, and modern corporation statutes usually designate
them as the officers of the corporation. However, other offices are
sometimes created by the charter or by-laws of a corporation, or
the board of directors may be empowered under the by-laws of a
corporation to create additional offices as may be necessary.
It has been held that an 'office' is created by the charter of
the corporation and the officer is elected by the directors or
stockholders. On the other hand, an 'employee' usually occupies
no office and generally is employed not by action of the directors
or stockholders but by the managing officer of the corporation
who also determines the compensation to be paid to such
employee."
This ruling was reiterated in the subsequent cases
of Ongkingco v. National Labor Relations Commission and De Rossi v.
National Labor Relations Commission.  CSIDTc

The position of vice-president for administration and finance,

which Coros used to hold in the corporation, was not created by the
corporation's board of directors but only by its president or executive
vice-president pursuant to the by-laws of the corporation.
Moreover, Coros' appointment to said position was not made through
any act of the board of directors or stockholders of the corporation.
Consequently, the position to which Coros was appointed and later on
removed from, is not a corporate office despite its nomenclature, but an
ordinary office in the corporation.
Coros' alleged illegal dismissal therefrom is, therefore, within the
jurisdiction of the labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
 The CA denied the petitioners' motion for reconsideration on April 2,
2003. 13
Issue
Thus, the petitioners are now before the Court for a review on certiorari,
positing that the respondent was a stockholder/member of the Matling's Board
of Directors as well as its Vice President for Finance and Administration; and
that the CA consequently erred in holding that the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer
of Matling or not. The resolution of the issue determines whether the LA or the
RTC had jurisdiction over his complaint for illegal dismissal.
Ruling
The appeal fails.
I
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a
private employer is properly cognizable by the LA. This is pursuant to Article
217 (a) 2 of the Labor Code, as amended, which provides as follows:
Article 217. Jurisdiction of the Labor Arbiters and the
Commission. — (a) Except as otherwise provided under this Code,
the Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the submission of
the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;  TSacCH

2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other
terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims arising from employer-
employee relations, including those of persons in domestic or household
 service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement. 
(b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of
collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said
agreements. (As amended by Section 9, Republic Act No. 6715, March
21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer,
however, the controversy falls under the jurisdiction of the Securities and
Exchange Commission (SEC), because the controversy arises out of intra-
corporate or partnership relations between and among stockholders,
members, or associates, or between any or all of them and the corporation,
partnership, or association of which they are stockholders, members, or
associates, respectively; and between such corporation, partnership, or
association and the State insofar as the controversy concerns their individual
franchise or right to exist as such entity; or because the controversy involves
the election or appointment of a director, trustee, officer, or manager of such
corporation, partnership, or association. 14 Such controversy, among others, is
known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No.
8799, 15 otherwise known as The Securities Regulation Code, the SEC's
jurisdiction over all intra-corporate disputes was transferred to the RTC,
pursuant to Section 5.2 of RA No. 8799, to wit:
5.2. The Commission's jurisdiction over all cases enumerated
under Section 5 of Presidential Decree No. 902-A is hereby transferred
to the Courts of general jurisdiction or the appropriate Regional
Trial Court: Provided, that the Supreme Court in the exercise of its
authority may designate the Regional Trial Court branches that shall
exercise jurisdiction over these cases. The Commission shall retain
jurisdiction over pending cases involving intra-corporate disputes
submitted for final resolution which should be resolved within one
(1) year from the enactment of this Code. The Commission shall
retain jurisdiction over pending suspension of payments/rehabilitation
cases filed as of 30 June 2000 until finally disposed. 
TSaEcH

Considering that the respondent's complaint for illegal dismissal was

commenced on August 10, 2000, it might come under the coverage of Section
5.2 of RA No. 8799, supra, should it turn out that the respondent was a
corporate, not a regular, officer of Matling.
 II
Was the Respondent's Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondent's position as Vice
President for Finance and Administration was a corporate office. If it was, his
dismissal by the Board of Directors rendered the matter an intra-corporate
dispute cognizable by the RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance
and Administration was a corporate office, having been created by Matling's
President pursuant to By-Law No. V, as amended, 16 to wit:
BY LAW NO. V
Officers
The President shall be the executive head of the corporation;
shall preside over the meetings of the stockholders and directors; shall
countersign all certificates, contracts and other instruments of the
corporation as authorized by the Board of Directors; shall have full power
to hire and discharge any or all employees of the corporation; shall have
full power to create new offices and to appoint the officers thereto
as he may deem proper and necessary in the operations of the
corporation and as the progress of the business and welfare of the
corporation may demand; shall make reports to the directors and
stockholders and perform all such other duties and functions as are
incident to his office or are properly required of him by the Board of
Directors. In case of the absence or disability of the President, the
Executive Vice President shall have the power to exercise his functions.
The petitioners argue that the power to create corporate offices and to
appoint the individuals to assume the offices was delegated by Matling's
Board of Directors to its President through By-Law No. V, as amended; and
that any office the President created, like the position of the respondent, was
as valid and effective a creation as that made by the Board of Directors,
making the office a corporate office. In justification, they cite Tabang v.
National Labor Relations Commission, 17 which held that "other offices are
sometimes created by the charter or by-laws of a corporation, or the board of
directors may be empowered under the by-laws of a corporation to create
additional officers as may be necessary."
The respondent counters that Matling's By-Laws did not list his position
as Vice President for Finance and Administration as one of the corporate
offices; that Matling's By-Law No. III listed only four corporate officers,
namely: President, Executive Vice President, Secretary, and Treasurer; 18 that
the corporate offices contemplated in the phrase "and such other officers as
may be provided for in the by-laws" found in Section 25 of the Corporation
Code should be clearly and expressly stated in the By-Laws; that the fact
that Matling's By-Law No. III dealt with Directors & Officers while its By-Law
No. V dealt with Officers proved that there was a differentiation between the
officers mentioned in the two provisions, with those classified under By-Law
No. V being ordinary or non-corporate officers; and that the officer, to be
considered as a corporate officer, must be elected by the Board of Directors
or the stockholders, for the President could only appoint an employee to a
position pursuant to By-Law No. V.  SEcITC

We agree with respondent.

Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum. — Immediately after their
election, the directors of a corporation must formally organize by the
election of a president, who shall be a director, a treasurer who may or
may not be a director, a secretary who shall be a resident and citizen of
the Philippines, and such other officers as may be provided for in
the by-laws. Any two (2) or more positions may be held concurrently by
the same person, except that no one shall act as president and secretary
or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform
the duties enjoined on them by law and the by-laws of the corporation.
Unless the articles of incorporation or the by-laws provide for a greater
majority, a majority of the number of directors or trustees as fixed in the
articles of incorporation shall constitute a quorum for the transaction of
corporate business, and every decision of at least a majority of the
directors or trustees present at a meeting at which there is a quorum
shall be valid as a corporate act, except for the election of officers which
shall require the vote of a majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board
meetings.
Conformably with Section 25, a position must be expressly mentioned
in the By-Laws in order to be considered as a corporate office. Thus, the
creation of an office pursuant to or under a By-Law enabling provision is not
enough to make a position a corporate office. Guerrea v. Lezama, 19 the first
ruling on the matter, held that the only officers of a corporation were those
given that character either by the Corporation Code or by the By-Laws; the
rest of the corporate officers could be considered only as employees or
subordinate officials. Thus, it was held in Easycall Communications Phils.,
Inc. v. King: 20
An "office" is created by the charter of the corporation and the
officer is elected by the directors or stockholders. On the other hand, an
 employee occupies no office and generally is employed not by the action
of the directors or stockholders but by the managing officer of the
corporation who also determines the compensation to be paid to such
employee.
In this case, respondent was appointed vice president for
nationwide expansion by Malonzo, petitioner's general manager, not by
the board of directors of petitioner. It was also Malonzo who determined
the compensation package of respondent. Thus, respondent was an
employee, not a "corporate officer." The CA was therefore correct in
ruling that jurisdiction over the case was properly with the NLRC, not the
SEC (now the RTC).  DTIaCS

This interpretation is the correct application of Section 25 of

the Corporation Code, which plainly states that the corporate officers are the
President, Secretary, Treasurer and such other officers as may be provided
for in the By-Laws. Accordingly, the corporate officers in the context of PD No.
902-A are exclusively those who are given that character either by
the Corporation Code or by the corporation's By-Laws.
A different interpretation can easily leave the way open for the Board of
Directors to circumvent the constitutionally guaranteed security of tenure of
the employee by the expedient inclusion in the By-Laws of an enabling clause
on the creation of just any corporate officer position.
It is relevant to state in this connection that the SEC, the primary
agency administering the Corporation Code, adopted a similar interpretation
of Section 25 of the Corporation Code in its Opinion dated November 25,
1993, 21 to wit:
Thus, pursuant to the above provision (Section 25 of
the Corporation Code), whoever are the corporate officers
enumerated in the by-laws are the exclusive Officers of the
corporation and the Board has no power to create other Offices
without amending first the corporate By-laws. However, the Board
may create appointive positions other than the positions of
corporate Officers, but the persons occupying such positions are
not considered as corporate officers within the meaning of Section
25 of the Corporation Code and are not empowered to exercise the
functions of the corporate Officers, except those functions lawfully
delegated to them. Their functions and duties are to be determined
by the Board of Directors/Trustees.  
Moreover, the Board of Directors of Matling could not validly delegate
the power to create a corporate office to the President, in light of Section 25
of the Corporation Code requiring the Board of Directors itself to elect the
corporate officers. Verily, the power to elect the corporate officers was a
discretionary power that the law exclusively vested in the Board of Directors,
and could not be delegated to subordinate officers or agents. 22 The office of
Vice President for Finance and Administration created by Matling's President
pursuant to By Law No. V was an ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to
appoint the officers to occupy them vested by By-Law No. V merely
allowed Matling's President to create non-corporate offices to be occupied by
ordinary employees of Matling. Such powers were incidental to the President's
duties as the executive head of Matling to assist him in the daily operations of
the business.
The petitioners' reliance on Tabang, supra, is misplaced. The statement
in Tabang, to the effect that offices not expressly mentioned in the By-Laws
but were created pursuant to a By-Law enabling provision were also
considered corporate offices, was plainly obiter dictum due to the position
subject of the controversy being mentioned in the By-Laws. Thus, the Court
held therein that the position was a corporate office, and that the
determination of the rights and liabilities arising from the ouster from the
position was an intra-corporate controversy within the SEC's jurisdiction. 
cATDIH

In Nacpil v. Intercontinental Broadcasting Corporation, 23 which may be

the more appropriate ruling, the position subject of the controversy was not
expressly mentioned in the By-Laws, but was created pursuant to a By-Law
enabling provision authorizing the Board of Directors to create other offices
that the Board of Directors might see fit to create. The Court held there that
the position was a corporate office, relying on the obiter dictum in Tabang.
Considering that the observations earlier made herein show that the
soundness of their dicta is not unassailable, Tabang and Nacpil should no
longer be controlling.
III
Did Respondent's Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a
Director/stockholder of Matling, and relying on Paguio v. National Labor
Relations Commission 24 and Ongkingko v. National Labor Relations
Commission, 25 the NLRC had no jurisdiction over his complaint, considering
that any case for illegal dismissal brought by a stockholder/officer against the
corporation was an intra-corporate matter that must fall under the jurisdiction
of the SEC conformably with the context of PD No. 902-A.
The petitioners' insistence is bereft of basis.
 To begin with, the reliance on Paguio and Ongkingko is misplaced. In
both rulings, the complainants were undeniably corporate officers due to their
positions being expressly mentioned in the By-Laws, aside from the fact that
both of them had been duly elected by the respective Boards of Directors. But
the herein respondent's position of Vice President for Finance and
Administration was not expressly mentioned in the By-Laws; neither was the
position of Vice President for Finance and Administration created by Matling's
Board of Directors. Lastly, the President, not the Board of Directors, appointed
him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between
a stockholder and the corporation. There is no distinction, qualification or
any exemption whatsoever. The provision is broad and covers all kinds
of controversies between stockholders and corporations. 26
However, the Tabang pronouncement is not controlling because it is
too sweeping and does not accord with reason, justice, and fair play. In order
to determine whether a dispute constitutes an intra-corporate controversy or
not, the Court considers two elements instead, namely: (a) the status or
relationship of the parties; and (b) the nature of the question that is the
subject of their controversy. This was our thrust in Viray v. Court of
Appeals: 27 DCTHaS

The establishment of any of the relationships mentioned above

will not necessarily always confer jurisdiction over the dispute on the
SEC to the exclusion of regular courts. The statement made in one case
that the rule admits of no exceptions or distinctions is not that absolute.
The better policy in determining which body has jurisdiction over a case
would be to consider not only the status or relationship of the parties but
also the nature of the question that is the subject of their controversy.
Not every conflict between a corporation and its stockholders
involves corporate matters that only the SEC can resolve in the exercise
of its adjudicatory or quasi-judicial powers. If, for example, a person
leases an apartment owned by a corporation of which he is a
stockholder, there should be no question that a complaint for his
ejectment for non-payment of rentals would still come under the
jurisdiction of the regular courts and not of the SEC. By the same token,
if one person injures another in a vehicular accident, the complaint for
damages filed by the victim will not come under the jurisdiction of the
SEC simply because of the happenstance that both parties are
stockholders of the same corporation. A contrary interpretation would
dissipate the powers of the regular courts and distort the meaning and
intent of PD No. 902-A.
 In another case, Mainland Construction Co., Inc. v. Movilla, 28 the Court
reiterated these determinants thuswise:
In order that the SEC (now the regular courts) can take
cognizance of a case, the controversy must pertain to any of the
following relationships:
a) between the corporation, partnership or association and the
public;
b) between the corporation, partnership or association and its
stockholders, partners, members or officers;
c) between the corporation, partnership or association and the
State as far as its franchise, permit or license to operate is
concerned; and
d) among the stockholders, partners or associates themselves.
The fact that the parties involved in the controversy are all
stockholders or that the parties involved are the stockholders and the
corporation does not necessarily place the dispute within the ambit of the
jurisdiction of SEC. The better policy to be followed in determining
jurisdiction over a case should be to consider concurrent factors such as
the status or relationship of the parties or the nature of the question that
is the subject of their controversy. In the absence of any one of these
factors, the SEC will not have jurisdiction. Furthermore, it does not
necessarily follow that every conflict between the corporation and its
stockholders would involve such corporate matters as only the SEC can
resolve in the exercise of its adjudicatory or quasi-judicial powers. 29 
cAaDCE

The criteria for distinguishing between corporate officers who may be

ousted from office at will, on one hand, and ordinary corporate employees
who may only be terminated for just cause, on the other hand, do not depend
on the nature of the services performed, but on the manner of creation of the
office. In the respondent's case, he was supposedly at once an employee, a
stockholder, and a Director of Matling. The circumstances surrounding his
appointment to office must be fully considered to determine whether the
dismissal constituted an intra-corporate controversy or a labor termination
dispute. We must also consider whether his status as Director and
stockholder had any relation at all to his appointment and subsequent
dismissal as Vice President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice President
for Finance and Administration because of his being a stockholder or Director
of Matling. He had started working for Matling on September 8, 1966, and had
been employed continuously for 33 years until his termination on April 17,
2000, first as a bookkeeper, and his climb in 1987 to his last position as Vice
President for Finance and Administration had been gradual but steady, as the
following sequence indicates:
1966 — Bookkeeper
1968 — Senior Accountant
1969 — Chief Accountant
1972 — Office Supervisor
1973 — Assistant Treasurer
1978 — Special Assistant for Finance
1980 — Assistant Comptroller
1983 — Finance and Administrative Manager
1985 — Asst. Vice President for Finance and Administration
1987 to April 17, 2000 — Vice President for Finance and
Administration
Even though he might have become a stockholder of Matling in 1992,
his promotion to the position of Vice President for Finance and Administration
in 1987 was by virtue of the length of quality service he had rendered as an
employee of Matling. His subsequent acquisition of the status of
Director/stockholder had no relation to his promotion. Besides, his status of
Director/stockholder was unaffected by his dismissal from employment as
Vice President for Finance and Administration.  ESCTaA

In Prudential Bank and Trust Company v. Reyes, 30 a case involving a

lady bank manager who had risen from the ranks but was dismissed, the
Court held that her complaint for illegal dismissal was correctly brought to the
NLRC, because she was deemed a regular employee of the bank. The Court
observed thus:
It appears that private respondent was appointed Accounting
Clerk by the Bank on July 14, 1963. From that position she rose to
become supervisor. Then in 1982, she was appointed Assistant Vice-
President which she occupied until her illegal dismissal on July 19,
1991. The bank's contention that she merely holds an elective
position and that in effect she is not a regular employee is belied by
the nature of her work and her length of service with the Bank. As
earlier stated, she rose from the ranks and has been employed with the
Bank since 1963 until the termination of her employment in 1991. As
Assistant Vice President of the Foreign Department of the Bank, she is
tasked, among others, to collect checks drawn against overseas banks
payable in foreign currency and to ensure the collection of foreign bills or
checks purchased, including the signing of transmittal letters covering
the same. It has been stated that "the primary standard of determining
regular employment is the reasonable connection between the particular
 activity performed by the employee in relation to the usual trade or
business of the employer. Additionally, "an employee is regular because
of the nature of work and the length of service, not because of the mode
or even the reason for hiring them." As Assistant Vice-President of the
Foreign Department of the Bank she performs tasks integral to the
operations of the bank and her length of service with the bank totaling 28
years speaks volumes of her status as a regular employee of the bank.
In fine, as a regular employee, she is entitled to security of tenure; that
is, her services may be terminated only for a just or authorized cause.
This being in truth a case of illegal dismissal, it is no wonder then that
the Bank endeavored to the very end to establish loss of trust and
confidence and serious misconduct on the part of private respondent
but, as will be discussed later, to no avail.  
WHEREFORE, we deny the petition for review on certiorari, and affirm
the decision of the Court of Appeals.
Costs of suit to be paid by the petitioners.
SO ORDERED.
Carpio Morales, Brion, Villarama, Jr. and Sereno, JJ., concur.
 
