G.R. No.

200575               February 5, 2014
INTEL TECHNOLOGY PHILIPPINES, INC., Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND JEREMIAS CABILES, Respondents.
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, 20122 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 Decision3 of the National Labor Relations Commission (NLRC) and its February 9,
2011 Resolution. The NLRC decision modified the March 18, 2010 Decision4 of the Labor Arbiter (LA), and held Intel
Phil. solely liable for the retirement benefits of respondent Jeremias Cabiles (Cabiles).
acknowledging receipt of ₱165,857.62 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

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:
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 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 HKD 419,868.77 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:
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.
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.

Intel Phil. moved for reconsideration but its motion was denied in the NLRC Resolution,12 dated February 9, 2011.
On January 31, 2007, Cabiles signed the job offer.8

The CA Decision
On March 8, 2007, Intel Phil. issued Cabiles his "Intel Final Pay Separation Voucher" indicating a net payout of
₱165,857.62. On March 26, 2007, Cabiles executed a Release, Waiver and Quitclaim (Waiver)9 in favor of Intel Phil.

1
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
execution14 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 (₱3,201,398.60) 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 (₱31,510.00) representing the execution fees pursuant to the provisions of the NLRC Manual of Execution of
Judgment.
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
₱3,201,398.60 which included the applicable withholding taxes due and paid to the Bureau of InternalRevenue.
Cabiles received a net amount of ₱2,485,337.35, 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.
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
2
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 service21 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
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?
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.
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.
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.
3
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.
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:
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, x x
x he is expected to know the import of everything that he executes, whether written or oral.32
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.
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.

Here, the NLRC concluded in its February 9, 2011 Resolution33 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..
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.
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.

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 xxx hereby acknowledge receipt from Intel Technology
Philippines, Inc. (the Company) the amount of xxx, 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, xxx from all liabilities arising
wholly, partially, or directly from my employment with the Company.
x x x           x x x          x x x
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 ₱165,857.62. Because the

4

G.R. No. 214291
AMERICAN POWER CONVERSION CORPORATION; AMERICAN POWER CONVERSION SINGAPORE PTE.
LTD.; AMERICAN POWER CONVERSION (A.P.C.), B.V.; AMERICAN POWER CONVERSION (PHILS.) B.V.;
DAVID W. PLUMER, JR.; GEORGE KONG; and ALICIA HENDY, Petitioner
vs.
JAYSON YU LIM, Respondent
This Petition for Review on Certiorari1seeks to set aside the April 23, 2014 Decision2 of the Court of Appeals (CA) in
CA-G.R SP No. 110142 setting aside the June 17, 2008 Decision3 and June 10, 2009 Resolution4 of the National Labor
Relations Commission (NLRC) in NLRC LAC No. 10-002807-07 and reinstating the July 27, 2007 Decision 5 of the
Labor Arbiter, as well as the CA's September 11, 2014 Resolution6 denying petitioners' Motion for Reconsideration.7
Factual Antecedents
On July 1, 1998, respondent Jason Yu Lim was hired to serve as the Country Manager of American Power Conversion
Philippine Sales Office, which was not registered with the Securities and Exchange Commission (SEC) but whose
function then was to act as a liaison office for American Power Conversion Corporation (APCC) - an American
corporation - and provide sales, marketing, and service support to the local distributor and consumers of APCC in the
Philippines. APCC is engaged in designing, developing, manufacturing and marketing of power protection and
management solutions for computer, communication, and electronic applications.
The only SEC-registered corporation then v.ras American Power Conversion (Phils.), Inc. (APCPI) with manufacturing
and production facilities in Cavite and Laguna.
Since American Power Conversion Philippine Sales Office was unregistered but doing business in the country,
respondent was included in the list of employees and payroll of APCPI. He was also instructed to create a petty cash
fund using his own personal bank account to answer for the day-to-day operations of American Power Conversion
Philippine Sales Office.
In 2002, American Power Conversion (Phils.) B. V. (APCP BV) was established in the country and it acquired APCPI
and continued the latter's business here.
In November, 2004, respondent was promoted as Regional Manager for APC North A.SEAN, a division of APC ASEAN.
As Regional Manager for APC North A.SEAN, he handled sales and marketing operations for Thailand, the Philippines,
Vietnam, Myanmar, Cambodia, Laos, and Guam, and reported directly to Larry Truong (Truong), Country General
Manager for the entire A.PC ASEAN and officer of APCC. Truong was not connected in any way with APCP BV - which,
per its SEC registration, is licensed to engage only in the manufacture of computer-related products.8
In an electronic mail (e-mail) message,9 Truong announced respondent's appointment together with the appointment
of David Shao (Shao) as Regional Manager for South ASEAN; which covered Singapore, Malaysia, Indonesia, and
Brunei. Truong noted respondent's "steady and principled leadership" since he "joined APC Philippines in 1998" that
"doubled x x x revenue x x x despite the Fact that the country economy has improved little since the Financial
Crisis."10
5
In 2005, Truong was replaced by petitioner George Kong (Kong).
During their stint with Kong, respondent and Shao supposedly discovered irregularities committed by Kong, which
sometime in late August, 2005 they reported to. Leanne Cunnold (Cunnold), General Manager for APC-South and
Kong's immediate superior. Cum10Jd took up the matter with petitioner Alicia Hendy (Hendy), Human Resource
Director for APCP BV. Respondent and Shao also took the matter directly to David Plumer (Plumer), Vice President
for Asia Pacific of APC Japan,11 who advised them to discuss the matter directly with Kong.
Upon being apprised of the issues against him, Kong on September 8, 2005 sent three e-mail messages 12 to
respondent and the other six members of the sales and marketing team indicating his displeasure and that he took
the matter quite personally. In the last of his e-mail messages, he remarked - "'and finally, thank you for the 7
knives in my back."13
On September 30, 2005, Kong and Hendy met with Shao, where the latter was asked to resign; when he refused, he
was right then and there terminated from employment with immediate effect. 14 The Letter of Termination15 handed to
him did not specify any reason why he was being fired from work, and was written on the official stationery of
American Power Conversion Singapore Pte, Ltd. (APCS) and signed by its Human Resource Manager, Samantha
Phang (Phang).
Thereafter, Kong arrived in the country and met with respondent on October 17, 2005, where he informed the latter
of a supposed company restructuring which rendered his position as Regional Manager for North ASEAN redundant.
Respondent was furnished by the Human Resource Manager of APCP BV Maximo del Ponso, Jr. (del Ponso) with a
Termination Letter16 of even date, which stated among others that -
Dear Jason:
In response to the changing directions of the business, and pursuant to the need to align and streamline the APAC
Sales organization, we advise that management has decided to reconfigure APAC Sales function and as a result of
such, we declare the position of Regional Manager - North ASEAN is [sic] redundant. Accordingly, we regard to
inform you of your last working day with us is effective close of business day 17 November, 2005. Until said date,
you will no longer be required to go to work other than the period required by management for the turn-over.
xxxx
On December 8, 2005, respondent's counsel proceeded to the Department of Labor and Employment (DOLE) to
verify if petitioners gave the requisite notice of termination due to redundancy. In a Certification, 17 the DOLE
through National Capital Region Assistant Regional Director Ma. Celeste M. Valderrama confirmed that there was no
record on file - from September l, 2005 up to November 30, 2005 - of a notice of termination filed by any of the
petitioners.
Respondent was paid severance pay, but in a written demand, 18 he sought reinstatement, the payment of
backwages and allowances/benefits, and damages for his claimed malicious and illegal termination. In a written
reply19 by APCC's counsel, petitioners refused to accede, thus:
Dear Atty. Marigomen
Mr. Jason Yu Lim
We write on behalf of our client American Power Conversion Corporation (' APCC') and respond to your letter x
x x.
x x x Mr. Lim was lawfully terminated on the ground of redundancy. Moreover, APCC complied with the
procedure for tennination x x x and paid Mr. Lim his separation pay in accordance with law.
xxxx
In view of the foregoing, APCC is unable to accede to your demands. (Emphasis supplied)
Likewise, in a December 9, 2005 letter20 to respondent, APCP BV through Hendy acknowledged to respondent that
should he be questioned about the use by APCC of his private bank account, petitioners will "offer the fullest possible
accounting of its [APCC] past actions."
Ruling of the Labor Arbiter
Respondent filed a labor case against the petitioners for illegal dismissal and recovery of money claims. In his
Position Paper21 and other pleadings, respondent claimed that he was illegally dismissed by petitioners using a
fabricated and contrived restructuring/reorganization/redundancy program; that in truth, his dismissal was motivated
by bad faith and malice out of Kong's desire to retaliate after he questioned Kong's irregularities; the petitioners
conspired and acted together to illegally remove respondent from his position through a fabricated redundancy; that
in effecting the purported redundancy program, petitioners did not comply with the requirements laid down by the
Labor Code, particularly the giving of notice to the DOLE, which thus renders the dismissal null and void; and that by
acting with malice and bad faith, petitioners are liable to respondent for moral and exemplary damages and
attorney's fees. Thus, respondent prayed for reinstatement with full backwages, allowances and other benefits; or in
the alternative, additional separation pay at the rate of three months salary for every year of service; damages in the
amount of US$1,500,000.00 for petitioners' malice, bad faith, and for subjecting respondent to the threat of criminal
and civil prosecution as a result of petitioners' illegal acts of evading taxes, non-registration with the SEC, and for
using respondent as their dummy; and attorney's fees and costs of suit.
In their joint Position Paper22 and other pleadings, petitioners claimed essentially that respondent should have
impleaded only APCP BV, as it is with the latter that respondent entered into an employment contract; that the
complaint against the other petitioners should thus be dismissed; that when Plumer was appointed Vice President for
APC Asia Pacific operations in August, 2005, a reorganization/restructuring of the APC Asia Pacific sales organization
was undertaken, in that its operations were divided into 1) Enterprise Sales - which shall be responsible for selling
directly to customers, and 2) Transactional Sales - which shall be tasked to handle distributions, network, and
channels accounts; that for this reason, there was a need to abolish the positions of Regional Manager - North ASEAN
and Regional Manager - South ASEAN because they were no longer aligned with the new business model - and in
their stead, the positions of Enterprise Sales Manager and Transactional Business Manager were created; that these
two new positions required a different set of functions including job description, qualifications, and experience, which
respondent did not possess; that in fact, two new employees with the requisite qualifications have been appointed to
these two new positions; that in effecting the redundancy program, they complied with the requirements of law; that
on October 6, 2005, APCP BV's del Ponso sent to DOLE Region IV at Calamba, Laguna a written notice 23 of the
redundancy program to be implemented, but it did not contain the number and names of workers intended to be
terminated from work, including that of respondent's; that respondent's dismissal was thus for cause; that
respondent is not entitled to his monetary claims on account of his valid dismissal due to redundancy; that
reinstatement is no longer feasible since his former position has been abolished; that respondent is not entitled to
the rest of his claims; and that the individual officers named in the complaint cannot be held personally liable as they
acted in their official capacity and without bad faith or malice. Thus, they prayed for the dismissal of respondent's
complaint .
Ruling of the Labor Arbiter
On July 27, 2007, the Labor Arbiter rendered her Decision in favor of respondent, stating thus:
From the conflicting statement of facts and evidence adduced by [the] parties in support of their respective
assertions, the issues for resolution by this Office are whether or not complainant was illegally dismissed, and
whether or not he is entitled to his monetary claims.
At the outset, it must be stressed that in cases of termination of an employee, it is the employer who has the
burden of proving that the termination x x x is for a valid or authorized cause x x x.
Further, a rule deeply entrenched in our jurisdiction is that 'in order to constitute a valid dismissal, two requisites
must concur: (a) the dismissal must be for any of the causes enumerated in Art. 282 of the Labor Code, and (b)
the employee must be accorded due process, basic of which is the opportunity to be heard and to defend himself x
xx
6
As also provided under Art. 283 of the Labor Code, as amended, redundancy, among other grounds, is an authorized
cause for termination of an employment. x x x the Supreme Court held that redundancy exists when the service
capability of the work force is in excess of what is reasonably needed to meet the demands of the enterprise. A
redundant position is one rendered superfluous by any number of factors, such as over hiring of workers, decreased
volume of business, dropping of a particular product line previously manufactured by the company, or phasing out of
a service activity previously undertaken by the business. x x x
x x x [T]he Supreme Court held that redundancy may be proven by a new staffing pattern, feasibility
studies/proposal on t11e viability of newly created positions, job description and approval by the management of the
restructuring.' In the instant case, we find respondents did not present any of the foregoing evidence to establish the
supposed restructuring and/or redundancy. There was also no evidence showing the approval of the said
restructuring and/or redundancy by the directors and officers of respondent APC BV. What was submitted on record
were the affidavits and memoranda of thee managers of respondent company on the alleged plans for restructuring
which the Supreme Court held not sufficient to substantially prove the existence of a restructuring or redundancy.
Moreover, in the previous reorganization of APC ASEAN in January 2005, Country Managers and Regional Managers,
complainant actively participated in the formation of the new structure for the APC ASEAN. The same tedious process
of reorganization was however not undertaken by respondents APCC in t11e supposed decision to abolish the position
of t11e ASEAN Regional Managers, thus rendering suspect the assertion of redundancy. Also significant to consider is
the point raised by complainant that up to present, respondent APCC has not yet annow1ced any reconfiguration,
reorganization, or restructuring in APC ASEAN despite the effected te1mination if only to validate the alleged
reorganization. The statement of Mr. Tzeng Kwan Chin, the APC Country Sales Manager for Malaysia, corroborates
this point of the complainant.
We also noted that after respondents terminated complainant and Mr. Shao as Regional Managers, the company
hired two (2) new employees to perform basically the same functions of complainant and that of Mr. Shao, which is
to market and promote APC products x x x, which factor also belies the claim of redundancy. The hiring of two (2)
new employees, albeit differently titled, merely effected substitution of complainant and Mr. Shao. The same
substitution suggest [sic] that vacated posts of Regional Managers is [sic] necessary in the operations of respondent
APCC which necessitated the performance thereof by the newly hired employees. We are thus persuaded [that] the
obtaining circumstances does [sic] not help support respondent APCC's claim of redundancy. With the abolition of the
Regional Manager position, there should have been a merger of functions and not the hiring of replacements.
It is not disputed that management is vested with the power and prerogative to decide whether to undergo a
reorganization to improve the business x x x. However, said power and prerogative is [sic] not absolute. The
Constitution and the Labor Code safeguards [sic] the right of the employees to their job and their income. Hence, the
guaranteed right to security of tenure of employees and their protection against dismissal, except for a just or
authorized cause.
In the absence of a clear showing of redundancy, we are inclined to give credence to the assertion that respondents
thru the initiative of respondent Kong was motivated to dismiss complainant from the company because of the
latter's report on the former's violations of the APCC's Code of Ethics. Evidently, the termination of complainant was
not due to redundancy but a retaliatory action in the guise of redundancy for purposes of dismissing the complainant
from the service. The said action is clearly an exercise of management prerogative in bad faith. It may be true that
investigation was conducted on the reported breach of the Code of Ethics by respondent Kong, the lack of
transparency on the results thereof, however, prevents us from giving credence to said assertion.
Moreover, it is also noticeable that only complainant and Mr. Shao (who complained about respondent Kong's
unethical conduct) were removed on account of the supposed reorganization. The five (5) other persons named in
respondent Kong's angry e-mails were not dismissed in connection with said reorganization since they did not join
complainant and Mr. Shao in their report on respondent Kong's unethical conduct, as against respondents' contention
that no such retaliatory action was undertaken by them as shown by the fact that five others also in the e-mails were Add: 1. ½ of 13th Month Pay of ₱175,694.44 - ₱14,641.20
not included in the said reorganization.
2. Car Maintenance Allowance - 15,000.00

Communication Allowance - 5,000.00

It also did not escape our notice that Mr. Shao, who previously held the position of Regional Manager for South
Asean, was terminated 'without cause' rather than due to redundancy. We are not persuaded by respondents' 4. Medical Benefit (EENT & Dental[)] - 800.00
explanation that Singapore law allows dismissal without cause and hence no longer deemed necessary to indicate the 5. Fuel [Subsidies] - 4,000.00
same reason of redundancy/reorganization for Mr. Shao's termination. To the contrary, we are inclined to believe
6. Executive Parking Benefit - 3,500.00
that having expressly stated that termination was 'without cause,' it only infers that there was actually no valid
reason for the latter's termination. Granting arguendo the same is allowed under Singapore law, the said 7. Broadband Internet Charges - 3,000.00 ₱ 45,941.20
circumstances nevertheless infer that termination of Mr. Shao, as well as complainant was not due to reorganization. TOTAL MONTHLY COMPENSATION ₱ 237,607.87
Furthermore, under Article 283 of the Labor Code, it is provided that in cases oftennination for redundancy, the
BACKWAGES (Partial Only) November 17, 2005 -
employer must serve a written notice to the workers and the DOLE at least one (1) month before the intended date ₱ 4,752,157.31
July 17, 2007 or 20 months x ₱ 237,607.87
thereof.
Less Amount already received ₱ 2,055,867.64

In the instant case, respondents failed to comply with the requirement of written notice to the DOLE as evidenced by Net Backwages ₱ 2,696,289.67

the Certification from said Office that there is no record on its file from 01 September 2005 to 30 November 2005 2. To reimburse allowable expenses, to wit:
reporting the termination of complainant for redundancy x x x [F]ailure to comply with the mandatory procedural
requirements taints the dismissal with illegality. We also do not find the notice to DOLE adduced by respondents a. 50% car insurance for 2006 23,892.00
applicable to complainant since the latter was not specifically named therein apart from the fact that said notice as
pointed out by complainant, appears to have been previously submitted to DOLE by reorganization of the human
b. 50% car insurance, paid in March 2007 13,244.50
resources department of APC BV Cavite and not that of the Regional Managers of APCC.

Thus, on the basis of the foregoing findings and pursuant to Article 279 of the Labor Code, we find complainant c. car registration for 2006 8,635.00
entitled to reinstatement without loss of seniority rights, and other privileges as well as to full backwages, inclusive
of allowances, and to other benefits or their monetary equivalent computed from the time his compensation was TOTAL ₱ 45,771.50
withheld from him up to the time of his actual reinstatement less the amount already paid to him representing 3. To reinstate complainant to his previous or similar position without loss of seniority rights.
separation pay and other benefits due to redundancy. 4. To pay complainant moral damages in the amount of P2,000,000.00 and exemplary damages in the
amount of P2,000,000.00.
5. To pay complainant ten (10%) percent attorney's fees of the total judgment award on [sic] the amount
Further finding the claim of redundancy to have been merely a guise to terminate complainant, abuse of
of ₱274,206.11.
management prerogative is established against respondent APCC which entitles complainant to moral damages in the
All other claims are hereby ordered dismissed for lack of merit.
amount of ₱2,000,000.00. Also, the award is justified due to respondent APCC's failure to register APC Philippines
Sales in accordance with Philippine laws including the respondents' use of the personal bank account of complainant
exposing him to the threat of criminal, civil, and/or administrative liabilities x x x To serve as a lesson to similarly Ruling of the National Labor Relations Commission
minded respondents x x x, we find the award of exemplary damages in the amount of ₱2,000,000.00 proper x x x.
Petitioners appealed before the NLRC. On June 17, 2008, the NLRC issued its Decision containing the following
It appearing further that respondent George Kong of APC Singapore Pte. Ltd., Alicia Hendy, and David Plumer, who pronouncement:
are both officials of respondent APCC to have participated, directly or indirectly, in the contrived
redundancy/reorganization that led to the dismissal of complainant, we find said officers to be jointly and severally After a careful review of the evidence submitted by the parties and the laws and the rules applicable to the instant
liable with respondents APCC to the adjudged monetary award to the complainant. case, We decide to grant the Appeal and rule in favor of Respondents/ Appellants.

WHEREFORE, foregoing premises considered, judgment is hereby rendered finding the termination of complainant
unlawful. Accordingly, respondents American Power Conversion Corporation (APCC), American Power Conversion
Singapore Pte. Ltd., American Power Conversion (APC) B.V., Ame1ican Power Conversion (Phils.) Inc., George Kong,
Alicia Hendy, and David Plumer are held jointly and severally liable as follows:
1. To pay complainant full backwages, inclusive of allowances, and other benefits or their monetary
equivalent computed from the time compen5ation was unlawfully withheld up to the time of actual
reinstatement less the amount already received by him from the respondents as separation package, to
wit:
MONTHLY RATE -------------------------------------- ₱ 191,666.67
The Labor Arbiter failed to take into consideration that the restructuring implemented by APC was organizational,
meaning it affected not only APC (Philippines) B.V. but also APC ASEAN and APC Asia Pacific. The Labor Arbiter
failed to take into consideration the APC ASEAN organizational chart presented by respondents, which showed that
APC's ASEAN organization was divided into Enterprise Sales and Transactional Sales (from the former grouping
based on territorial boundaries), consistent with the organizational changes in the APC Asia Pacific sales
organization (Respondents/Appellants' Position Paper, Annex "7''). Respondents/ Appellants also presented the
organizational chart of APC (Philippines) B.V. after August 2005, which showed that the ASEAN restructuring
resulted in direct reporting lines from the Philippines to the ASEAN Enterprise Sales and ASEAN Transactional

7
Business Managers (Respondents' Position Paper, Annex "11"). This change in reporting lines rendered
Complainant/Appellee's position as Regional Manager - North ASEAN redundant.
Further, it appears from the records that the ASEAN restructuring was conceived as early as 1 August 2005 upon
Respondent/ Appellant Plumer's appointment as VP for Asia Pacific. As soon as Mr. Plumer assumed office, he
proposed that the organizational structure of Asia Pacific be divided on the basis of customer needs: (1) Enterprise
Sales, covering direct selling to customers, and (2) Transactional Sales, covering distributions, network, and
channel accounts. This plan to reorganize was thus conceived even before Complainant/Appellee reported, on 29
August 2005, individual Respondent/Appellant Kong's "unexplained" use of company funds. This negates
Complainant/Appellee's theory that his dismissal was a purely retaliatory act orchestrated by Respondent/
Appellant Kong. Considering the complexity of the Asia Pacific and ASEAN reorganization, we are inclined to hold
that it is only by pure happenstance that the restructuring was implemented at a time when
Complainant/Appellee's personal troubles with individual respondent Kong began.
xxxx
In the instant case, Complainant/Appellee's dismissal may have been preceded by an unpleasant exchange
between him rn1d his superior respondent Kong, which Complainant/Appellee clainls is the reason why he was
illegally dismissed. As in the case of International Harvester Macleod, however, Complainrn1t/Appellee's theory as
to the cause of his separation merely constitutes surmise and speculation. The fact that five other persons, against
whom Kong's 'angry emails' were also directed, were not dismissed from APC negates Complainant/ Appellee's
theory that he is being persecuted for 'whistleblowing.' That x x x Kong may have had a personal misunderstanding
with Complainant/ Appellee does not necessarily mean that it was the reason why Complainant/APJ2_ellee's
position was abolished. Personal matters between the company's employees cannot, by themselves, invalidate an
otherwise valid reorganization nor cause prejudice to the company's bona fide business interests.
In any case, the findings of the Labor Arbiter on the supposed absence of evidence to justify a declaration of
redundancy in this case are contrary to the records. First, a brief reading of the Job Description for the positions of
Enterprise Sales Manager and Transactional Sales Manager x x x negate[s] the Labor Arbiter's ruling that the two
employees hired by the company are mere replacements of Complainant/Appellee. These positions involved a
different set of functions than Complainant/ Appellee's position of Regional Manager - North ASEAN.
Complainant/Appellee also failed to deny that he did not possess the requisite qualifications, experience and
contacts for these two new positions. Hence, the hiring of individuals to occupy these two did not invalidate the
redundancy implemented by APC.
The insistence of the Labor Arbiter in the Decision on appeal upon a merger of functions rather than the hiring of
new persons is tantamount to a substitution of the Arbiter's judgment for the Company's judgment as regards the
characterization of the necessity of Complainant/ Appellee's services. It would have been contrary to the very
interests of APC if Complainant/ Appellee was retained as ASEAN Enterprise Sales Manager or Transactional
Business Manager, when he is clearly unqualified for either position.
xxxx
Hence, the creation by the company of the new positions of Enterprise Sales Manager and Transactional Business
Manager, which rendered unnecessary Complainant/Appellee's position as North ASEAN Regional Manager must be
respected.
Second, we find that contrary to the findings of the Labor Arbiter, Complainant/ Appellee had kiiowledge of the
redundancy. In the e-mail dated 16 September 2005 to then Asia Pacific South General Manager Cunnold x x x,
8
and in Complainant/Appellee's discussion with Mr. Kong on or about 18 October 2005 x x x, it is evident that
Complainant/ Appellee knew for some time that changes were underway in APC's organizational structure. APC was
likewise transparent about the organization to APC (Philippines) B.V.'s employees. In a meeting on 18 October
2005, individual Respondent/ Appellant Kong briefed the Philippine employees about the abolition of the Regional
Manager - North ASEAN and the Regional Manager - South ASEAN positions and the dismissal of Complainant/
Appellee on the ground of redundancy as a result of the reorganization x x x.
We rule that the circumstances cited by the Labor Arbiter in the appealed Decision do not, under pertinent law and
jurisprudence, negate the validity of the company's redundancy program. In dismissals due to redundancy, the
Labor Code merely requires written notice to the affected employee and to the DOLE, and payment of separation
pay thus:
There is no law or jurisprudence that requires a showing of the 'approval of the restructuring or redundancy by
the directors and officers' of a company x x x. There is likewise no law requiring that prior consultation be made
with an enterprise's employees before any reorganization may be effected x x x. There is, moreover, no law
requiring the making of an announcement as regards the reorganization of an enterprise x x x. The Labor Code
again only categorically requires that notice be given to the affected employee/s. It does not require the giving of
notice to persons not otherwise affected by the redundancy, such as, for instance, the company's other
employees. As a rule, the characterization of the services of an employee who was terminated for redundancy is
an exercise of the business judgment of the employer. The wisdom or soundness of such characterization or
decision is not subject to the discretionary review by the Labor Arbiter, the NLRC and the Courts thereafter x x x.
To require the employer to make prior consultation, with its employees, amounts to subjecting the company's
business decision to the discretionary review of its employees. This dilutes the company's prerogative as an
employer, to run its business as it sees fit.
Employers cannot be unduly burdened by extra-legal requirements imposed upon them by the courts, such as
those imposed in the Decision on Appeal, i.e. prior consultation with employees, company-wide announcement,
board resolution, etc. The basic requirements of due process demand that employers be informed
definitively of what the law requires. Otherwise, employers will forever be at the mercy of quasi-judicial
tribunals. The basic requirements of due process demru1d that an employer's compliance with labor laws be not
made dependent on a matter as fluid as judicial legislation, as in the many requirements laid down by the Labor
Arbiter in the Assailed Decision.
Finally on this point, Complainant/Appellee's status as an executive officer must be considered in evaluating the
exercise of the company's prerogative to declare his position redundant. Under pertinent jurisprudence, the
Company retained a wider latitude of discretion in determining whether Complainant/Appellee's employment should
be sustained. InAlmodiel v. NLRC, x x x the Supreme Court ruled:
'Considering further that petitioner herein held a position which was definitely managerial in character, Raytheon
had a broad latitude of discretion in abolishing his position. An employer has a much wider discretion in
terminating employment relationship of managerial personnel compared to rank and file employees. The reason
obviously is that officers in such key position perform not only functions which by nature require the employer's
full trust and confidence but also functions that spell the success or failure of an enterprise. '
The Labor Code requires that employees separated on the ground of redundancy be given notice of their separation
at least thirty (30) days before the effective date thereof: A notice of the separation must likewise be given to the
DOLE, to give the latter the opportunity to determine whether economic causes exist that justify the termination of
the worker's employment, x x x.
 In the instant case, we find that although Respondents/ Appellants gave the requisite 30-day notice to
Complainant/ Appellee x x x, Respondents/ Appellants failed to comply with the procedural requirement of giving
notice to the DOLE 30 days before the effective date of Complainant/Appellee's separation. The notice referred to
by Respondents/ Appellants x x x does not specifically include Complainant/Appellee's name. It thus cannot be
considered as sufficient compliance with the notice requirement laid down by the Labor Code.
The prevailing rule is that a dismissal is not to be declared illegal simply because the employer failed to comply
with the requirements of procedural due process. x x x
Complainant/Appellee's claims for backwages and reinstatement must be denied in view of our finding above that
Complainant/ Appellee was dismissed for authorized cause. It is settled that backwages and reinstatement are
merely legal consequences of a finding that the employee was indeed illegally dismissed x x x. These reliefs cannot
be awarded to a separated employee absent a finding of illegal dismissal.
We find the Labor Arbiter's award of moral and exemplary damages, and attorney's fees in favor of Complainant/
Appellee unwarranted. We find merit in Respondents/Appellees' argument that the reasons cited by the Labor
Arbiter in the Decision, which purport to justify an award of damages in the instant case, are speculative. x x x
The Labor Arbiter's award of Two Million Pesos x x x by way of moral damages and another Two Million Pesos x x x
by way of exemplary damages is too large an amount by any standard. x x x
We finally find it irregular for the Labor Arbiter to award specific items and amounts in the Decision, such as
Complainant/Appellee's car maintenance allowance, communication allowance, executive parking benefit, etc.,
when no mention of said items or their amounts was made by either party in the records of the case. This is
contrary to the constitutional proscription against decisions rendered without bases in fact x x x
There is no reason to hold individual Respondents/Appellant liable in the instant case considering that whatever
acts were committed by them were done in the performance of their official functions, without malice or bad faith.
xxx
Since Our jurisdiction is limited to those cases where an employment relationship exists between the parties,
Respondents/ Appellants APCC, APC Singapore Pte. Ltd., and APC (Phils.) Inc. cannot be held liable under the
complaint. These entities, although related to Complainant/Appellee's employer APC (Philippines) B.V., maintain
separate corporate personalities from the latter. They cannot be considered Complainant/Appellee's employer on
the basis of [sic] alone of their affiliation with APC (Philippines) B.V. x x x:
WHEREFORE, the Appeal is GRANTED and the Decision dated 27 July 2007 in NLRC NCR Case No. 00-05-03722-
06 is REVERSED and SET ASIDE. Respondents/Appellants are, however, directed to pay Complainant/Appellee
Php30,000.00 in nominal damages for failure to comply with the notice requirement under the Labor Code.
Respondent moved for reconsideration, but the NLRC stood its ground.
Ruling of the Court of Appeals
In a Petition for Certiorari26before the CA, respondent questioned the above NLRC dispositions and prayed for the
reinstatement of the Labor Arbiter's Decision.
9
On April 23, 2014, the CA rendered the assailed Decision granting the petition, decreeing thus:
The present controversy revolves on the issue of whether or not the dismissal of the petitioner on the ground of
redundancy is tenable.
The petitioner mainly contends that respondents dismally failed to prove that the dismissal was valid; that contrary
to the claims of respondents, there was no restructuring to effect a redundancy of his position but it is just a make-
believe redundancy to cover up for the illegality of his dismissal; that his dismissal was a retaliat01y act to the
complaint that he filed questioning the unethical conduct of his former immediate superior, George Kong; that
respondents failed to notify DOLE of his termination as required under the Labor Code.
On the other hand, respondents claim that the dismissal of the petitioner due to redundancy is a management
prerogative which cannot be inte1fered with; that contrary to the claim of the petitioner, the restructuring effected
by the company is legitimate and in accordance with the needs of the company; that notices as required by law
have been strictly complied with.
xxxx
Settled is the fact that redundancy is an authorized cause for the termination of employment, as provided by Article
283 of the Labor Code.
Redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to meet
the demands of the business enterprise. A reasonably redundant position is one rendered superfluous by any
number of factors, such as overhiring of workers, decreased volume of business, dropping of a particular product
line previously manufactured by the company or phasing out of service activity priorly undertaken by the business.
Among the requisites of a valid redundancy program arc: (1) the good faith of the employer in abolishing the
redundant position; and (2) fair and reasonable criteria in ascertaining what positions are to be declared redundant
and accordingly established.
Likewise, settled is the fact that the declaration of redundant positions is a management prerogative, an exercise of
business judgment by the employer.
It is however not enough for a company to merely declare that positions have become redundant. It must produce
adequate proof of such redundancy to justify the dismissal of the affected employees. In Panlileo v. NLRC, the High
Court said that the following evidence may be proffered to substantiate redundancy: 'the new staffing pattern,
feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the
management of the restructuring.' In another case, it was held that the company sufficiently established the fact of
redundancy through 'affidavits executed by the officers of the respondent PLDT, explaining the reasons and
necessities for the implementation of the redundancy program.'
As found out by the Labor Arbiter which we look with favor: 'In the instant case, we find (that) respondent did not
present any of the foregoing evidence to establish the supposed restructuring and/or redundancy. There was also
no evidence showing the approval of the said restructuring and/or redundancy by the directors and officers of
respondent APC B. V What was submitted on record were the affidavits and memoranda of the managers of
respondent company on the alleged plans for restructuring which the Supreme Court held not sufficient to
substantially prove the existence of a restructuring or redundancy. Moreover, in the previous reorganization of APC
ASEAN in January 2005, Country Managers and Regional Managers actively participated in the formation of the new
structure for the APC ASEAN. The same tedious process of reorganization was however not undertaken by
 respondents APCC in the supposed decision to abolish the position of the ASEAN Regional Managers, thus rendering
suspect the assertion of redundancy. Also significant to consider is the point raised by complainant that up to
present, respondent APCC has not announced any reconfiguration, reorganization, or restructuring in APC ASEAN
despite the effected termination if only to validate the alleged reorganization. '
A company's exercise of its management prerogatives is not absolute. It cannot exercise its prerogative in a cruel,
repressive, or despotic manner. x x x. Employment to the common man is his very life and blood, which must be
protected against concocted causes to legitimize an otherwise irregular termination of employment.
In the present case, it appeared from the records that the redundancy program was not in existence.
Circumstances obtaining therein never [point] to the fact of a restructuring being carried out by the company. The
respondents dismally failed to convince this Court that the organizational chart and self-serving affidavits presented
are sufficient proof of the existence of redundancy.
It must be remembered that the employer bears the burden of proving the cause or causes for termination. Its
failure to do so would necessarily lead to a judgment of illegal dismissal.
The pieces of evidence presented did not justify the reorganization that led to redundant positions as claimed by
the respondent. Moreover, records also show that the written notice to the Department of Labor and Employment
(DOLE), as required by Article 283 of the Labor Code, was not complied with.
The Labor Arbiter in her Decision said: ‘x x x respondent failed to comply with the requirement of written notice to
the DOLE as evidenced by the Certification from said office that there is no record on its file from 01 September
2005 to 30 November 2005 reporting the termination of complainant for redundancy. Failure to comply with the
mandatory procedural requirements taints the dismissal with illegality. We also do not find the notice to DOLE
adduced by respondents applicable to complainant since the latter was not specifically named therein apart from
the fact that said notice as pointed out by complainant, appears to have been previously submitted to DOLE by
reorganization of the human resources [sic] department of APC BV Cavite and not that of the Regional Managers of
APCC. '
Again, it bears stressing that substantial evidence is the [quantum] of evidence required to establish a fact in cases
before administrative and quasi-judicial bodies. Substantial evidence, as amply explained in numerous cases, is that
amount of 'relevant evidence which a reasonable mind might accept as adequate to support a conclusion.'
We find this substantial evidence wanting in the present case.
Clearly the foregoing circumstances support the illegal dismissal of the complainant, as aptly ruled by the Labor
Arbiter.
In balancing the interest between labor and capital, the prudent recourse in termination cases is to safeguard the
prized security of tenure of employees and to require employers to present the best evidence obtainable, especially
so because in most cases, the documents or proof needed to resolve the validity of the termination, are in the
possession of employers. A contrary ruling would encourage employers to utilize redundancy as a means of
dis1nissing employees when no valid grounds for termination are shown by simply invoking a feigned or
unsubstantiated redundancy program.
The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the employee
becomes entitled to reinstatement to his former position without loss of seniority rights and, secondly, the payment
10
of backwages corresponding to the period from his illegal dismissal up to actual reinstatement. x x x. Put a little
differently, payment of backwages is a form of relief that restores the income that was lost by reason of unlawful
dismissal; separation pay, in contrast, is oriented towards the immediate future, the transitional period the dismissed
employee must undergo before locating a replacement job. x x x. The grant of separation pay was a proper
substitute only for reinstatement; it could not be an adequate substitute both for reinstatement and for backwages.
On a final note, respondents have raised the issue of this Court's taking cognizance of this petition
for certiorari questioning therein the grounds posed for the filing of the petition.
We find this misplaced and without merit. The petition is mainly grounded on alleged grave abuse of discretion
an1ounting to lack or excess of jurisdiction allegedly committed by NLRC, although some errors in judgment have
surfaced as well.
The extent of judicial review by certiorari of decisions or resolutions of the NLRC, as exercised previously by the
Supreme Court and now by the Court of Appeals, is described in Zarate, .Jr. v. Olegario, thus –
'The rule is settled that the original and exclusive jurisdiction of this Court to review a decision of respondent NLRC
(or Executive Labor Arbiter as in this case) in a petition for certiorari under Rule 65 does not normally include an
inquiry into the correctness of its evaluation of the evidence. Errors of judgment, as distinguished from errors of
jurisdiction, are not within the province of a special civil action for certiorari, which is merely confined to issues of
jurisdiction or grave abuse of discretion. It is thus incumbent upon petitioner to satisfactorily establish that
respondent Commission or executive labor arbiter acted capriciously and whimsically in total disregard of evidence
material to or even decisive of the controversy, in order that the extraordinary writ of certiorari will lie. By grave
abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, and it must be shown that the discretion was exercised arbitrarily or despotically. For certiorari to lie,
there must be capricious, arbitrary and whimsical exercise of power, the very antithesis of the judicial prerogative in
accordance with centuries of both civil law and common law traditions.'
Was NLRC guilty of such grave abuse of discretion?
We say yes.
The Court of Appeals, therefore, can grant the petition for certiorari if it finds that the NLRC in its assailed decision or
resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence
which is material or decisive of the controversy.
And this is amplified in AMA case where the Supreme Court held that:
In this instance, the Court in the exercise of its equity jurisdiction may look into the records of the case and re-
examine the questioned findings. As a corollary, this Court is clothed with ample authority to review matters, even
if they are not assigned as errors in their appeal, if it finds that their consideration is necessary to arrive at a just
decision of the case. The same principles are now necessarily adhered to and are applied by the Court of Appeals in
its expanded jurisdiction over labor cases elevated through a petition for certiorari; thus, we see no error on its
part when it made anew a factual determination of the matters and on that basis reversed the ruling of the NLRC.'
Thus, pursuant to law and jurisprudence, Our taking cognizance of the present case is in order.
WHEREFORE, premises considered, the petition is GRANTED. Accordingly the assailed Decision of the NLRC
is REVERSED and SET ASIDE and the decision of the Labor Arbiter is hereby REINSTATED with the MODIFICATION
that if reinstatement is no longer possible, petitioner should be paid full backwages reckoned from the date of his
 illegal dismissal up to the time that this Decision becomes final and executory, separation pay equivalent to one
month's salary for every year of service less the amount already received by him from the respondent as
separation package and moral and exemplary damages in the amount of Phpl00,000.00 each.
Accordingly the case is remanded to the Labor Arbiter for the computation of the award.
Petitioners filed a motion for reconsideration, but the CA denied the same via its September 11, 2014 Resolution.
Hence, the instant Petition.
In a January 11, 2016 Resolution,28 the Court resolved to give due course to the Petition.
Issues
Petitioners raise the following issues for resolution:
I. THE COURT OF APPEALS DECIDED IN A MANNER CONTRARY TO LAW AND LEGAL PRECEDENTS WHEN IT
EXERCISED ITS CERTIORARI POWER ABSENT ANY FINDING THAT THE NLRC COMMITTED GRAVE ABUSE OF
DISCRE110N AMOUNTING TO LACK OR EXCESS OF JURISDICTION.
A. The Court of Appeals exercised its certiorari jurisdiction without a finding that the NLRC committed grave
abuse of discretion amounting to lack or excess of jurisdiction.
B. The Court of Appeals erred in granting respondent's CA Petition, even when respondent failed to raise any
ground which would justify the exercise of the Court of Appeals' certiorari jurisdiction.
C. In any event, the Court of Appeals should have dismissed the CA Petition outright for being a mere rehash of
respondent Lim's arguments before the NLRC.
II. THE COURT OF APPEALS DECIDED IN A MANNER CONTRARY TO LEGAL PRECEDENT WHEN IT REVISITED AND
REVERSED
FACTUAL FINDINGS OF THE NLRC SOLELY ON THE GROUND THAT THERE SUPPOSEDLY IS A DIVERGENCE OF
VIEWS BETWEEN THE LABOR ARBITER AND THE NLRC.
III. IN ANY EVENT, THE NLRC DID NOT COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION, AND THE COURT OF APPEALS' FACTUAL FINDINGS WERE UNSUPPORTED BY EVIDENCE AND ITS
CONCLUSIONS CONTRARY TO LAW AND EXISTING JURISPRUDENCE.
A. The NLRC's finding that respondent Lim was validly dismissed due to redundancy is substantially supported by
evidence on record.
B. The NLRC's findings on the existence of redundancy are correct. The Court of Appeals misapplied and/or
misconstrued this Honorable Court's rulings in San Miguel v. Del Rosario and Panlilio v. NLRC regarding the
evidence that may prove redundancy.
C. Petitioners have presented evidence sufficient to prove redundancy, even if measured against the standards
set by the Court of Appeals.
(i) New staffing pattern proved redundancy.
(ii) Restructuring/reorganization resulted from a series of proposals and prior extensive feasibility
studies.1âwphi1
(iii) Job descriptions provided adequate basis to conclude that the new positions were different from the
abolished ones.
(iv) Approval by the management of the restructuring/reorganization.
D. Petitioners complied with the requirement to notify the DOLE. In any event, respondent Lim's dismissal due to
redundancy cannot be rendered illegal even assuming arguendo that Petitioners failed to strictly comply with such
requirement.29
Petitioners' Arguments
11
In their Petition and Reply30 seeking reversal of the assailed CA dispositions and, in lieu thereof, the reinstatement of
the June 17, 2008 NLRC Decision, petitioners essentially argue that the CA erred in finding that the NLRC committed
grave abuse of discretion; that it failed to explain how the NLRC's findings could have amounted to grave abuse of
discretion so patent and gross as to amount to an evasion of positive duty or virtual refusal to perform a duty
enjoined by law; that respondent fulled to raise any ground which would justify the CA's exercise of
its certiorari jurisdiction; that the NLRC's finding that respondent was validly dismissed for redundancy is
substantially supported by the evidence adduced; that contrary to the CA's pronouncement, redundancy may be
proved by evidence other than a new staffing pattern, feasibility studies/proposals on the viability of newly created
positions, job descriptions, and approval of the redundancy scheme by management; that they presented sufficient
evidence to prove the necessity of dismissing respondent on account of redundancy, such as a new staffing
pattern/organizational chart, series of proposals/meetings/ extensive study, new job descriptions for the new
positions, and approval by management of the scheme; and that the requirements of Article 283 of the Labor
Code31 were substantially complied with, although failure to comply therewith does not render the dismissal illegal or
ineffectual.
Respondent's Arguments
In his Comment32 to the Petition, respondent insists that petitioners' redundancy scheme was a sham as it was
contrived with the sole aim to discharge him from employment; that petitioners did not comply with the notice
requirement under the Labor Code; that he remained an employee of APCC, and was only an APCP BV employee on
paper; that upon his termination, he was immediately replaced by another employee who held the same position,
although his title was changed; that the documentary evidence adduced by petitioners to prove their sham
redundancy scheme were fabricated; that in deciding the case the way it did, the NLRC committed grave abuse of
discretion; and that the CA was correct in granting his Petition for Certiorari. Thus, he prays for denial of the instant
Petition.
Our Ruling
The Court denies the Petition.
The CA committed no error in taking cognizance of respondent's Petition for Certiorari. As will be shown below, the
NLRC committed an error so patent and gross as to amount to an evasion of its positive duty to administer justice in
favor of the respondent in this case. Failing in its duty to properly appreciate the facts and evidence on record, and
apply the law and decide this otherwise simple case in favor of the party to whom justice should be served, the NLRC
arrived at a fundamentally unjust, unreasonable, and absurd pronouncement that is consequently null and void and
without force and effect. An appreciation of the copious evidence on record should lead one to a single obvious
inevitable legal conclusion, yet the NLRC, with its expertise and experience as a labor tribunal, failed to arrive at such
a resolution.
A void judgment or order has no legal and binding effect. It does not divest rights and no rights can be obtained
under it; all proceedings founded upon a void judgment are equally worthless.
Void judgments, because they are legally non-existent, are susceptible to collateral attacks. A collateral attack is an
attack, made as an incident in another action, whose purpose is to obtain a different relief In other words, a party
need not file an action to purposely attack a void judgment; he may attack the void judgment as part of some other
proceeding. A void judgment or order is a lawless thing, which can be treated as an outlaw and slain at sight, or
ignored wherever and whenever it exhibits its head. Thus, it can never become final, and could be assailed at any
time.33
When respondent was hired directly by APCC, an American entity that was not registered to conduct business here,
to sell its products and services here, he was tossed over to another APC corporation, APCPI (now APCP BV), a
Philippine-registered manufacturing corporation, where he was ostensibly included in the list of employees and the
payroll. In other words, APCC sanctioned the use of APCP BV as respondent's cover, from where he conducted his
sales operations for APCC. To further conceal and promote APCC's covert sales operations here, respondent was
required to create a petty cash fund using his own personal bank account to answer for the daily expenses and
operations of the American Power Conversion Philippine Sales Office. Thus, APCC conducted business here as an
unregistered and unregulated enterprise; consequently, it did not pay truces despite doing business here and earning
income as a result. APCP BV was not engaged in sales, as it is licensed to engage only in the manufacture of
computer-related products - yet, it holds respondent in its payroll. Meanwhile, respondent took orders from and
came under the supervision and control of APCS and Kong from Singapore. This Management and manner of
conducting business by petitioners is illegal. Being illegal, this should have been early on remedied by petitioners,
including Plumer, Kong, and Hendy, who are presumed to know, by the very nature of their positions and business,
how legitimate business is supposed to be conducted in this country, that is, by registering the business to allow
regulation and taxation by the authorities. Yet they did not, and instead continued with this illegal arrangement to
further their business here and avoid their legal obligations to the public and government.
Everything seemed to go well for petitioners with their illegitimate business arrangement.1awp++i1 For his part,
respondent- who was at the losing end of the bargain given that it was his name and reputation on the line as he was
working for an unregistered, unregulated, and untaxed foreign enterprise and doing business with the public -
prodded APCC to formalize and declare its existence in order to free himself from the precarious position that APCC
has placed him in. Thus, respondent declared in his Position Paper that -
16. Despite Complainant's (respondent) continued requests and suggestions, APC Corporation's international
management failed and refused to fo1malize the registration of APC Philippines Sales as distinct and separate from
APCPI, and to discontinue the use of his personal bank account for the petty cash requirements of APC Philippines
Sales.34
When respondent joined APCC, he was merely in his early twenties, as admitted by Truong in his email message
announcing respondent's appointment as Regional Manager for APC North ASEAN. He cannot be faulted for acceding
to APCC's condition at the outset that he use his personal bank account for APCC's operations in the meantime;
during the incipient phase of his employment, he must have been operating wider the impression that since APCC's
sales and marketing operations were new in the country, it needed time to formalize its operations and secure a
license to do business here. And with this hope, he innocently went about doing his·· work. Indeed, APCC had the
sole responsibility of complying with domestic laws if it wanted to continue - as it did - doing business here. It was
not respondent's concern to perform administrative and compliance work that APCC, through APCP BV, was more
than capable of doing; his only job was to sell APCC's products and services. Given that respondent made repeated
requests for APCC to formalize and legalize its presence here, it could be that the latter may have repeatedly assured
or misrepresented to the former that it would do so - which kept respondent toward the uncomplaining performance
of his work. And when he was ostensibly absorbed into the APCP BV payroll, respondent must have thought that
APCC had remedied the situation. Which it did not. Meanwhile, respondent continued as its employee, doing sales
work for it. He remained an APCP BV employee on paper, and continued to do business unregulated and untaxed,
using his personal bank account to conceal APCC's income.
APC Japan and APCS Singapore, on the other hand, maintained supervision and control over respondent, through
Plumer and Kong, respectively. Still, respondent remained an employee of APCC, and not of APC Japan or APCS.
We therefore have this unique situation where respondent was hired directly by APCC of the U.S.A., but was being
paid his remuneration by a separate entity-APCP BV of the Philippines, and is supervised and controlled by APCS from
12
Singapore and APC Japan - all in furtherance of APCC's objective of doing business here unfettered by government
regulation.
To determine the existence of an employer-employee relationship, four elements generally need to be 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 employee's conduct. These elements or indicators comprise the so-called 'four-fold'
test of employment relationship. x x x35
From the above, it would seem that all of the petitioners are for all practical purposes respondent's employers. He
was selected and engaged by APCC. His salaries and benefits were paid by APCP BV. And he is under the supervision
and control of APCS and APC Japan. But of course, there is no such thing in legitimate employment arrangements.
This bizarre labor relation was made possible and necessary only by the petitioners' common objective: to enable
APCC to skirt the law. For all legal purposes, APCC is respondent's employer. Therefore, this Court declares the
subject redundancy scheme a sham, the same being an integral part of petitioners' illegitimate scheme to defraud
the public - including respondent - and the State. It is null and void for being contrary to law and public policy as it is
in furtherance of an illegal scheme perpetrated by APCC with the aid of its co-petitioners. Quae  ab initio  non valent,
ex post facto convalescere non possunt. Things that are invalid from the beginning are not made valid by a
subsequent act.
For levity's sake, let us set aside the foregoing for a while and indulge petitioners by precisely illustrating the fallacy
of their position. Thus, to demonstrate, while APCC was respondent's employer, the redundancy program in issue
that was used to justify respondent's dismissal from work was nonetheless implemented by Plumer and Kong - who
are employees of APC Japan and APCS, as well as by Hendy and del Ponso - employees of APCP BV. As admitted by
petitioners, Plumer and Kong conceived and implemented the redundancy program, and Hendy and del Ponso
prepared the documents which consummated respondent's supposed dismissal. As APCP BV Human Resource
Director and Manager, respectively, Hendy and del Ponso furnished the DOLE with documents relative to the
redundancy scheme, including a notice of termination/redundancy. Now, since APCC is respondent's true employer,
APC Japan, APCS, APCP BV, Plumer, Kong, Hendy, and del Ponso had no business coming into the picture; they are
not connected with APCC whatsoever. They had no authority to devise a redundancy scheme and represent APCC in
their dealings with the DOLE. Therefore, their supposed redundancy scheme, as against respondent, is ineffective;
they had no power to terminate the services of respondent, in the first place; the prerogative belonged to APCC.
However, this does not prevent respondent from recovering from all the petitioners. Since they all benefited from his
services - APCC was able to grow its business and conceal its sales operations and, by its misrepresentations and
assurances that it would register its operations, it successfully convinced respondent to do its bidding; APCP BV
enjoyed the immense goodwill of APCC for aiding the latter in its elaborate cover-up and duping respondent,
government, and the public into believing that it was respondent's actual employer; and APCS utilized respondent as
its workhorse even as he drew his salaries from APCP BV - and knowingly aided and abetted each other in the
commission of wrong, they should all be held responsible, under the principle of quasi-contract, for respondent's
money claims, including damages and attorney's fees. For all purposes beneficial to respondent, all the petitioners
should be considered as his employers since they all benefited from his industry and used him in their elaborate
scheme and to further their aim - evading the regulatory processes of this country. And from a labor standpoint, they
are al1 guilty of violating the Labor Code as a result of their concerted acts of fraud and misrepresentation upon the
respondent, using him and placing him in a precarious position without risk to themselves, and thus deliberately
disregarding their fundamental obligation to afford protection to labor and insure the safety of their employees. For
this gross violation of the fundamental policy of the Labor Code, petitioners must be held liable to pay backwages,
damages, and atto1ney's fees.
It is true that the 'backwages' sought by an illegally dismissed employee may be considered, by reason of its
practical effect, as a 'money claim.' However, it is not the principal cause of action in an illegal dismissal case but the
unlawful deprivation of one's employment committed by the employer in violation of the right of an employee.
Backwages is merely one of the reliefs which an illegally dismissed employee prays the labor arbiter and the NLRC to
render in his favor as a consequence of the unlawful act committed by the employer. The award thereof is not private
compensation or damages but is in furtherance and effectuation of the public objectives of the Labor Code. Even
though the practical effect is the enrichment of the individual, the award of backwages is not in redress of a private
right, but rather, is in the nature of a command upon the employer to make public reparation for his violation of the
Labor Code.36

Under Article 2142 of the Civil Code, "[c]ertain lawful, voluntary and unilateral acts give rise to the juridical relation
of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another."