Footnotes
1.Rollo, pp. 53-61; penned by Associate Justice Oswaldo D. Agcaoili (retired), with
Associate Justice Edgardo P. Cruz (retired) and Associate Justice Amelita G.
Tolentino concurring.
2.Id., pp. 63-67.
3.Id., pp. 69-70.
4.Id., pp. 71-74.
5.Id., pp. 90-95.
6.Id., pp. 96-99.
7.Id., pp. 100-111.
8.Id., pp. 112-116.
9.Id., pp. 117-120.
10.Id., pp. 121-142.
11.Id., pp. 143-144.
12.Supra, at note 1.
13.Supra, at note 2.
14.Section 5 of Presidential Decree No. 902-A.
15.President Estrada approved the law on July 19, 2000.
16.Rollo, p. 135.
17.G.R. No. 121143, January 21, 1997, 266 SCRA 462, 467.
18.Rollo, p. 134:
BY-LAW NO. III
Directors and Officers
The directors shall be elected by the stockholders at their annual meeting and
shall hold their respective offices for a term of one year or until their successors
are duly elected and qualified unless they shall be sooner removed as
hereinafter provided; provided, however, that the foregoing provisions shall not
apply to the first Board of Directors who are appointed to serve until the next
annual meeting of the stockholders. Absence from two successive meetings of
the Board of Directors may in the discretion of the Board terminate the
membership of the director. Directors shall receive no compensation for their
services except per diems as may be allowed by the stockholders.
The officers of the corporation shall be the President, Executive Vice
President, Secretary and Treasurer, each of whom may hold his office until
his successor is elected and qualified, unless sooner removed by the Board of
Directors; Provided, That for the convenience of the corporation, the office of
the Secretary and Treasurer may be held by one and the same person. Officers
shall be designated by the stockholders' meeting at the time they elect the
members of the Board of Directors. Any vacancy occurring among the officers
of the Corporation on account of removal or resignation shall be filled by a
stockholders' meeting. Stockholders holding one half or more of the subscribed
capital stock of the corporation may demand and compel the resignation of any
officer at any time.
19.103 Phil. 553 (1958).
20.G.R. No. 145901, December 15, 2005, 478 SCRA 102, 110-111.
21.SEC Folio 1960-1976, at p. 498.
22.2 Fletcher 377, cited in Agbayani, Commentaries and Jurisprudence on the
Commercial Laws of the Philippines, Vol. 3, 1988 Edition, page 226.
23.G.R. No. 144767, March 21, 2002, 379 SCRA 653.
24.G.R. No. 116662, February 1, 1996, 253 SCRA 166.
25.G.R. No. 119877, March 31, 1997, 270 SCRA 613.
26.Supra, at note 16.
27.G.R. No. 92481, November 9, 1990, 191 SCRA 308, 322-323.
 28.G.R. No. 118088, November 23, 1995, 250 SCRA 290, 294-295.
29.See also Saura v. Saura, Jr., G.R. No. 136159, September 1, 1999, 313 SCRA
465; Lozano v. De los Santos, G.R. No. 125221, June 19, 1997, 274 SCRA
452.
30.G.R. No. 141093, February 20, 2001, 352 SCRA 316, 327. 
 (Matling Industrial and Commercial Corporation v. Coros, G.R. No. 157802,
|||

[October 13, 2010], 647 PHIL 324-350)

[G.R. No. 201298. February 5, 2014.]

RAUL C. COSARE, petitioner, vs. BROADCOM ASIA, INC. and

DANTE AREVALO, respondents.

DECISION

REYES, J  : p

Before the Court is a petition for review on certiorari 1 under Rule 45 of

the Rules of Court, which assails the Decision 2 dated November 24, 2011 and
Resolution 3 dated March 26, 2012 of the Court of Appeals (CA) in CA-G.R. SP.
No. 117356, wherein the CA ruled that the Regional Trial Court (RTC), and not
the Labor Arbiter (LA), had the jurisdiction over petitioner Raul C. Cosare's
(Cosare) complaint for illegal dismissal against Broadcom Asia, Inc. (Broadcom)
and Dante Arevalo (Arevalo), the President of Broadcom (respondents).
The Antecedents
The case stems from a complaint 4 for constructive dismissal, illegal
suspension and monetary claims filed with the National Capital Region
Arbitration Branch of the National Labor Relations Commission (NLRC)
by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a
salesman by Arevalo, who was then in the business of selling broadcast
equipment needed by television networks and production houses. In December
2000, Arevalo set up the company Broadcom, still to continue the business of
trading communication and broadcast equipment. Cosare was named an
incorporator of Broadcom, having been assigned 100 shares of stock with par
value of P1.00 per share. 5 In October 2001, Cosare was promoted to the
position of Assistant Vice President for Sales (AVP for Sales) and Head of the
Technical Coordination, having a monthly basic net salary and average
commissions of P18,000.00 and P37,000.00, respectively. 6  ICTcDA

Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom's

Vice President for Sales and thus, became Cosare's immediate superior. On
March 23, 2009, Cosare sent a confidential memo 7 to Arevalo to inform him of
the following anomalies which were allegedly being committed by Abiog against
the company: (a) he failed to report to work on time, and would immediately
leave the office on the pretext of client visits; (b) he advised the clients
of Broadcom to purchase camera units from its competitors, and received
commissions therefor; (c) he shared in the "under the-table dealings" or
"confidential commissions" which Broadcom extended to its clients' personnel
and engineers; and (d) he expressed his complaints and disgust
over Broadcom's uncompetitive salaries and wages and delay in the payment of
other benefits, even in the presence of office staff. Cosare ended his memo by
clarifying that he was not interested in Abiog's position, but only wanted Arevalo
to know of the irregularities for the corporation's sake.
Apparently, Arevalo failed to act on Cosare's accusations. Cosare claimed
that he was instead called for a meeting by Arevalo on March 25, 2009, wherein
he was asked to tender his resignation in exchange for "financial assistance" in
the amount of P300,000.00. 8 Cosare refused to comply with the directive, as
signified in a letter 9 dated March 26, 2009 which he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal
(Villareal), Broadcom's Manager for Finance and Administration, a
memo 10 signed by Arevalo, charging him of serious misconduct and willful
breach of trust, and providing in part: 
THaAEC

1.  A confidential memo was received from the VP for Sales informing
me that you had directed, or at the very least tried to persuade, a
customer to purchase a camera from another supplier. Clearly,
this action is a gross and willful violation of the trust and
confidence this company has given to you being its AVP for Sales
and is an attempt to deprive the company of income from which
you, along with the other employees of this company, derive your
salaries and other benefits. . . . .
2.  A company vehicle assigned to you with plate no. UNV 402 was
found abandoned in another place outside of the office without
proper turnover from you to this office which had assigned said
vehicle to you. The vehicle was found to be inoperable and in very
bad condition, which required that the vehicle be towed to a
nearby auto repair shop for extensive repairs.
3.  You have repeatedly failed to submit regular sales reports informing
the company of your activities within and outside of company
 premises despite repeated reminders. However, it has been
observed that you have been both frequently absent and/or tardy
without proper information to this office or your direct supervisor,
the VP for Sales Mr. Alex Abiog, of your whereabouts.
4.  You have been remiss in the performance of your duties as a Sales
officer as evidenced by the fact that you have not recorded any
sales for the past immediate twelve (12) months. This was inspite
of the fact that my office decided to relieve you of your duties as
technical coordinator between Engineering and Sales since June
last year so that you could focus and concentrate [on] your
activities in sales. 11 
STaCIA

Cosare was given forty-eight (48) hours from the date of the memo within
which to present his explanation on the charges. He was also "suspended from
having access to any and all company files/records and use of company assets
effective immediately." 12 Thus, Cosare claimed that he was precluded from
reporting for work on March 31, 2009, and was instead instructed to wait at the
office's receiving section. Upon the specific instructions of Arevalo, he was also
prevented by Villareal from retrieving even his personal belongings from the
office.
On April 1, 2009, Cosare was totally barred from entering the company
premises, and was told to merely wait outside the office building for further
instructions. When no such instructions were given by 8:00 p.m., Cosare was
impelled to seek the assistance of the officials of Barangay San Antonio, Pasig
City, and had the incident reported in the barangay blotter. 13
On April 2, 2009, Cosare attempted to furnish the company with a
memo 14 by which he addressed and denied the accusations cited in Arevalo's
memo dated March 30, 2009. The respondents refused to receive the memo on
the ground of late filing, prompting Cosare to serve a copy thereof by registered
mail. The following day, April 3, 2009, Cosare filed the subject labor complaint,
claiming that he was constructively dismissed from employment by the
respondents. He further argued that he was illegally suspended, as he placed no
serious and imminent threat to the life or property of his employer and co-
employees. 15 TcDIEH

In refuting Cosare's complaint, the respondents argued that Cosare was

neither illegally suspended nor dismissed from employment. They also
contended that Cosare committed the following acts inimical to the interests
of Broadcom: (a) he failed to sell any broadcast equipment since the year 2007;
(b) he attempted to sell a Panasonic HMC 150 Camera which was to be sourced
from a competitor; and (c) he made an unauthorized request in Broadcom's
name for its principal, Panasonic USA, to issue an invitation for Cosare's friend,
one Alex Paredes, to attend the National Association of Broadcasters'
Conference in Las Vegas, USA. 16 Furthermore, they contended
that Cosare abandoned his job 17 by continually failing to report for work
beginning April 1, 2009, prompting them to issue on April 14, 2009 a
memorandum 18 accusing Cosare of absence without leave beginning April 1,
2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his
Decision 19 dismissing the complaint on the ground of Cosare's failure to
establish that he was dismissed, constructively or otherwise, from his
employment. For the LA, what transpired on March 30, 2009 was merely the
respondents' issuance to Cosare of a show-cause memo, giving him a chance to
present his side on the charges against him. He explained:
It is obvious that [Cosare] DID NOT wait for respondents' action
regarding the charges leveled against him in the show-cause memo.
What he did was to pre-empt that action by filing this complaint just a
day after he submitted his written explanation. Moreover, by specifically
seeking payment of "Separation Pay" instead of reinstatement,
[Cosare's] motive for filing this case becomes more evident. 20 
EHTSCD

It was also held that Cosare failed to substantiate by documentary

evidence his allegations of illegal suspension and non-payment of allowances
and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision 21 reversing the
Decision of LA Menese. The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is
REVERSED and the Respondents are found guilty of Illegal Constructive
Dismissal. Respondents BROADCOM ASIA[,] INC. and Dante Arevalo
are ordered to pay [Cosare's] backwages, and separation pay, as well as
damages, in the total amount of [P]1,915,458.33, per attached
Computation.
SO ORDERED. 22
In ruling in favor of Cosare, the NLRC explained that "due weight and
credence is accorded to [Cosare's] contention that he was constructively
dismissed by Respondent Arevalo when he was asked to resign from his
employment." 23 The fact that Cosare was suspended from using the assets
of Broadcom was also inconsistent with the respondents' claim that Cosare opted
to abandon his employment.
 Exemplary damages in the amount of P100,000.00 was awarded, given
the NLRC's finding that the termination of Cosare's employment was effected by
the respondents in bad faith and in a wanton, oppressive and malevolent
manner. The claim for unpaid commissions was denied on the ground of the
failure to include it in the prayer of pleadings filed with the LA and in the
appeal. IDTHcA

The respondents' motion for reconsideration was denied. 24 Dissatisfied,

they filed a petition for certiorari with the CA founded on the following arguments:
(1) the respondents did not have to prove just cause for terminating the
employment of Cosare because the latter's complaint was based on an alleged
constructive dismissal; (2) Cosare resigned and was thus not dismissed from
employment; (3) the respondents should not be declared liable for the payment
of Cosare's monetary claims; and (4) Arevalo should not be held solidarily liable
for the judgment award.  aATEDS

In a manifestation filed by the respondents during the pendency of the CA

appeal, they raised a new argument, i.e., the case involved an intra-corporate
controversy which was within the jurisdiction of the RTC, instead of the
LA. 25 They argued that the case involved a complaint against a corporation filed
by a stockholder, who, at the same time, was a corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision 26 granting
the respondents' petition. It agreed with the respondents' contention that the case
involved an intra-corporate controversy which, pursuant to Presidential Decree
No. 902-A, as amended, was within the exclusive jurisdiction of the RTC. It
reasoned:
Record shows that [Cosare] was indeed a stockholder of
[Broadcom], and that he was listed as one of its directors. Moreover, he
held the position of [AVP] for Sales which is listed as a corporate office.
Generally, the president, vice-president, secretary or treasurer are
commonly regarded as the principal or executive officers of a
corporation, and modern corporation statutes usually designate them as
the officers of the corporation. However, it bears mentioning that under
Section 25 of the Corporation Code, the Board of Directors of
[Broadcom] is allowed to appoint such other officers as it may deem
necessary. Indeed, [Broadcom's] By-Laws provides:  CTcSIA

Article IV
Officer
Section 1.  Election/Appointment. — Immediately after
their election, the Board of Directors shall formally
 organize by electing the President, the Vice-President,
the Treasurer, and the Secretary at said meeting.
The Board, may, from time to time, appoint such other
officers as it may determine to be necessary or proper. . . .
We hold that [the respondents] were able to present substantial
evidence that [Cosare] indeed held a corporate office, as evidenced
by the General Information Sheet which was submitted to the
Securities and Exchange Commission (SEC) on October 22,
2009. 27 (Citations omitted and emphasis supplied)  acSECT

Thus, the CA reversed the NLRC decision and resolution, and then
entered a new one dismissing the labor complaint on the ground of lack of
jurisdiction, finding it unnecessary to resolve the main issues that were raised in
the petition. Cosare filed a motion for reconsideration, but this was denied by the
CA via the Resolution 28 dated March 26, 2012. Hence, this petition.
The Present Petition
The pivotal issues for the petition's full resolution are as follows: (1)
whether or not the case instituted by Cosare was an intra-corporate dispute that
was within the original jurisdiction of the RTC, and not of the LAs; and (2)
whether or not Cosare was constructively and illegally dismissed from
employment by the respondents.
The Court's Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary
to the ruling of the CA, it is the LA, and not the regular courts, which has the
original jurisdiction over the subject controversy. An intra-corporate controversy,
which falls within the jurisdiction of regular courts, has been regarded in its broad
sense to pertain to disputes that involve any of the following relationships: (1)
between the corporation, partnership or association and the public; (2) between
the corporation, partnership or association and the state in so far as its franchise,
permit or license to operate is concerned; (3) between the corporation,
partnership or association and its stockholders, partners, members or officers;
and (4) among the stockholders, partners or associates, themselves. 29 Settled
jurisprudence, however, qualifies that when the dispute involves a charge of
illegal dismissal, the action may fall under the jurisdiction of the LAs upon whose
jurisdiction, as a rule, falls termination disputes and claims for damages arising
from employer-employee relations as provided in Article 217 of the Labor Code.
Consistent with this jurisprudence, the mere fact that Cosare was a stockholder
and an officer of Broadcom at the time the subject controversy developed failed
to necessarily make the case an intra-corporate dispute.  TAacHE

In Matling Industrial and Commercial Corporation v. Coros, 30 the Court

distinguished between a "regular employee" and a "corporate officer" for
purposes of establishing the true nature of a dispute or complaint for illegal
dismissal and determining which body has jurisdiction over it. Succinctly, it was
explained that "[t]he determination of whether the dismissed officer was a regular
employee or corporate officer unravels the conundrum" of whether a complaint
for illegal dismissal is cognizable by the LA or by the RTC. "In case of the regular
employee, the LA has jurisdiction; otherwise, the RTC exercises the legal
authority to adjudicate. 31
Applying the foregoing to the present case, the LA had the original
jurisdiction over the complaint for illegal dismissal because Cosare, although an
officer of Broadcom for being its AVP for Sales, was not a "corporate officer" as
the term is defined by law. We emphasized in Real v. Sangu Philippines,
Inc. 32 the definition of corporate officers for the purpose of identifying an intra-
corporate controversy. Citing Garcia v. Eastern Telecommunications Philippines,
Inc., 33 we held:
"'Corporate officers' in the context of Presidential Decree No. 902-
A are those officers of the corporation who are given that character by
the Corporation Code or by the corporation's by-laws. There are
three specific officers whom a corporation must have under Section 25
of the Corporation Code. These are the president, secretary and the
treasurer. The number of officers is not limited to these three. A
corporation may have such other officers as may be provided for by its
by-laws like, but not limited to, the vice-president, cashier, auditor or
general manager. The number of corporate officers is thus limited by law
and by the corporation's by-laws." 34 (Emphasis ours)
In Tabang v. NLRC, 35 the Court also made the following pronouncement
on the nature of corporate offices:  EcTCAD