There is unjust enrichment 'when a person unjustly retains a benefit to the loss of another, or when a person retains
money or property of another against the fundamental principles of justice, equity and good conscience. The principle
of unjust enrichment requires two conditions: (1) that a person is benefited without a valid ba5is or justification, and
(2) that such benefit is derived at the expense of another.

The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense
of another without just cause or consideration. x x x37

With the view taken of the case, it cannot be said that respondent may still be reinstated to his former position, on
account of strained relations. Besides, the Court shall endeavor to determine the respective accountabilities of
petitioners by way of taxes and other possible liabilities proceeding from the manner that they conducted business all
these years. Hendy' s admission in her December 9, 2005 letter to respondent about APCC's use of the latter's
private bank account with which to conduct its business and operations is certainly revealing, just as telling as the
evidence on record which suggests that APCC generated substantial revenue from its Philippine operations. For this
purpose, respondent's cooperation might be required by the authorities. As a potential witness to the activities of G.R. No. 196539               October 10, 2012
petitioners, his security and safety may not be guaranteed if he continues to work for the petitioners - not to mention
that any investigation into the matter might be jeopardized by his continued association with petitioners.
MARIETTA N. PORTILLO, Petitioner,
vs.
Apparent from the Petition is petitioners' failure to question the monetary awards. Perhaps they found no need to RUDOLF LIETZ, INC., RUDOLF LIETZ and COURT OF APPEALS Respondents.
question the same, thinking that it is unnecessary to do so with their full concentration devoted to defending the
validity and propriety of their redundancy scheme - which they must sincerely believe will stand the test of validity.
Before us is a petition for certiorari  assailing the Resolution 1 dated 14 October 2010 of the Court of Appeals in CA-
Understandably, if the scheme were upheld, respondent's monetary claims would necessarily be struck down.
G.R. SP No. I 065g I which modified its Decision2 dated 31 March 2009, thus allowing the legal compensation or
Nonetheless, the Court observes that the Labor Arbiter committed a patent error regarding one of the awards
petitioner Marietta N. Portillo's (Portillo) monetary claims against respondent corporation Rudolf Lietz, Inc.'s (Lietz
contained in the dispositive portion of her Decision-which escaped the attention of the CA. This pertains to the award
Inc.)3 claim for liquidated damages arising from Portillo’s alleged violation of the "Goodwill Clause" in the employment
of ₱45,771.50, covering vehicle insurance for the years 2006 and 2007, and vehicle registration for the year 2006 -
contract executed by the parties.
which should be deleted. It has no basis in fact and in law.

The facts are not in dispute.

WHEREFORE, the Petition is DENIED. The April 23, 2014 Decision and September 11, 2014 Resolution of the Court
of Appeals in CA-G.R. SP No. 110142 are AFFIRMED WITH MODIFICATION, in that the decree to reinstate
respondent to his former position and the award of ₱45,771.50 covering vehicle insurance for the years 2006 and In a letter agreement dated 3 May 1991, signed by individual respondent Rudolf Lietz (Rudolf) and conformed to by
2007 and vehicle registration for the year 2006 are DELETED. Portillo, the latter was hired by the former under the following terms and conditions:

Let the Office of the Commissioner of the Bureau of Internal Revenue be furnished a copy of this Decision for A copy of [Lietz Inc.’s] work rules and policies on personnel is enclosed and an inherent part of the terms and
appropriate action. conditions of employment.

37
 Locsin II v. Mekeni Food Corporation, 722 Phil. 886, 901 (2013), citing Flores v. Spouses Lindo, Jr., 664 Phil. 210,
221 (2011).

13
We acknowledge your proposal in your application specifically to the effect that you will not engage in any other
gainful employment by yourself or with any other company either directly or indirectly without written consent of
[Lietz Inc.], and we hereby accept and henceforth consider your proposal an undertaking on your part, a breach of
which will render you liable to [Lietz Inc.] for liquidated damages.
If you are in agreement with these terms and conditions of employment, please signify your conformity below.4
On her tenth (10th) year with Lietz Inc., specifically on 1 February 2002, Portillo was promoted to Sales
Representative and received a corresponding increase in basic monthly salary and sales quota. In this regard, Portillo
signed another letter agreement containing a "Goodwill Clause:"
It remains understood and you agreed that, on the termination of your employment by act of either you or [Lietz
Inc.], and for a period of three (3) years thereafter, you shall not engage directly or indirectly as employee,
manager, proprietor, or solicitor for yourself or others in a similar or competitive business or the same character of
work which you were employed by [Lietz Inc.] to do and perform. Should you breach this good will clause of this
Contract, you shall pay [Lietz Inc.] as liquidated damages the amount of 100% of your gross compensation over the
last 12 months, it being agreed that this sum is reasonable and just.5
Three (3) years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her exit interview, Portillo
declared that she intended to engage in business—a rice dealership, selling rice in wholesale.
On 15 June 2005, Lietz Inc. accepted Portillo’s resignation and reminded her of the "Goodwill Clause" in the last letter
agreement she had signed. Upon receipt thereof, Portillo jotted a note thereon that the latest contract she had
signed in February 2004 did not contain any "Goodwill Clause" referred to by Lietz Inc. In response thereto, Lietz Inc.
categorically wrote:
Please be informed that the standard prescription of prohibiting employees from engaging in business or seeking
employment with organizations that directly or indirectly compete against [Lietz Inc.] for three (3) years after
resignation remains in effect.
The documentation you pertain to is an internal memorandum of your salary increase, not an employment
contract. The absence of the three-year prohibition clause in this document (or any document for that matter) does
not cancel the prohibition itself. We did not, have not, and will not issue any cancellation of such in the foreseeable
future[.] [T]hus[,] regretfully, it is erroneous of you to believe otherwise.6
In a subsequent letter dated 21 June 2005, Lietz Inc. wrote Portillo and supposed that the exchange of
correspondence between them regarding the "Goodwill Clause" in the employment contract was a moot exercise
since Portillo’s articulated intention to go into business, selling rice, will not compete with Lietz Inc.’s products.
Subsequently, Lietz Inc. learned that Portillo had been hired by Ed Keller Philippines, Limited to head its Pharma Raw
Material Department. Ed Keller Limited is purportedly a direct competitor of Lietz Inc.
Meanwhile, Portillo’s demands from Lietz Inc. for the payment of her remaining salaries and commissions went
unheeded. Lietz Inc. gave Portillo the run around, on the pretext that her salaries and commissions were still being
computed.
On 14 September 2005, Portillo filed a complaint with the National Labor Relations Commission (NLRC) for non-
payment of 1½ months’ salary, two (2) months’ commission, 13th month pay, plus moral, exemplary and actual
damages and attorney’s fees.
14
In its position paper, Lietz Inc. admitted liability for Portillo’s money claims in the total amount of P110,662.16.
However, Lietz Inc. raised the defense of legal compensation: Portillo’s money claims should be offset against her
liability to Lietz Inc. for liquidated damages in the amount of ₱869,633.09 7 for Portillo’s alleged breach of the
"Goodwill Clause" in the employment contract when she became employed with Ed Keller Philippines, Limited.
On 25 May 2007, Labor Arbiter Daniel J. Cajilig granted Portillo’s complaint:
WHEREFORE, judgment is hereby rendered ordering respondents Rudolf Lietz, Inc. to pay complainant Marietta N.
Portillo the amount of Php110,662.16, representing her salary and commissions, including 13th month pay.8
On appeal by respondents, the NLRC, through its Second Division, affirmed the ruling of Labor Arbiter Daniel J.
Cajilig. On motion for reconsideration, the NLRC stood pat on its ruling.
Expectedly, respondents filed a petition for certiorari  before the Court of Appeals, alleging grave abuse of discretion
in the labor tribunals’ rulings.
As earlier adverted to, the appellate court initially affirmed the labor tribunals:
WHEREFORE, considering the foregoing premises, judgment is hereby rendered by us DENYING the petition filed
in this case. The Resolution of the National Labor Relations Commission (NLRC), Second Division, in the labor case
docketed as NLRC NCR Case No. 00-09- 08113-2005 [NLRC LAC No. 07-001965-07(5)] is hereby AFFIRMED.9
The disposition was disturbed. The Court of Appeals, on motion for reconsideration, modified its previous decision,
thus:
WHEREFORE, in view of the foregoing premises, we hereby MODIFY the decision promulgated on March 31, 2009
in that, while we uphold the monetary award in favor of the [petitioner] in the aggregate sum of ₱110,662.16
representing the unpaid salary, commission and 13th month pay due to her, we hereby allow legal compensation or
set-off of such award of monetary claims by her liability to [respondents] for liquidated damages arising from her
violation of the "Goodwill Clause" in her employment contract with them.10
Portillo’s motion for reconsideration was denied.
Hence, this petition for certiorari  listing the following acts as grave abuse of discretion of the Court of Appeals:
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY EVADING TO RECOGNIZE (sic) THAT THE
RESPONDENTS’ EARLIER PETITION IS FATALLY DEFECTIVE;
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY OVERSTEPPING THE BOUNDS OF
APPELLATE JURISDICTION[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY MODIFYING ITS PREVIOUS DECISION
BASED ON AN ISSUE THAT WAS RAISED ONLY ON THE FIRST INSTANCE AS AN APPEAL BUT WAS NEVER AT THE
TRIAL COURT AMOUNTING TO DENIAL OF DUE PROCESS[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY EVADING THE POSITIVE DUTY TO
UPHOLD THE RELEVANT LAWS[.]11
Simply, the issue is whether Portillo’s money claims for unpaid salaries may be offset against respondents’ claim for
liquidated damages.
Before anything else, we address the procedural error committed by Portillo, i.e., filing a petition for certiorari, a
special civil action under Rule 65 of the Rules of Court, instead of a petition for review on certiorari, a mode of
appeal, under Rule 45 thereof. On this score alone, the petition should have been dismissed outright.
Section 1, Rule 45 of the Rules of Court expressly provides that a party desiring to appeal by certiorari  from a
judgment or final order or resolution of the Court of Appeals may file a verified petition for review on certiorari.
Considering that, in this case, appeal by certiorari  was available to Portillo, that available recourse foreclosed her
right to resort to a special civil action for certiorari, a limited form of review and a remedy of last recourse, which lies
only where there is no appeal or plain, speedy and adequate remedy in the ordinary course of law.12
A petition for review on certiorari  under Rule 45 and a petition for certiorari  under Rule 65 are mutually exclusive
remedies. Certiorari  cannot co-exist with an appeal or any other adequate remedy. 13 If a petition for review is
available, even prescribed, the nature of the questions of law intended to be raised on appeal is of no consequence.
It may well be that those questions of law will treat exclusively of whether or not the judgment or final order was
rendered without or in excess of jurisdiction, or with grave abuse of discretion. This is immaterial. The remedy is
appeal, not certiorari  as a special civil action.14
Be that as it may, on more than one occasion, to serve the ultimate purpose of all rules of procedures—attaining
substantial justice as expeditiously as possible 15 —we have accepted procedurally incorrect petitions and decided
them on the merits. We do the same here.
The Court of Appeals anchors its modified ruling on the ostensible causal connection between Portillo’s money claims
and Lietz Inc.’s claim for liquidated damages, both claims apparently arising from the same employment relations.
Thus, did it say:
x x x This Court will have to take cognizance of and consider the "Goodwill Clause" contained [in] the employment
contract signed by and between [respondents and Portillo]. There is no gainsaying the fact that such "Goodwill
Clause" is part and parcel of the employment contract extended to [Portillo], and such clause is not contrary to law,
morals and public policy. There is thus a causal connection between [Portillo’s] monetary claims against
[respondents] and the latter’s claim for liquidated damages against the former. Consequently, we should allow
legal compensation or set-off to take place. [Respondents and Portillo] are both bound principally and, at the same
time, are creditors of each other. [Portillo] is a creditor of [respondents] in the sum of ₱110,662.16 in connection
with her monetary claims against the latter. At the same time, [respondents] are creditors of [Portillo] insofar as
their claims for liquidated damages in the sum of ₱980,295.2516 against the latter is concerned.17
We are not convinced.
Paragraph 4 of Article 217 of the Labor Code appears to have caused the reliance by the Court of Appeals on the
"causal connection between [Portillo’s] monetary claims against [respondents] and the latter’s claim from liquidated
damages against the former."
Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided under this
code, the 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 case involving all workers, whether agricultural or nonagricultural:
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
(Underscoring supplied)
Evidently, the Court of Appeals is convinced that the claim for liquidated damages emanates from the "Goodwill
Clause of the employment contract and, therefore, is a claim for damages arising from the employeremployee
relations."
As early as Singapore Airlines Limited v. Paño,18 we established that not all disputes between an employer and his
employee(s) fall within the jurisdiction of the labor tribunals. We differentiated between abandonment per se  and the
15
manner and consequent effects of such abandonment and ruled that the first, is a labor case, while the second, is a
civil law case.
Upon the facts and issues involved, jurisdiction over the present controversy must be held to belong to the civil
Courts. While seemingly petitioner's claim for damages arises from employer-employee relations, and the latest
amendment to Article 217 of the Labor Code under PD No. 1691 and BP Blg. 130 provides that all other claims
arising from employer-employee relationship are cognizable by Labor Arbiters [citation omitted], in essence,
petitioner's claim for damages is grounded on the "wanton failure and refusal" without just cause of private
respondent Cruz to report for duty despite repeated notices served upon him of the disapproval of his application for
leave of absence without pay. This, coupled with the further averment that Cruz "maliciously and with bad faith"
violated the terms and conditions of the conversion training course agreement to the damage of petitioner removes
the present controversy from the coverage of the Labor Code and brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per se  by private respondent Cruz of his job—as the
latter was not required in the Complaint to report back to work—but on the manner  and consequent effects  of such
abandonment of work translated in terms of the damages which petitioner had to suffer.
Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines Melale Veneer & Plywood, Inc. [citation
omitted], the pertinent portion of which reads:
"Although the acts complained of seemingly appear to constitute 'matter involving employee-employer' relations as
Quisaba's dismissal was the severance of a pre-existing employee-employer relations, his complaint is grounded
not on his dismissal per se, as in fact he does not ask for reinstatement or backwages, but on the manner of his
dismissal and the consequent effects of such dismissal.
"Civil law consists of that 'mass of precepts that determine or regulate the relations . . . that exist between
members of a society for the protection of private interest (1 Sanchez Roman 3).
"The 'right' of the respondents to dismiss Quisaba should not be confused with the manner in which the right was
exercised and the effects flowing therefrom. If the dismissal was done anti-socially or oppressively as the complaint
alleges, then the respondents violated Article 1701 of the Civil Code which prohibits acts of oppression by either
capital or labor against the other, and Article 21, which makes a person liable for damages if he wilfully causes loss
or injury to another in a manner that is contrary to morals, good customs or public policy, the sanction for which,
by way of moral damages, is provided in article 2219, No. 10. [citation omitted]"
Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the
Labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation.
The other items demanded are not labor benefits demanded by workers generally taken cognizance of
in labor disputes, such as payment of wages, overtime compensation or separation pay. The items
claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil
dispute.19 (Emphasis supplied)
Subsequent rulings amplified the teaching in Singapore Airlines.  The reasonable causal connection  rule was
discussed. Thus, in San Miguel Corporation v. National Labor Relations Commission,20 we held:
While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the entire
universe of money claims that might be asserted by workers against their employers has been absorbed into the
original and exclusive jurisdiction of Labor Arbiters. In the first place, paragraph 3 should be read not in isolation
from but rather within the context formed by paragraph 1 (relating to unfair labor practices), paragraph 2 (relating
to claims concerning terms and conditions of employment), paragraph 4 (claims relating to household services, a
particular species of employer-employee relations), and paragraph 5 (relating to certain activities prohibited to
employees or to employers). It is evident that there is a unifying element which runs through paragraph 1 to 5 and
that is, that they all refer to cases or disputes arising out of or in connection with an employer-employee
relationship. This is, in other words, a situation where the rule of noscitur a sociis  may be usefully invoked in
 clarifying the scope of paragraph 3, and any other paragraph of Article 217 of the Labor Code, as amended. We
reach the above conclusion from an examination of the terms themselves of Article 217, as last amended by B.P.
Blg. 227, and even though earlier versions of Article 217 of the Labor Code expressly brought within the jurisdiction
of the Labor Arbiters and the NLRC "cases arising from employer-employee relations, [citation omitted]" which
clause was not expressly carried over, in printer's ink, in Article 217 as it exists today. For it cannot be presumed
that money claims of workers which do not arise out of or in connection with their employer-employee relationship,
and which would therefore fall within the general jurisdiction of regular courts of justice, were intended by the
legislative authority to be taken away from the jurisdiction of the courts and lodged with Labor Arbiters on an
exclusive basis. The Court, therefore, believes and so holds that the "money claims of workers" referred
to in paragraph 3 of Article 217 embraces money claims which arise out of or in connection with the
employer-employee relationship, or some aspect or incident of such relationship. Put a little differently,
that money claims of workers which now fall within the original and exclusive jurisdiction of Labor
Arbiters are those money claims which have some reasonable causal connection with the employer-
employee relationship.21 (Emphasis supplied)
We thereafter ruled that the "reasonable causal connection with the employer-employee relationship" is a
requirement not only in employees’ money claims against the employer but is, likewise, a condition when the
claimant is the employer.
In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr.,22 which reiterated the San Miguel  ruling and allied
jurisprudence, we pronounced that a non-compete clause, as in the "Goodwill Clause" referred to in the present case,
with a stipulation that a violation thereof makes the employee liable to his former employer for liquidated damages,
refers to post-employment relations of the parties.
In Dai-Chi, the trial court dismissed the civil complaint filed by the employer to recover damages from its employee
for the latter’s breach of his contractual obligation. We reversed the ruling of the trial court as we found that the
employer did not ask for any relief under the Labor Code but sought to recover damages agreed upon in the contract
as redress for its employee’s breach of contractual obligation to its "damage and prejudice." We iterated that Article
217, paragraph 4 does not automatically cover all disputes between an employer and its employee(s). We noted that
the cause of action was within the realm of Civil Law, thus, jurisdiction over the controversy belongs to the regular
courts. At bottom, we considered that the stipulation referred to post-employment relations of the parties.
That the "Goodwill Clause" in this case is likewise a postemployment issue should brook no argument. There is no
dispute as to the cessation of Portillo’s employment with Lietz Inc.23 She simply claims her unpaid salaries and
commissions, which Lietz Inc. does not contest. At that juncture, Portillo was no longer an employee of Lietz
Inc.24 The "Goodwill Clause" or the "Non-Compete Clause" is a contractual undertaking effective after the cessation of
the employment relationship between the parties. In accordance with jurisprudence, breach of the undertaking is a
civil law dispute, not a labor law case.
It is clear, therefore, that while Portillo’s claim for unpaid salaries is a money claim that arises out of or in connection
with an employer-employee relationship, Lietz Inc.’s claim against Portillo for violation of the goodwill clause is a
money claim based on an act done after the cessation of the employment relationship. And, while the jurisdiction
over Portillo’s claim is vested in the labor arbiter, the jurisdiction over Lietz Inc.’s claim rests on the regular courts.
Thus:
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover damages based on
the parties' contract of employment as redress for respondent's breach thereof. Such cause of action is within the
realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts. More so must this be in the
present case, what with the reality that the stipulation refers to the postemployment relations of the parties.
16
For sure, a plain and cursory reading of the complaint will readily reveal that the subject matter is one of claim for
damages arising from a breach of contract, which is within the ambit of the regular court's jurisdiction. [citation
omitted]
It is basic that jurisdiction over the subject matter is determined upon the allegations made in the complaint,
irrespective of whether or not the plaintiff is entitled to recover upon the claim asserted therein, which is a matter
resolved only after and as a result of a trial. Neither can jurisdiction of a court be made to depend upon the
defenses made by a defendant in his answer or motion to dismiss. If such were the rule, the question of jurisdiction
would depend almost entirely upon the defendant.25 [citation omitted]
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for
damages filed by employees [citation omitted], we hold that by the designating clause "arising from the employer-
employee relations" Article 217 should apply with equal force to the claim of an employer  for actual damages
against its dismissed employee, where the basis for the claim arises from or is necessarily connected with the fact
of termination, and should be entered as a counterclaim in the illegal dismissal case.26
This is, of course, to distinguish from cases of actions for damages where the employer-employee
relationship is merely incidental and the cause of action proceeds from a different source of obligation.
Thus, the jurisdiction of regular courts was upheld where the damages, claimed for were based on
tort [citation omitted], malicious prosecution [citation omitted], or breach of contract, as when the
claimant seeks to recover a debt from a former employee [citation omitted] or seeks liquidated damages
in enforcement of a prior employment contract. [citation omitted]
Neither can we uphold the reasoning of respondent court that because the resolution of the issues presented by the
complaint does not entail application of the Labor Code or other labor laws, the dispute is intrinsically civil. Article
217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over
claims for damages arising from employer-employee relations─in other words, the Labor Arbiter has jurisdiction to
award not only the reliefs provided by labor laws, but also damages governed by the Civil Code. 27 (Emphasis
supplied)
In the case at bar, the difference in the nature of the credits that one has against the other, conversely, the nature of
the debt one owes another, which difference in turn results in the difference of the forum where the different credits
can be enforced, prevents the application of compensation. Simply, the labor tribunal in an employee’s claim for
unpaid wages is without authority to allow the compensation of such claims against the post employment claim of the
former employer for breach of a post employment condition. The labor tribunal does not have jurisdiction over the
civil case of breach of contract.
We are aware that in Bañez v. Hon. Valdevilla,  we mentioned that:
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for
damages filed by employees [citation omitted], we hold that by the designating clause "arising from the employer-
employee relations" Article 217 should apply with equal force to the claim of an employer  for actual damages
against its dismissed employee, where the basis for the claim arises from or is necessarily connected with the fact
of termination, and should be entered as a counterclaim in the illegal dismissal case.28
While on the surface, Bañez  supports the decision of the Court of Appeals, the facts beneath premise an opposite
conclusion. There, the salesman-employee obtained from the NLRC a final favorable judgment of illegal dismissal.
Afterwards, the employer filed with the trial court a complaint for damages for alleged nefarious activities causing
damage to the employer. Explaining further why the claims for damages should be entered as a counterclaim in the
illegal dismissal case, we said:
 Even under Republic Act No. 875 (the ‘Industrial Peace Act,’ now completely superseded by the Labor Code),
jurisprudence was settled that where the plaintiff’s cause of action for damages arose out of, or was necessarily
intertwined with, an alleged unfair labor practice committed by the union, the jurisdiction is exclusively with the
(now defunct) Court of Industrial Relations, and the assumption of jurisdiction of regular courts over the same is a
nullity. To allow otherwise would be "to sanction split jurisdiction, which is prejudicial to the orderly administration
of justice." Thus, even after the enactment of the Labor Code, where the damages separately claimed by the
employer were allegedly incurred as a consequence of strike or picketing of the union, such complaint for damages
is deeply rooted from the labor dispute between the parties, and should be dismissed by ordinary courts for lack of
jurisdiction. As held by this Court in National Federation of Labor vs. Eisma, 127 SCRA 419:
Certainly, the present Labor Code is even more committed to the view that on policy grounds, and equally so in the
interest of greater promptness in the disposition of labor matters, a court is spared the often onerous task of
determining what essentially is a factual matter, namely, the damages that may be incurred by either labor or
management as a result of disputes or controversies arising from employer-employee relations.29
Evidently, the ruling of the appellate court is modeled after the basis used in Bañez  which is the "intertwined" facts of
the claims of the employer and the employee or that the "complaint for damages is deeply rooted from the labor
dispute between the parties." Thus, did the appellate court say that:
There is no gainsaying the fact that such "Goodwill Clause" is part and parcel of the employment contract extended
to [Portillo], and such clause is not contrary to law, morals and public policy. There is thus a causal connection
between [Portillo’s] monetary claims against [respondents] and the latter’s claim for liquidated damages against
the former. Consequently, we should allow legal compensation or set-off to take place.30
The Court of Appeals was misguided. Its conclusion was incorrect.
There is no causal connection between the petitioner employees’ claim for unpaid wages and the respondent
employers’ claim for damages for the alleged "Goodwill Clause" violation. Portillo’s claim for unpaid salaries did not
have anything to do with her alleged violation of the employment contract as, in fact, her separation from
employment is not "rooted" in the alleged contractual violation. She resigned from her employment. She was not
dismissed. Portillo’s entitlement to the unpaid salaries is not even contested. Indeed, Lietz Inc.’s argument about
legal compensation necessarily admits that it owes the money claimed by Portillo.
The alleged contractual violation did not arise during the existence of the employer-employee relationship. It was a
post-employment matter, a post-employment violation. Reminders are apt. That is provided by the fairly recent case
of Yusen Air and Sea Services Phils., Inc. v. Villamor,31 which harked back to the previous rulings on the necessity of
"reasonable causal connection" between the tortious damage and the damage arising from the employer-employee
relationship. Yusen  proceeded to pronounce that the absence of the connection results in the absence of jurisdiction
of the labor arbiter. Importantly, such absence of jurisdiction cannot be remedied by raising before the labor tribunal
the tortious damage as a defense. Thus:
When, as here, the cause of action is based on a quasi-delict or tort, which has no reasonable causal connection
with any of the claims provided for in Article 217, jurisdiction over the action is with the regular courts. [citation
omitted]
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover damages based on
the parties’ contract of employment as redress for respondent’s breach thereof. Such cause of action is within the
realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts. More so must this be in the
present case, what with the reality that the stipulation refers to the postemployment relations of the parties.
17
For sure, a plain and cursory reading of the complaint will readily reveal that the subject matter is one of claim for
damages arising from a breach of contract, which is within the ambit of the regular court’s jurisdiction.
It is basic that jurisdiction over the subject matter is determined upon the allegations made in the complaint,
irrespective of whether or not the plaintiff is entitled to recover upon the claim asserted therein, which is a matter
resolved only after and as a result of a trial. Neither can jurisdiction of a court be made to depend upon the defenses
made by a defendant in his answer or motion to dismiss. If such were the rule, the question of jurisdiction would
depend almost entirely upon the defendant.32 (Underscoring supplied).
The error of the appellate court in its Resolution of 14 October 2010 is basic. The original decision, the right ruling,
should not have been reconsidered.1âwphi1
Indeed, the application of compensation in this case is effectively barred by Article 113 of the Labor Code which
prohibits wage deductions except in three circumstances:
ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any person, shall make any deduction
from wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense
the employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized by the
employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.
WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals in CA-G.R. SP No. I 06581 dated 14
October 20 I 0 is SET ASIDE. The Decision of the Court of Appeals in CA-G.R. SP No. I 06581 dated 3 I March :2009
is REINSTATED. No costs.
G.R. No. 220978
CENTURY PROPERTIES, INC., Petitioner,
vs
EDWIN J. BABIANO and EMMA B. CONCEPCION, Respondents.
Assailed in this petition for review on certiorari1are the Decision2 dated April 8, 2015 and the Resolution3 dated
October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953, which affirmed with modification the
Decision4 dated June 25, 2013 and the Resolution5 dated October 16, 2013 of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 05-001615-12, and ordered petitioner Century Properties, Inc. (CPI) to pay
respondents Edwin J. Babiano (Babiano) and Emma B. Concepcion (Concepcion; collectively, respondents) unpaid
commissions in the amounts of P889,932.42 and P591,953.05, respectively.
The Facts
On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was eventually 6 appointed as Vice President
for Sales effective September 1, 2007. As CPI' s Vice President for Sales, Babiano was remunerated with, inter
alia,  the following benefits: (a)  monthly salary of P70,000.00; (b)  allowance of P50,000.00; and (c) 0.5% override
commission for completed sales. His employment contract7 also contained a "Confidentiality of Documents and Non:-
Compete Clause"8 which, among others, barred him from disclosing confidential information, and from working in any
business enterprise that is in direct competition with CPI "while [he is] employed and for a period of one year from
date of resignation or termination from [CPI]." Should Babiano breach any of the terms thereof, his "forms of
compensation, including commissions and incentives will be forfeited."9
During the same period, Concepcion was initially hired as Sales Agent by CPI and was eventually10 promoted as
Project Director on September 1, 2007.11 As such, she signed an employment agreement, denominated as "Contract
of Agency for Project Director"12 which provided, among others, that she would directly report to Babiano, and
receive a monthly subsidy of P60,000.00, 0.5% commission, and cash incentives.13 On March 31, 2008, Concepcion
executed a similar contract14 anew with CPI in which she would receive a monthly subsidy of P50,000.00, 0.5%
commission, and cash incentives as per company policy. Notably, it was stipulated in both contracts that no
employer-employee relationship exists between Concepcion and CPI.15
After receiving reports that Babiano provided a competitor with information regarding CPI's marketing strategies,
spread false information regarding CPI and its projects, recruited CPI's personnel to join the competitor, and for
being absent without official leave (AWOL) for five (5) days, CPI, through its Executive Vice President for Marketing
and Development, Jose Marco R. Antonio (Antonio), sent Babiano a Notice to Explain 16 on February 23, 2009
directing him to explain why he should not be charged with disloyalty, conflict of interest, and breach of trust and
confidence for his actuations.17
On February 25, 2009, Babiano tendered18 his resignation and revealed that he had been accepted as Vice President
of First Global BYO Development Corporation (First Global), a competitor of CPI. 19 On March 3, 2009, Babiano was
served a Notice of Termination20 for: (a)  incurring AWOL; (b)  violating the "Confidentiality of Documents and Non-
Compete Clause" when he joined a competitor enterprise while still working for CPI and provided such competitor
enterprise information regarding CPI' s marketing strategies; and (c) recruiting CPI personnel to join a competitor.21
On the other hand, Concepcion resigned as CPI's Project Director through a letter 22 dated February 23, 2009,
effective immediately.
On August 8, 2011, respondents filed a complaint23 for non-payment of commissions and damages against CPI and
Antonio before the NLRC, docketed as NLRC Case No. NCR-08-12029-11, claiming that their repeated demands for
the payment and release of their commissions remained unheeded.24
For its part, CPI maintained25 that Babiano is merely its agent tasked with selling its projects. Nonetheless, he was
afforded due process in the termination of his employment which was based on just causes. 26 It also claimed to have
validly withheld Babiano' s commissions, considering that they were deemed forfeited for violating the
"Confidentiality of Documents and Non-Compete Clause."27 On Concepcion's money claims, CPI asserted that the
NLRC had no jurisdiction to hear the same because there was no employer-employee relations between them, and
thus, she should have litigated the same in an ordinary civil action.28
The LA Ruling
In a Decision29 dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's favor and, accordingly, dismissed the
complaint for lack of merit.30 The LA found that: (a)  Babiano's acts of providing information on CPI’s marketing
strategies to the competitor and spreading false information about CPI and its projects are blatant violations of the
18
"Confidentiality of Documents and Non-Compete Clause" of his employment contract, thus, resulting in the forfeiture
of his unpaid commissions in accordance with the same clause; 31 and (b)  it had no jurisdiction over Concepcion's
money claim as she was not an employee but a mere agent of CPI, as clearly stipulated in her engagement contract
with the latter.32
Aggrieved, respondents appealed33 to the NLRC.1âwphi1
The NLRC Ruling
In a Decision34 dated June 25, 2013, the NLRC reversed and set aside the LA ruling, and entered a new one ordering
CPI to pay Babiano and Concepcion the amounts of P685,211.76 and P470,754.62, respectively, representing their
commissions from August 9, 2008 to August 8, 2011, as well as 10% attorney's fees of the total monetary awards.35
While the NLRC initially concurred with the LA that Babiano's acts constituted just cause which would warrant the
termination of his employment from CPI, it, however, ruled that the forfeiture of all earned commissions ofBabiano
under the "Confidentiality of Documents and Non-Compete Clause" is confiscatory and unreasonable and hence,
contrary to law and public policy.36 In this light, the NLRC held that CPI could not invoke such clause to avoid the
payment of Babiano's commissions since he had already earned those monetary benefits and, thus, should have
been released to him. However, the NLRC limited the grant of the money claims in light of Article 291 (now Article
306)37 of the Labor Code which provides for a prescriptive period of three (3) years. Consequently,· the NLRC
awarded unpaid commissions only from August 9, 2008 to August 8, 2011 - i.e.,  which was the date when the
complaint was filed.38 Meanwhile, contrary to the LA's finding, the NLRC ruled that Concepcion was CPI's employee,
considering that CPI: (a)  repeatedly hired and promoted her since 2002; (b)  paid her wages despite referring to it as
"subsidy"; and (c) exercised the power of dismissal and control over her.39 Lastly, the NLRC granted respondents'
claim for attorney's fees since they were forced to litigate and incurred expenses for the protection of their rights and
interests.40
Respondents did not assail the NLRC findings. In contrast, only CPI moved for reconsideration, 41 which the NLRC
denied in a Resolution42 dated October 16, 2013. Aggrieved, CPI filed a petition for certiorari43before the CA.
The CA Ruling
In a Decision44 dated April 8, 2015, the CA affirmed the NLRC ruling with modification increasing the award of unpaid
commissions to Babiano and Concepcion in the amounts of P889,932.42 and P591,953.05, respectively, and
imposing interest of six percent (6%) per annum on all monetary awards from the finality of its decision until fully
paid.45
The CA held that Babiano properly instituted his claim for unpaid commissions before the labor tribunals as it is a
money claim arising from an employer-employee relationship with CPI. In this relation, the CA opined that CPI
cannot withhold such unpaid commissions on the ground of Babiano's alleged breach of the "Confidentiality of
Documents and Non-Compete Clause" integrated in the latter's employment contract, considering that such clause
referred to acts done after the cessation of the employer-employee relationship or to the "post-employment"
relations of the parties. Thus, any such supposed breach thereof is a civil law dispute that is best resolved by the
regular courts and not by labor tribunals.46
Similarly, the CA echoed the NLRC's finding that there exists an employer-employee relationship between Concepcion
and CPI, because the latter exercised control over the performance of her duties as Project Director which is
indicative of an employer-employee relationship. Necessarily therefore, CPI also exercised control over Concepcion's
duties in recruiting, training, and developing directors of sales because she was supervised by Babiano in the
performance of her functions. The CA likewise observed the presence of critical factors which were indicative of an
employer-employee relationship with CPI, such as: (a)  Concepcion's receipt of a monthly salary from CPI; and
(b)  that she performed tasks besides selling CPI properties. To add, the title of her contract which was referred to as
"Contract of Agency for Project Director" was not binding and conclusive, considering that the characterization of the
juridical relationship is essentially a matter of law that is for the courts to determine, and not the parties thereof.
Moreover, the totality of evidence sustains a finding of employer-employee relationship between CPI and
Concepcion.47
Further, the CA held that despite the NLRC's proper application of the three (3)-year prescriptive period under Article
291 of the Labor Code, it nonetheless failed to include all of respondents' earned commissions during that time
- i.e.,  August 9, 2008 to August 8, 2011 - thus, necessitating the increase in award of unpaid commissions in
respondents' favor.48
Undaunted, CPI sought for reconsideration,49 which was, however, denied in a Resolution50 dated October 12, 2015;
hence, this petition.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA erred in denying CPI's petition
for certiorari,  thereby holding it liable for the unpaid commissions of respondents.
The Court's Ruling
The petition is partly meritorious.
I.
Article 1370 of the Civil Code provides that "[i]f the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall control."51 In Norton Resources and
Development Corporation v. All Asia Bank Corporation, 52the Court had the opportunity to thoroughly discuss the said
rule as follows:
The rule is that where the language of a contract is plain and unambiguous, its meaning should be
determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from
that language, and from that language alone. Stated differently, where the language of a written contract is
clear and unambiguous, the contract must be taken to mean that which, on its face, it purports to
mean, unless some good reason can be assigned to show that the words should be understood in a
different sense. Courts cannot make for the parties better or more equitable agreements than they themselves
have been satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the
parties, or alter them for the benefit of one party and to the detriment of the other, or by construction, relieve one
of the parties from the terms which he voluntarily consented to, or impose on him those which he did
not.53 (Emphases and underscoring supplied)
Thus, in the interpretation of contracts, the Court must first determine whether a provision or stipulation therein is
ambiguous. Absent any ambiguity, the provision on its face will be read as it is written and treated as the binding law
of the parties to the contract.54
19
In the case at bar, CPI primarily invoked the "Confidentiality of Documents and Non-Compete Clause" found in
Babiano's employment contract55 to justify the forfeiture of his commissions, viz.:
Confidentiality of Documents and Non-Compete Clause
All records and documents of the company and all information pertaining to its business or affairs or that of its
affiliated companies are confidential and no unauthorized disclosure or reproduction or the same will be made by
you any time during or after your employment.
And in order to ensure strict compliance herewith, you shall not work for whatsoever capacity, either
as an employee, agent or consultant with any person whose business is in direct competition with the
company while you are employed and for a period of one year from date of resignation or termination
from the company.
In the event the undersigned breaches any term of this contract, the undersigned agrees and acknowledges that
damages may not be an adequate remedy and that in addition to any other remedies available to the Company at
law or in equity, the Company is entitled to enforce its rights hereunder by way of injunction, restraining order or
other relief to enjoin any breach or default of this contract.
The undersigned agrees to pay all costs, expenses and attorney's fees incurred by the Company in connection
with the enforcement of the obligations of the undersigned. The undersigned also agrees to .pay the Company all
profits, revenues and income or benefits derived by or accruing to the undersigned resulting from the
undersigned's breach of the obligations hereunder. This Agreement shall be binding upon the undersigned, all
employees, agents, officers, directors, shareholders, partners and representatives of the undersigned and all
heirs, successors and assigns of the foregoing.
Finally, if undersigned breaches any terms of this contract, forms of compensation including
commissions and incentives will be forfeited.56 (Emphases and underscoring supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating that Babiano is barred to "work for
whatsoever capacity x x x with any person whose business is in direct competition with [CPI] while [he is] employed
and for a period of one year from date of [his] resignation or termination from the company," it also expressly
provided in no uncertain terms that should Babiano "[breach] any term of [the employment contract], forms of
compensation including commissions and incentives will be forfeited." Here, the contracting parties - namely Babiano
on one side, and CPI as represented by its COO-Vertical, John Victor R. Antonio, and Director for Planning and
Controls, Jose Carlo R. Antonio, on the other - indisputably wanted the said clause to be effective even during the
existence of the employer-employee relationship between Babiano and CPI, thereby indicating their intention to be
bound by such clause by affixing their respective signatures to the employment contract. More significantly, as CPI's
Vice President for Sales, Babiano held a highly sensitive and confidential managerial position as he "was tasked,
among others, to guarantee the achievement of agreed sales targets for a project and to ensure that his team has a
qualified and competent manpower resources by conducting recruitment activities, training sessions, sales rallies,
motivational activities, and evaluation programs."57 Hence, to allow Babiano to freely move to direct competitors
during and soon after his employment with CPI would make the latter's trade secrets vulnerable to exposure,
especially in a highly competitive marketing environment. As such, it is only reasonable that CPI and Babiano agree
on such stipulation in the latter's employment contract in order to afford a fair and reasonable protection to
CPI.58 Indubitably, obligations arising from contracts, including employment contracts, have the force of law between
the contracting parties and should be complied with in good faith.59 Corollary thereto, parties are bound by the
stipulations, clauses, terms, and conditions they have agreed to, provided that these stipulations, clauses, terms, and
conditions are not contrary to law, morals, public order or public policy,60 as in this case.
Therefore, the CA erred in limiting the "Confidentiality of Documents and Non-Compete Clause" only to acts done
after the cessation of the employer-employee relationship or to the "post-employment" relations of the parties. As
clearly stipulated, the parties wanted to apply said clause during the pendency of Babiano' s employment, and CPI
correctly invoked the same before the labor tribunals to resist the farmer's claim for unpaid commissions on account
of his breach of the said clause while the employer-employee relationship between them still subsisted. Hence, there
is now a need to determine whether or not Babiano breached said clause while employed by CPI, which would then
resolve the issue of his entitlement to his unpaid commissions.
A judicious review of the records reveals that in his resignation letter61 dated February 25, 2009, Babiano
categorically admitted to CPI Chairman Jose Antonio that on February 12, 2009, he sought employment from First
Global, and five (5) days later, was admitted thereto as vice president. From the foregoing, it is evidently clear that
when he sought and eventually accepted the said position with First Global, he was still employed by CPI as he has
not formally resigned at that time. Irrefragably, this is a glaring violation of the "Confidentiality of Documents and
Non-Compete Clause" in his employment contract with CPI, thus, justifying the forfeiture of his unpaid commissions.
II.
Anent the nature of Concepcion' s engagement, based on case law, the presence of the following elements evince the
existence of an employer-employee relationship: (a)  the power to hire, i.e.,  the selection and engagement of the
employee; (b)  the payment of wages; (c) the power of dismissal; and (d)  the employer's power to control the
employee's conduct, or the so called "control test." The control test is commonly regarded as the most important
indicator of the presence or absence of an employer-employee relationship. 62 Under this test, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to control not only the
end achieved, but also the manner and means to be used in reaching that end.63
Guided by these parameters, the Court finds that Concepcion was an employee of CPI considering that: (a)  CPI
continuously hired and promoted Concepcion from October 2002 until her resignation on February 23, 2009,64 thus,
showing that CPI exercised the power of selection and engagement over her person and that she performed functions
that were necessary and desirable to the business of CPI; (b)  the monthly "subsidy" and cash incentives that
Concepcion was receiving from CPI are actually remuneration in the concept of wages as it was regularly given to her
on a monthly basis without any qualification, save for the "complete submission of documents on what is a sale
policy";65 (c) CPI had the power to discipline or even dismiss Concepcion as her engagement contract with CPI
expressly conferred upon the latter "the right to discontinue [her] service anytime during the Eeriod of engagement
should [she] fail to meet the performance standards,"66 among others, and that CPI actually exercised such power to
dismiss when it accepted and approved Concepcion' s resignation letter; and most importantly, (d)  as aptly pointed
out by the CA, CPI possessed the power of control over Concepcion because in the performance of her duties as
Project Director - particularly in the conduct of recruitment activities, training sessions, and skills development of
Sales Directors - she did not exercise independent discretion thereon, but was still subject to the direct supervision of
CPI, acting through BabiaNo. 67
Besides, while the employment agreement of Concepcion was denominated as a "Contract of Agency for Project
Director," it should be stressed that the existence of employer-employee relations could not be negated by the mere
expedient of repudiating it in a contract. In the case of Insular Life Assurance Co., Ltd. v. NLRC, 68 it was ruled that
one's employment status is defined and prescribed by law, and not by what the parties say it should be, viz.:
It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating
it in the management contract and providing therein that the "employee" is an independent contractor when the
terms of the agreement clearly show otherwise. For, the employment status of a person is defined and