It has been held that an "office" is created by the charter of the

corporation and the officer is elected by the directors and stockholders.
On the other hand, an "employee" usually occupies no office and
generally is employed not by action of the directors or stockholders but
by the managing officer of the corporation who also determines the
compensation to be paid to such employee. 36 (Citations omitted)
As may be deduced from the foregoing, there are two circumstances which
must concur in order for an individual to be considered a corporate officer, as
against an ordinary employee or officer, namely: (1) the creation of the position is
under the corporation's charter or by-laws; and (2) the election of the officer is by
the directors or stockholders. It is only when the officer claiming to have been
illegally dismissed is classified as such corporate officer that the issue is deemed
an intra-corporate dispute which falls within the jurisdiction of the trial courts.
To support their argument that Cosare was a corporate officer, the
respondents referred to Section 1, Article IV of Broadcom's by-laws, which reads:
ARTICLE IV
OFFICER
Section 1.  Election/Appointment. — Immediately after their
election, the Board of Directors shall formally organize by electing the
President, the Vice-President, the Treasurer, and the Secretary at said
meeting.
The Board may, from time to time, appoint such other
officers as it may determine to be necessary or proper. Any two (2)
or more compatible positions may be held concurrently by the same
person, except that no one shall act as President and Treasurer or
Secretary at the same time. 37 (Emphasis ours)  TaISEH

This was also the CA's main basis in ruling that the matter was an intra-
corporate dispute that was within the trial courts' jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned
from the aforequoted provision, the only officers who are specifically listed, and
thus with offices that are created under Broadcom's by-laws are the following: the
President, Vice-President, Treasurer and Secretary. Although a blanket authority
provides for the Board's appointment of such other officers as it may deem
necessary and proper, the respondents failed to sufficiently establish that the
position of AVP for Sales was created by virtue of an act of Broadcom's board,
and that Cosare was specifically elected or appointed to such position by the
directors. No board resolutions to establish such facts form part of the case
records. Further, it was held in Marc II Marketing, Inc. v. Joson 38 that an
enabling clause in a corporation's by-laws empowering its board of directors to
create additional officers, even with the subsequent passage of a board
resolution to that effect, cannot make such position a corporate office. The board
of directors has no power to create other corporate offices without first amending
the corporate by-laws so as to include therein the newly created corporate
office. 39 "To allow the creation of a corporate officer position by a simple
inclusion in the corporate by-laws of an enabling clause empowering the board of
directors to do so can result in the circumvention of that constitutionally well-
protected right [of every employee to security of tenure]." 40  DSHTaC

The CA's heavy reliance on the contents of the General Information

Sheets, 41 which were submitted by the respondents during the appeal
proceedings and which plainly provided that Cosare was an "officer"
of Broadcom, was clearly misplaced. The said documents could neither govern
nor establish the nature of the office held by Cosare and his appointment thereto.
Furthermore, although Cosare could indeed be classified as an officer as
provided in the General Information Sheets, his position could only be deemed a
regular office, and not a corporate office as it is defined under the Corporation
Code. Incidentally, the Court noticed that although the Corporate Secretary
of Broadcom, Atty. Efren L. Cordero, declared under oath the truth of the matters
set forth in the General Information Sheets, the respondents failed to explain why
the General Information Sheet officially filed with the Securities and Exchange
Commission in 2011 and submitted to the CA by the respondents still
indicated Cosare as an AVP for Sales, when among their defenses in the charge
of illegal dismissal, they asserted that Cosare had severed his relationship with
the corporation since the year 2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the
time of the case's filing did not necessarily make the action an intra-corporate
controversy. "[N]ot all conflicts between the stockholders and the corporation are
classified as intra-corporate. There are other facts to consider in determining
whether the dispute involves corporate matters as to consider them as intra-
corporate controversies." 42 Time and again, the Court has ruled that in
determining the existence of an intra-corporate dispute, the status or relationship
of the parties and the nature of the question that is the subject of the controversy
must be taken into account. 43 Considering that the pending dispute particularly
relates to Cosare's rights and obligations as a regular officer of Broadcom,
instead of as a stockholder of the corporation, the controversy cannot be deemed
intra-corporate. This is consistent with the "controversy test" explained by the
Court in Reyes v. Hon. RTC, Br. 142, 44 to wit:  HCEcAa

Under the nature of the controversy test, the incidents of that

relationship must also be considered for the purpose of ascertaining
whether the controversy itself is intra-corporate. The controversy must
not only be rooted in the existence of an intra-corporate relationship, but
must as well pertain to the enforcement of the parties' correlative rights
and obligations under the Corporation Code and the internal and intra-
corporate regulatory rules of the corporation. If the relationship and its
incidents are merely incidental to the controversy or if there will still be
conflict even if the relationship does not exist, then no intra-corporate
controversy exists. 45 (Citation omitted)
It bears mentioning that even the CA's finding 46 that Cosare was a director
of Broadcom when the dispute commenced was unsupported by the case
records, as even the General Information Sheet of 2009 referred to in the CA
decision to support such finding failed to provide such detail.  TaCIDS
 All told, it is then evident that the CA erred in reversing the NLRC's ruling
that favored Cosare solely on the ground that the dispute was an intra-corporate
controversy within the jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate
to rule on the correctness of the NLRC's ruling finding Cosare to have been
illegally dismissed from employment.
In filing his labor complaint, Cosare maintained that he was constructively
dismissed, citing among other circumstances the charges that were hurled and
the suspension that was imposed against him via Arevalo's memo dated March
30, 2009. Even prior to such charge, he claimed to have been subjected to
mental torture, having been locked out of his files and records and disallowed
use of his office computer and access to personal
belongings. 47 While Cosare attempted to furnish the respondents with his reply
to the charges, the latter refused to accept the same on the ground that it was
filed beyond the 48-hour period which they provided in the memo.  TSHIDa

Cosare further referred to the circumstances that allegedly transpired

subsequent to the service of the memo, particularly the continued refusal of the
respondents to allow Cosare's entry into the company's premises. These
incidents were cited in the CA decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked
Villareal if he could retrieve his personal belongings, but the latter said
that . . . Arevalo directed her to deny his request, so [Cosare] again
waited at the receiving section of the office. On April 1, 2009, [Cosare]
was not allowed to enter the office premises. He was asked to just wait
outside of the Tektite (PSE) Towers, where [Broadcom] had its offices,
for further instructions on how and when he could get his personal
belongings. [Cosare] waited until 8 p.m. for instructions but none were
given. Thus, [Cosare] sought the assistance of the officials of
Barangay San Antonio, Pasig who advised him to file a labor or
replevin case to recover his personal belongings. . . . . 48 (Citation
omitted)
It is also worth mentioning that a few days before the issuance of the
memo dated March 30, 2009, Cosare was allegedly summoned to Arevalo's
office and was asked to tender his immediate resignation from the company, in
exchange for a financial assistance of P300,000.00. 49 The directive was said to
be founded on Arevalo's choice to retain Abiog's employment with the
company. 50 The respondents failed to refute these claims.  CITDES

Given the circumstances, the Court agrees with Cosare's claim of

constructive and illegal dismissal. "[C]onstructive dismissal occurs when there
is cessation of work because continued employment is rendered impossible,
unreasonable, or unlikely as when there is a demotion in rank or diminution in
pay or when a clear discrimination, insensibility, or disdain by an employer
becomes unbearable to the employee leaving the latter with no other option but
to quit." 51 In Dimagan v. Dacworks United, Incorporated, 52 it was explained:
The test of constructive dismissal is whether a reasonable person in
the employee's position would have felt compelled to give up his
position under the circumstances. It is an act amounting to dismissal
but is made to appear as if it were not. Constructive dismissal is
therefore a dismissal in disguise. The law recognizes and resolves this
situation in favor of employees in order to protect their rights and
interests from the coercive acts of the employer. 53 (Citation omitted)
It is clear from the cited circumstances that the respondents already
rejected Cosare's continued involvement with the company. Even their refusal to
accept the explanation which Cosare tried to tender on April 2, 2009 further
evidenced the resolve to deny Cosare of the opportunity to be heard prior to any
decision on the termination of his employment. The respondents allegedly
refused acceptance of the explanation as it was filed beyond the mere 48-hour
period which they granted to Cosare under the memo dated March 30, 2009.
However, even this limitation was a flaw in the memo or notice to explain which
only further signified the respondents' discrimination, disdain and insensibility
towards Cosare, apparently resorted to by the respondents in order to deny their
employee of the opportunity to fully explain his defenses and ultimately, retain his
employment. The Court emphasized in King of Kings Transport, Inc. v.
Mamac 54 the standards to be observed by employers in complying with the
service of notices prior to termination: EHTSCD

[T]he first written notice to be served on the employees should

contain the specific causes or groundsfor termination against them,
and a directive that the employees are given the opportunity to submit
their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of
assistance that management must accord to the employees to enable
them to prepare adequately for their defense. This should be construed
as a period of at least five (5) calendar days from receipt of the notice
to give the employees an opportunity to study the accusation against
them, consult a union official or lawyer, gather data and evidence, and
decide on the defenses they will raise against the complaint. Moreover,
in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed
narration of the facts and circumstances that will serve as basis for the
charge against the employees. A general description of the charge will
not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds
 under Art. 282 is being charged against the employees. 55 (Citation
omitted, underscoring ours, and emphasis supplied)
In sum, the respondents were already resolute on a severance of their
working relationship with Cosare, notwithstanding the facts which could have
been established by his explanations and the respondents' full investigation on
the matter. In addition to this, the fact that no further investigation and final
disposition appeared to have been made by the respondents on Cosare's case
only negated the claim that they actually intended to first look into the matter
before making a final determination as to the guilt or innocence of their
employee. This also manifested from the fact that even before Cosare was
required to present his side on the charges of serious misconduct and willful
breach of trust, he was summoned to Arevalo's office and was asked to tender
his immediate resignation in exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also
manifested by their persistent accusation that Cosare abandoned his post,
allegedly signified by his failure to report to work or file a leave of absence
beginning April 1, 2009. This was even the subject of a memo 56 issued by
Arevalo to Cosare on April 14, 2009, asking him to explain his absence within 48
hours from the date of the memo. As the records clearly indicated, however,
Arevalo placed Cosare under suspension beginning March 30, 2009. The
suspension covered access to any and all company files/records and the use of
the assets of the company, with warning that his failure to comply with the memo
would be dealt with drastic management action. The charge of abandonment was
inconsistent with this imposed suspension. "Abandonment is the deliberate and
unjustified refusal of an employee to resume his employment. To constitute
abandonment of work, two elements must concur: '(1) the employee must have
failed to report for work or must have been absent without valid or justifiable
reason; and (2) there must have been a clear intention on the part of the
employee to sever the employer-employee relationship manifested by some
overt act.'" 57 Cosare's failure to report to work beginning April 1, 2009 was
neither voluntary nor indicative of an intention to sever his employment
with Broadcom. It was illogical to be requiring him to report for work, and
imputing fault when he failed to do so after he was specifically denied access to
all of the company's assets. As correctly observed by the NLRC:
[T]he Respondent[s] had charged [Cosare] of abandoning his
employment beginning on April 1, 2009. However[,] the show-cause
letter dated March 3[0], 2009 (Annex "F", ibid.) suspended [Cosare]
from using not only the equipment but the "assets" of Respondent
[Broadcom]. This insults rational thinking because the Respondents
tried to mislead us and make [it appear] that [Cosare] failed to report
for work when they had in fact had [sic] placed him on
suspension. . . . . 58 
aSDHCT
 Following a finding of constructive dismissal, the Court finds no cogent
reason to modify the NLRC's monetary awards in Cosare's favor. In Robinsons
Galleria/Robinsons Supermarket Corporation v. Ranchez, 59 the Court reiterated
that an illegally or constructively dismissed employee is entitled to: (1) either
reinstatement, if viable, or separation pay, if reinstatement is no longer viable;
and (2) backwages. 60 The award of exemplary damages was also justified given
the NLRC's finding that the respondents acted in bad faith and in a wanton,
oppressive and malevolent manner when they dismissed Cosare. It is also by
reason of such bad faith that Arevalo was correctly declared solidarity liable for
the monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November
24, 2011 and Resolution dated March 26, 2012 of the Court of Appeals in CA-
G.R. SP. No. 117356 are SET ASIDE. The Decision dated August 24, 2010 of
the National Labor Relations Commission in favor of petitioner Raul
C. Cosare is AFFIRMED.
SO ORDERED.  caADSE

Sereno, C.J., Leonardo-de Castro, Bersamin and Villarama, Jr.,

JJ., concur.
 
Footnotes
1.Rollo, pp. 14-42.
2.Penned by Associate Justice Mariflor P. Punzalan Castillo, with Presiding Justice
Andres B. Reyes, Jr. and Associate Justice Franchito N. Diamante,
concurring; id. at 44-65.
3.Id. at 67-69.
4.Id. at 70.
5.Id. at 45, 102.
6.Id. at 45.
7.Id. at 120-121.
8.Id. at 193.
9.Id. at 122.
10.Id. at 123.
11.Id.
12.Id.
13.Id. at 50-51, 194.
14.Id. at 125-127.
15.Id. at 54.
16.Id. at 136-137.
17.Id. at 54-55.
18.Id. at 152.
19.Id. at 182-188; erroneously dated January 6, 2009.
20.Id. at 187.
21.Penned by Commissioner Nieves E. Vivar-de Castro, with Presiding Commissioner
Benedicto R. Palacol and Commissioner Isabel G. Panganiban-Ortiguerra,
concurring; id. at 189-203.
22.Id. at 202.
23.Id. at 200.
24.Id. at 56.
25.Id. at 57.
26.Id. at 44-65.
27.Id. at 63-64.
28.Id. at 67-69.
29.Go v. Distinction Properties Development and Construction, Inc., G.R. No. 194024,
April 25, 2012, 671 SCRA 461, 479-480, citing Yujuico v. Quiambao, 542 Phil.
236, 247 (2007).
30.G.R. No. 157802, October 13, 2010, 633 SCRA 12.
31.Id. at 15.
32.G.R. No. 168757, January 19, 2011, 640 SCRA 67.
33.G.R. No. 173115, April 16, 2009, 585 SCRA 450, 468.
34.Supra note 32, at 83-84.
35.334 Phil. 424 (1997).
36.Id. at 429.
37.Rollo, p. 110.
38.G.R. No. 171993, December 12, 2011, 662 SCRA 35.
39.Id. at 54.
40.Id. at 55, citing Matling Industrial and Commercial Corporation v. Coros,
supra note 30, at 27.
 41.Rollo, pp. 275-292.
42.Real v. Sangu Philippines, Inc., supra note 32, at 82.
43.Marc II Marketing, Inc. v. Joson, supra note 38, at 51; Real v. Sangu Philippines,
Inc., supra note 32, at 81; Speed Distributing Corp. v. Court of Appeals, 469
Phil. 739, 758 (2004).
44.583 Phil. 591 (2008).
45.Id. at 608.
46.Rollo, pp. 63-64.
47.Id. at 86.
48.Id. at 50-51.
49.Id. at 48.
50.Id. at 79.
51.The University of the Immaculate Conception v. National Labor Relations
Commission, G.R. No. 181146, January 26, 2011, 640 SCRA 608, 618-619,
citing La Rosa v. Ambassador Hotel, G.R. No. 177059, March 13, 2009, 581
SCRA 340, 346-347.
52.G.R. No. 191053, November 28, 2011, 661 SCRA 438.
53.Id. at 446.
54.553 Phil. 108 (2007).
55.Id. at 115-116.
56.Rollo, p. 152.
57.Dimagan v. Dacworks United, Incorporated, supra note 52, at 447, citing Exodus
International Construction Corporation v. Biscocho, et al., G.R. No. 166109,
February 23, 2011, 644 SCRA 76.
58.Rollo, p. 200.
59.G.R. No. 177937, January 19, 2011, 640 SCRA 135.
60.Id. at 144.
 (Cosare v. Broadcom Asia, Inc., G.R. No. 201298, [February 5, 2014], 726
|||

PHIL 316-337)
[G.R. No. 187320. January 26, 2011.]

ATLANTA INDUSTRIES, INC. and/or ROBERT

CHAN, petitioners, vs. APRILITO R. SEBOLINO, KHIM V.
 COSTALES, ALVIN V. ALMOITE, and JOSEPH S.
SAGUN, respondents.