prescribed by law and not by what the parties say it should be . In determining the status of the
management contract, the "four-fold test" on employment earlier mentioned has to be applied.69 (Emphasis and
underscoring supplied)
Therefore, the CA correctly ruled that since there exists an employer-employee relationship between Concepcion and
CPI, the labor tribunals correctly assumed jurisdiction over her money claims.
III.
20
Finally, CPI contends that Concepcion's failure to assail the NLRC ruling awarding her the amount of P470,754.62
representing unpaid commissions rendered the same final and binding upon her. As Such, the CA erred in increasing
her monetary award to P591,953.05.70
The contention lacks merit.
As a general rule, a party who has not appealed cannot obtain any affirmative relief other than the one granted in
the appealed decision.1avvphi1 However, jurisprudence admits an exception to the said rule, such as when strict
adherence thereto shall result in the impairment of the substantive rights of the parties concerned. In Global
Resource for Outsourced Workers, Inc. v. Velasco:71
Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to it and can no longer
obtain from the appellate court any affirmative relief other than what was already granted under said
judgment. However, when strict adherence to such technical rule will impair a substantive right, such as
that of an illegally dismissed employee to monetary compensation as provided by law, then equity
dictates that the Court set aside the rule to pave the way for a full and just adjudication of the
case. 72 (Emphasis and underscoring supplied)
In the present case, the CA aptly pointed out that the NLRC failed to account for all the unpaid commissions due to
Concepcion for the period of August 9, 2008 to August 8, 201l.73 Indeed, Concepcion's right to her earned
commissions is a substantive right which cannot be impaired by an erroneous computation of what she really is
entitled to. Hence, following the dictates of equity and in order to arrive at a complete and just resolution of the case,
and avoid a piecemeal dispensation of justice over the same, the CA correctly recomputed Concepcion' s unpaid
commissions, notwithstanding her failure to seek a review of the NLRC's computation of the same.
In sum, the Court thus holds that the commissions of Babiano were properly forfeited for violating the
"Confidentiality of Documents and Non-Compete Clause." On the other hand, CPI remains liable for the unpaid
commissions of Concepcion in the sum of P591,953.05.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2015 and the Resolution dated
October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953 are hereby MODIFIED in that the
commissions of respondent Edwin J. Babiano are deemed FORFEITED. The rest of the CA Decision stands.
G.R. No. 124382           August 16, 1999
PASTOR DIONISIO V. AUSTRIA, petitioner,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL PHILIPPINE
UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS, ELDER HECTOR V. GAYARES,
PASTORS REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON
BUHAT, ISACHAR GARSULA, ELISEO DOBLE, PORFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR.
RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR.
ELEUTERIO LOBITANA, respondents.
Subject of the instant petition for certiorari under Rule 65 of the Rules of Court is the Resolution 1 of public
respondent National Labor Relations Commission (the "NLRC"), rendered on 23 January 1996, in NLRC Case No. V-
0120-93, entitled "Pastor Dionisio V. Austria vs. Central Philippine Union Mission Corporation of Seventh Day
Adventists, et al.," which dismissed the case for illegal dismissal filed by the petitioner against private respondents
for lack of jurisdiction.1âwphi1.nêt
Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists (hereinafter referred
to as the "SDA") is a religious corporation duly organized and existing under Philippine law and is represented in this
case by the other private respondents, officers of the SDA. Petitioner, on the other hand, was a Pastor of the SDA
until 31 October 1991, when his services were terminated.
The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight (28) years from
1963 to 1991.2 He began his work with the SDA on 15 July 1963 as a literature evangelist, selling literature of the
SDA over the island of Negros. From then on, petitioner worked his way up the ladder and got promoted several
times. In January, 1968, petitioner became the Assistant Publishing Director in the West Visayan Mission of the SDA.
In July, 1972, he was elevated to the position of Pastor in the West Visayan Mission covering the island of Panay, and
the provinces of Romblon and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989, petitioner
was promoted as District Pastor of the Negros Mission of the SDA and was assigned at Sagay, Balintawak and
Toboso, Negros Occidental, with twelve (12) churches under his jurisdiction. In January, 1991, petitioner was
transferred to Bacolod City. He held the position of district pastor until his services were terminated on 31 October
1991.
On various occasions from August up to October, 1991, petitioner received several communications 3 from Mr.
Eufronio Ibesate, the treasurer of the Negros Mission asking him to admit accountability and responsibility for the
church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his district which amounted to P15,078.10,
and to remit the same to the Negros Mission.
In his written explanation dated 11 October 1991,4 petitioner reasoned out that he should not be made accountable
for the unremitted collections since it was private respondents Pastor Gideon Buhat and Mr. Eufronio Ibesate who
authorized his wife to collect the tithes and offerings since he was very sick to do the collecting at that time.
Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor Buhat, the president of
the Negros Mission. During said call, petitioner tried to persuade Pastor Buhat to convene the Executive Committee
for the purpose of settling the dispute between him and the private respondent, Pastor David Rodrigo. The dispute
between Pastor Rodrigo and petitioner arose from an incident in which petitioner assisted his friend, Danny Diamada,
to collect from Pastor Rodrigo the unpaid balance for the repair of the latter's motor vehicle which he failed to pay to
Diamada.5 Due to the assistance of petitioner in collecting Pastor Rodrigo's debt, the latter harbored ill-feelings
against petitioner. When news reached petitioner that Pastor Rodrigo was about to file a complaint against him with
the Negros Mission, he immediately proceeded to the office of Pastor Buhat on the date abovementioned and asked
the latter to convene the Executive Committee. Pastor Buhat denied the request of petitioner since some committee
members were out of town and there was no quorum. Thereafter, the two exchanged heated arguments. Petitioner
then left the office of Pastor Buhat. While on his way out, petitioner overheard Pastor Buhat saying, "Pastor daw
inisog na ina iya (Pador you are talking tough)." 6 Irked by such remark, petitioner returned to the office of Pastor
Buhat, and tried to overturn the latter's table, though unsuccessfully, since it was heavy. Thereafter, petitioner
banged the attaché case of Pastor Buhat on the table, scattered the books in his office, and threw the
phone.7 Fortunately, private respondents Pastors Yonilo Leopoldo and Claudio Montaño were around and they pacified
both Pastor Buhat and petitioner.
On 17 October 1991, petitioner received a letter8 inviting him and his wife to attend the Executive Committee
meeting at the Negros Mission Conference Room on 21 October 1991, at nine in the morning. To be discussed in the
meeting were the non-remittance of church collection and the events that transpired on 16 October 1991. A fact-
finding committee was created to investigate petitioner. For two (2) days, from October 21 and 22, the fact-finding
21
committee conducted an investigation of petitioner. Sensing that the result of the investigation might be one-sided,
petitioner immediately wrote Pastor Rueben Moralde, president of the SDA and chairman of the fact-finding
committee, requesting that certain members of the fact-finding committee be excluded in the investigation and
resolution of the case.9 Out of the six (6) members requested to inhibit themselves from the investigation and
decision-making, only two (2) were actually excluded, namely: Pastor Buhat and Pastor Rodrigo. Subsequently, on
29 October 1991, petitioner received a letter of dismissal 10 citing misappropriation of denominational funds, willful
breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of an offense against the
person of employer's duly authorized representative, as grounds for the termination of his services.
Reacting against the adverse decision of the SDA, petitioner filed a complaint 11 on 14 November 1991, before the
Labor Arbiter for illegal dismissal against the SDA and its officers and prayed for reinstatement with backwages and
benefits, moral and exemplary damages and other labor law benefits.
On 15 February 1993, Labor Arbiter Cesar D. Sideño rendered a decision in favor of petitioner, the dispositive portion
of which reads thus:
WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE
SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its officers, respondents herein, are hereby ordered to immediately
reinstate complainant Pastor Dionisio Austria to his former position as Pastor of Brgy. Taculing, Progreso and
Banago, Bacolod City, without loss of seniority and other rights and backwages in the amount of ONE HUNDRED
FIFTEEN THOUSAND EIGHT HUNDRED THIRTY PESOS (P115,830.00) without deductions and qualificatioons.
Respondent CPUMCSDA is further ordered to pay complainant the following:
A. 13th month pay — P 21,060.00
B. Allowance — P 4,770.83
C. Service Incentive
Leave Pay — P 3,461.85
D. Moral Damages — P 50,000.00
E. Exemplary
Damages — P 25,000.00
F. Attorney's Fee — P 22,012.27
The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor Labor Relations
Commission, Fourth Division, Cebu City. In a decision, dated 26 August 1994, the NLRC vacated the findings of the
Labor Arbiter. The decretal portion of the NLRC decision states:
WHEREFORE, the Decision appealed from is hereby VACATED and a new one ENTERED dismissing this case for
want of merit.
Petitioner filed a motion for reconsideration of the above-named decision. On 18 July 1995, the NLRC issued a
Resolution reversing its original decision. The dispositive portion of the resolution reads:
WHEREFORE, premises considered, Our decision dated August 26, 1994 is VACATED and the decision of the Labor
Arbiter dated February 15, 1993 is REINSTATED.
In view of the reversal of the original decision of the NLRC, the SDA filed a motion for reconsideration of the above
resolution. Notable in the motion for reconsideration filed by private respondents is their invocation, for the first time
on appeal, that the Labor Arbiter has no jurisdiction over the complaint filed by petitioner due to the constitutional
provision on the separation of church and state since the case allegedly involved an ecclesiastical affair to which the
State cannot interfere.
The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the argument posed by
private respondents and, accordingly, dismissed the complaint of petitioner. The dispositive portion of the NLRC
resolution dated 23 January 1996, subject of the present petition, is as follows:
WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby granted. Accordingly, this
case is hereby DISMISSED for lack of jurisdiction.
Hence, the recourse to this Court by petitioner.
After the filing of the petition, the Court ordered the Office of the Solicitor General (the "OSG") to file its comment on
behalf of public respondent NLRC. Interestingly, the OSG filed a manifestation and motion in lieu of
comment16 setting forth its stand that it cannot sustain the resolution of the NLRC. In its manifestation, the OSG
submits that the termination of petitioner from his employment may be questioned before the NLRC as the same is
secular in nature, not ecclesiastical. After the submission of memoranda of all the parties, the case was submitted for
decision.
The issues to be resolved in this petition are:
1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint filed by petitioner against
the SDA;
2) Whether or not the termination of the services of petitioner is an ecclesiastical affair, and, as such, involves the
separation of church and state; and
3) Whether or not such termination is valid.
The first two issues shall be resolved jointly, since they are related.
Private respondents contend that by virtue of the doctrine of separation of church and state, the Labor Arbiter and
the NLRC have no jurisdiction to entertain the complaint filed by petitioner. Since the matter at bar allegedly involves
the discipline of a religious minister, it is to be considered a purely ecclesiastical affair to which the State has no right
to interfere.
The contention of private respondents deserves scant consideration. The principle of separation of church and state
finds no application in this case.
The rationale of the principle of the separation of church and state is summed up in the familiar saying, "Strong
fences make good-neighbors."17 The idea advocated by this principle is to delineate the boundaries between the two
institutions and thus avoid encroachments by one against the other because of a misunderstanding of the limits of
their respective exclusive jurisdictions.18 The demarcation line calls on the entities to "render therefore unto Ceasar
the things that are Ceasar's and unto God the things that are God's."19 While the state is prohibited from interfering
in purely ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters.20
The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from taking cognizance
of the same. An ecclesiastical affair is "one that concerns doctrine, creed, or form of worship of the church, or the
adoption and enforcement within a religious association of needful laws and regulations for the government of the
membership, and the power of excluding from such associations those deemed unworthy of membership.21 Based on
this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to
matters of faith, religious doctrines, worship and governance of the congregation. To be concrete, examples of this
so-called ecclesiastical affairs to which the State cannot meddle are proceedings for excommunication, ordinations of
religious ministers, administration of sacraments and other activities with attached religious significance. The case at
bar does not even remotely concern any of the abovecited examples. While the matter at hand relates to the church
and its religious minister it does not ipso facto give the case a religious significance. Simply stated, what is involved
22
here is the relationship of the church as an employer and the minister as an employee. It is purely secular and has
no relation whatsoever with the practice of faith, worship or doctrines of the church. In this case, petitioner was not
ex-communicated or expelled from the membership of the SDA but was terminated from employment. Indeed, the
matter of terminating an employee, which is purely secular in nature, is different from the ecclesiastical act of
expelling a member from the religious congregation.
As pointed out by the OSG in its memorandum, the grounds invoked for petitioner's dismissal, namely:
misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of
duties and commission of an offense against the person of his employer's duly authorized representative, are all
based on Article 282 of the Labor Code which enumerates the just causes for termination of employment. 22 By this
alone, it is palpable that the reason for petitioner's dismissal from the service is not religious in nature. Coupled with
this is the act of the SDA in furnishing NLRC with a copy of petitioner's letter of termination. As aptly stated by the
OSG, this again is an eloquent admission by private respondents that NLRC has jurisdiction over the case. Aside from
these, SDA admitted in a certification23 issued by its officer, Mr. Ibesate, that petitioner has been its employee for
twenty-eight (28) years. SDA even registered petitioner with the Social Security System (SSS) as its employee. As a
matter of fact, the worker's records of petitioner have been submitted by private respondents as part of their
exhibits. From all of these it is clear that when the SDA terminated the services of petitioner, it was merely exercising
its management prerogative to fire an employee which it believes to be unfit for the job. As such, the State, through
the Labor Arbiter and the NLRC, has the right to take cognizance of the case and to determine whether the SDA, as
employer, rightfully exercised its management prerogative to dismiss an employee. This is in consonance with the
mandate of the Constitution to afford full protection to labor.
Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to include
religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on post-employment states
that "the provisions of this Title shall apply to all establishments or undertakings, whether for profit or not."
Obviously, the cited article does not make any exception in favor of a religious corporation. This is made more
evident by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the
Termination of Employment and Retirement, categorically includes religious institutions in the coverage of the law, to
wit:
Sec. 1. Coverage. — This Rule shall apply to all establishments and undertakings, whether operated for profit or
not, including educational, medical, charitable and religious institutions and organizations, in cases of regular
employment with the exception of the Government and its political subdivisions including government-owned or
controlled corporations.24
With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of church
and state to avoid its responsibilities as an employer under the Labor Code.
Finally, as correctly pointed out by petitioner, private respondents are estopped from raising the issue of lack of
jurisdiction for the first time on appeal. It is already too late in the day for private respondents to question the
jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully participated in the trials and hearings of the
case from start to finish. The Court has already ruled that the active participation of a party against whom the action
war brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial body where the action
is pending, is tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the case
and will bar said party from later on impugning the court or body's jurisdiction. 25 Thus, the active participation of
private respondents in the proceedings before the Labor Arbiter and the NLRC mooted the question on jurisdiction.
The jurisdictional question now settled, we shall now proceed to determine whether the dismissal of petitioner was
valid.
At the outset, we note that as a general rule, findings of fact of administrative bodies like the NLRC are binding upon
this Court. A review of such findings is justified, however, in instances when the findings of the NLRC differ from
those of the labor arbiter, as in this case.26 When the findings of NLRC do not agree with those of the Labor Arbiter,
this Court must of necessity review the records to determine which findings should be preferred as more comfortable
to the evidentiary facts.27
We turn now to the crux of the matter. In termination cases, the settled rule is that the burden of proving that the
termination was for a valid or authorized cause rests on the employer.28 Thus, private respondents must not merely
rely on the weaknesses of petitioner's evidence but must stand on the merits of their own defense.
The issue being the legality of petitioner's dismissal, the same must be measured against the requisites for a valid
dismissal, namely: (a) the employee must be afforded due process, i.e., he must be given an opportunity to be heard
and to defend himself, and; (b) the dismissal must be for a valid cause as provided in Article 282 of the Labor
Code.29 Without the concurrence of this twin requirements, the termination would, in the eyes of the law, be illegal.30
Before the services of an employee can be validly terminated, Article 277 (b) of the Labor Code and Section 2, Rule
XXIII, Book V of the Rules Implementing the Labor Code further require the employer to furnish the employee with
two (2) written notices, to wit: (a) a written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to explain his side; and, (b) a written
notice of termination served on the employee indicating that upon due consideration of all the circumstances,
grounds have been established to justify his termination.
The first notice, which may be considered as the proper charge, serves to apprise the employee of the particular acts
or omissions for which his dismissal is sought.31 The second notice on the other hand seeks to inform the employee of
the employer's decision to dismiss him.32 This decision, however, must come only after the employee is given a
reasonable period from receipt of the first notice within which to answer the charge and ample opportunity to be
heard and defend himself with the assistance of a representative, if he so desires.33 This is in consonance with the
express provision of the law on the protection to labor and the broader dictates of procedural due process. 34 Non-
compliance therewith is fatal because these requirements are conditions sine qua non before dismissal may be validly
effected.35
Private respondent failed to substantially comply with the above requirements. With regard to the first notice, the
letter,36 dated 17 October 1991, which notified petitioner and his wife to attend the meeting on 21 October 1991,
cannot be construed as the written charge required by law. A perusal of the said letter reveals that it never
categorically stated the particular acts or omissions on which petitioner's impending termination was grounded. In
fact, the letter never even mentioned that petitioner would be subject to investigation. The letter merely mentioned
that petitioner and his wife were invited to a meeting wherein what would be discussed were the alleged unremitted
church tithes and the events that transpired on 16 October 1991. Thus, petitioner was surprised to find out that the
alleged meeting turned out to be an investigation. From the tenor of the letter, it cannot be presumed that petitioner
was actually on the verge of dismissal. The alleged grounds for the dismissal of petitioner from the service were only
revealed to him when the actual letter of dismissal was finally issued. For this reason, it cannot be said that
petitioner was given enough opportunity to properly prepare for his defense. While admittedly, private respondents
complied with the second requirement, the notice of termination, this does not cure the initial defect of lack of the
proper written charge required by law.
In the letter of termination,37 dated 29 October 1991, private respondents enumerated the following as grounds for
the dismissal of petitioner, namely: misappropriation of denominational funds, willful breach of trust, serious
misconduct, gross and habitual neglect of duties, and commission of an offense against the person of employer's duly
authorized representative. Breach of trust and misappropriation of denominational funds refer to the alleged failure of
23
petitioner to remit to the treasurer of the Negros Mission tithes, collections and offerings amounting to P15,078.10
which were collected by his wife, Mrs. Thelma Austria, in the churches under his jurisdiction. On the other hand,
serious misconduct and commission of an offense against the person of the employer's duly authorized
representative pertain to the 16 October 1991 incident wherein petitioner allegedly committed an act of violence in
the office of Pastor Gideon Buhat. The final ground invoked by private respondents is gross and habitual neglect of
duties allegedly committed by petitioner.
We cannot sustain the validity of dismissal based on the ground of breach of trust. Private respondents allege that
they have lost their confidence in petitioner for his failure, despite demands, to remit the tithes and offerings
amounting to P15,078.10, which were collected in his district. A careful study of the voluminous records of the case
reveals that there is simply no basis for the alleged loss of confidence and breach of trust. Settled is the rule that
under Article 282 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is done
intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.38 It must rest on substantial grounds and not on the employer's
arbitrariness, whims, caprices or suspicion; otherwise the employee would eternally remain at the mercy of the
employer.39 It should be genuine and not simulated. 40 This ground has never been intended to afford an occasion for
abuse, because of its subjective nature. The records show that there were only six (6) instances when petitioner
personally collected and received from the church treasurers the tithes, collections, and donations for the
church.41 The stenographic notes on the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a
witness for private respondents, show that Pastor Austria was able to remit all his collections to the treasurer of the
Negros Mission.42
Though private respondents were able to establish that petitioner collected and received tithes and donations several
times, they were notable to establish that petitioner failed to remit the same to the Negros Mission, and that he
pocketed the amount and used it for his personal purpose. In fact, as admitted by their own witness, Naomi
Geniebla, petitioner remitted the amounts which he collected to the Negros Mission for which corresponding receipts
were issued to him. Thus, the allegations of private respondents that petitioner breached their trust have no leg to
stand on.
In a vain attempt to support their claim of breach of trust, private respondents try to pin on petitioner the alleged
non-remittance of the tithes collected by his wife. This argument deserves little consideration. First of all, as proven
by convincing and substantial evidence consisting of the testimonies of the witnesses for private respondents who are
church treasurers, it was Mrs. Thelma Austria who actually collected the tithes and donations from them, and, who
failed to remit the same to the treasurer of the Negros Mission. The testimony of these church treasurers were
corroborated and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA. Hence, in the absence of
conspiracy and collusion, which private respondents failed to demonstrate, between petitioner and his wife, petitioner
cannot be made accountable for the alleged infraction committed by his wife. After all, they still have separate and
distinct personalities. For this reason, the Labor Arbiter found it difficult to see the basis for the alleged loss of
confidence and breach of trust. The Court does not find any cogent reason, therefore, to digress from the findings of
the Labor Arbiter which is fully supported by the evidence on record.
With respect to the grounds of serious misconduct and commission of an offense against the person of the
employer's duly authorized representative, we find the same unmeritorious and, as such, do not warrant petitioner's
dismissal from the service.
Misconduct has been defined as improper or wrong conduct. It is the transgression of some established and definite
rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere
error in judgment.43 For misconduct to be considered serious it must be of such grave and aggravated character and
not merely trivial or unimportant.44 Based on this standard, we believe that the act of petitioner in banging the
attaché case on the table, throwing the telephone and scattering the books in the office of Pastor Buhat, although
improper, cannot be considered as grave enough to be considered as serious misconduct. After all, as correctly
observed by the Labor Arbiter, though petitioner committed damage to property, he did not physically assault Pastor
Buhat or any other pastor present during the incident of 16 October 1991. In fact, the alleged offense committed
upon the person of the employer's representatives was never really established or proven by private respondents.
Hence, there is no basis for the allegation that petitioner's act constituted serious misconduct or that the same was
an offense against the person of the employer's duly authorized representative. As such, the cited actuation of
petitioner does not justify the ultimate penalty of dismissal from employment. While the Constitution does condone
wrongdoing by the employee, it nevertheless urges a moderation of the sanctions that may be applied to him in light
of the many disadvantages that weigh heavily on him like an albatross on his neck.45 Where a penalty less punitive
would suffice, whatever missteps may have been committed by the worker ought not be visited with a consequence
so severe such as dismissal from employment.46 For the foregoing reasons, we believe that the minor infraction
committed by petitioner does not merit the ultimate penalty of dismissal.
The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect of duties, does
not require an exhaustive discussion. Suffice it to say that all private respondents had were allegations but not proof.
Aside from merely citing the said ground, private respondents failed to prove culpability on the part of petitioner. In
fact, the evidence on record shows otherwise. Petitioner's rise from the ranks disclose that he was actually a hard-
worker. Private respondents' evidence,47 which consisted of petitioner's Worker's Reports, revealed how petitioner
travelled to different churches to attend to the faithful under his care. Indeed, he labored hard for the SDA, but, in
return, he was rewarded with a dismissal from the service for a non-existent cause.
In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated from service
without just or lawful cause. Having been illegally dismissed, petitioner is entitled to reinstatement to his former
position without loss of seniority right48 and the payment of full backwages without any deduction corresponding to
the period from his illegal dismissal up to actual reinstatement.46
WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of public respondent National Labor
Relations Commission, rendered on 23 January 1996, is NULLIFIED and SET ASIDE. The Decision of the Labor
Arbiter, dated 15 February 1993, is REINSTATED and hereby AFFIRMED.1âwphi1.nêt
[ G.R. No. 224521, February 17, 2020 ]
24
BISHOP SHINJI AMARI OF ABIKO BAPTIST CHURCH, REPRESENTED BY SHINJI AMARI AND MISSIONARY
BAPTIST INSTITUTE AND SEMINARY, REPRESENTED BY ITS DIRECTOR JOEL P. NEPOMUCENO,
PETITIONERS, V. RICARDO R. VILLAFLOR, JR., RESPONDENT.
This is an appeal by certiorari seeking to reverse and set aside the October 27, 2015 Decision1 and April 26, 2016
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 08067. The CA reversed and set aside the July 15, 2013
Decision3 and September 30, 2013 Resolution4 of the National Labor Relations Commission (NLRC) and reinstated
the February 12, 2013 Decision5 of the Labor Arbiter (LA) with instructions to the latter to re-compute the monetary
awards of backwages, separation pay, and attorney's fees based on the date of finality of the CA's Decision.
Antecedents
The controversy stemmed from the Letter dated November 24, 20116 where Ricardo R. Villaflor, Jr. (respondent)
was informed of his removal as a missionary of the Abiko Baptist Church, cancellation of his American Baptist
Association (ABA) recommendation as a national missionary, and exclusion of his membership in the Abiko Baptist
Church in Japan.
Respondent believed that he was dismissed from his employment without the benefit of due process and valid cause;
thus, he filed a complaint before the NLRC. He claimed that he was illegally dismissed from his work as
missionary/minister because he refused to sign a resignation letter and vacate the property where he had already
constructed a house and church building. Consequently, his salary was cut off.7
For their part, petitioners alleged that in 1999, respondent became a missionary sponsored by Bishop Shinji Amari of
the Abiko Baptist Church (BSAABC). Respondent was appointed as an instructor at the Shinji Amari & Missionary
Baptist Institute and Seminary (MBIS; petitioner) effective June 1999.8 However, a Certification issued by MBIS
Director Joel Nepomuceno states that sometime during the schoolyear 2006-2007, respondent told Bishop Shinji
Amari that he cannot continue teaching due to the distance between San Carlos City, where his mission work was,
and MBIS, Minglanilla, Cebu. His appointment as volunteer teacher was thereafter cancelled.9
Petitioners further claimed that since the Baptist Church was already successfully organized and established at San
Carlos City, respondent's mission was already finished. Thus, BSAABC ordered him to be transferred to other areas of
mission work; but in defiance to the order, respondent refused without justifiable reason. After investigation, it was
discovered that respondent's refusal to leave San Carlos City was because he had built his personal house on the
land owned by BSAABC without the latter's consent. On November 20, 2011, after earnest efforts of negotiating with
respondent and giving him adequate opportunity to ventilate his side, the members of the BSAABC unanimously
voted to remove him as missionary and cancel his ABA recommendation. He was informed of the decision in the
November 24, 2011 Letter. In the same letter, BSAABC demanded respondent to vacate the property as soon as
possible, and offered to buy the house erected thereon at the estimated cost of building materials.10
This prompted respondent to file a Complaint for Illegal Dismissal on September 10, 2012.11
The LA Ruling
The LA found respondent's dismissal illegal. Petitioners were ordered to pay backwages, separation pay, 13th month
pay, moral and exemplary damages, and attorney's fees.12
The LA held that it has jurisdiction over the matter considering that respondent was appointed as instructor of MBIS.
His being a member of the Abiko Baptist Church of Japan was only incidental to his main duties and responsibilities
as instructor.13 Respondent's Appointment Paper was considered sufficient evidence to establish the employer-
employee relationship. It further ruled that considering respondent had attained regular status, he cannot be
dismissed unless for a cause. The November 24, 2011 Letter was, in effect, a way of terminating the employment of
respondent, hence, illegal. 14
The NLRC Ruling
The NLRC reversed the LA's ruling and dismissed the complaint on the ground of lack of jurisdiction. It held simply
that the expulsion of respondent from their church was an ecclesiastical affair, and as such, has no remedy in civil
courts.15
The CA Ruling
On appeal to the CA, the NLRC's Decision and Resolution were reversed and set aside. Accordingly, the LA's ruling
was reinstated.
The CA ruled that both the LA and NLRC had jurisdiction over the matter. It found that the November 24, 2011 Letter
served as: (1) notice for the termination of respondent's employment, and (2) exclusion of his membership in the
church. The tenor of the letter itself implicitly demonstrated that these incidents were distinct from each other.
Respondent's status as a missionary on one hand, and his membership in the church on the other, were separate
matters. The former was a purely secular matter, and the latter was an ecclesiastical affair; and one does not
necessarily include the other.16
The CA recognized that there may be a scenario where a minister is removed from his employment as a consequence
of his exclusion from the church. But in such situation, the church, as employer, can and should deal with the
employment aspect separately and observe due process.17
It also held that respondent was an employee of BSAABC and MBIS because of the existence of the four (4) elements
which determine an employment relationship. First, as to the selection and engagement of the employee, the CA said
that the Appointment Paper was credible evidence of BSAABC and MBIS' power to select and engage him as an
employee. Second, the payment of wages was shown through the "love gifts" given to respondent who was even
described as a "salaried missionary." Third, the power of control was shown in the duties enumerated in the
Appointment Paper, together with BSAABC's evident power to order him to areas of mission work. Finally, the
November 24, 2011 Letter clearly established the power of dismissal.18
The CA found no just cause for the termination of respondent's employment. It dismissed the claim of BSAABC that
respondent disobeyed it by building his own house, instead of a church, on its property without its consent. The
Certification19 presented by respondent disproves the claim that he was not authorized to build his own house
thereon. It also appears that any misunderstanding was already settled between the parties citing the
Agreement20 between respondent and BSAABC dated February 23, 2010. Also, there was no credible proof of
respondent's supposed refusal to be reassigned to another area.21
Issue
Petitioners raise the sole issue of whether the CA erred in ruling that respondent was illegally dismissed despite the
fact that the dispute involves an ecclesiastical affair as the latter was a member of the Abiko Baptist Church.22
The Court's Ruling
25
At the outset, the Court finds the need to distinguish a purely ecclesiastical affair from a secular matter. While the
State is prohibited from interfering in purely ecclesiastical affairs, the Church is likewise barred from meddling in
purely secular matters.23
An ecclesiastical affair is '"one that concerns doctrine, creed, or form of worship of the church, or the adoption and
enforcement within a religious association of needful laws and regulations for the government of the membership,
and the power of excluding from such associations those deemed unworthy of membership.' Based on this definition,
an ecclesiastical affair involves the relationship between the church and its members and relate[s] to matters of
faith, religious doctrines, worship and governance of the congregation. To be concrete, examples of these so-called
ecclesiastical affairs in which the State cannot meddle are proceedings for excommunication, ordinations of religious
ministers, administration of sacraments and other activities with attached religious significance."24 Secular matters,
on the other hand, have no relation whatsoever with the practice of faith, worship or doctrines of the church.25
In this case, there were three (3) acts which were decided upon by the Abiko Baptist Church against respondent in
its November 24, 2011 Letter, to wit: (1) removal as a missionary of Abiko Baptist Church; (2) cancellation of the
ABA recommendation as a national missionary; and (3) exclusion of membership from Abiko Baptist Church in Japan.
To the mind of the Court, the exclusion of membership from Abiko Baptist Church in Japan and the cancellation of
ABA recommendation as a national missionary are ecclesiastical matters which this jurisdiction will not touch upon.
These matters are exclusively determined by the church in accordance with the standards they have set. The Court
cannot meddle in these affairs since the church has the discretion to choose members who live up to their religious
standards. The ABA recommendation as a national missionary is likewise discretionary upon the church since it is a
matter of governance of congregation.
We are left to determine whether respondent's removal as a missionary of Abiko Baptist Church is an ecclesiastical
affair.
Indeed, the matter of terminating an employee, which is purely secular in nature, is different from the ecclesiastical
act of expelling a member from the religious congregation.26 Petitioners insist that this case is an ecclesiastical affair
as there is no employer-employee relationship between BSAABC/MBIS and respondent.
In order to settle the issue, it is imperative to determine the existence of an employer-employee relationship. We
have previously ruled that "[i]n an illegal dismissal case, the onus probandi rests on the employer to prove that its
dismissal of an employee was for a valid cause. However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. Thus, in filing a complaint before the LA for illegal
dismissal, based on the premise that he was an employee of [petitioners], it is incumbent upon [respondent] to
prove the employer-employee relationship by substantial evidence."27
Although based on the Rule 45 parameters, the Court cannot generally touch factual matters, We allow certain
exceptions in the exercise of our discretionary appellate jurisdiction, all in the interest of giving substance and
meaning to the justice We are sworn to uphold and give primacy to.28 Thus, We deem it appropriate to re-examine
the records and analyze the appreciation on of evidence by the lower tribunals.
The lower tribunals used the "four-fold test" in determining the existence of an employer-employee relationship, to
wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the power to control the employee's conduct.29
First, the LA and the CA anchored their findings of employer-employee relationship on the Appointment Paper
presented by respondent. This evidence, however, refers to his appointment as an instructor, as well as his duties
and responsibilities as such; but, to emphasize, respondent as removed as a missionary of Abiko Baptist Church, not
as an instructor of MBIS. There is no evidence or allegation to show that respondent's status as a missionary is the
same or dependent on his appointment as an instructor of MBIS. True, the removal as a missionary may have
affected respondent's status as instructor of MBIS, but the Court is not convinced that there was an illegal dismissal.
In this relation, We find the statement of the LA, that respondent's membership with Abiko Baptist Church of Japan
as merely incidental to his main duties and responsibilities as an instructor,30 misplaced. On the contrary, it is more
appropriate to say that being an instructor of MBIS was part of respondent's mission work as a missionary/minister
of BSAABC.
Respondent's removal as a missionary of Abiko Baptist Church is different from his status as an instructor of MBIS.
The Mission Policy Agreement31 shows that the mission was accepted by respondent as early as September 15,
1998, while the appointment as an instructor was made on a different instrument, an Appointment Paper made
effective in June 1999.32 These two (2) instruments establish two (2) different positions held by respondent, and
means that being a missionary of BSAABC is separate from being an instructor of MBIS, though they may be
completely related.
Be that as it may, petitioners' unrebutted claim that respondent voluntarily excused himself sometime in 2007 from
teaching in MBIS, due to the distance of the school from his missionary work in San Carlos City,33 raises doubt on
the allegation of illegal dismissal.
Second, We do not find in the records concrete evidence of the alleged monthly compensation of respondent
amounting to $550. Respondent is not even consistent in claiming the exact amount of his supposed salary as he
claims he was receiving $650 in his Motion for Reconsideration34 with the NLRC and Petition35 before the CA.
Although petitioners do not deny that respondent was receiving "love gifts" in the amount of $550, they aver that
these came from ABA and Abiko Baptist Church in Japan. Respondent also admitted that the "main bulk of the fund
[came] from donor American Baptist Association[.]"36 Thus, there may be merit in petitioners' claim that funds given
to missionaries like respondent come from the ABA, not BSAABC or MBIS. In fact, the document from which the CA
based its conclusion that there was payment of wages and the recipient thereof called a "salaried missionary" is the
Mission Policy as contained in the ABA yearbook. In addition, the designation of "salaried missionary" is not
determinative of the existence of an employer-employee relationship. "Salary" is a general term defined as
remuneration for services given,37 but the term does not establish a certain kind of relationship.
Absent any clear indication that the amount respondent was allegedly receiving came from BSAABC or MBIS, or at
the very least that ABA, Abiko Baptist Church of Japan and BSAABC and MBIS are one and the same, We cannot
concretely establish payment of wages.
As to the third element, We find that dismissal is inherent in religious congregations as they have the power to
discipline their members. Admittedly, the nature of respondent's position as a missionary calls on the exercise of
supervision by the church of which he is a member considering that the basis of the relationship between a religious
corporation and its members is the latter's absolute adherence to a common religious or spiritual belief.38 Although
respondent's removal is clear from the November 24, 2011 Letter, this alone cannot establish an employer-employee
relationship.
Lastly, as to the power of control, the CA ruled that the duties enumerated in the Appointment Paper, together with
BSAABC's power to order respondent to areas of mission work, as well as the Mission Policy Agreement, all indicated
the exercise of control.
26
We do not agree. The use of the LA and CA of the Appointment Paper, as basis of the employer-employee
relationship in this case, is misplaced considering that respondent failed to establish that such duties enumerated
therein are the duties only of a missionary. Again, the said document refers to respondent's status as an instructor of
MBIS.
Even then, this Court sees that respondent's appointment as instructor of petitioners' own educational institution was
by virtue of his membership with Abiko Baptist Church. It is one of his duties as a missionary/minister of the same.
He himself admitted that he was teaching "bible history, philosophy, Christian doctrine, public speaking, English and
other religious subjects to seminarians in [MBIS intending] to be [a] pastor/minister[.]"39 These subject matters and
how they prepare or educate their ministers are ecclesiastical in nature which the State cannot regulate unless there
is clear violation of secular laws. It follows, therefore, that even his alleged exclusion as instructor is beyond the
power of review by the State considering that this is purely an ecclesiastical affair. It is up to the members of the
religious congregation to determine whether their minister still lives up to the beliefs they stand for, continues to
share his knowledge, and remains an exemplar of faith to the members of their church.
True, the Mission Policy Agreement may show badges of control over its members and missionaries; nevertheless,
respondent, as member of the religious congregation, must be subjected to a certain sense of control for the church
to achieve the ends of its belief. As to the power to order respondent to areas of mission work, the Court deems it
appropriate not to expound on this because aside from the fact that it is a mere allegation, it is also an ecclesiastical
matter as it concerns governance of the congregation.
Other than the Appointment Paper (as an instructor), no other evidence was adduced by respondent to show an
employer-employee relationship. Respondent, as the one alleging an employer-employee relationship, failed to
establish with clear and convincing evidence that such relationship exists. With this, We do not see the need to
discuss whether the dismissal as a missionary was illegal as it is clearly an ecclesiastical affair.
Respondent is trying to confuse the Court in claiming that his appointment as instructor of MBIS is basis of an
employer-employee relationship while at the same time, claiming the benefits accorded him as a missionary of
BSAABC, such as the privilege to live on the latter's property and the financial support he was receiving. Respondent
obviously filed the instant case to protect his property rights over the house he built on the land of BSAABC, which is
not within the ambit of a labor case. Then again, he was not able to sufficiently prove the existence of an employer-
employee relationship which is the first requirement to claim relief in a labor case.
Admittedly, there is a thin line between secular and ecclesiastical matters with regard to respondent's status as a
missionary. Respondent's claim of illegal dismissal is dependent on the existence of the employer-employee
relationship. Unfortunately, respondent failed to prove his own affirmative allegation.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The October 27, 2015 Decision and
April 26, 2016 Resolution of the Court of Appeals in CA-G.R. SP No. 08067 are REVERSED and SET ASIDE.
Accordingly, the July 15, 2013 Decision of the National Labor Relations Commission dismissing the case for lack of
jurisdiction is hereby REINSTATED.
 service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees
Stock Option Plan ("ESOP").
G.R. No. 138051             June 10, 2004