DECISION

BRION, J  :
p

For resolution is the petition for review on certiorari  1 assailing the

decision 2 and the resolution 3 of the Court of Appeals (CA) rendered on
November 4, 2008 and March 25, 2009, respectively, in CA-G.R. SP. No.
99340. 4 DHSACT

The Antecedents
The facts are summarized below.
In the months of February and March 2005, complainants Aprilito
R. Sebolino, Khim V. Costales, Alvin V. Almoite, Joseph S. Sagun, Agosto D.
Zaño, Domingo S. Alegria, Jr., Ronie Ramos, Edgar Villagomez, Melvin
Pedregoza, Teofanes B. Chiong, Jr., Leonardo L. dela Cruz, Arnold A.
Magalang, and Saturnino M. Mabanag filed several complaints for illegal
dismissal, regularization, underpayment, nonpayment of wages and other
money claims, as well as claims for moral and exemplary damages and
attorney's fees against the petitioners Atlanta Industries, Inc. (Atlanta) and its
President and Chief Operating Officer Robert Chan. Atlanta is a domestic
corporation engaged in the manufacture of steel pipes.
The complaints were consolidated and were raffled to Labor Arbiter
Daniel Cajilig, but were later transferred to Labor Arbiter Dominador B.
Medroso, Jr.
The complainants alleged that they had attained regular status as they
were allowed to work with Atlanta for more than six (6) months from the start
of a purported apprenticeship agreement between them and the company.
They claimed that they were illegally dismissed when the apprenticeship
agreement expired.
In defense, Atlanta and Chan argued that the workers were not entitled
to regularization and to their money claims because they were engaged as
apprentices under a government-approved apprenticeship program. The
company offered to hire them as regular employees in the event vacancies for
regular positions occur in the section of the plant where they had trained.
They also claimed that their names did not appear in the list of employees
(Master List) 5 prior to their engagement as apprentices.
 On May 24, 2005, dela Cruz, Magalang, Zaño and Chiong executed
a Pagtalikod at Pagwawalang Saysay before Labor Arbiter Cajilig.
The Compulsory Arbitration Rulings
On April 24, 2006, Labor Arbiter Medroso dismissed the complaint with
respect to dela Cruz, Magalang, Zaño and Chiong, but found the termination
of service of the remaining nine to be illegal. 6 Consequently, the arbiter
awarded the dismissed workers backwages, wage differentials, holiday pay
and service incentive leave pay amounting to P1,389,044.57 in the aggregate.
Atlanta appealed to the National Labor Relations Commission (NLRC).
In the meantime, or on October 10, 2006, Ramos, Alegria, Villagomez,
Costales and Almoite allegedly entered into a compromise agreement
with Atlanta. 7 The agreement provided that except for Ramos, Atlanta agreed
to pay the workers a specified amount as settlement, and to acknowledge
them at the same time as regular employees.
On December 29, 2006, 8 the NLRC rendered a decision, on appeal,
modifying the ruling of the labor arbiter, as follows: (1) withdrawing the illegal
dismissal finding with respect to Sagun, Mabanag, Sebolino and Pedregoza;
(2) affirming the dismissal of the complaints of dela Cruz, Zaño, Magalang
and Chiong; (3) approving the compromise agreement entered into by
Costales, Ramos, Villagomez, Almoite and Alegria, and (4) denying all other
claims. STcAIa

Sebolino, Costales, Almoite and Sagun moved for the reconsideration

of the decision, but the NLRC denied the motion in its March 30,
2007 9 resolution. The four then sought relief from the CA through a petition
for certiorari under Rule 65 of the Rules of Court. They charged that the
NLRC committed grave abuse of discretion in: (1) failing to recognize their
prior employment with Atlanta; (2) declaring the second apprenticeship
agreement valid; (3) holding that the dismissal of Sagun,
Mabanag, Sebolino and Melvin Pedregoza is legal; and (4) upholding the
compromise agreement involving Costales, Ramos, Villagomez, Almoite and
Alegria.
The CA Decision
The CA granted the petition based on the following findings: 10
1. The respondents were already employees of the company before
they entered into the first and second apprenticeship agreements — Almoite
and Costales were employed as early as December 2003 and, subsequently,
entered into a first apprenticeship agreement from May 13, 2004 to October
12, 2004; before this first agreement expired, a second apprenticeship
agreement, from October 9, 2004 to March 8, 2005 was executed. The same
is true with Sebolino and Sagun, who were employed by Atlanta as early as
March 3, 2004. Sebolino entered into his first apprenticeship agreement with
the company from March 20, 2004 to August 19, 2004, and his second
apprenticeship agreement from August 20, 2004 to January 19, 2005. Sagun,
on the other hand, entered into his first agreement from May 28, 2004 to
October 8, 2004, and the second agreement from October 9, 2004 to March
8, 2005.
2. The first and second apprenticeship agreements were defective as
they were executed in violation of the law and the rules. 11 The agreements
did not indicate the trade or occupation in which the apprentice would be
trained; neither was the apprenticeship program approved by the Technical
Education and Skills Development Authority (TESDA).
3. The positions occupied by the respondents — machine operator,
extruder operator and scaleman — are usually necessary and desirable in the
manufacture of plastic building materials, the company's main business.
Costales, Almoite, Sebolino and Sagun were, therefore, regular employees
whose dismissals were illegal for lack of a just or authorized cause and notice.
4. The compromise agreement entered into by Costales and Almoite,
together with Ramos, Villagomez and Alegria, was not binding on Costales
and Almoite because they did not sign the agreement.
The petitioners themselves admitted that Costales and Almoite were
initially planned to be a part of the compromise agreement, but their
employment has been regularized as early as January 11, 2006; hence, the
company did not pursue their inclusion in the compromise agreement. 12
The CA faulted the NLRC for failing to appreciate the evidence
regarding the respondents' prior employment with Atlanta. The NLRC
recognized the prior employment of Costales and Almoite on Atlanta's
monthly report for December 2003 for the CPS Department/Section dated
January 6, 2004. 13 This record shows that Costales and Almoite were
assigned to the company's first shift from 7:00 a.m. to 3:00 p.m. The NLRC
ignored Sebolino and Sagun's prior employment under the company's
Production and Work Schedule for March 7 to 12, 2005 dated March 3,
2004, 14 as they had been Atlanta's employees as early as March 3, 2004,
with Sebolino scheduled to work on March 7-12, 2005 at 7:00 a.m. to 7:00
p.m., while Sagun was scheduled to work for the same period but from 7:00
p.m. to 7:00 a.m. The CA noted that Atlanta failed to challenge the
authenticity of the two documents before it and the labor authorities. 
AaEcDS

Atlanta and Chan moved for reconsideration, but the CA denied the

motion in a resolution rendered on March 25, 2009. 15 Hence, the present
petition.
The Petition
 Atlanta seeks a reversal of the CA decision, contending that the
appellate court erred in (1) concluding that Costales, Almoite, Sebolino and
Sagun were employed by Atlanta before they were engaged as apprentices;
(2) ruling that a second apprenticeship agreement is invalid; (3) declaring that
the respondents were illegally dismissed; and (4) disregarding the
compromise agreement executed by Costales and Almoite. It submits the
following arguments:
First. The CA's conclusion that the respondent workers were company
employees before they were engaged as apprentices was primarily based on
the Monthly Report 16 and the Production and Work Schedule for March 7-12,
2005, 17 in total disregard of the Master List 18 prepared by the company
accountant, Emelita M. Bernardo. The names of Costales,
Almoite, Sebolino and Sagun do not appear as employees in the Master List
which "contained the names of all the persons who were employed by and at
petitioner." 19
Atlanta faults the CA for relying on the Production and Work Schedule
and the Monthly Report which were not sworn to, and in disregarding the
Master List whose veracity was sworn to by Bernardo and by Alex Go who
headed the company's accounting division. It maintains that the CA should
have given more credence to the Master List.
Second. In declaring invalid the apprenticeship agreements it entered
into with the respondent workers, the CA failed to recognize the rationale
behind the law on apprenticeship. It submits that under the
law, 20 apprenticeship agreements are valid, provided they do not exceed six
(6) months and the apprentices are paid the appropriate wages of at least
75% of the applicable minimum wage.
The respondents initially executed a five-month apprenticeship program
with Atlanta, at the end of which, they "voluntarily and willingly entered into
another apprenticeship agreement with the petitioner for the training of a
second skill" 21 for five months; thus, the petitioners committed no violation of
the apprenticeship period laid down by the law.
Further, the apprenticeship agreements, entered into by the parties,
complied with the requisites under Article 62 of the Labor Code; the
company's authorized representative and the respondents signed the
agreements and these were ratified by the company's apprenticeship
committee. The apprenticeship program itself was approved and certified by
the TESDA. 22 The CA, thus, erred in overturning the NLRC's finding that the
apprenticeship agreements were valid. 
Third. There was no illegal dismissal as the respondent workers' tenure
ended with the expiration of the apprenticeship agreement they entered into.
There was, therefore, no regular employer-employee relationship
between Atlanta and the respondent workers.
The Case for Costales, Almoite, Sebolino and Sagun
In a Comment filed on August 6, 2009, 23 Costales,
Almoite, Sebolino and Sagun pray for a denial of the petition for being
procedurally defective and for lack of merit.
The respondent workers contend that the petition failed to comply with
Section 4, Rule 45 of the Rules of Court which requires that the petition be
accompanied by supporting material portions of the records. The petitioners
failed to attach to the petition a copy of the Production and Work Schedule
despite their submission that the CA relied heavily on the document in finding
the respondent workers' prior employment with Atlanta. They also did not
attach a copy of the compromise agreement purportedly executed by
Costales and Almoite. For this reason, the respondent workers submit that the
petition should be dismissed.  CSaITD

The respondents posit that the CA committed no error in holding that

they were already Atlanta's employees before they were engaged as
apprentices, as confirmed by the company's Production and Work
Schedule. 24 They maintain that the Production and Work Schedule meets the
requirement of substantial evidence as the petitioners failed to question its
authenticity. They point out that the schedule was prepared by Rose A. Quirit
and approved by Adolfo R. Lope, head of the company's PE/Spiral Section.
They argue that it was highly unlikely that the head of a production section of
the company would prepare and assign work to the complainants if the latter
had not been company employees.
The respondent workers reiterate their mistrust of the Master List 25 as
evidence that they were not employees of the company at the time they
became apprentices. They label the Master List as "self-serving, dubious and
even if considered as authentic, its content contradicts a lot of petitioner's
claim and allegations," 26 thus —
1. Aside from the fact that the Master List is not legible, it contains only
the names of inactive employees. Even those found by the NLRC to have
been employed in the company (such as Almoite, Costales and Sagun) do not
appear in the list. If Costales and Almoite had been employed
with Atlanta since January 11, 2006, as the company claimed, 27 their names
would have been in the list, considering that the Master List accounts for all
employees "as of May 2006" — the notation carried on top of each page of
the document.
 2. There were no entries of employees hired or resigned in the years
2005 and 2006 despite the "as of May 2006" notation; several pages making
up the Master List contain names of employees for the years 1999-2004.
3. The fact that Atlanta presented the purported Master List instead of
the payroll raised serious doubts on the authenticity of the list.
In sum, the respondent workers posit that the presentation of the
Master List revealed the "intention of the herein petitioner[s] to perpetually
hide the fact of [their] prior employment." 28
On the supposed apprenticeship agreements they entered into,
Costales, Almoite, Sebolino and Sagun refuse to accept the agreements'
validity, contending that the company's apprenticeship program is merely a
ploy "to continually deprive [them] of their rightful wages and benefits which
are due them as regular employees." 29 They submit the following "indubitable
facts and ratiocinations:" 30
1. The apprenticeship agreements were submitted to TESDA only in
2005 (with dates of receipt on "1/4/05" & "2/22/05"), 31 when the agreements
were supposed to have been executed in April or May 2004. Thus, the
submission was made long after the starting date of the workers'
apprenticeship or even beyond the agreement's completion/termination date,
in violation of Section 23, Rule VI, Book II of the Labor Code.
2. The respondent workers were made to undergo apprenticeship for
occupations different from those allegedly approved by TESDA. TESDA
approved Atlanta's apprenticeship program on "Plastic Molder" 32 and not for
extrusion molding process, engineering, pelletizing process and mixing
process.
3. The respondents were already skilled workers prior to the
apprenticeship program as they had been employed and made to work in the
different job positions where they had undergone training. Sagun
and Sebolino, together with Mabanag, Pedregoza, dela Cruz, Chiong,
Magalang and Alegria were even given production assignments and work
schedule at the PE/Spiral Section from May 11, 2004 to March 23, 2005, and
some of them were even assigned to the 3:00 p.m.-11:00 p.m. and graveyard
shifts (11:00 p.m. — 7:00 a.m.) during the period. 33 
TaDAIS

4. The respondent workers were required to continue as apprentices

beyond six months. The TESDA certificate of completion indicates that the
workers' apprenticeship had been completed after six months. Yet, they were
suffered to work as apprentices beyond that period.
Costales, Almoite, Sebolino and Sagun resolutely maintain that they
were illegally dismissed, as the reason for the termination of their employment
— notice of the completion of the second apprenticeship agreement — did not
constitute either a just or authorized cause under Articles 282 and 283 of
the Labor Code.
Finally, Costales and Almoite refuse to be bound by the compromise
agreement 34 that Atlanta presented to defeat the two workers' cause of
action. They claim that the supposed agreement is invalid as against them,
principally because they did not sign it.
The Court's Ruling
The procedural issue
The respondent workers ask that the petition be dismissed outright for
the petitioners' failure to attach to the petition a copy of the Production and
Work Schedule and a copy of the compromise agreement Costales and
Almoite allegedly entered into — material portions of the record that should
accompany and support the petition, pursuant to Section 4, Rule 45 of
the Rules of Court.
In Mariners Polytechnic Colleges Foundation, Inc. v. Arturo J.
Garchitorena  35 where the Court addressed essentially the same issue arising
from Section 2 (d), Rule 42 of the Rules of Court, 36 we held that the phrase
"of the pleadings and other material portions of the record . . . as would
support the allegation of the petition clearly contemplates the exercise of
discretion on the part of the petitioner in the selection of documents that are
deemed to be relevant to the petition. The crucial issue to consider then is
whether or not the documents accompanying the petition sufficiently
supported the allegations therein." 37
As in Mariners, we find that the documents attached to the petition
sufficiently support the petitioners' allegations. The accompanying CA
decision 38 and resolution, 39 as well as those of the labor arbiter 40 and the
NLRC, 41 referred to the parties' position papers and even to their replies and
rejoinders. Significantly, the CA decision narrates the factual antecedents,
defines the complainants' cause of action, and cites the arguments, including
the evidence the parties adduced. If any, the defect in the petition lies in the
petitioners' failure to provide legible copies of some of the material documents
mentioned, especially several pages in the decisions of the labor arbiter and
of the NLRC. This defect, however, is not fatal as the challenged CA decision
clearly summarized the labor tribunal's rulings. We, thus, find no procedural
obstacle in resolving the petition on the merits. 
AHCETa

The merits of the case

We find no merit in the petition. The CA committed no reversible
error in nullifying the NLRC decision 42 and in affirming the labor arbiter's
ruling, 43 as it applies to Costales, Almoite, Sebolino and Sagun. Specifically,
the CA correctly ruled that the four were illegally dismissed because (1) they
were already employees when they were required to undergo apprenticeship
and (2) apprenticeship agreements were invalid.
The following considerations support the CA ruling.
First. Based on company operations at the time material to the case,
Costales, Almoite, Sebolino and Sagun were already rendering service to the
company as employees before they were made to undergo apprenticeship.
The company itself recognized the respondents' status through relevant
operational records — in the case of Costales and Almoite, the CPS monthly
report for December 2003 44 which the NLRC relied upon and,
for Sebolino and Sagun, the production and work schedule for March 7 to 12,
2005 45 cited by the CA.
Under the CPS monthly report, Atlanta assigned Costales and Almoite
to the first shift (7:00 a.m. to 3:00 p.m.) of the Section's work. The Production
and Work Schedules, in addition to the one noted by the CA, showed
that Sebolino and Sagun were scheduled on different shifts vis-à-vis the
production and work of the company's PE/Spiral Section for the periods July
5-10, 2004; 46 October 25-31, 2004; 47 November 8-14, 2004; 48 November
16-22, 2004; 49 January 3-9, 2005; 50 January 10-15, 2005; 51 March 7-12,
2005 52 and March 17-23, 2005. 53
We stress that the CA correctly recognized the authenticity of the
operational documents, for the failure of Atlanta to raise a challenge against
these documents before the labor arbiter, the NLRC and the CA itself. The
appellate court, thus, found the said documents sufficient to establish the
employment of the respondents before their engagement as apprentices.
Second. The Master List 54 (of employees) that the petitioners heavily
rely upon as proof of their position that the respondents were not Atlanta's
employees, at the time they were engaged as apprentices, is unreliable and
does not inspire belief. 
The list, consisting of several pages, is hardly legible. It requires
extreme effort to sort out the names of the employees listed, as well as the
other data contained in the list. For this reason alone, the list deserves little or
no consideration. As the respondents also pointed out, the list itself
contradicts a lot of Atlanta's claims and allegations, thus: it lists only the
names of inactive employees; even the names of those the NLRC found to
have been employed by Atlanta, like Costales and Almoite, and those who
even Atlanta claims attained regular status on January 11, 2006, 55 do not
appear in the list when it was supposed to account for all employees "as of
May 6, 2006." Despite the "May 6, 2006" cut off date, the list contains no
entries of employees who were hired or who resigned in 2005 and 2006. We
note that the list contains the names of employees from 1999 to 2004.  ITSaHC
 We cannot fault the CA for ignoring the Master List even if Bernardo, its
head office accountant, swore to its correctness and authenticity. 56 Its
substantive unreliability gives it very minimal probative value. Atlanta would
have been better served, in terms of reliable evidence, if true copies of the
payroll (on which the list was based, among others, as Bernardo claimed in
her affidavit) were presented instead.
Third. The fact that Costales, Almoite, Sebolino and Sagun were
already rendering service to the company when they were made to undergo
apprenticeship (as established by the evidence) renders the apprenticeship
agreements irrelevant as far as the four are concerned. This reality is
highlighted by the CA finding that the respondents occupied positions such as
machine operator, scaleman and extruder operator — tasks that are usually
necessary and desirable in Atlanta's usual business or trade as manufacturer
of plastic building materials. 57 These tasks and their nature characterized the
four as regular employees under Article 280 of the Labor Code. Thus, when
they were dismissed without just or authorized cause, without notice, and
without the opportunity to be heard, their dismissal was illegal under the
law. 58
Even if we recognize the company's need to train its employees through
apprenticeship, we can only consider the first apprenticeship agreement for
the purpose. With the expiration of the first agreement and the retention of the
employees, Atlanta had, to all intents and purposes, recognized the
completion of their training and their acquisition of a regular employee status.
To foist upon them the second apprenticeship agreement for a second skill
which was not even mentioned in the agreement itself, 59 is a violation of
the Labor Code's implementing rules 60 and is an act manifestly unfair to the
employees, to say the least. This we cannot allow.
Fourth. The compromise agreement 61 allegedly entered into by
Costales and Almoite, together with Ramos, Villagomez and Alegria,
purportedly in settlement of the case before the NLRC, is not binding on
Costales and Almoite because they did not sign it. The company itself
admitted 62 that while Costales and Almoite were initially intended to be a part
of the agreement, it did not pursue their inclusion "due to their regularization
as early as January 11, 2006." 63
WHEREFORE, premises considered, we hereby DENY the petition for
lack of merit. The assailed decision and resolution of the Court of Appeals
are AFFIRMED. Costs against the petitioner Atlanta Industries, Inc.
SO ORDERED.  cASTED

Carpio Morales, Bersamin, Villarama, Jr. and Sereno, JJ., concur.

 
 Footnotes
1.Rollo, pp. 12-34; filed pursuant to Rule 45 of the Rules of Court.
2.Id. at 42-63; penned by Associate Justice Pampio A. Abarintos, and concurred in by
Associate Justice Edgardo F. Sundiam and Associate Justice Sesinando E.
Villon.
3.Id. at 65-66.
4.Aprilito R. Sebolino, Khim V. Costales, Alvin V. Almoite and Joseph S. Sagun v.
National Labor Relations Commission, Atlanta Industries, Inc. and/or Robert
Chan.
5.Rollo, pp. 192-216.
6.Id. at 89-99; Petition, Annex "N."
7.CA rollo, pp. 286-287.
8.Rollo, pp. 100-110; Petition, Annex "O."
9.Id. at 115-118; Petition, Annex "P."
10.Supra note 2.
11.Article 61 of the Labor Code,and its Implementing Rules and Regulations, Book II,
Rule VI, Section 18.
12.CA rollo, p. 323; petitioners' Comment, p. 31, last paragraph.
13.CA rollo, p. 78.
14.Id. at 92.
15.Supra note 3.
16.Supra note 13.
17.Supra note 14.
18.Supra note 5.
19.Rollo, p. 22; Petition, p. 11, par. 1.
20.Article 61 of the Labor Code.
21.Rollo, pp. 27-28; Petition, pp. 16-17.
22.CA rollo, p. 354; Annex "4" of Atlanta's Comment.
23.Rollo, pp. 125-139.
24.Supra note 14.
25.Supra note 5.
26.Rollo, p. 127; respondents' Comment, p. 3, par. 5.
27.Rollo, p. 189.
28.Id. at 151.
29.Id. at 130; Respondent's Comment, p. 6, par. 12.
30.Ibid.
31.CA rollo, pp. 129-148 and 152-153.
32.Id. at 162, Annex "H."
33.Id. at 85-92-A; Petition for Certiorari, Annexes "JJ" to "RR."
34.Id. at 286, Annex "RRR."
35.G.R. No. 162253, August 13, 2008, 562 SCRA 80, citing Atillo v. Bombay, 404
Phil. 179 (2001).
36.SEC. 2. Form and contents. — The petition shall be filed in seven (7) legible
copies, with the original copy intended for the court being indicated as such by
the petitioner, and shall (a) state the full names of the parties to the case,
without impleading the lower courts or judges thereof either as petitioners or
respondents; (b) indicate the specific material dates showing that it was filed on
time; (c) set forth concisely a statement of the matters involved, the issues
raised, the specification of errors of fact or law, or both, allegedly committed by
the Regional Trial Court, and the reasons or arguments relied upon for the
allowance of the appeal; (d) be accompanied by clearly legible duplicate
originals or true copies of the judgments or final orders of both lower courts,
certified correct by the clerk of court of the Regional Trial Court, the requisite
number of plain copies thereof and of the pleadings and other material portions
of the record as would support the allegations of the petition.
37.Supra note 35, at 87.
38.Supra note 2.
39.Supra note 3.
40.Rollo, pp. 89-99; Petition, Annex "N."
41.Id. at 100-110; Petition, Annex "O."
42.Ibid.
43.Supra note 40.
44.Supra note 13.
45.Supra note 14.
46.CA rollo, p. 86.
47.Id. at 87.
48.Id. at 88.
 49.Id. at 89.
50.Id. at 90.
51.Id. at 91.
52.Id. at 92.
53.Id. at 92-A.
54.Supra note 5.
55.Supra note 5, caption of each page of the list's last line.
56.Rollo, p. 217; Bernardo's Affidavit dated May 25, 2006.
57.Id. at 60; CA Decision, p. 19, par. 1.
58.Articles 279 & 277 (b) of the Labor Code.
59.Rollo, pp. 67-82; copies of the second apprenticeship agreements.
60.Section 18, Rule VI, Book II of the Implementing Rules and Regulations of
the Labor Code.
61.CA rollo, pp. 286-287.
62.Supra note 12.
63.Rollo, p. 61; CA Decision, p. 20, last paragraph. 
 (Atlanta Industries, Inc. v. Sebolino, G.R. No. 187320, [January 26, 2011], 655
|||

PHIL 678-694)
[G.R. No. 200575. February 5, 2014.]

INTEL TECHNOLOGY PHILIPPINES,
INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISS
ION AND JEREMIAS CABILES, respondents.

DECISION

MENDOZA, J  : p

This is a petition for review on certiorari under Rule 45 of the Rules of

Court filed by petitioner Intel Technology Philippines, Inc. (Intel Phil.). It assails
the October 28, 2011 1 and February 3, 2012 2 Resolutions of the Court of
Appeals (CA) in CA-G.R. SP No. 118880, which dismissed the petition
for certiorari filed by Intel Phil. thereby affirming the September 2, 2010
Decision 3 of the National Labor Relations Commission (NLRC) and its February
9, 2011 Resolution. The NLRC decision modified the March 18, 2010
Decision 4 of the Labor Arbiter (LA), and held Intel Phil. solely liable for the
retirement benefits of respondent Jeremias Cabiles (Cabiles).
The Facts
This case concerns the eligibility of Cabiles to receive retirement benefits
from Intel Phil. granted to employees who had complied with the ten (10)-year
service period requirement of the company.
Cabiles was initially hired by Intel Phil. on April 16, 1997 as an Inventory
Analyst. He was subsequently promoted several times over the years and was
also assigned at Intel Arizona and Intel Chengdu. He later applied for a position
at Intel Semiconductor Limited Hong Kong (Intel HK).
In a letter, 5 dated December 12, 2006, Cabiles was offered the position of
Finance Manager by Intel HK. Before accepting the offer, he inquired
from Intel Phil., through an email, the consequences of accepting the newly
presented opportunity in Hong Kong, to wit:  SADECI

Are there any clearance requirements I need to fulfil as I move as

a local hire to Hong Kong starting February 1?? I am still on my expat
assignment in Chengdu till it ends January 31. Then immediately I
become a HK local employee so I don't technically repatriate and work
back to my home site Philippines at all. Nevertheless, I still need to close
I think my employment there and so that all my ES benefits and
clearance will be closed like conversion of my vacation leaves to cash,
carry over of my service tenure in CV to HK etc. Please do let me know
what process I need to go through or would an email notification be
enough?
Another issue I would like to clarify is with regard to my retirement
benefits. I will celebrate my 10th year of service with Intel on April 16,
2007. However, because I will be moving to Hong Kong as a local hire
starting February 1, would I still be entitled to retirement benefits?? Do
we roundup the years of service if its close enough to 10 years?? If not,
what other alternatives I have or do I just lose my years of service
at Intel Philippines? Any possibility that I keep my 9.5 years and start
from there when I work in the Philippines again in the future?? 6
On January 23, 2007, Intel Phil., through Penny Gabronino (Gabronino),
replied as follows:
Jerry — you are not eligible to receive your retirement benefit
given that you have not reached 10 years of service at the time you
moved to Hong Kong. We do not round up the years of service.
There will [be] no gap in your years of service. So in case that you
move back to the Philippines your total tenure of service will be
 computed less on the period that you are out
of Intel Philippines. 7 [Emphasis supplied]
On January 31, 2007, Cabiles signed the job offer. 8  CTHaSD

On March 8, 2007, Intel Phil. issued Cabiles his "Intel Final Pay Separation

Voucher" indicating a net payout of P165,857.62. On March 26, 2007, Cabiles
executed a Release, Waiver and Quitclaim (Waiver) 9 in favor of Intel Phil.
acknowledging receipt of P165,857.62 as full and complete settlement of all
benefits due him by reason of his separation from Intel Phil.
On September 8, 2007, after seven (7) months of employment, Cabiles
resigned from Intel HK.
About two years thereafter, or on August 18, 2009, Cabiles filed a
complaint for non-payment of retirement benefits and for moral and exemplary
damages with the NLRC Regional Arbitration Branch-IV. He insisted that he was
employed by Intel for 10 years and 5 months from April 1997 to September 2007
— a period which included his seven (7) month stint with Intel HK. Thus, he
believed he was qualified to avail of the benefits under the company's retirement
policy allowing an employee who served for 10 years or more to receive
retirement benefits.
The Labor Arbiter's Decision
On March 18, 2010, the LA ordered Intel Phil. together with Grace Ong,
Nida delos Santos, Gabronino, and Pia Viloria, to pay Cabiles the amount of
HKD419,868.77 or its peso equivalent as retirement pay with legal interest and
attorney's fees. The LA held that Cabiles did not sever his employment
with Intel Phil. when he moved to Intel HK, similar to the instances when he was
assigned at Intel Arizona and Intel Chengdu. Despite the clarification made
by Intel Phil. regarding his ineligibility to receive retirement benefits, the LA stated
that Cabiles could not be faulted if he was made to believe his non-entitlement to
retirement benefits. Thus, it should not prevent him from asserting his right to
receive them. Finally, the Waiver executed by Cabiles when he left Intel Phil.,
was treated by the LA as no bar for claiming his retirement pay because it merely
covered the last salary and commutation of sick leaves and vacation leaves to
the exclusion of retirement benefits. The dispositive portion of the LA decision
reads: HCTEDa

WHEREFORE, premises considered, Respondents are hereby

ordered to pay complainant the amount of Four Hundred Nineteen
Thousand Eight Hundred Sixty-Eight and 77/100 Hong Kong Dollars
(HKD419,868.77) or its Peso equivalent as retirement pay with legal
interest until satisfied, and to pay attorney's fees equivalent to ten
percent (10%) of the judgment award.
SO ORDERED. 10
 The NLRC Ruling
On appeal, the NLRC affirmed with modification the LA decision. In its
September 2, 2010 Decision, the NLRC held Intel Phil. solely liable to pay
Cabiles his retirement benefits. It determined that his decision to move
to Intel HK was not definitive proof of permanent severance of his ties
with Intel Phil. It treated his transfer to Hong Kong as akin to his overseas
assignments in Arizona and Chengdu. As to the email exchange between
Cabiles and Intel Phil., the NLRC considered the same as insufficient to diminish
his right over retirement benefits under the law. Meanwhile,
the NLRC disregarded the Waiver because at the time it was signed, the
retirement pay due him had not yet accrued. Hence:
WHEREFORE, the appealed Decision is MODIFIED.
Respondent-appellant Intel Technology Phil., Inc. is ordered to pay
complainant-appellee Jeremias Cabiles the sum [xx] of Four Hundred
Nineteen Thousand Eight Hundred Sixty Eight and 77/100 Hong Kong
Dollars (HKD419,868.77) or its equivalent in Philippine peso as
retirement pay together with legal interest thereon and attorney's fees
computed at ten percent (10%) of the award.
The individual respondents-appellants Grace Ong, Nida delos
Santos, Penny Gabronino and Pia Viloria are RELIEVED from any
personal liability resulting from the foregoing.
SO ORDERED. 11
Intel Phil. moved for reconsideration but its motion was denied in
the NLRC Resolution, 12 dated February 9, 2011.  SCHcaT

The CA Decision
Aggrieved, Intel Phil. elevated the case to the CA via a petition
for certiorari with application for a Temporary Restraining Order (TRO) on April 5,
2011. The application for TRO was denied in a Resolution, dated July 5, 2011. A
motion for reconsideration, dated July 27, 2011, was filed, but it was denied in a
Resolution, dated October 28, 2011, which also dismissed the petition
for certiorari. 13
On December 1, 2011, Intel Phil. filed a motion for reconsideration.
Earlier, on September 19, 2011, pending disposition of the petition before
the CA, the NLRC issued a writ of execution 14 against Intel Phil.:
NOW, THEREFORE, you are commanded to proceed to the
premises of respondent INTEL TECHNOLOGY PHILIPPINES,
INCORPORATED located at Gateway Business Park, Javalera, General
Trias, Cavite or anywhere in the Philippines where it could be located to
collect the amount of Three Million Two Hundred One Thousand Three
 Hundred Ninety Eight Pesos and Sixty Centavos (P3,201,398.60) and
turn over the same to this Office for appropriate disposition.
You are likewise directed to collect from the respondents the
amount of Thirty One Thousand Five Hundred Ten Pesos (P31,510.00)
representing the execution fees pursuant to the provisions of
the NLRC Manual of Execution of Judgment.  ACETSa

In case you fail to collect the said amount in cash, you are
directed to cause the satisfaction of the same out of the respondents'
chattels or movable goods or in the absence thereof, out of the
immovable properties not exempt from execution and return this Writ of
Execution to the undersigned not more than five (5) years from receipt
hereof together with the report not later than thirty (30) days from receipt
and every thirty (30) days thereafter pursuant to Section 12, Rule XI of
the 2001 NLRC Rules of Procedures. 15
As ordered by the NLRC, Intel Phil. satisfied the judgment on December
13, 2011 by paying the amount of P3,201,398.60 which included the applicable
withholding taxes due and paid to the Bureau of Internal Revenue. Cabiles
received a net amount of P2,485,337.35, covered by the Bank of the Philippine
Islands Manager's Check No. 0000000806. 16
By reason thereof, Intel Phil. filed on December 21, 2011 a Supplement to
the Petition for Certiorari 17 praying, in addition to the reliefs sought in the main,
that the CA order the restitution of all the amounts paid by them pursuant to
the NLRC's writ of execution, dated September 19, 2011.
In its February 3, 2012 Resolution, 18 the CA noted without action the
supplement to the petition for certiorari of Intel Phil. and denied the December
21, 2011 motion for reconsideration.
Hence, this petition.
ISSUES
I
The Court of Appeals committed serious error in dismissing the
Petition for Certiorari without expressing clearly and distinctly the
facts and the law on which its decision was based.
II
The Court of Appeals committed serious and reversible error in
not finding that respondent NLRC gravely abused its discretion
when it ruled that private respondent was entitled to retire
under Intel Philippines' retirement plan.
III
 The Court of Appeals committed serious and reversible error in
not finding that respondent NLRC gravely abused its discretion in
annulling private respondent's quitclaim.  SEDICa