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed
JOSE Y. SONZA, petitioner, between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
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
The Case deposited SONZA’s talent fees and other payments due him under the Agreement.

Before this Court is a petition for review on certiorari 1 assailing the 26 March 1999 Decision2 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 ₱310,000 for the first year and ₱317,000 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.
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:

On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads: While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent,"
Dear Mr. Lopez, it stands to reason that a "talent" as above-described cannot be considered as an employee by reason of the
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on peculiar circumstances surrounding the engagement of his services.
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
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent
career. We consider these acts of the station violative of the Agreement and the station as in breach
as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services
thereof. In this connection, we hereby serve notice of rescission of said Agreement at our instance effective
he undertook to render in accordance with his own style. The benefits conferred to complainant under the
as of date.
May 1994 Agreement are certainly very much higher than those generally given to employees. For one,
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in
complainant Sonza’s monthly talent fees amount to a staggering ₱317,000. Moreover, his engagement as a talent
paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said
was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he
Agreement.
worked only for such number of hours as may be necessary.
Thank you for your attention.
Very truly yours,
(Sgd.) The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee
JOSE Y. SONZA is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties
President and Gen. Manager4 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
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,

27
 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).
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:
x x x 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-
28
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
(₱500,000.00).
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 (₱150,000.00) 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
29
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, x
x x 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 ₱317,000 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. x x x 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. x x x
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. x x
x28 (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,
30
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.
31
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
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. x x x
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.
32
G.R. No. 155207             August 13, 2008
WILHELMINA S. OROZCO, petitioner,
vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY INQUIRER, and
LETICIA JIMENEZ MAGSANOC, respondents.
The case before this Court raises a novel question never before decided in our jurisdiction – whether a newspaper
columnist is an employee of the newspaper which publishes the column.
In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure, petitioner Wilhelmina S. Orozco
assails the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002 and its
Resolution2 dated September 11, 2002 denying her Motion for Reconsideration. The CA reversed and set aside the
Decision3 of the National Labor Relations Commission (NLRC), which in turn had affirmed the Decision4 of the Labor
Arbiter finding that Orozco was an employee of private respondent Philippine Daily Inquirer (PDI) and was illegally
dismissed as columnist of said newspaper.
In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle section. She
religiously submitted her articles every week, except for a six-month stint in New York City when she, nonetheless,
sent several articles through mail. She received compensation of P250.00 – later increased to P300.00 – for every
column published.5
On November 7, 1992, petitioner’s column appeared in the PDI for the last time. Petitioner claims that her then
editor, Ms. Lita T. Logarta,6 told her that respondent Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop
publishing her column for no reason at all and advised petitioner to talk to Magsanoc herself. Petitioner narrates that
when she talked to Magsanoc, the latter informed her that it was PDI Chairperson Eugenia Apostol who had asked to
stop publication of her column, but that in a telephone conversation with Apostol, the latter said that Magsanoc
informed her (Apostol) that the Lifestyle section already had many columnists.7
On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to discuss how to
improve said section. They agreed to cut down the number of columnists by keeping only those whose columns were
well-written, with regular feedback and following. In their judgment, petitioner’s column failed to improve, continued
to be superficially and poorly written, and failed to meet the high standards of the newspaper. Hence, they decided
to terminate petitioner’s column.8
Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal dismissal, backwages, moral and
exemplary damages, and other money claims before the NLRC.
 On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of petitioner, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of respondent company;
ordering respondent company to reinstate her to her former or equivalent position, with backwages.
Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.
Other claims are hereby dismissed for lack of merit.
The Labor Arbiter found that:
[R]espondent company exercised full and complete control over the means and method by which complainant’s
work – that of a regular columnist – had to be accomplished. This control might not be found in an instruction,
verbal or oral, given to complainant defining the means and method she should write her column. Rather, this
control is manifested and certained (sic) in respondents’ admitted prerogative to reject any article submitted by
complainant for publication.
By virtue of this power, complainant was helplessly constrained to adopt her subjects and style of writing to suit
the editorial taste of her editor. Otherwise, off to the trash can went her articles.
Moreover, this control is already manifested in column title, "Feminist Reflection" allotted complainant. Under this
title, complainant’s writing was controlled and limited to a woman’s perspective on matters of feminine interests.
That respondent had no control over the subject matter written by complainant is strongly belied by this
observation. Even the length of complainant’s articles were set by respondents.
Inevitably, respondents would have no control over when or where complainant wrote her articles as she was a
columnist who could produce an article in thirty (3) (sic) months or three (3) days, depending on her mood or the
amount of research required for an article but her actions were controlled by her obligation to produce an article a
week. If complainant did not have to report for work eight (8) hours a day, six (6) days a week, it is because her
task was mainly mental. Lastly, the fact that her articles were (sic) published weekly for three (3) years show that
she was respondents’ regular employee, not a once-in-a-blue-moon contributor who was not under any pressure or
obligation to produce regular articles and who wrote at his own whim and leisure.10
PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC Second Division dismissed
the appeal thereby affirming the Labor Arbiter’s Decision. The NLRC initially noted that PDI failed to perfect its
appeal, under Article 223 of the Labor Code, due to non-filing of a cash or surety bond. The NLRC said that the
reason proffered by PDI for not filing the bond – that it was difficult or impossible to determine the amount of the
bond since the Labor Arbiter did not specify the amount of the judgment award – was not persuasive. It said that all
PDI had to do was compute based on the amount it was paying petitioner, counting the number of weeks from
November 7, 1992 up to promulgation of the Labor Arbiter’s decision.11
The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiter’s findings of fact and law. It
sustained the Labor Arbiter’s reasoning that respondent PDI exercised control over petitioner’s work.
PDI then filed a Petition for Review12 before this Court seeking the reversal of the NLRC Decision. However, in a
Resolution13 dated December 2, 1998, this Court referred the case to the Court of Appeals, pursuant to our ruling
in St. Martin Funeral Homes v. National Labor Relations Commission.14
33
The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision and dismissed petitioner’s
Complaint. It held that the NLRC misappreciated the facts and rendered a ruling wanting in substantial evidence. The
CA said:
The Court does not agree with public respondent NLRC’s conclusion. First, private respondent admitted that she
was and [had] never been considered by petitioner PDI as its employee. Second, it is not disputed that private
respondent had no employment contract with petitioner PDI. In fact, her engagement to contribute articles for
publication was based on a verbal agreement between her and the petitioner’s Lifestyle Section Editor. Moreover, it
was evident that private respondent was not required to report to the office eight (8) hours a day. Further, it is not
disputed that she stayed in New York for six (6) months without petitioner’s permission as to her leave of absence
nor was she given any disciplinary action for the same. These undisputed facts negate private respondent’s claim
that she is an employee of petitioner.
Moreover, with regards (sic) to the control test, the public respondent NLRC’s ruling that the guidelines given by
petitioner PDI for private respondent to follow, e.g. in terms of space allocation and length of article, is not the
form of control envisioned by the guidelines set by the Supreme Court. The length of the article is obviously limited
so that all the articles to be featured in the paper can be accommodated. As to the topic of the article to be
published, it is but logical that private respondent should not write morbid topics such as death because she is
contributing to the lifestyle section. Other than said given limitations, if the same could be considered limitations,
the topics of the articles submitted by private respondent were all her choices. Thus, the petitioner PDI in deciding
to publish private respondent’s articles only controls the result of the work and not the means by which said articles
were written.
As such, the above facts failed to measure up to the control test necessary for an employer-employee relationship
to exist.15
Petitioner’s Motion for Reconsideration was denied in a Resolution dated September 11, 2002. She then filed the
present Petition for Review.
In a Resolution dated April 29, 2005, the Court, without giving due course to the petition, ordered the Labor Arbiter
to clarify the amount of the award due petitioner and, thereafter, ordered PDI to post the requisite bond. Upon
compliance therewith, the petition would be given due course. Labor Arbiter Amansec clarified that the award under
the Decision amounted to P15,350.00. Thus, PDI posted the requisite bond on January 25, 2007.16
We shall initially dispose of the procedural issue raised in the Petition.
Petitioner argues that the CA erred in not dismissing outright PDI’s Petition for Certiorari for PDI’s failure to post a
cash or surety bond in violation of Article 223 of the Labor Code.
This issue was settled by this Court in its Resolution dated April 29, 2005.17 There, the Court held:
But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to the perfection of
an appeal, there is a plethora of jurisprudence recognizing exceptional instances wherein the Court relaxed the
bond requirement as a condition for posting the appeal.
In the case of Taberrah v. NLRC,  the Court made note of the fact that the assailed decision of the Labor Arbiter
concerned did not contain a computation of the monetary award due the employees, a circumstance which is
likewise present in this case. In said case, the Court stated,
 As a rule, compliance with the requirements for the perfection of an appeal within the reglamentary (sic) period is
mandatory and jurisdictional. However, in National Federation of Labor Unions v. Ladrido as well as in several
other cases, this Court relaxed the requirement of the posting of an appeal bond within the reglementary period
as a condition for perfecting the appeal. This is in line with the principle that substantial justice is better served
by allowing the appeal to be resolved on the merits rather than dismissing it based on a technicality.
The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to backwages, 13th month
pay and service incentive leave pay without however including a computation of the alleged amounts.
In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be expected to post such
appeal bond equivalent to the amount of the monetary award when the amount thereof was not included in the
decision of the labor arbiter." The computation of the amount awarded to petitioner not having been clearly stated
in the decision of the labor arbiter, private respondents had no basis for determining the amount of the bond to be
posted.
Thus, while the requirements for perfecting an appeal must be strictly followed as they are considered
indispensable interdictions against needless delays and for orderly discharge of judicial business, the law does
admit of exceptions when warranted by the circumstances. Technicality should not be allowed to stand in the way
of equitably and completely resolving the rights and obligations of the parties. But while this Court may relax the
observance of reglementary periods and technical rules to achieve substantial justice, it is not prepared to give due
course to this petition and make a pronouncement on the weighty issue obtaining in this case until the law has
been duly complied with and the requisite appeal bond duly paid by private respondents.18
19
Records show that PDI has complied with the Court’s directive for the posting of the bond;  thus, that issue has been
laid to rest.
We now proceed to rule on the merits of this case.
The main issue we must resolve is whether petitioner is an employee of PDI, and if the answer be in the affirmative,
whether she was illegally dismissed.
We rule for the respondents.
The existence of an employer-employee relationship is essentially a question of fact. 20 Factual findings of quasi-
judicial agencies like the NLRC are generally accorded respect and finality if supported by substantial evidence.21
Considering, however, that the CA’s findings are in direct conflict with those of the Labor Arbiter and NLRC, this Court
must now make its own examination and evaluation of the facts of this case.
It is true that petitioner herself admitted that she "was not, and [had] never been considered respondent’s employee
because the terms of works were arbitrarily decided upon by the respondent." 22 However, the employment status of
a person is defined and prescribed by law and not by what the parties say it should be.23
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee
relationship between parties.24 The four elements 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 employee’s conduct.25
34
Of these four elements, it is the power of control which is the most crucial26 and most determinative factor,27 so
important, in fact, that the other elements may even be disregarded.28 As this Court has previously held:
the significant factor in determining the relationship of the parties is the presence or absence of supervisory
authority to control the method and the details of performance of the service being rendered, and the degree to
which the principal may intervene to exercise such control.29
In other words, the test is whether the employer controls or has reserved the right to control the employee, not only
as to the work done, but also as to the means and methods by which the same is accomplished.30
Petitioner argues that several factors exist to prove that respondents exercised control over her and her work,
namely:
a. As to the Contents of her Column – The PETITIONER had to insure that the contents of her column hewed closely
to the objectives of its Lifestyle Section and the over-all principles that the newspaper projects itself to stand for.
As admitted, she wanted to write about death in relation to All Souls Day but was advised not to.
b. As to Time Control – The PETITIONER, as a columnist, had to observe the deadlines of the newspaper for her
articles to be published. These deadlines were usually that time period when the Section Editor has to "close the
pages" of the Lifestyle Section where the column in located. "To close the pages" means to prepare them for
printing and publication.
As a columnist, the PETITIONER’s writings had a definite day on which it was going to appear. So she submitted
her articles two days before the designated day on which the column would come out.
This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers’ obligations to the readers
with regard to timeliness and freshness of ideas.
c. As to Control of Space – The PETITIONER was told to submit only two or three pages of article for the column,
(sic) "Feminist Reflections" per week. To go beyond that, the Lifestyle editor would already chop off the article and
publish the rest for the next week. This shows that PRIVATE RESPONDENTS had control over the space that the
PETITIONER was assigned to fill.
d. As to Discipline – Over time, the newspaper readers’ eyes are trained or habituated to look for and read the
works of their favorite regular writers and columnists. They are conditioned, based on their daily purchase of the
newspaper, to look for specific spaces in the newspapers for their favorite write-ups/or opinions on matters
relevant and significant issues aside from not being late or amiss in the responsibility of timely submission of their
articles.
The PETITIONER was disciplined to submit her articles on highly relevant and significant issues on time by the
PRIVATE RESPONDENTS who have a say on whether the topics belong to those considered as highly relevant and
significant, through the Lifestyle Section Editor. The PETITIONER had to discuss the topics first and submit the
articles two days before publication date to keep her column in the newspaper space regularly as expected or
without miss by its readers.31
Given this discussion by petitioner, we then ask the question: Is this the form of control that our labor laws
contemplate such as to establish an employer-employee relationship between petitioner and respondent PDI?
It is not.
Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.
Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former.
Rules which serve as general guidelines towards the achievement of the mutually desired result are not indicative of
the power of control.32 Thus, this Court has explained:
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. x x x.33
The main determinant therefore is whether the rules set by the employer are meant to control not just the results of
the work but also the means and method to be used by the hired party in order to achieve such results. Thus, in this
case, we are to examine the factors enumerated by petitioner to see if these are merely guidelines or if they indeed
fulfill the requirements of the control test.
Petitioner believes that respondents’ acts are meant to control how she executes her work. We do not agree. A
careful examination reveals that the factors enumerated by the petitioner are inherent conditions in running a
newspaper. In other words, the so-called control as to time, space, and discipline are dictated by the very nature of
the newspaper business itself.
We agree with the observations of the Office of the Solicitor General that:
The Inquirer is the publisher of a newspaper of general circulation which is widely read throughout the country. As
such, public interest dictates that every article appearing in the newspaper should subscribe to the standards set by
the Inquirer, with its thousands of readers in mind. It is not, therefore, unusual for the Inquirer to control what
would be published in the newspaper. What is important is the fact that such control pertains only to the end
result, i.e., the submitted articles. The Inquirer has no control over [petitioner] as to the means or method used by
her in the preparation of her articles. The articles are done by [petitioner] herself without any intervention from the
Inquirer.34
Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or produce her articles
each week. Aside from the constraints presented by the space allocation of her column, there were no restraints on
her creativity; petitioner was free to write her column in the manner and style she was accustomed to and to use
whatever research method she deemed suitable for her purpose. The apparent limitation that she had to write only
on subjects that befitted the Lifestyle section did not translate to control, but was simply a logical consequence of the
fact that her column appeared in that section and therefore had to cater to the preference of the readers of that
section.
The perceived constraint on petitioner’s column was dictated by her own choice of her column’s perspective. The
column title "Feminist Reflections" was of her own choosing, as she herself admitted, since she had been known as a
feminist writer.35 Thus, respondent PDI, as well as her readers, could reasonably expect her columns to speak from
such perspective.
35
Contrary to petitioner’s protestations, it does not appear that there was any actual restraint or limitation on the
subject matter – within the Lifestyle section – that she could write about. Respondent PDI did not dictate how she
wrote or what she wrote in her column. Neither did PDI’s guidelines dictate the kind of research, time, and effort she
put into each column. In fact, petitioner herself said that she received "no comments on her articles…except for her
to shorten them to fit into the box allotted to her column." Therefore, the control that PDI exercised over petitioner
was only as to the finished product of her efforts, i.e., the column itself, by way of either shortening or outright
rejection of the column.
The newspaper’s power to approve or reject publication of any specific article she wrote for her column cannot be the
control contemplated in the "control test," as it is but logical that one who commissions another to do a piece of work
should have the right to accept or reject the product. The important factor to consider in the "control test" is still the
element of control over how the work itself is done, not just the end result thereof.
In contrast, a regular reporter is not as independent in doing his or her work for the newspaper. We note the
common practice in the newspaper business of assigning its regular reporters to cover specific subjects, geographical
locations, government agencies, or areas of concern, more commonly referred to as "beats." A reporter must
produce stories within his or her particular beat and cannot switch to another beat without permission from the
editor. In most newspapers also, a reporter must inform the editor about the story that he or she is working on for
the day. The story or article must also be submitted to the editor at a specified time. Moreover, the editor can easily
pull out a reporter from one beat and ask him or her to cover another beat, if the need arises.
This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was not precluded from
submitting her column ahead of time or from submitting columns to be published at a later time. More importantly,
respondents did not dictate upon petitioner the subject matter of her columns, but only imposed the general
guideline that the article should conform to the standards of the newspaper and the general tone of the particular
section.
Where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit,
not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not
the amount thereof, no employer-employee relationship exists.36
Aside from the control test, this Court has also used the economic reality test. The economic realities prevailing
within the activity or between the parties are examined, taking into consideration the totality of circumstances
surrounding the true nature of the relationship between the parties.37 This is especially appropriate when, as in this
case, there is no written agreement or contract on which to base the relationship. In our jurisdiction, the benchmark
of economic reality in analyzing possible employment relationships for purposes of applying the Labor Code ought to
be the economic dependence of the worker on his employer.38
Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights advocate working in
various women’s organizations.39 Likewise, she herself admits that she also contributes articles to other
publications.40 Thus, it cannot be said that petitioner was dependent on respondent PDI for her continued
employment in respondent’s line of business.41
The inevitable conclusion is that petitioner was not respondent PDI’s employee but an independent contractor,
engaged to do independent work.
There is no inflexible rule to determine if a person is an employee or an independent contractor; thus, the
characterization of the relationship must be made based on the particular circumstances of each case.42 There are
several factors43 that may be considered by the courts, but as we already said, the right to control is the dominant
factor in determining whether one is an employee or an independent contractor.44
In our jurisdiction, the Court has held that an independent contractor is one who carries on a distinct and
independent business and undertakes to perform the job, work, or service on one’s 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.45
On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that case, the Court found, using the
four-fold test, that petitioner, Jose Y. Sonza, was not an employee of ABS-CBN, but an independent contractor.
Sonza was hired by ABS-CBN due to his "unique skills, talent and celebrity status not possessed by ordinary
employees," a circumstance that, the Court said, was indicative, though not conclusive, of an independent
contractual relationship. Independent contractors often present themselves to possess unique skills, expertise or
talent to distinguish them from ordinary employees.47 The Court also found that, as to payment of wages, Sonza’s
talent fees were the result of negotiations between him and ABS-CBN. 48 As to the power of dismissal, the Court found
that the terms of Sonza’s engagement were dictated by the contract he entered into with ABS-CBN, and the same
contract provided that either party may terminate the contract in case of breach by the other of the terms
thereof.49 However, the Court held that the foregoing are not determinative of an employer-employee relationship.
Instead, it is still the power of control that is most important.
On the power of control, the Court found that in performing his work, Sonza only needed his skills and talent – how
he delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s control.50 Thus:
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s
work. 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." 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.
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. 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.
A radio broadcast specialist who works under minimal supervision is an independent contractor. 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.51
The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent, skill, experience,
and her unique viewpoint as a feminist advocate. How she utilized all these in writing her column was not subject to
dictation by respondent. As in Sonza, respondent PDI was not involved in the actual performance that produced the
finished product. It only reserved the right to shorten petitioner’s articles based on the newspaper’s capacity to
accommodate the same. This fact, we note, was not unique to petitioner’s column. It is a reality in the newspaper
business that space constraints often dictate the length of articles and columns, even those that regularly appear
therein.
Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she needed to perform her
work. Petitioner only needed her talent and skill to come up with a column every week. As such, she had all the tools
she needed to perform her work.
Considering that respondent PDI was not petitioner’s employer, it cannot be held guilty of illegal dismissal.
WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 50970 are hereby AFFIRMED.