IV
The Court of Appeals committed serious and reversible error in
not finding that Cabiles has the legal obligation to return all the
amounts paid by Intel pursuant to the writ of execution. 19
Intel Phil. insists as serious error the CA's affirmation of the NLRC decision
holding it liable for the retirement benefits claimed by Cabiles. It contends that he
is disqualified to receive the benefits for his failure to complete the required
minimum ten (10) years of service as he resigned to assume new responsibilities
with Intel HK effective February 1, 2007.
Respondent's Position
In his Comment, 20 Cabiles submits (1) that the petition presents questions
of fact which cannot be reviewed via Rule 45; and (2) that the CA did not err
when it affirmed the NLRC ruling:
(a)   for his entitlement to retirement pay as he was under the
employ of Intel Phil. for more than ten (10) years in
accordance with the prevailing retirement policy;
(b)   for the nullity of the quitclaim as he was misled to believe that
he was disqualified to receive retirement benefits; and
(c)   for his right to receive legal interest, damages and attorney's
fees.
Cabiles views his employment with Intel HK as a continuation of his
service with Intel Phil. alleging that it was but an assignment by his principal
employer, similar to his assignments to Intel Arizona and Intel Chengdu. Having
rendered 9.5 years of service with Intel Phil. and an additional seven months
with Intel HK, he claims that he had completed the required 10 year continuous
service 21 with Intel Phil., thus, qualifying him for retirement benefits.
In its Reply, Intel Phil. reiterates the arguments contained in its petition.
The Court's Ruling
Review of Factual Findings
As a general rule, this Court is not a trier of facts and a petition for review
on certiorari under Rule 45 of the Rules of Court must exclusively raise questions
of law. 22 Nevertheless, this Court will not hesitate to deviate from what are
clearly procedural guidelines and disturb and strike down the findings of the CA
and those of the labor tribunals if there is a showing that they are unsupported by
the evidence on record or there was a patent misappreciation of facts. Indeed,
that the impugned decision of the CA is consistent with the findings of
the labor tribunals does not per se conclusively demonstrate its correctness. By
way of exception to the general rule, this Court will scrutinize the facts if only to
rectify the prejudice and injustice resulting from an incorrect assessment of the
evidence presented. 23  ICHcTD

It is in this wise that the Court agrees with Intel Phil. that the CA seriously
erred in affirming the findings of the NLRC on the face of substantial evidence
showing Cabiles' disqualification to receive the retirement benefits. The Court,
therefore, reverses the ruling of the CA for the reasons hereinafter discussed.
Cabiles Resigned from Intel
Philippines
Cabiles calls the attention of the Court to the lack of evidence proving his
resignation. On the contrary, he states that no severance of relationship was
made upon his transfer to Intel HK.
The Court is not convinced.
Resignation is the formal relinquishment of an office, 24 the overt act of
which is coupled with an intent to renounce. This intent could be inferred from the
acts of the employee before and after the alleged resignation. 25
In this case, Cabiles, while still on a temporary assignment
in Intel Chengdu, was offered by Intel HK the job of a Finance Manager.
In contemplating whether to accept the offer, Cabiles wrote Intel Phil.
providing details and asking as follows:
Are there any clearance requirements I need to fulfil as I move as
a local hire to Hong Kong starting February 1?? I am still on my expat
assignment in Chengdu till it ends January 31. Then immediately I
become a HK local employee so I don't technically repatriate and
work back to my home site Philippines at all. Nevertheless, I still
need to close I think my employment there and so that all my ES
benefits and clearance will be closed like conversion of my vacation
leaves to cash, carry over of my service tenure in CV to HK etc. Please
do let me know what process I need to go through or would an email
notification be enough?  SECAHa

Another issue I would like to clarify is with regard to my retirement

benefits. Will celebrate my 10th year of service with Intel on April 16,
2007. However, because I will be moving to Hong Kong as a local
hire starting February 1, would I still be entitled to retirement
benefits?? Do we roundup the years of service if its close enough to 10
years?? If not, what other alternatives I have or do I just lose my years of
service at Intel Philippines? Any possibility that I keep my 9.5 years and
 start it from there when I work in the Philippines again in the
future?? 26 [Emphases supplied]
This communication manifested two of his main concerns: a) clearance
procedures; and b) the probability of getting his retirement pay despite the non-
completion of the required 10 years of employment service. Beyond these
concerns, however, was his acceptance of the fact that he would be ending his
relationship with Intel Phil. as his employer. The words he used — local hire,
close, clearance — denote nothing but his firm resolve to voluntarily disassociate
himself from Intel Phil. and take on new responsibilities with Intel HK.
Despite a non-favorable reply as to his retirement concerns, Cabiles still
accepted the offer of Intel HK.
His acceptance of the offer meant letting go of the retirement benefits he
now claims as he was informed through email correspondence that his 9.5 years
of service with Intel Phil. would not be rounded off in his favor. He, thus, placed
himself in this position, as he chose to be employed in a company that would pay
him more than what he could earn in Chengdu or in the Philippines.  SHIETa

The choice of staying with Intel Phil. vis-à-vis a very attractive opportunity

with Intel HK put him in a dilemma. If he would wait to complete ten (10) years of
service with Intel Phil. (in about 4 months) he would enjoy the fruits of his
retirement but at the same time it would mean forfeiture of Intel HK's
compensation offer in the amount of HK $942,500.00, an amount a lot bigger
than what he would receive under the plan. He decided to forfeit and
became Intel HK's newest hire.
All these are indicative of the clearest intent of Cabiles to sever ties
with Intel Phil. He chose to forego his tenure with Intel Phil., with all its associated
benefits, in favor of a more lucrative job for him and his family with Intel HK.
The position of Cabiles that he was being merely assigned leads the Court
to its next point. 
aTIAES

No Secondment Contract Exists

Cabiles views his employment in Hong Kong as an assignment or an
extension of his employment with Intel Phil. He cited as evidence the offer made
to him as well as the letter, dated January 8, 2007, 27 both of which used the
word "assignment" in reference to his engagement in Hong Kong as a clear
indication of the alleged continuation of his ties with Intel Phil.
The foregoing arguments of Cabiles, in essence, speak of the "theory of
secondment."
The Court, however, is again not convinced.
 The continuity, existence or termination of an employer-employee
relationship in a typical secondment contract or any employment contract for that
matter is measured by the following yardsticks:
1.   the selection and engagement of the employee;
2.   the payment of wages;
3.   the power of dismissal; and
4.   the employer's power to control the employee's conduct. 28
As applied, all of the above benchmarks ceased upon Cabiles' assumption
of duties with Intel HK on February 1, 2007. Intel HK became the new employer.
It provided Cabiles his compensation. Cabiles then became subject to Hong
Kong labor laws, and necessarily, the rights appurtenant thereto, including the
right of Intel HK to fire him on available grounds. Lastly, Intel HK had control and
supervision over him as its new Finance Manager. Evidently, Intel Phil. no longer
had any control over him.
Although in various instances, his move to Hong Kong was referred to as
an "assignment," it bears stressing that it was categorized as a "permanent
transfer." In Sta. Maria v. Lopez, 29 the Court held that "no permanent transfer
can take place unless the officer or employee is first removed from the position
held, and then appointed to another position." Undoubtedly, Cabiles' decision to
move to Hong Kong required the abandonment of his permanent position
with Intel Phil. in order for him to assume a position in an entirely different
company. Clearly, the "transfer" was more than just an assignment. It constituted
a severance of Cabiles' relationship with Intel Phil., for the assumption of a
position with a different employer, rank, compensation and benefits.
Hence, Cabiles' theory of secondment must fail.  ECaITc

The NLRC, however, was of the view that the transfer of Cabiles

to Intel HK was similar to his assignments in Intel Chengdu and Intel Arizona.
The Court finds this conclusion baseless.
What distinguishes Intel Chengdu and Intel Arizona from Intel HK is the
lack of intervention of Intel Phil. on the matter. In the two previous
transfers, Intel Phil. remained as the principal employer while Cabiles was on a
temporary assignment. By virtue of which, it still assumed responsibility for the
payment of compensation and benefits due him. The assignment to Intel HK, on
the other hand, was a permanent transfer and Intel Phil. never participated in any
way in the process of his employment there. It was Cabiles himself who took the
opportunity and the risk. If it were indeed similar to Intel Arizona
and Intel Chengdu assignments, Intel Philippines would have had a say in it.
 Release, Waiver and Quitclaim Valid
Terms Are Clear
Contrary to the conclusion affirmed by the CA, the Waiver executed by
Cabiles was valid.
In Goodrich Manufacturing Corporation v. Ativo, 30 the Court reiterated the
standards that must be observed in determining whether a waiver and quitclaim
had been validly executed:
Not all waivers and quitclaims are invalid as against public policy.
If the agreement was voluntarily entered into and represents a
reasonable settlement, it is binding on the parties and may not later be
disowned simply because of a change of mind. It is only where there is
clear proof that the waiver was wangled from an unsuspecting or
gullible person, or the terms of settlement are unconscionable on
its face, that the law will step in to annul the questionable
transaction. But where it is shown that the person making the waiver
did so voluntarily, with full understanding of what he was doing, and the
consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking.
In Callanta v. National Labor Relations Commission,  31 this Court ruled
that:  aETDIc

It is highly unlikely and incredible for a man of petitioner's position

and educational attainment to so easily succumb to private respondent
company's alleged pressures without even defending himself nor
demanding a final audit report before signing any resignation letter.
Assuming that pressure was indeed exerted against him, there was no
urgency for petitioner to sign the resignation letter. He knew the nature
of the letter that he was signing, for as argued by respondent company,
petitioner being "a man of high educational attainment and qualification, .
. . he is expected to know the import of everything that he executes,
whether written or oral. 32
Here, the NLRC concluded in its February 9, 2011 Resolution 33 that the
Waiver was executed merely to allow Intel Phil. to escape its obligation to pay the
retirement benefits, thus, violative of law, morals, and public policy. The Court,
however, sees no clear evidence in the records showing that Cabiles was
constrained into signing the document. Also, it cannot be said that Cabiles did
not fully understand the consequences of signing the Waiver. Being a person
well-versed in matters of finance, it would have been impossible for him not to
have comprehended the consequences of signing a waiver. Failing to see any
evidence to warrant the disregard of the Waiver, the Court is unable to affirm the
CA and, hence, declares it as valid and binding between Cabiles
and Intel Phil.  SCHTac
 Assuming the Waiver was valid, the NLRC contended that it could not be
construed to cover the claims for the retirement pay because it had not yet
accrued at the time the document was signed by Cabiles.
The Court finds itself unable to agree.
The terms of the Waiver are clear:
I, Jeremias P. Cabiles, Filipino, of legal age and a resident of . . .
hereby acknowledge receipt from Intel Technology Philippines, Inc.
(the Company) the amount of . . ., in full and complete settlement of
all benefits due me by reason of my lawful separation from the
Company effective February 1, 2007.
In consideration of the foregoing:
1.  I release, remise and forever discharge the Company, its
successors-in-interest, its stockholders, its officers,
directors, agents or employees from any action, sum of
money, damages, claims and demands whatsoever, which
in law or in equity I ever had, now have, or which I, my
heirs, successors and assigns hereafter may have by
reason of any matter, cause or thing whatsoever, up to the
time of these presents, the intention thereof being to
completely and absolutely release the Company, its
successors-in-interest, . . . from all liabilities arising wholly,
partially, or directly from my employment with the
Company.  AIDTSE

xxx xxx xxx

5.  I acknowledge that I have received all amounts that are
now or in the future may be due me from the Company. I
also acknowledge that during the entire period of my
employment with the Company, I received or was paid all
compensation, benefits and privileges, to which I am
entitled under all laws and policies of the Company by
reason of my past employment and/or engagement
therewith, and if I hereafter be found in any manner to be
entitled to any amount, the aforementioned monetary
amount is a full and final satisfaction of any and all such
undisclosed claims. (Emphasis supplied) 34
Suffice it to state that nothing is clearer than the words used in the Waiver
duly signed by Cabiles — that all claims, in the present and in the future, were
waived in consideration of his receipt of the amount of P165,857.62. Because the
waiver included all present and future claims, the non-accrual of benefits cannot
be used as a basis in awarding retirement benefits to him.
 Lastly, even if the Court assumes that the Waiver was invalid, Cabiles
nonetheless remains disqualified as a recipient of retirement benefits because,
as previously discussed, the ten-year minimum requirement was not satisfied on
account of his early resignation. cDHAES

Cabiles is not entitled to the

Retirement Benefits
Having effectively resigned before completing his 10th year anniversary
with Intel Phil. and after having validly waived all the benefits due him, if any,
Cabiles is hereby declared ineligible to receive the retirement pay pursuant to the
retirement policy of Intel Phil.
For that reason, Cabiles must return all the amounts he received
from Intel Phil. pursuant to the Writ of Execution issued by the NLRC, dated
September 19, 2011.
WHEREFORE, the petition is GRANTED. The assailed October 28, 2011
and February 3, 2012 Resolutions of the Court of Appeals are
hereby REVERSED and SET ASIDE.
Respondent Jeremias P. Cabiles is ordered to make restitution to
petitioner Intel Technology Philippines, Inc. for whatever amounts he received
pursuant to the Writ of Execution issued by
the National Labor Relations Commission, dated September 19, 2011.
SO ORDERED.  STaHIC

Velasco, Jr., Peralta, Abad and Leonen, JJ., concur.

 
Footnotes
1.Rollo, pp. 69-71. Penned by Associate Justice Normandie Q. Pizarro, with Associate
Justice Amelita G. Tolentino and Associate Justice Rodil V. Zalameda
concurring.
2.Id. at 73-74.
3.Id. at 113-123. Penned by Commissioner Angelo Ang Palaña, with Commissioners
Herminio V. Suelo and Numeriano D. Villena concurring.
4.Id., Position Paper, pp. 267-272. Penned by Labor Arbiter Enrico Angelo C. Portillo.
5.Rollo, pp. 368-369.
6.Id. at 581.
7.Id. at 582.
8.Id. at 369.
9.Id. at 211.
10.Id. at 272.
11.Id. at 122.
12.Id. at 125-137.
13.Id. at 69-71.
14.Id. at 789-790.
15.Id. at 790.
16.Id. at 792.
17.Id. at 794-799.
18.Id. at 73.
19.Id. at 31-32.
20.Id. at 820-850.
21.Intel Philippines Retirement Policy provides:
   Section 7. Resignation Retirement Benefit. —
   A participant who, with 60 days prior notice to the Company, resigns from the
Company with the completion of at least ten (10) years of Plan Service, but
without having entitlement to the benefit mentioned in Section 2 to Section 6 of
this Article, shall be entitled to a lump sum benefit of Pensionable Salary per
year of Pensionable Service. . . .
22.Cirtek Employees Labor Union-Federation of Free Workers v. Cirtek Electronics,
Inc., G.R. No. 190515, January 6, 2011, 650 SCRA 656.
23.Timoteo H. Sarona v. NLRC, Royale Security Agency and Cesar S. Tan, G.R. No.
185280, January 18, 2012, 663 SCRA 394, 415.
24.Go v. Court of Appeals, G.R. No. 158922, May 28, 2004, 430 SCRA 358, 367.
25.San Miguel Properties Philippines, Inc. v. Gucaban, G.R. No. 153982, July 18,
2011, 654 SCRA 18, 28-29.
26.Rollo, p. 581.
27.Id. at 853.
28.Victorio Meteor v. Creative Creatures, Inc., G.R. No. 171275, July 13, 2009, 593
SCRA 481, 492.
29.G.R. No. L-30773, 18 February 1970, 31 SCRA 637.
30.G.R. No. 188002, February 1, 2010, 611 SCRA 261, citing Periquet v. NLRC, 264
Phil. 1115, 1122 (1990).
 31.G.R. No. 105083, August 20, 1993, 225 SCRA 526.
32.Id. at 535.
33.Rollo, pp. 403-415.
34.Id. at 211.
 (Intel Technology Phils., Inc. v. National Labor Relations Commission, G.R. No.
|||

200575, [February 5, 2014], 726 PHIL 298-315)

[G.R. No. 195190. July 28, 2014.]

ROYALE HOMES MARKETING CORPORATION, petitioner, vs.
FIDEL P. ALCANTARA [deceased], substituted by his
heirs, respondent.

DECISION

DEL CASTILLO, J  : p

Not every form of control that a hiring party imposes on the hired party is
indicative of employee-employer relationship. Rules and regulations that merely
serve as guidelines towards the achievement of a mutually desired result without
dictating the means and methods of accomplishing it do not establish employer-
employee relationship. 1
This Petition for Review on Certiorari 2 assails the June 23, 2010
Decision 3 of the Court of Appeals (CA) in CA-G.R. SP No. 109998 which (i)
reversed and set aside the February 23, 2009 Decision 4 of the National Labor
Relations Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing
Corporation (Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara)
backwages and separation pay, and (iii) remanded the case to the Labor Arbiter
for the proper determination and computation of said monetary awards.
Also assailed in this Petition is the January 18, 2011 Resolution 5 of the CA
denying Royale Homes' Motion for Reconsideration, 6 as well as its
Supplemental 7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates,
appointed Alcantara as its Marketing Director for a fixed period of one year. His
work consisted mainly of marketing Royale Homes' real estate inventories on an
exclusive basis. Royale Homes reappointed him for several consecutive years,
the last of which covered the period January 1 to December 31, 2003 where he
held the position of Division 5 Vice-President-Sales. 8
Proceedings before the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal
Dismissal 9 against Royale Homes and its President Matilde Robles, Executive
Vice-President for Administration and Finance Ma. Melinda Bernardino, and
Executive Vice-President for Sales Carmina Sotto. Alcantara alleged that he is a
regular employee of Royale Homes since he is performing tasks that are
necessary and desirable to its business; that in 2003 the company gave him P1.2
million for the services he rendered to it; that in the first week of November 2003,
however, the executive officers of Royale Homes told him that they were
wondering why he still had the gall to come to office and sit at his table; 10 and
that the acts of the executive officers of Royale Homes amounted to his dismissal
from work without any valid or just cause and in gross disregard of the proper
procedure for dismissing employees. Thus, he also impleaded the corporate
officers who, he averred, effected his dismissal in bad faith and in an oppressive
manner.  cACHSE

Alcantara prayed to be reinstated to his former position without loss of

seniority rights and other privileges, as well as to be paid backwages, moral and
exemplary damages, and attorney's fees. He further sought that the ownership of
the Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its
employee. It argued that the appointment paper of Alcantara is clear that it
engaged his services as an independent sales contractor for a fixed term of one
year only. He never received any salary, 13th month pay, overtime pay or holiday
pay from Royale Homes as he was paid purely on commission basis. In
addition, Royale Homes had no control on how Alcantara would accomplish his
tasks and responsibilities as he was free to solicit sales at any time and by any
manner which he may deem appropriate and necessary. He is even free to
recruit his own sales personnel to assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company after
his wife, who was once connected with it as a sales agent, had formed a
brokerage company that directly competed with its business, and even recruited
some of its sales agents. Although this was against the exclusivity clause of the
contract, Royale Homes still offered to accept Alcantara's wife back so she could
continue to engage in real estate brokerage, albeit exclusively for Royale Homes.
In a special management committee meeting on October 8, 2003,
however, Alcantara announced publicly and openly that he would leave the
company by the end of October 2003 and that he would no longer finish the
unexpired term of his contract. He has decided to join his wife and pursue their
own brokerage business. Royale Homes accepted Alcantara's decision. It then
threw a despedida party in his honor and, subsequently, appointed a new
independent contractor.
Two months after he relinquished his post, however, Alcantara appeared
in Royale Homes and submitted a letter claiming that he was illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005, the Labor Arbiter rendered a Decision 11 holding
that Alcantara is an employee of Royale Homes with a fixed-term employment
period from January 1 to December 31, 2003 and that the pre-termination of his
contract was against the law. Hence, Alcantara is entitled to an amount which he
may have earned on the average for the unexpired portion of the contract. With
regard to the impleaded corporate officers, the Labor Arbiter absolved them from
any liability.
The dispositive portion of the Labor Arbiter's Decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered ordering the respondent Royale Homes Marketing Corp. to pay
the complainant the total amount of TWO HUNDRED SEVENTY SEVEN
THOUSAND PESOS (P277,000.00) representing his
compensation/commission for the unexpired term of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED. 12
Both parties appealed the Labor Arbiter's Decision to the
NLRC. Royale Homes claimed that the Labor Arbiter grievously erred in ruling
that there exists an employer-employee relationship between the parties. It
insisted that the contract between them expressly states that Alcantara is an
independent contractor and not an ordinary employee. It had no control over the
means and methods by which he performed his work. Royale Homes likewise
assailed the award of P277,000.00 for lack of basis as it did not pre-terminate the
contract. It was Alcantara who chose not to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his
employment was for a fixed-term and that he is not entitled to backwages,
reinstatement, unpaid commissions, and damages.  EcICDT

Ruling of the National Labor Relations Commission

On February 23, 2009, the NLRC rendered its Decision, 13 ruling
that Alcantara is not an employee but a mere independent contractor
of Royale Homes. It based its ruling mainly on the contract which does not
require Alcantara to observe regular working hours. He was also free to adopt
the selling methods he deemed most effective and can even recruit sales agents
to assist him in marketing the inventories of Royale Homes. The NLRC also
considered the fact that Alcantara was not receiving monthly salary, but was
being paid on commission basis as stipulated in the contract. Being an
independent contractor, the NLRC concluded that Alcantara's Complaint is
cognizable by the regular courts.
The fallo of the NLRC Decision reads:
WHEREFORE, premises considered, the Decision of Labor
Arbiter Dolores Peralta-Beley dated September 5, 2005 is REVERSED
and SET ASIDE and a NEW ONE rendered dismissing the complaint for
lack of jurisdiction.
SO ORDERED. 14
Alcantara moved for reconsideration. 15 In a Resolution 16 dated May 29,
2009, however, the NLRC denied his motion.
Alcantara thus filed a Petition for Certiorari 17 with the CA imputing grave
abuse of discretion on the part of the NLRC in ruling that he is not an employee
of Royale Homes and that it is the regular courts which have jurisdiction over the
issue of whether the pre-termination of the contract is valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision 18 granting Alcantara's
Petition and reversing the NLRC's Decision. Applying the four-fold and economic
reality tests, it held that Alcantara is an employee
of Royale Homes. Royale Homes exercised some degree of control
over Alcantara since his job, as observed by the CA, is subject to company rules,
regulations, and periodic evaluations. He was also bound by the company code
of ethics. Moreover, the exclusivity clause of the contract has
made Alcantara economically dependent on Royale Homes, supporting the
theory that he is an employee of said company.
The CA further held that Alcantara's termination from employment was
without any valid or just cause, and it was carried out in violation of his right to
procedural due process. Thus, the CA ruled that he is entitled to backwages and
separation pay, in lieu of reinstatement. Considering, however, that the CA was
not satisfied with the proof adduced to establish the amount of Alcantara's annual
salary, it remanded the case to the Labor Arbiter to determine the same and the
monetary award he is entitled to. With regard to the corporate officers, the CA
absolved them from any liability for want of clear proof that they assented to the
patently unlawful acts or that they are guilty of bad faith or gross negligence.
Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is
GRANTED. The assailed decision of the National Labor Relations
 Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO.
046104-05 dated February 23, 2009 as well as the Resolution dated
May 29, 2009 are hereby SET ASIDE and a new one is entered ordering
the respondent company to pay petitioner backwages which shall be
computed from the time of his illegal termination in October 2003 up to
the finality of this decision, plus separation pay equivalent to one month
salary for every year of service. This case is REMANDED to the Labor
Arbiter for the proper determination and computation of back wages,
separation pay and other monetary benefits that petitioner is entitled to.
SO ORDERED. 19
Royale Homes filed a Motion for Reconsideration 20 and a Supplemental
Motion for Reconsideration. 21 In a Resolution 22 dated January 18, 2011,
however, the CA denied said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the
following issues for resolution: CHIEDS

A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE
INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE
RULING OF THE NLRC DISMISSING THE COMPLAINT OF
RESPONDENT FOR LACK OF JURISDICTION AND
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS
ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS
ERROR OF LAW IN DISREGARDING THE EN BANC RULING OF
THIS HONORABLE COURT IN THE CASE OF TONGKO VS.
MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE
RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS
ERROR OF LAW IN DENYING THE MOTION FOR
RECONSIDERATION OF PETITIONER AND IN REFUSING TO
CORRECT ITSELF[.] 23
Royale Homes contends that its contract with Alcantara is clear and
unambiguous — it engaged his services as an independent contractor. This can
be readily seen from the contract stating that no employer-employee relationship
exists between the parties; that Alcantara was free to solicit sales at any time and
by any manner he may deem appropriate; that he may recruit sales personnel to
assist him in marketing Royale Homes' inventories; and, that his remunerations
are dependent on his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it
exercised control over Alcantara based on a shallow ground that his performance
is subject to company rules and regulations, code of ethics, periodic evaluation,
and exclusivity clause of contract. Royale Homes maintains that it is expected to
exercise some degree of control over its independent contractors, but that does
not automatically result in the existence of employer-employee relationship. For
control to be considered as a proof tending to establish employer-employee
relationship, the same must pertain to the means and method of performing the
work; not on the relationship of the independent contractors among themselves
or their persons or their source of living.
Royale Homes further asserts that it neither hired nor wielded the power to
dismiss Alcantara. It was Alcantara who openly and publicly declared that he was
pre-terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an
independent contractor or an employee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is
an employee or an independent contractor involves an evaluation of factual
matters which, ordinarily, is not within the province of this Court. In view of the
conflicting findings of the tribunals below, however, this Court is constrained to
go over the factual matters involved in this case. 24
The juridical relationship of the parties
based on their written contract
The primary evidence of the nature of the parties' relationship in this case
is the written contract that they signed and executed in pursuance of their mutual
agreement. While the existence of employer-employee relationship is a matter of
law, the characterization made by the parties in their contract as to the nature of
their juridical relationship cannot be simply ignored, particularly in this case
where the parties' written contract unequivocally states their intention at the time
they entered into it. In Tongko v. The Manufacturers Life Insurance Co. (Phils.),
Inc., 25 it was held that:
To be sure, the Agreement's legal characterization of the nature of the
relationship cannot be conclusive and binding on the courts; . . . the
characterization of the juridical relationship the Agreement embodied is
a matter of law that is for the courts to determine. At the same time,
though, the characterization the parties gave to their relationship in the
 Agreement cannot simply be brushed aside because it embodies their
intent at the time they entered the Agreement, and they were governed
by this understanding throughout their relationship. At the very least,
the provision on the absence of employer-employee relationship
between the parties can be an aid in considering the Agreement and
its implementation, and in appreciating the other evidence on
record. 26 
DISHEA

In this case, the contract, 27 duly signed and not disputed by the parties,
conspicuously provides that "no employer-employee relationship exists
between" Royale Homes and Alcantara, as well as his sales agents. It is clear
that they did not want to be bound by employer-employee relationship at the time
of the signing of the contract. Thus:
January 24, 2003
MR. FIDEL P. ALCANTARA
13 Rancho I
Marikina City
Dear Mr. Alcantara,
This will confirm your appointment as Division 5
VICE[-]PRESIDENT-SALES of ROYALE HOMES MARKETING
CORPORATION effective January 1, 2003 to December 31, 2003.
Your appointment entails marketing our real estate inventories on
an EXCLUSIVE BASIS under such price, terms and condition to be
provided to you from time to time.
As such, you can solicit sales at any time and by any manner
which you deem appropriate and necessary to market our real estate
inventories subject to rules, regulations and code of ethics promulgated
by the company. Further, you are free to recruit sales personnel/agents
to assist you in marketing of our inventories provided that your
personnel/agents shall first attend the required seminars and briefing to
be conducted by us from time to time for the purpose of familiarizing
them of terms and conditions of sale, the nature of property sold, etc.,
attendance of which shall be a condition precedent for their accreditation
by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be
entitled to:
1. Commission override of 0.5% for all option sales beginning
January 1, 2003 booked by your sales agents.
2. Budget allocation depending on your division's sale
performance as per our budget guidelines.
 3. Sales incentive and other forms of company support which may
be granted from time to time.
It is understood, however, that no employer-employee
relationship exists between us, that of your sales personnel/agents,
and that you shall hold our company . . ., its officers and directors, free
and harmless from any and all claims of liability and damages arising
from and/or incident to the marketing of our real estate inventories.
We reserve, however, our right to terminate this agreement in
case of violation of any company rules and regulations, policies and
code of ethics upon notice for justifiable reason.
Your performance shall be subject to periodic evaluation based
on factors which shall be determined by the management.
If you are amenable to the foregoing terms and conditions, please
indicate your conformity by signing on the space provided below and
return [to] us a duplicate copy of this letter, duly accomplished, to
constitute as our agreement on the matter. (Emphasis ours)
Since "the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations should
control." 28 No construction is even needed as they already expressly state their
intention. Also, this Court adopts the observation of the NLRC that it is rather
strange on the part of Alcantara, an educated man and a veteran sales broker
who claimed to be receiving P1.2 million as his annual salary, not to have
contested the portion of the contract expressly indicating that he is not an
employee of Royale Homes if their true intention were otherwise.  ICDSca

The juridical relationship of the parties

based on Control Test
In determining the existence of an employer-employee relationship, this
Court has generally relied on the four-fold test, to wit: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the employer's power to control the employee with respect to
the means and methods by which the work is to be accomplished. 29 Among the
four, the most determinative factor in ascertaining the existence of employer-
employee relationship is the "right of control test". 30 "It is deemed to be such an
important factor that the other requisites may even be disregarded." 31 This holds
true where the issues to be resolved is whether a person who performs work for
another is the latter's employee or is an independent contractor, 32 as in this
case. For where the person for whom the services are performed reserves the
right to control not only the end to be achieved, but also the means by which
such end is reached, employer-employee relationship is deemed to exist. 33
 In concluding that Alcantara is an employee of Royale Homes, the CA
ratiocinated that since the performance of his tasks is subject to company rules,
regulations, code of ethics, and periodic evaluation, the element of control is
present.
The Court disagrees.
Not every form of control is indicative of employer-employee relationship. A
person who performs work for another and is subjected to its rules, regulations,
and code of ethics does not necessarily become an employee. 34 As long as the
level of control does not interfere with the means and methods of accomplishing
the assigned tasks, the rules imposed by the hiring party on the hired party do
not amount to the labor law concept of control that is indicative of employer-
employee relationship. In Insular Life Assurance Co., Ltd. v. National Labor
Relations Commission 35 it was pronounced that:
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim
only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to
achieve it. . . . 36
In this case, the Court agrees with Royale Homes that the rules,
regulations, code of ethics, and periodic evaluation alluded to by Alcantara do not
involve control over the means and methods by which he was to perform his job.
Understandably, Royale Homes has to fix the price, impose requirements on
prospective buyers, and lay down the terms and conditions of the sale, including
the mode of payment, which the independent contractors must follow. It is also
necessary for Royale Homes to allocate its inventories among its independent
contractors, determine who has priority in selling the same, grant commission or
allowance based on predetermined criteria, and regularly monitor the result of
their marketing and sales efforts. But to the mind of this Court, these do not
pertain to the means and methods of how Alcantara was to perform and
accomplish his task of soliciting sales. They do not dictate upon him the details of
how he would solicit sales or the manner as to how he would transact business
with prospective clients. In Tongko, this Court held that guidelines or rules and
regulations that do not pertain to the means or methods to be employed in
attaining the result are not indicative of control as understood in labor law Thus:
From jurisprudence, an important lesson that the first Insular
Life case teaches us is that a commitment to abide by the rules and
regulations of an insurance company does not ipso facto make the
insurance agent an employee. Neither do guidelines somehow restrictive
 of the insurance agent's conduct necessarily indicate "control" as this
term is defined in jurisprudence. Guidelines indicative of labor law
"control," as the first Insular Life case tells us, should not merely
relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means or
methods to be employed in attaining the result, or of fixing the
methodology and of binding or restricting the party hired to the use
of these means. In fact, results-wise, the principal can impose
production quotas and can determine how many agents, with specific
territories, ought to be employed to achieve the company's objectives.
These are management policy decisions that the labor law element of
control cannot reach. Our ruling in these respects in the first Insular
Life case was practically reiterated in Carungcong. Thus, as will be
shown more fully below, Manulife's codes of conduct, all of which do not
intrude into the insurance agents' means and manner of conducting their
sales and only control them as to the desired results and Insurance
Code norms, cannot be used as basis for a finding that the labor law
concept of control existed between Manulife and Tongko. 37 (Emphases
in the original) 
IDCHTE

As the party claiming the existence of employer-employee relationship, it

behoved upon Alcantara to prove the elements thereof,
particularly Royale Homes' power of control over the means and methods of
accomplishing the work. 38 He, however, failed to cite specific rules,
regulations or codes of ethics that supposedly imposed control on his means
and methods of soliciting sales and dealing with prospective clients. On the
other hand, this case is replete with instances that negate the element of
control and the existence of employer-employee relationship.
Notably, Alcantara was not required to observe definite working
hours. 39 Except for soliciting sales, Royale Homes did not assign other tasks
to him. He had full control over the means and methods of accomplishing his
tasks as he can "solicit sales at any time and by any manner which [he may]
deem appropriate and necessary." He performed his tasks on his own
account free from the control and direction of Royale Homes in all matters
connected therewith, except as to the results thereof. 40
Neither does the repeated hiring of Alcantara prove the existence of
employer-employee relationship. 41 As discussed above, the absence of control
over the means and methods disproves employer-employee relationship. The
continuous rehiring of Alcantara simply signifies the renewal of his contract
with Royale Homes, and highlights his satisfactory services warranting the
renewal of such contract. Nor does the exclusivity clause of contract establish the
existence of the labor law concept of control. In Consulta v. Court of
Appeals, 42 it was held that exclusivity of contract does not necessarily result in
employer-employee relationship, viz.:
 . . . However, the fact that the appointment required Consulta to solicit
business exclusively for Pamana did not mean that Pamana exercised
control over the means and methods of Consulta's work as the term
control is understood in labor jurisprudence. Neither did it make
Consulta an employee of Pamana. Pamana did not prohibit Consulta
from engaging in any other business, or from being connected with any
other company, for as long as the business [of the] company did not
compete with Pamana's business. 43
The same scenario obtains in this case. Alcantara was not prohibited from
engaging in any other business as long as he does not sell projects
of Royale Homes' competitors. He can engage in selling various other products
or engage in unrelated businesses.
Payment of Wages
The element of payment of wages is also absent in this case. As provided
in the contract, Alcantara's remunerations consist only of commission override of
0.5%, budget allocation, sales incentive and other forms of company support.
There is no proof that he received fixed monthly salary. No payslip or payroll was
ever presented and there is no proof that Royale Homes deducted from his
supposed salary withholding tax or that it registered him with the Social Security
System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his
Complaint merely states a ballpark figure of his alleged salary of P100,000.00,
more or less. All of these indicate an independent contractual
relationship. 44 Besides, if Alcantara indeed considered himself an employee
of Royale Homes, then he, an experienced and professional broker, would have
complained that he was being denied statutorily mandated benefits. But for nine
consecutive years, he kept mum about it, signifying that he has agreed,
consented, and accepted the fact that he is not entitled to those employee
benefits because he is an independent contractor.
This Court is, therefore, convinced that Alcantara is not an employee
of Royale Homes, but a mere independent contractor. The NLRC is, therefore,
correct in concluding that the Labor Arbiter has no jurisdiction over the case and
that the same is cognizable by the regular courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June 23,
2010 Decision of the Court of Appeals in CA-G.R. SP No. 109998 is REVERSED
and SET ASIDE. The February 23, 2009 Decision of the National Labor
Relations Commission is REINSTATED and AFFIRMED.
SO ORDERED.  IHCSTE

Carpio, Brion, Perez and Perlas-Bernabe, JJ., concur.