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.

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., 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.

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.

36

G.R. No. 167622             November 7, 2008
GREGORIO V. TONGKO, petitioner
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, respondents.
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March 29, 2005 Decision 1 of the Court
of Appeals (CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life Insurance Co. (Phils.), Inc. v. National
Labor Relations Commission and Gregorio V. Tongko. The assailed decision set aside the Decision dated September
27, 2004 and Resolution dated December 16, 2004 rendered by the National Labor Relations Commission (NLRC) in
NLRC NCR CA No. 040220-04.
The Facts
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life insurance
business. Renato A. Vergel De Dios was, during the period material, its President and Chief Executive Officer.
Gregorio V. Tongko started his professional relationship with Manulife on July 1, 1977 by virtue of a Career Agent's
Agreement2 (Agreement) he executed with Manulife.
In the Agreement, it is provided that:
It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee relationship between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered
by the Company, and collect, in exchange for provisional receipts issued by the Agent, money due or to become
due to the Company in respect of applications or policies obtained by or through the Agent or from policyholders
allotted by the Company to the Agent for servicing, subject to subsequent confirmation of receipt of payment by
the Company as evidenced by an Official Receipt issued by the Company directly to the policyholder.
37
xxxx
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the
Agent by giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach.
No waiver, extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by
the Company shall be construed for any previous failure to exercise its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other
party fifteen (15) days notice in writing. x x x
In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization. In 1990, he became a
Branch Manager. As the CA found, Tongko's gross earnings from his work at Manulife, consisting of commissions,
persistency income, and management overrides, may be summarized as follows:
January to December 10, 2002 - P 865,096.07
2001 - 6,214,737.11
2000 - 8,003,180.38
1999 - 6,797,814.05
1998 - 4,805,166.34
1997 - 2,822,620.003
The problem started sometime in 2001, when Manulife instituted manpower development programs in the regional
sales management level. Relative thereto, De Dios addressed a letter dated November 6, 2001 4 to Tongko regarding
an October 18, 2001 Metro North Sales Managers Meeting. In the letter, De Dios stated:
The first step to transforming Manulife into a big league player has been very clear - to increase the number of
agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when
you first joined the organization. Since then, however, substantial changes have taken place in the organization, as
these have been influenced by developments both from within and without the company.
xxxx
The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers'
meeting earlier last month when Kevin O'Connor, SVP - Agency, took to the floor to determine from our senior
agency leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your Region was the lowest performer (on a per Manager basis) in terms of
recruiting in 2000 and, as of today, continues to remain one of the laggards in this area.
While discussions, in general, were positive other than for certain comments from your end which were perceived
to be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and
management, were on the same plane. As gleaned from some of your previous comments in prior meetings (both
in group and one-on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent
meetings you reiterated certain views, the validity of which we challenged and subsequently found as having no
basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit
confused as to the directions the company was taking. For this reason, I sought a meeting with everyone in your
management team, including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Region's Sales Managers
meeting held at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the
table before the rest of your Region's Sales Managers to verify its validity. As you must have noted, no Sales
Manager came forward on their own to confirm your statement and it took you to name Malou Samson as a source
of the same, an allegation that Malou herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all
along, that these allegations were simply meant to muddle the issues surrounding the inability of your Region to
meet its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found that you made a lot more money in
the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you
probably will make more money in the Year 2001 compared to Year 2000. Obviously, your above statement about
making "less money" did not refer to you but the way you argued this point had us almost believing that you were
spouting the gospel of truth when you were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new
direction that we have been discussing these past few weeks, i.e., Manulife's goal to become a major agency-led
distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have
never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it
comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the
following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which
can be easily delegated. This assistant should be so chosen as to complement your skills and help you in the
areas where you feel "may not be your cup of tea".
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your
health. The above could solve this problem.
38
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB)
in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully
on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in
Metro North. I will hold you solely responsible for meeting the objectives of these remaining groups.
The above changes can end at this point and they need not go any further. This, however, is entirely dependent
upon you. But you have to understand that meeting corporate objectives by everyone is primary and will not be
compromised. We are meeting tough challenges next year and I would want everybody on board. Any resistance or
holding back by anyone will be dealt with accordingly.
Subsequently, De Dios wrote Tongko another letter dated December 18, 2001,5 terminating Tongko's services, thus:
It would appear, however, that despite the series of meetings and communications, both one-on-one meetings
between yourself and SVP Kevin O'Connor, some of them with me, as well as group meetings with your Sales
Managers, all these efforts have failed in helping you align your directions with Management's avowed agency
growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are
now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this
letter.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife for illegal dismissal.
The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter Marita V. Padolina.
In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios gave him
specific directives on how to manage his area of responsibility in the latter's letter dated November 6, 2001. He
further claimed that Manulife exercised control over him as follows:
Such control was certainly exercised by respondents over the herein complainant. It was Manulife who hired,
promoted and gave various assignments to him. It was the company who set objectives as regards productions,
recruitment, training programs and all activities pertaining to its business. Manulife prescribed a Code of Conduct
which would govern in minute detail all aspects of the work to be undertaken by employees, including the sales
process, the underwriting process, signatures, handling of money, policyholder service, confidentiality, legal and
regulatory requirements and grounds for termination of employment. The letter of Mr. De Dios dated 06 November
2001 left no doubt as to who was in control. The subsequent termination letter dated 18 December 2001 again
established in no uncertain terms the authority of the herein respondents to control the employees of Manulife.
Plainly, the respondents wielded control not only as to the ends to be achieved but the ways and means of
attaining such ends.6
Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4 th  Division)7 and Great Pacific Life
Assurance Corporation v. NLRC,8 which Tongko claimed to be similar to the instant case.
Tongko further claimed that his dismissal was without basis and that he was not afforded due process. He also cited
the Manulife Code of Conduct by which his actions were controlled by the company.
Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,9 in which it alleged that Tongko
is not its employee, and that it did not exercise "control" over him. Thus, Manulife claimed that the NLRC has no
jurisdiction over the case.
In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of an employer-
employee relationship. Padolina found that applying the four-fold test in determining the existence of an employer-
employee relationship, none was found in the instant case. The dispositive portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for lack of
jurisdiction, there being no employer-employee relationship between the parties.
Tongko appealed the arbiter's Decision to the NLRC which reversed the same and rendered a Decision dated
September 27, 2004 finding Tongko to have been illegally dismissed.
The NLRC's First Division, while finding an employer-employee relationship between Manulife and Tongko applying
the four-fold test, held Manulife liable for illegal dismissal. It further stated that Manulife exercised control over
Tongko as evidenced by the letter dated November 6, 2001 of De Dios and wrote:
The above-mentioned letter shows the extent to which respondents controlled complainant's manner and means of
doing his work and achieving the goals set by respondents. The letter shows how respondents concerned
themselves with the manner complainant managed the Metro North Region as Regional Sales Manager, to the point
that respondents even had a say on how complainant interacted with other individuals in the Metro North Region.
The letter is in fact replete with comments and criticisms on how complainant carried out his functions as Regional
Sales Manager.
More importantly, the letter contains an abundance of directives or orders that are intended to directly affect
complainant's authority and manner of carrying out his functions as Regional Sales Manager.10 x x x
Additionally, the First Division also ruled that:
Further evidence of [respondents'] control over complainant can be found in the records of the case. [These] are
the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the
Manulife Financial Code of Conduct Agreement, which serve as the foundations of the power of control wielded by
respondents over complainant that is further manifested in the different administrative and other tasks that he is
required to perform. These codes of conduct corroborate and reinforce the display of respondents' power of control
in their 06 November 2001 Letter to complainant.11
The fallo of the September 27, 2004 Decision reads:
WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside. We find complainant to
be a regular employee of respondent Manulife and that he was illegally dismissed from employment by
respondents.
In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant separation pay as above set
forth. Respondent Manulife is further ordered to pay complainant backwages from the time he was dismissed on 02
January 2002 up to the finality of this decision also as indicated above.
xxxx
All other claims are hereby dismissed for utter lack of merit.
From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First Division in a
Resolution dated December 16, 2004.12
Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA issued the assailed
Decision dated March 29, 2005, finding the absence of an employer-employee relationship between the parties and
deeming the NLRC with no jurisdiction over the case. The CA arrived at this conclusion while again applying the four-
fold test. The CA found that Manulife did not exercise control over Tongko that would render the latter an employee
of Manulife. The dispositive portion reads:
WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for accordingly
GRANTED. The assailed Decision dated September 27, 2004 and Resolution dated December 16, 2004 of the
39
National Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04) are
hereby ANNULLED and SET ASIDE. The Decision dated April 15, 2004 of Labor Arbiter Marita V. Padolina is hereby
REINSTATED.
Hence, Tongko filed this petition and presented the following issues:
A The Court of Appeals committed grave abuse of discretion in granting respondents' petition for certiorari.
B The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision dated
September 27, 2004 and Resolution dated December 16, 2004 in finding that there is no employer-employee
relationship between petitioner and respondent.
C The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision dated
September 27, 2004 and Resolution dated December 16, 2004 which found petitioner to have been illegally
dismissed and ordered his reinstatement with payment of backwages.13
Restated, the issues are: (1) Was there an employer-employee relationship between Manulife and Tongko? and (2) If
yes, was Manulife guilty of illegal dismissal?
The Court's Ruling
This petition is meritorious.
Tongko Was An Employee of Manulife
The basic issue of whether or not the NLRC has jurisdiction over the case resolves itself into the question of whether
an employer-employee relationship existed between Manulife and Tongko. If no employer-employee relationship
existed between the two parties, then jurisdiction over the case properly lies with the Regional Trial Court.
In the determination of whether an employer-employee relationship exists between two parties, this Court applies
the four-fold test to determine the existence of the elements of such relationship. In Pacific Consultants International
Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four
elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. It is the so-
called "control test" which constitutes the most important index of the existence of the employer-employee
relationship that is, whether the employer controls or has reserved the right to control the employee not only as to
the result of the work to be done but also as to the means and methods by which the same is to be accomplished.
Stated otherwise, an employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means to be used in reaching such end.14
The NLRC, for its part, applied the four-fold test and found the existence of all the elements and declared Tongko an
employee of Manulife. The CA, on the other hand, found that the element of control as an indicator of the existence
of an employer-employee relationship was lacking in this case. The NLRC and the CA based their rulings on the same
findings of fact but differed in their interpretations.
The NLRC arrived at its conclusion, first, on the basis of the letter dated November 6, 2001 addressed by De Dios to
Tongko. According to the NLRC, the letter contained "an abundance of directives or orders that are intended to
directly affect complainant's authority and manner of carrying out his functions as Regional Sales Manager." It
enumerated these "directives" or "orders" as follows:
 1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can
be easily delegated. x x x
xxxx
This assistant should be hired immediately.
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in
autonomous fashion x x x.
xxxx
I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro
North. x x x
3. Any resistance or holding back by anyone will be dealt with accordingly.
4. I have been straightforward in this my letter and I know that we can continue to work together… but it will have
to be on my terms. Anything else is unacceptable!
The NLRC further ruled that the different codes of conduct that were applicable to Tongko served as the foundations
of the power of control wielded by Manulife over Tongko that is further manifested in the different administrative and
other tasks that he was required to perform.
The NLRC also found that Tongko was required to render exclusive service to Manulife, further bolstering the
existence of an employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure over which Manulife exercised
control, including the actions of its officers. The NLRC held that such integration added to the fact that Tongko did
not have his own agency belied Manulife's claim that Tongko was an independent contractor.
The CA, however, considered the finding of the existence of an employer-employee relationship by the NLRC as far
too sweeping having as its only basis the letter dated November 6, 2001 of De Dios. The CA did not concur with the
NLRC's ruling that the elements of control as pointed out by the NLRC are "sufficient indicia of control that negates
independent contractorship and conclusively establish an employer-employee relationship between" 15 Tongko and
Manulife. The CA ruled that there is no employer-employee relationship between Tongko and Manulife.
An impasse appears to have been reached between the CA and the NLRC on the sole issue of control over an
employee's conduct. It bears clarifying that such control not only applies to the work or goal to be done but also to
the means and methods to accomplish it. 16 In Sonza v. ABS-CBN Broadcasting Corporation, we explained that not all
forms of control would establish an employer-employee relationship, to wit:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to
the services being rendered may be accorded the effect of establishing an employer-employee relationship. The
facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve
it.17 (Emphasis supplied.)
We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:
It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission
agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a
character are the rules which prescribe the qualifications of persons who may be insured, subject insurance
40
applications to processing and approval by the Company, and also reserve to the Company the determination of
the premiums to be paid and the schedules of payment. None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot
justifiably be said to establish an employer-employee relationship between him and the company.18
Hence, we ruled in Insular that no employer-employee relationship existed therein. However, such ruling was
tempered with the qualification that had there been evidence that the company promulgated rules or regulations that
effectively controlled or restricted an insurance agent's choice of methods or the methods themselves in selling
insurance, an employer-employee relationship would have existed. In other words, the Court in Insular in no way
definitively held that insurance agents are not employees of insurance companies, but rather made the same a case-
to-case basis. We held:
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe
and conform to such rules and regulations as the latter might from time to time prescribe. No showing has been
made that any such rules or regulations were in fact promulgated, much less that any rules existed or
were issued which effectively controlled or restricted his choice of methods or the methods themselves
of selling insurance. Absent such showing, the Court will not speculate that any exceptions or
qualifications were imposed on the express provision of the contract leaving Basiao "... free to exercise
his own judgment as to the time, place and means of soliciting insurance." 19 (Emphasis supplied.)
There is no conflict between our rulings in Insular and in Great Pacific Life Assurance Corporation. We said in the
latter case:
[I]t cannot be gain said that Grepalife had control over private respondents' performance as well as the result of
their efforts. A cursory reading of their respective functions as enumerated in their contracts reveals
that the company practically dictates the manner by which their jobs are to be carried out. For instance,
the District Manager must properly account, record and document the company's funds spot-check and audit the
work of the zone supervisors, conserve the company's business in the district through ‘reinstatements', follow up
the submission of weekly remittance reports of the debit agents and zone supervisors, preserve company property
in good condition, train understudies for the position of district manager, and maintain his quota of sales (the
failure of which is a ground for termination). On the other hand, a zone supervisor must direct and supervise the
sales activities of the debit agents under him, conserve company property through "reinstatements", undertake and
discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure proper
documentation of sales and collections by the debit agents.20 (Emphasis supplied.)
Based on the foregoing cases, if the specific rules and regulations that are enforced against insurance agents or
managers are such that would directly affect the means and methods by which such agents or managers would
achieve the objectives set by the insurance company, they are employees of the insurance company.
In the instant case, Manulife had the power of control over Tongko that would make him its employee. Several
factors contribute to this conclusion.
In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:
The Agent hereby agrees to comply with all regulations and requirements of the Company as herein provided as
well as maintain a standard of knowledge and competency in the sale of the Company's products which satisfies
those set by the Company and sufficiently meets the volume of new business required of Production Club
membership.21
Under this provision, an agent of Manulife must comply with three (3) requirements: (1) compliance with the
regulations and requirements of the company; (2) maintenance of a level of knowledge of the company's products
that is satisfactory to the company; and (3) compliance with a quota of new businesses.
Among the company regulations of Manulife are the different codes of conduct such as the Agent Code of Conduct,
Manulife Financial Code of Conduct, and Manulife Financial Code of Conduct Agreement, which demonstrate the
power of control exercised by the company over Tongko. The fact that Tongko was obliged to obey and comply with
the codes of conduct was not disowned by respondents.
Thus, with the company regulations and requirements alone, the fact that Tongko was an employee of Manulife may
already be established. Certainly, these requirements controlled the means and methods by which Tongko was to
achieve the company's goals.
More importantly, Manulife's evidence establishes the fact that Tongko was tasked to perform administrative duties
that establishes his employment with Manulife.
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife attached affidavits of
its agents purportedly to support its claim that Tongko, as a Regional Sales Manager, did not perform any
administrative functions. An examination of these affidavits would, however, prove the opposite.
22
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 Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 200323 that:
3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate activites of other commission
agents;
d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and recruitment
goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28, 200324 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).
41
A comparison of the above functions and those contained in the Agreement with those cited in Great Pacific Life
Assurance Corporation25 reveals a striking similarity that would more than support a similar finding as in that case.
Thus, there was an employer-employee relationship between the parties.
Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a certain number of agents,
in addition to his other administrative functions, leads to no other conclusion that he was an employee of Manulife.
In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of becoming a major agency-led
distribution company whereby greater agency recruitment is required of the managers, including Tongko. De Dios
made it clear that agent recruitment has become the primary means by which Manulife intends to sell more policies.
More importantly, it is Tongko's alleged failure to follow this principle of recruitment that led to the termination of his
employment with Manulife. With this, it is inescapable that Tongko was an employee of Manulife.
Tongko Was Illegally Dismissed
In its Petition for Certiorari dated January 7, 200526 filed before the CA, Manulife argued that even if Tongko is
considered as its employee, his employment was validly terminated on the ground of gross and habitual neglect of
duties, inefficiency, as well as willful disobedience of the lawful orders of Manulife. Manulife stated:
In the instant case, private respondent, despite the written reminder from Mr. De Dios refused to shape up and
altogether disregarded the latter's advice resulting in his laggard performance clearly indicative of his willful
disobedience of the lawful orders of his superior. x x x
xxxx
As private respondent has patently failed to perform a very fundamental duty, and that is to yield obedience to all
reasonable rules, orders and instructions of the Company, as well as gross failure to reach at least minimum quota,
the termination of his engagement from Manulife is highly warranted and therefore, there is no illegal dismissal to
speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it failed to cite a single iota of evidence
to support its claims. Manulife did not even point out which order or rule that Tongko disobeyed. More importantly,
Manulife did not point out the specific acts that Tongko was guilty of that would constitute gross and habitual neglect
of duty or disobedience. Manulife merely cited Tongko's alleged "laggard performance," without substantiating such
claim, and equated the same to disobedience and neglect of duty.
We cannot, therefore, accept Manulife's position.
In Quebec, Sr. v. National Labor Relations Commission, we ruled that:
When there is no showing of a clear, valid and legal cause for the termination of employment, the law considers the
matter a case of illegal dismissal and the burden is on the employer to prove that the termination was for a valid or
authorized cause. This burden of proof appropriately lies on the shoulders of the employer and not on the employee
because a worker's job has some of the characteristics of property rights and is therefore within the constitutional
mantle of protection. No person shall be deprived of life, liberty or property without due process of law, nor shall
any person be denied the equal protection of the laws.
Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms that the burden of proving the
validity of the termination of employment rests on the employer. Failure to discharge this evidential burden would
necessarily mean that the dismissal was not justified, and, therefore, illegal.27
We again ruled in Times Transportation Co., Inc. v. National Labor Relations Commission that:
 The law mandates that the burden of proving the validity of the termination of employment rests with the
employer. Failure to discharge this evidentiary burden would necessarily mean that the dismissal was not justified,
and, therefore, illegal. Unsubstantiated suspicions, accusations and conclusions of employers do not provide for
legal justification for dismissing employees. In case of doubt, such cases should be resolved in favor of labor,
pursuant to the social justice policy of our labor laws and Constitution.28
This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc. v. Paez to mean substantial
evidence, to wit:
The Labor Code provides that an employer may terminate the services of an employee for just cause and this must
be supported by substantial evidence. The settled rule in administrative and quasi-judicial proceedings is that proof
beyond reasonable doubt is not required in determining the legality of an employer's dismissal of an employee, and
not even a preponderance of evidence is necessary as substantial evidence is considered sufficient. Substantial
evidence is more than a mere scintilla of evidence or relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise.29
Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife even failed to identify the
specific acts by which Tongko's employment was terminated much less support the same with substantial evidence.
To repeat, mere conjectures cannot work to deprive employees of their means of livelihood. Thus, it must be
concluded that Tongko was illegally dismissed.
Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that Tongko not being its employee
is not entitled to such notices. Since we have ruled that Tongko is its employee, however, Manulife clearly failed to
afford Tongko said notices. Thus, on this ground too, Manulife is guilty of illegal dismissal. In Quebec, Sr., we also
stated:
Furthermore, not only does our legal system dictate that the reasons for dismissing a worker must be pertinently
substantiated, it also mandates that the manner of dismissal must be properly done, otherwise, the termination
itself is gravely defective and may be declared unlawful.30
In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated that an illegally dismissed employee
shall be entitled to backwages and separation pay, if reinstatement is no longer viable:
As the law now stands, an illegally dismissed employee is entitled to two reliefs, namely: backwages and
reinstatement. These are separate and distinct from each other. However, separation pay is granted where
reinstatement is no longer feasible because of strained relations between the employee and the employer. In
effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable and backwages.33
Taking into consideration the cases of Songco and Triad, we find correct the computation of the NLRC that the
monthly gross wage of Tongko in 2001 was PhP 518,144.76. For having been illegally dismissed, Tongko is entitled
to reinstatement with full backwages under Art. 279 of the Labor Code. Due to the strained relationship between
Manulife and Tongko, reinstatement, however, is no longer advisable. Thus, Tongko will be entitled to backwages
from January 2, 2002 (date of dismissal) up to the finality of this decision. Moreover, Manulife will pay Tongko
separation pay of one (1) month salary for every year of service that is from 1977 to 2001 amounting to PhP
12,435,474.24, considering that reinstatement is not feasible. Tongko shall also be entitled to an award of attorney's
fees in the amount of ten percent (10%) of the aggregate amount of the above awards.
WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA in CA-G.R. SP No.
88253 is REVERSED and SET ASIDE. The Decision dated September 27, 2004 of the NLRC is REINSTATED with
the following modifications:
Manulife shall pay Tongko the following:
(1) Full backwages, inclusive of allowances and other benefits or their monetary equivalent from January 2, 2002
up to the finality of this Decision;
(2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001 amounting to PhP
12,435,474.24;
(3) Nominal damages of PhP 30,000 as indemnity for violation of the due process requirements; and
(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages and separation pay.

For breach of the due process requirements, Manulife is liable to Tongko in the amount of PhP 30,000 as indemnity in Costs against respondent Manulife.
the form of nominal damages.31

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

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

Article 279 of the Labor Code on security of tenure pertinently provides that:
In cases of regular employment the employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.

42
 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

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:
G.R. No. 167622               June 29, 2010

The first step to transforming Manulife into a big league player has been very clear – to increase the number of
GREGORIO V. TONGKO, Petitioner, agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run
vs. when you first joined the organization. Since then, however, substantial changes have taken place in the
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, Respondents. organization, as these have been influenced by developments both from within and without the company.

This resolves the Motion for Reconsideration1 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.
The following facts have been stated in our Decision of November 7, 2008, now under reconsideration, but are
repeated, simply for purposes of clarity.
xxxx
The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers’
meeting earlier last month when Kevin O’Connor, SVP-Agency, took to the floor to determine from our senior
agency leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your Region was the lowest performer (on a per Manager basis) in terms
of recruiting in 2000 and, as of today, continues to remain one of the laggards in this area.

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.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered
by the Company, and collect, in exchange for provisional receipts issued by the Agent, money due 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.
xxxx
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the
Agent by giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach.
While discussions, in general, were positive other than for certain comments from your end which were perceived
to be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and
management, were on the same plane. As gleaned from some of your previous comments in prior meetings (both
in group and one-on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent
meetings you reiterated certain views, the validity of which we challenged and subsequently found as having no
basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit
confused as to the directions the company was taking. For this reason, I sought a meeting with everyone in your
management team, including you, to clear the air, so to speak.

43
This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales Managers
meeting held at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the
table before the rest of your Region’s Sales Managers to verify its validity. As you must have noted, no Sales
Manager came forward on their own to confirm your statement and it took you to name Malou Samson as a
source of the same, an allegation that Malou herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought
all along, that these allegations were simply meant to muddle the issues surrounding the inability of your Region
to meet its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found that you made a lot more money
in the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you
probably will make more money in the Year 2001 compared to Year 2000. Obviously, your above statement
about making "less money" did not refer to you but the way you argued this point had us almost believing that
you were spouting the gospel of truth when you were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new
direction that we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led
distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have
never heard you proactively push for greater agency recruiting. You have not been proactive all these years when
it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making
the following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which
can be easily delegated. This assistant should be so chosen as to complement your skills and help you in the
areas where you feel "may not be your cup of tea."
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your
health. The above could solve this problem.
xxxx
44
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB)
in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully
on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in
Metro North. I will hold you solely responsible for meeting the objectives of these remaining groups.
xxxx
The above changes can end at this point and they need not go any further. This, however, is entirely dependent
upon you. But you have to understand that meeting corporate objectives by everyone is primary and will not be
compromised. We are meeting tough challenges next year, and I would want everybody on board. Any resistance
or holding back by anyone will be dealt with accordingly.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.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are
now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this
letter.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 ₱50,000.00, 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 ₱36,000.00 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
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 Insular11 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.
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.
45
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."
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.
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 x x x 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.1avvphi1.net
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.
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,
46
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.
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 subsequent management 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.
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.
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.1awph!1 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.
47
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.
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 concept28 – 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.
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.
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
48
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 agents to be - train understudies for the position of district
licensed, trained and contracted to sell Manulife manager
products and who will be part of my Unit
- to coordinate activities of the agents under [the - properly account, record and document the
managers’] Unit in [the agents’] daily, weekly and company’s funds, spot-check and audit the work
monthly selling activities, making sure that their of the zone supervisors, x x x follow up the
respective sales targets are met; submission of weekly remittance reports of the
debit agents and zone supervisors
- to conduct periodic training sessions for [the] agents
to further enhance their sales skill; and - direct and supervise the sales activities of the
debit agents under him, x x x undertake and
- to assist [the] agents with their sales activities by discharge the functions of absentee debit
way of joint fieldwork, consultations and one-on-one agents, spot-check the record of debit agents,
and insure proper documentation of sales and
evaluation and analysis of particular accounts
collections of debit agents.
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.
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 soliticing 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;
xxxx
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;
xxxx
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.
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
49
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.
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 In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’ letter, as a
control over Tongko’s contractual duties points to the absence of any employer-employee relationship between ground for termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence of an
Tongko and Manulife. In the context of the established evidence, Tongko remained an agent all along; although his employer-employee relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance,
subsequent duties made him a lead agent with leadership role, he was nevertheless only an agent whose basic agency and contracts.
contract yields no evidence of means-and-manner control.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7,
This conclusion renders unnecessary any further discussion of the question of whether an agent may simultaneously 2008, GRANT Manulife’s motion for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.
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 G.R. No. 220617
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
NESTLE PHILIPPINES, INC., Petitioner,
no doubt exists as in a situation where the claimant clearly failed to substantiate his claim of employment
vs.
relationship by the quantum of evidence the Labor Code requires.
BENNY A. PUEDAN, JR., JAYFER D. LIMBO, BRODNEY N. AVILA, ARTHUR C. AQUINO, RYAN A. MIRANDA,
RONALD R. ALAVE, JOHNNY A. DIMAYA, MARLON B. DELOS REYES, ANGELITO R. CORDOVA, EDGAR S.
On the dissent’s last point regarding the lack of jurisprudential value of our November 7, 2008 Decision, suffice it to BARRUGA, CAMILO B. CORDOVA, JR., JEFFRY B. LANGUISAN, EDISON U. VILLAPANDO, JHEIRNEY S.
state that, as discussed above, the Decision was not supported by the evidence adduced and was not in accordance REMOLIN, MARY LUZ A. MACATALAD, * JENALYN M. GAMUROT, DENNIS G. BAWAG, RAQUEL A. ABELLERA,
with controlling jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the manner the and RICANDRO G. GUATNO, JR., Respondents.
dissent suggests as the dissenting opinions are as factually and as legally erroneous as the Decision under
reconsideration.

50
Assailed in this petition for review on certiorari1are the Decision2 dated March 26, 2015 and the Resolution 3 dated
September 17, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132686, which affirmed the Decision 4 dated May
30, 2013 and the Resolution5 dated August 30, 2013 of the National Labor Relations Commission (NLRC) in LAC No.
02-000699-13/ NCR-03-04761-12, declaring petitioner Nestle Philippines, Inc. (NPI), jointly and severally liable with
Ocho de Septiembre, Inc. (ODSI) to respondents Benny A. Puedan, Jr., Jayfer D. Limbo, Brodney N. Avila, Arthur C.
Aquino, Ryan A. Miranda, Ronald R. Alave, Johnny A. Dimaya, Marlon B. Delos Reyes, Angelita R. Cordova, Edgar S.
Barruga, Camilo B. Cordova, Jr., Jeffry B. Languisan, Edison U. Villapando, Jheirney S. Remolin, Mary Luz A.
Macatalad, Jenalyn M. Gamurot, Dennis G. Bawag, Raquel A. Abellera, and Ricandro G. Guatno, Jr. (respondents) for
separation pay, nominal damages, and attorney's fees.
The Facts
The instant case arose from an amended6 complaint7 dated July 6, 2012 for illegal dismissal, damages, and attorney's
fees filed by respondents against, inter alia,  ODSI and NPI. Respondents alleged that on various dates, ODSI and NPI
hired them to sell various NPI products in the assigned covered area. After some time, respondents demanded that
they be considered regular employees of NPI, but they were directed to sign contracts of employment with ODSI
instead. When respondents refused to comply with such directives, NPI and ODSI terminated them from their
position. 8 Thus, they were constrained to file the complaint, claiming that: (a)  ODSI is a labor-only contractor and,
thus, they should be deemed regular employees of NPI; and (b)  there was no just or authorized cause for their
dismissal.9
For its part, ODSI averred that it is a company engaged in the business of buying, selling, distributing, and marketing
of goods and commodities of every kind and it enters into all kinds of contracts for the acquisition thereof. ODSI
admitted that on various dates, it hired respondents as its employees and assigned them to execute the
Distributorship Agreement10 it entered with NPI, 11 the relevant portions of which state:
3.1 DISTRIBUTOR (ODSI) shall assign a sales force in his/her regular employ, dedicated solely to the handling of
NPI Grocery Retail Products under this Agreement, and who shall exclusively cover assigned areas/channels of
distribution.
3.2 DISTRIBUTOR shall service the outlets within the Territory by reselling Products obtained exclusively from
Nestle Philippines, Inc. and not from any other source.
3.3 DISTRIBUTOR shall utilize booking and distribution salesmen to
undertake territory development. Booking done by DISTRIBUTOR shall be delivered by its personnel. Collection of
accounts shall be taken cared (sic)  of by DISTRIBUTOR, without prejudice to the provisions of Clause 13 hereof.
3.4 DISTRIBUTOR's route salesmen shall exclusively cover assigned ex-truck areas/channels of distribution.
3.5 DISTRIBUTOR shall also provide training to its staff or personnel where necessary, to improve operations in
servicing the requirements of DISTRIBUTOR's customers. From time to time, NESTLE shall offer to DISTRIBUTOR
suggestions and recommendations to improve sales and to further develop the market.
3.6 DISTRIBUTOR shall meet the sales, reach and distribution targets agreed upon by NESTLE and DISTRIBUTOR.
For purposes of this clause, reach targets refer to the number of stores, dealers and/or outlets which DISTRIBUTOR
should cover or service within a particular period. Distribution targets refer to the number of stock keeping units
and/or product lines covered by this Agreement.
In the event of DISTRIBUTOR's failure to meet NESTLE's sales targets, NESTLE has the sole discretion of assigning
another distributor of the Products and/or reducing the Territory covered by DISTRIBUTOR.
3.7 DISTRIBUTOR agrees to provide at its own cost and expense facilities and other resources necessary for the
distribution and sale of the Products.
3.8 NESTLE's sales personnel may get orders for the Products distributed by DISTRIBUTOR and pass on the said
orders to DISTRIBUTOR.
3.9 NESTLE shall provide the necessary promotional and marketing support for the Products through promotional
materials, product information literature, participation in trade fairs, and other market development activities.
51
3.10 Should NESTLE manufacture and/or distribute other products not subject of this Agreement, which, in
NESTLE's opinion, should likewise be extended to DISTRIBUTOR's outlets, such additional products shall be
included among those listed in Annex "A" hereof.
NESTLE shall deliver the Products to DISTRIBUTOR's warehouse(s) at its own expenses. Immediately upon receipt
of the Products, DISTRIBUTOR shall carry out a visual inspection thereof. In the event any quantity of the Products
is found to be defective upon such visual inspection, NESTLE shall replace such quantity of the Products at no cost
to DISTRIBUTOR.
3.11 All costs for transportation and/or shipment of the Products from DISTRIBUTOR's warehouse(s) to its
outlets/customers shall be the account of the DISTRIBUTOR. 12
However, the business relationship between NPI and ODSI turned sour when the former' s sales department
badgered the latter regarding the sales targets. Eventually, NPI downsized its marketing and promotional support
from ODSI which resulted to business reverses and in the latter's filing of a petition for corporate rehabilitation and,
subsequently, the closure of its Nestle unit due to the termination of the Distributorship Agreement and the failure of
rehabilitation. Under the foregoing circumstances, ODSI argued that respondents were not dismissed but merely put
in floating status. 13
On the other hand, NPI did not file any position paper or appear in the scheduled conferences. 14
The Labor Arbiter Ruling
In a Decision15 dated December 28, 2012, the Labor Arbiter (LA) dismissed the complaint for lack of merit, but
nevertheless, ordered, inter alia,  ODSI and NPI to pay respondents nominal damages in the aggregate amount of
₱235,728.00 plus attorney's fees amounting to ten percent (10%) of the total monetary awards. 16 The LA found
that: (a) respondents were unable to prove that they were NPI employees; and (b)  respondents were not illegally
dismissed as ODSI had indeed closed down its operations due to business losses. 17 As to the issue on the failure to
give respondents a thirty (30)-day notice prior to such closure, the LA concluded that all the impleaded respondents
therein (i.e.,  including NPI) should be held liable for the payment of nominal damages plus attorney's
fees. 18 Aggrieved, respondents appealed to the NLRC.19
The NLRC Ruling
In a Decision20 dated May 30, 2013, the NLRC reversed and set aside the LA ruling and, accordingly, ordered ODSI
and NPI to pay each of the respondents: (a) separation pay amounting to Yi  month pay for every year of service
reckoned from the time they were employed until the finality of the Decision; and (b) nominal damages in the
amount of ₱30,000.00. The NLRC likewise ordered NPI and ODSI to pay respondents attorney's fees amounting to
ten percent (10%) of the monetary awards.21
Contrary to the LA's findings, the NLRC found that while ODSI indeed shut down its operations, it failed to prove that
such closure was due to serious business losses as it did not present evidence, e.g.,  financial statements, to
corroborate its claims. As such, it ruled that respondents are entitled to separation pay. In this relation, the NLRC
also found that since ODSI failed to notify respondents of such closure, the latter are likewise entitled to nominal
damages.22
Further, the NLRC found ODSI to be a labor-only contractor of NPI, considering that: (a) ODSI had no substantial
capitalization or investment; (b)  respondents performed activities directly related to NPI's principal business;
and (c)  the fact that respondents' employment depended on the continuous supply of NPI products shows that ODSI
had not been carrying an independent business according to its own manner and method.23
Consequently, the NLRC deemed NPI to be respondents' true employer, and thus, ordered it jointly and severally
liable with ODSI to pay the monetary claims of respondents. 24
Respondents moved for a partial reconsideration, 25 arguing that since it was only ODSI that closed down operations
and not NPI and, considering the finding that the latter was deemed to be their true employer, NPI should reinstate
them, or if not practicable, to pay them separation pay equivalent to one (1) month pay for every year of service.
NPI also moved for reconsideration, 26 contending that: (a) it was deprived of its right to participate in the
proceedings before the LA and the NLRC; and (b) it had no employer-employee relationship with respondents as
ODSI was never its contractor, whether independent or labor-only.27 However, the NLRC denied both motions in a
Resolution28 dated August 30, 2013, holding that: (a) respondents' termination was due to the closure of ODSI's
Nestle unit, an authorized cause and, thus, the monetary awards in their favor were proper; (b)  NPI was not
deprived of its right to participate in the proceedings as it was duly served with copies of the parties' respective
pleadings, as well as the rulings of both the LA and the NLRC; (c)  assuming arguendo  that NPI was indeed deprived
of due process, its subsequent filing of a motion for reconsideration before the NLRC cured the defect as it was able
to argue its position in the said motion; and (d)  the circumstances surrounding the Distributorship Agreement
between ODSI and NPI showed that the former is indeed a labor-only contractor of the latter. 29
Dissatisfied, NPI filed a petition for certiorari30before the CA, essentially insisting that: (a)  it was deprived of due
process before the tribunals a quo;  and (b)  there was no employer-employee relationship between NPI and
respondents. 31 Records reveal that no other party elevated the matter before the CA.
The CA Ruling
In a Decision32 dated March 26, 2015, the CA affirmed the NLRC ruling. Anent the issue on due process, the CA held
that NPI was not deprived of its opportunity to be heard as it was able to receive a copy of the complaint and other
pleadings, albeit it failed to respond thereto. 33 As regards the substantive issue, the CA ruled that despite ODSI and
NPI's contract being denominated as a "Distributorship Agreement," it contained provisions demonstrating a labor-
only contracting arrangement between them, as well as NPI' s exercise of control over the business of ODSI.
Moreover, the CA pointed out that: (a)  there was nothing in the records which showed that ODSI had substantial
capital to undertake an independent business; and (b)  respondents performed tasks essential to NPI's
business.34 Undaunted, NPI moved for reconsideration, 35 which was, however, denied in a Resolution36 dated
September 17, 2015; hence, this petition.
The Issues Before the Court
The essential issues for the Court's resolution are whether or not the CA correctly ruled that: (a)  NPI was accorded
due process by the tribunals a quo;  and (b)  ODSI is a labor-only contractor of NPI, and consequently, NPI is
respondents' true employer and, thus, deemed jointly and severally liable with ODSI for respondents' monetary
claims.
The Court's Ruling
To justify the grant of the extraordinary remedy of certiorari,  the petitioner must satisfactorily show that the court or
quasi-judicial authority gravely abused the discretion conferred upon it. Grave abuse of discretion connotes a
capricious and whimsical exercise of judgment, done in a despotic manner by reason of passion or personal hostility,
the character of which being so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined by or to act at all in contemplation of law. 37
52
In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia,  its findings and
conclusions are not supported by substantial evidence, or that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. 38
Guided by the foregoing considerations, the Court finds that the CA was correct in ruling that the labor tribunals a
quo  gave NPI an opportunity to be heard. However, it erred in not ascribing grave abuse of discretion on the NLRC's
finding that ODSI is a labor-only contractor of NPI and, thus, the latter is the respondents' true employer, and jointly
and severally liable with ODSI for respondents' monetary claims. As will be explained hereunder, such finding by the
NLRC is not supported by substantial evidence.
I.
The observance of fairness in the conduct of any investigation is at the very heart of procedural due process. The
essence of due process is to be heard, and, as applied to administrative proceedings, this means a fair and
reasonable opportunity to explain one's side, or an opportunity to seek a reconsideration of the action or ruling
complained of. Administrative due process cannot be fully equated with due process in its strict judicial sense, for in
the former a formal or trial-type hearing is not always necessary, and technical rules of procedure are not strictly
applied.39 The Court's disquisition in Ledesma v. CA40is instructive on this matter, to wit:
Due process, as a constitutional precept, does not always and in all situations require a trial-type proceeding. Due
process is satisfied when a person is notified of the charge against him and given an opportunity to explain or
defend himself. In administrative proceedings, the filing of charges and giving reasonable opportunity for the
person so charged to answer the accusations against him constitute the minimum requirements of due
process. The essence of due process is simply to be heard, or as applied to administrative proceedings,
an opportunity to explain ones side, or an opportunity to seek a reconsideration of the action or ruling
complained of.41(Emphasis and underscoring supplied)
In this case, NPI essentially claims that it was deprived of its right to due process when it was not notified of the
proceedings before the LA and did not receive copies and issuances from the other parties and the LA,
respectively.42 However, as correctly pointed out by the CA, NPI was furnished via courier of a copy of the amended
complaint filed by the respondents against it as shown by LBC Receipt No. 125158910840. 43 It is also apparent that
NPI was also furnished with the respondents' Position Paper, Reply, and Rejoinder.44 Verily, NPI was indeed accorded
due process, but as the LA mentioned, the former chose not to file any position paper or appear in the scheduled
conferences.45
Assuming arguendo  that NPI was somehow deprived of due process
by either of the labor tribunals, such defect was cured by: (a)  NPI' s filing of its motion for reconsideration before the
NLRC; (b)  the NLRC's subsequent issuance of its Resolution dated August 30, 2013 wherein the tribunal considered
all of NPI's arguments as contained in its motion; and (c) NPI's subsequent elevation of the case to the CA.
In Gonzales v. Civil Service Commission,  46 the Court reiterated the rule that "[a]ny seeming defect in [the]
observance [of due process] is cured by the filing of a motion for reconsideration," and that "denial of due process
cannot be successfully invoked by a party who [was] afforded the opportunity to be heard x x x." 47 Similarly,
in Autencio v. Mañara, 48it was held that defects in procedural due process may be cured when the party has been
afforded the opportunity to appeal or to seek reconsideration of the action or ruling complained of. 49
Evidently, the foregoing shows that NPI was not denied due process of law as it was afforded the fair and reasonable
opportunity to explain its side.
II.
In holding NPI jointly and severally liable with ODSI for the monetary awards in favor of respondents, both the NLRC WHEREFORE, the petition is GRANTED. The Decision dated March 26, 2015 and the Resolution dated September
and the CA held that based on the provisions of the Distributorship Agreement between them, ODSI is merely a 17, 2015 of the Court of Appeals in CA-G.R. SP No. 132686 are hereby REVERSED and SET ASIDE. Accordingly, the
labor-only contractor of NPI. 50 In this regard, the CA opined that the following stipulations of the said Agreement Decision dated May 30, 2013 and the Resolution dated August 30, 2013 of the National Labor Relations Commission
evinces that NPI had control over the business of ODSI, namely, that: (a)  NPI shall offer to ODSI suggestions and in LAC No. 02-000699-13/ NCR-03-04761-12 are MODIFIED, DELETING petitioner Nestle Philippines, Inc.'s
recommendations to improve sales and to further develop the market; (b)  NPI prohibits ODSI from exporting its solidary liability with Ocho de Septiembre, Inc. (ODSI) for the latter's monetary obligations to respondents Benny A.
products (the No-Export provision); (c)  NPI provided standard requirements to ODSI for the warehousing and Puedan, Jr., Jayfer D. Limbo, Brodney N. Avila, Arthur C. Aquino, Ryan A. Miranda, Ronald R. Alave, Johnny A.
inventory management of the sold goods; and (d)  prohibition imposed on ODSI to sell any other products that Dimaya, Marlon B. Delos Reyes, Angelito R. Cordova, Edgar S. Barruga, Camilo B. Cordova, Jr., Jeffry B. Languisan,
directly compete with those of NPI.51 Edison U. Villapando, Jheimey S. Remolin, Mary Luz A. Macatalad, Jenalyn M. Gamurot, Dennis G. Bawag, Raquel A.
Abellera, and Ricandro G. Guatno, Jr.
However, a closer examination of the Distributorship Agreement reveals that the relationship of NPI and ODSI is not
that of a principal and a contractor (regardless of whether labor-only or independent), but that of a seller and a
buyer/re-seller. As stipulated in the Distributorship Agreement, NPI agreed to sell its products to ODSI at discounted
prices,52 which in turn will be re-sold to identified customers, ensuring in the process the integrity and quality of the
said products based on the standards agreed upon by the parties. 53 As aptly explained by NPI, the goods it
manufactures are distributed to the market through various distributors, e.g.,  ODSI, that in turn, re-sell the same to
designated outlets through its own employees such as the respondents. Therefore, the reselling activities allegedly
performed by the respondents properly pertain to ODSI, whose principal business consists of the "buying, selling,
distributing, and marketing goods and commodities of every kind" and "[entering] into all kinds of contracts for the
acquisition of such goods [and commodities]."54

Thus, contrary to the CA's findings, the aforementioned stipulations in the Distributorship Agreement hardly
demonstrate control on the part of NPI over the means and methods by which ODSI performs its business, nor were
they intended to dictate how ODSI shall conduct its business as a distributor. Otherwise stated, the stipulations in the
Distributorship Agreement do not operate to control or fix the methodology on how ODSI should do its business as a
distributor of NPI products, but merely provide rules of conduct or guidelines towards the achievement of a mutually
desired result55 - which in this case is the sale of NPI products to the end consumer. In Steelcase, Inc. v. Design
International Selections, Inc.,  56 the Court held that the imposition of minimum standards concerning sales,
marketing, finance and operations are nothing more than an exercise of sound business practice to increase sales
and maximize profits, to wit:
Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required by Steelcase of its
distributors to prove that DISI was not functioning independently from Steelcase because the same imposed
certain conditions pertaining to business planning, organizational structure, operational effectiveness and efficiency,
and financial stability. It is actually logical to expect that Steelcase, being one of the major manufacturers of office
systems furniture, would require its dealers to meet several conditions for the grant and continuation of a
distributorship agreement. The imposition of minimum standards concerning sales, marketing, finance and
operations is nothing more than an exercise of sound business practice to increase sales and maximize
profits for the benefit of both Steelcase and its distributors. For as long as these requirements do not
impinge on a distributor's independence, then there is nothing wrong with placing reasonable
expectations on them. 57 (Emphasis and underscoring supplied)

Verily, it was only reasonable for NPI - it being a local arm of one of the largest manufacturers of foods and grocery
products worldwide - to require its distributors, such as ODSI, to meet various conditions for the grant and
continuation of a distributorship agreement for as long as these conditions do not control the means and methods on
how ODSI does its distributorship business, as shown in this case.1âwphi1 This is to ensure the integrity and quality
of the products which will ultimately fall into the hands of the end consumer.

Thus, the foregoing circumstances show that ODSI was not a labor-only contractor of NPI; hence, the latter cannot
be deemed the true employer of respondents. As a consequence, NPI cannot be held jointly and severally liable to
ODSI's monetary obligations towards respondents.

53