 
 Footnotes
1.Insular Life Assurance Co., Ltd. v. National Labor Relations Commission, 259 Phil.
65, 70-71 (1989).
2.Rollo, pp. 3-50.
3.CA rollo, pp. 209-229; penned by Associate Justice Mariflor P. Punzalan Castillo
and concurred in by Associate Justices Josefina Guevara-Salonga and
Franchito N. Diamante.
4.Rollo, pp. 241-248; penned by Presiding Commissioner Gerardo C. Nograles and
concurred in by Commissioners Perlita B. Velasco and Romeo L. Go.
5.CA rollo, pp. 288-294.
6.Id. at 231-256.
7.Id. at 258-275.
8.See Contract dated January 24, 2003, id. at 36.
9.Rollo, p. 271.
10.See [Alcantara's] Position Paper, id. at 106-110.
11.Id. at 208-219; penned by Labor Arbiter Dolores M. Peralta-Beley.
12.Id. at 218-219.
13.Id. at 241-248.
14.Id. at 247-248.
15.See Motion for Reconsideration, id. at 249-251.
16.Id. at 260-261.
17.CA rollo, pp. 3-13.
18.Id. at 209-229.
19.Id. at 228.
20.Id. at 231-256.
21.Id. at 258-275.
22.Id. at 288-294.
23.Rollo, p. 376.
24.Bernarte v. Philippine Basketball Association (PBA), G.R. No. 192084, September
14, 2011, 657 SCRA 745, 754.
25.G.R. No. 167622, June 29, 2010, 622 SCRA 58.
 26.Id. at 80.
27.CA rollo, p. 36.
28.CIVIL CODE OF THE PHILIPPINES, Article 1370.
29.Bernarte v. Philippine Basketball Association (PBA), supra note 24; Sandigan
Savings and Loan Bank, Inc. v. National Labor Relations Commission, 324
Phil. 348, 358 (1996); Sonza v. ABS-CBN Broadcasting Corporation, G.R. No.
138051, June 10, 2004, 431 SCRA 583, 594-595.
30.Id.
31.Sandigan Savings and Loan Bank, Inc. v. National Labor Relations Commission,
supra note 29.
32.Cosmopolitan Funeral Homes, Inc. v. Maalat, G.R. No. 86693, July 2, 1990, 187
SCRA 108, 112.
33.Id. at 112-113.
34.Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., supra note 25 at
85; Sonza v. ABS-CBN Broadcasting Corporation, supra note 29 at 603.
35.Supra note 1.
36.Id. at 71.
37.Supra note 25 at 86-87.
38.Javier v. Fly Ace Corporation, G.R. No. 192558, February 15, 2012, 666 SCRA
382, 397-398.
39.See Consulta v. Court of Appeals, 493 Phil. 842, 848 (2005); Sonza v. ABS-CBN
Broadcasting Corporation, supra note 29 at 600.
40.See Chavez v. National Labor Relations Commission, 489 Phil. 444, 457-458
(2005).
41.Bernarte v. Philippine Basketball Association (PBA), supra note 24 at 759.
42.Supra note 39.
43.Id. at 852.
44.Bernarte v. Philippine Basketball Association (PBA), supra note 24 at
757; Consulta v. Court of Appeals, supra note 39 at 851.
 (Royale Homes Marketing Corp. v. Alcantara, G.R. No. 195190, [July 28,
|||

2014])
[G.R. No. 170087. August 31, 2006.]
 ANGELINA FRANCISCO, petitioner, vs. NATIONAL LABOR RE
LATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO
TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON
ESCUETA, respondents.

DECISION

YNARES-SANTIAGO, J  : p

This petition for review on certiorari under Rule 45 of the Rules of

Court seeks to annul and set aside the Decision and Resolution of the Court of
Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-
G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by
herein petitioner Angelina Francisco. The appellate court reversed and set aside
the Decision of the National Labor Relations Commission (NLRC) dated April 15,
2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the
decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-
10-0-489-01, finding that private respondents were liable for constructive
dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation
stage. She was designated as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not
entrusted with the corporate documents; neither did she attend any board
meeting nor required to do so. She never prepared any legal document and
never represented the company as its Corporate Secretary. However, on some
occasions, she was prevailed upon to sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also
hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner
was assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government
agencies, especially with the Bureau of Internal Revenue (BIR), Social Security
System (SSS) and in the city government of Makati; and to administer all other
matters pertaining to the operation of Kasei Restaurant which is owned and
operated by Kasei Corporation. 7
 For five years, petitioner performed the duties of Acting Manager. As of
December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.
Petitioner alleged that she was required to sign a prepared resolution for her
replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of
all employees of Kasei Corporation and announced that nothing had changed
and that petitioner was still connected with Kasei Corporation as Technical
Assistant to Seiji Kamura and in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month
beginning January up to September 2001 for a total reduction of P22,500.00 as
of September 2001. Petitioner was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did not
receive her salary from the company. She made repeated follow-ups with the
company cashier but she was advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and the
rest of the officers but she was informed that she is no longer connected with the
company. 11
Since she was no longer paid her salary, petitioner did not report for work
and filed an action for constructive dismissal before the labor arbiter. 
EHASaD

Private respondents averred that petitioner is not an employee of Kasei

Corporation. They alleged that petitioner was hired in 1995 as one of its technical
consultants on accounting matters and act concurrently as Corporate Secretary.
As technical consultant, petitioner performed her work at her own discretion
without control and supervision of Kasei Corporation. Petitioner had no daily time
record and she came to the office any time she wanted. The company never
interfered with her work except that from time to time, the management would
ask her opinion on matters relating to her profession. Petitioner did not go
through the usual procedure of selection of employees, but her services were
engaged through a Board Resolution designating her as technical consultant.
The money received by petitioner from the corporation was her professional fee
subject to the 10% expanded withholding tax on professionals, and that she was
not one of those reported to the BIR or SSS as one of the company's
employees. 12
Petitioner's designation as technical consultant depended solely upon the
will of management. As such, her consultancy may be terminated any time
considering that her services were only temporary in nature and dependent on
the needs of the corporation.
 To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was not among the employees
reported to the BIR, as well as a list of payees subject to expanded withholding
tax which included petitioner. SSS records were also submitted showing that
petitioner's latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant's dismissal as illegal;
3. ordering respondents to reinstate complainant to her former
position without loss of seniority rights and jointly and severally pay
complainant her money claims in accordance with the following
computation:
a. Backwages 10/2001 — 07/2002 275,000.00
  (27,500 x 10 mos.)  
b. Salary Differentials (01/2001 — 09/2001) 22,500.00
c. Housing Allowance (01/2001 — 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei  
  Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney's fees 87,076.50
  P957,742.50  
If reinstatement is no longer feasible, respondents are ordered to
pay complainant separation pay with additional backwages that would
accrue up to actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of
the Labor Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is
hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay
computed at one month per year of service in addition to full backwages
from October 2001 to July 31, 2002;
 2) The awards representing moral and exemplary damages and
10% share in profit in the respective accounts of P100,000.00 and
P361,175.00 are deleted;
3) The award of 10% attorney's fees shall be based on salary
differential award only;
4) The awards representing salary differentials, housing
allowance, mid year bonus and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The
decision of the National Labor Relations Commissions dated April 15,
2003 is hereby REVERSED and SET ASIDE and a new one is hereby
rendered dismissing the complaint filed by private respondent against
Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioner's motion for reconsideration, hence,
the present recourse.
The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent Kasei
Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.
Considering the conflicting findings by the Labor Arbiter and
the National Labor Relations Commission on one hand, and the Court of Appeals
on the other, there is a need to reexamine the records to determine which of the
propositions espoused by the contending parties is supported by substantial
evidence. 17
We held in Sevilla  v. Court of Appeals 18 that in this jurisdiction, there has
been no uniform test to determine the existence of an employer-employee
relation. Generally, courts have relied on the so-called right of control test where
the person for whom the services are performed reserves a right to control not
only the end to be achieved but also the means to be used in reaching such end.
In addition to the standard of right-of-control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls,
can help in determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a
complete picture of the relationship between the parties, owing to the complexity
of such a relationship where several positions have been held by the worker.
There are instances when, aside from the employer's power to control the
employee with respect to the means and methods by which the work is to be
accomplished, economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as
employee, independent contractor, corporate officer or some other capacity.  caIEAD

The better approach would therefore be to adopt 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.
 
This two-tiered test would provide us with a framework of analysis, which
would take into consideration the totality of circumstances surrounding the true
nature of the relationship between the parties. This is especially appropriate in
this case where there is no written agreement or terms of reference to base the
relationship on; and due to the complexity of the relationship based on the
various positions and responsibilities given to the worker over the period of the
latter's employment.
The control test initially found application in the case of Viaña  v. Al-
Lagadan and Piga, 19 and lately in Leonardo  v. Court of Appeals, 20 where we
held that there is an employer-employee relationship when the person for whom
the services are performed reserves the right to control not only the end achieved
but also the manner and means used to achieve that end.
In Sevilla  v. Court of Appeals, 21 we observed the need to consider the
existing economic conditions prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the employee in the payrolls, to
give a clearer picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic circumstances of the
worker.
Thus, the determination of the relationship between employer and
employee depends upon the circumstances of the whole economic
activity, 22 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. 23
 The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that line of
business. 24 In the United States, the touchstone of economic reality in analyzing
possible employment relationships for purposes of the Federal Labor Standards
Act is dependency. 25 By analogy, the benchmark of economic reality in
analyzing possible employment relationships for purposes of
the Labor Code ought to be the economic dependence of the worker on his
employer.
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.
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. 26 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. 27
It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latter's line of
business.
In Domasig  v.  National Labor Relations Commission,  28 we held that in a
business establishment, an identification card is 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. Together with the cash vouchers covering petitioner's salaries
for the months stated therein, these matters constitute substantial evidence
adequate to support a conclusion that petitioner was an employee of private
respondent.
 We likewise ruled in Flores  v. Nuestro 29 that a corporation who registers
its workers with the SSS is proof that the latter were the former's employees. The
coverage of Social Security Law is predicated on the existence of an employer-
employee relationship.
Furthermore, 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. Petitioner
was never entrusted with corporate documents of the company, nor required to
attend the meeting of the corporation. She was never privy to the preparation of
any document for the corporation, although once in a while she was required to
sign prepared documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself
from the records of the case. 31 Regardless of this fact, we are convinced that the
allegations in the first affidavit are sufficient to establish that petitioner is an
employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first
one, courts do not generally look with favor on any retraction or recanted
testimony, for it could have been secured by considerations other than to tell the
truth and would make solemn trials a mockery and place the investigation of the
truth at the mercy of unscrupulous witnesses. 32 A recantation does not
necessarily cancel an earlier declaration, but like any other testimony the same is
subject to the test of credibility and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is
an employee of respondent Kasei Corporation. She was selected and engaged
by the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main job
function involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of engagement.
Respondent corporation hired and engaged petitioner for compensation, with the
power to dismiss her for cause. More importantly, respondent corporation had
the power to control petitioner with the means and methods by which the work is
to be accomplished.  aHTEIA

The corporation constructively dismissed petitioner when it reduced her

salary by P2,500 a month from January to September 2001. This amounts to an
illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and
confidence, and under the principle of strained relations, petitioner is further
entitled to separation pay, in lieu of reinstatement. 34
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 continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to an employee. 35 In Globe Telecom, Inc.  v.
Florendo-Flores, 36 we ruled that where an employee ceases to work due to a
demotion of rank or a diminution of pay, an unreasonable situation arises which
creates an adverse working environment rendering it impossible for such
employee to continue working for her employer. Hence, her severance from the
company was not of her own making and therefore amounted to an illegal
termination of employment.
In affording full protection to labor, this Court must ensure equal work
opportunities regardless of sex, race or creed. Even as we, in every case,
attempt to carefully balance the fragile relationship between employees and
employers, we are mindful of the fact that the policy of the law is to apply
the Labor Code to a greater number of employees. This would enable employees
to avail of the benefits accorded to them by law, in line with the constitutional
mandate giving maximum aid and protection to labor, promoting their welfare and
reaffirming it as a primary social economic force in furtherance of social justice
and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of
the Court of Appeals dated October 29, 2004 and October 7, 2005, respectively,
in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of
the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
No. 032766-02, is REINSTATED. The case is REMANDED to the Labor Arbiter
for the recomputation of petitioner Angelina Francisco's full backwages from the
time she was illegally terminated until the date of finality of this decision, and
separation pay representing one-half month pay for every year of service, where
a fraction of at least six months shall be considered as one whole year.
 
SO ORDERED.
Panganiban, C.J., Austria-Martinez, Callejo, Sr. and Chico-Nazario,
JJ., concur.
 
Footnotes
1.Rollo, pp. 9-22. Penned by Associate Justice Eloy R. Bello, Jr. and concurred in by
Associate Justices Regalado E. Maambong and Lucenito N. Tagle.
2.Id. at 24-25.
3.Id. at 193-198. Penned by Presiding Commissioner Lourdes C. Javier and concurred
in by Commissioner Tito F. Genilo.
4.Id. at 164-173. Penned by Labor Arbiter Eduardo J. Carpio.
5.Id. at 89.
6.Id. at 89-90.
7.Id. at 90.
8.Id.
9.Id. at 91.
10.Id.
11.Id. at 91-92.
12.Id. at 92-93.
13.Id. at 94.
14.Id. at 172-173.
15.Id. at 197-198.
16.Id. at 100.
17.Abante, Jr.  v. Lamadrid Bearing & Parts Corporation, G.R. No. 159890, May 28,
2004, 430 SCRA 368, 379.
18.G.R. Nos. L-41182-3, April 15, 1988, 160 SCRA 171, 179-180, citing Visayan
Stevedore Transportation Company  v. Court of Industrial  Relations, 125 Phil.
817, 820 (1967).
19.99 Phil. 408 (1956).
20.G.R. No. 152459, June 15, 2006.
21.Supra note 18.
22.Rutherford Food Corporation v. McComb, 331 U.S. 722, 727 (1947); 91 L.Ed.
1772, 1777 (1946).
23.See Brock v. Lauritzen, 624 F.Supp. 966 (E.D. Wisc. 1985); Real v. Driscoll
Strawberry Associates, Inc., 603 F.2d 748 (9th Cir. 1979); Goldberg v.
Whitaker House Cooperative, Inc., 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100
(1961); Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947
(1947).
24.Halferty v. Pulse Drug Company, 821 F.2d 261 (5th Cir. 1987).
 25.Weisel v. Singapore Joint Venture, Inc., 602 F.2d. 1185 (5th Cir. 1979).
26.Rollo, pp. 305-321.
27.Id. at 264-265.
28.330 Phil. 518, 524 (1996).
29.G.R. No. 66890, April 15, 1988, 160 SCRA 568, 571.
30.Rollo, pp. 120-121.
31.Id. at 57.
32.People  v. Joya, G.R. No. 79090, October 1, 1993, 227 SCRA 9, 26-27.
33.People  v. Davatos, G.R. No. 93322, February 4, 1994, 229 SCRA 647, 651.
34.Globe-Mackay Cable and Radio
Corporation  v.  National Labor Relations Commission, G.R. No. 82511, March
3, 1992, 206 SCRA 701, 711-712.
35.Leonardo  v.  National Labor Relations Commission, 389 Phil. 118, 126 (2000).
36.438 Phil. 756 (2002).
 (Francisco v. National Labor Relations Commission, G.R. No. 170087, [August
|||

31, 2006], 532 PHIL 399-413)