JOSE

Y.
SONZA,
PETITIONER,
VS.
ABS-CBN
BROADCASTING
CORPORATION, RESPONDENT.G.R. No. 138051, June 10, 2004, CARPIO,
J., FIRST DIVISION
3
Facts
In May 1994, ABS-CBN signed an 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 SONZAs services exclusively
to ABS-CBN as talent for radio and television. Under such contract, Sonza was to Cohost the Mel and Jay program for radio and television receiving an amount of
310K a month for the first year and 317k for the second and third. In 1996,
Sonza sent a letter to ABS-CBN rescinding the contract. Later on, Sonza filed
a complaint before the Department of Labor and Employment, National Capital
Region in Quezon City. SONZA complained that ABS-CBN did not pay his
salaries, separation pay, service incentive leave pay, 13th month pay, signing
bonus, travel allowance and amounts due under the Employees Stock Option
Plan. The labor arbiter dismissed the complaint for lack of jurisdiction on the
ground that no employer-employee relationship existed between Sonza and
ABS-CBN. The NLRC and CA likewise, affirmed the decision on appeal.
Issue.
WON Sonza is an employee of ABS-CBN entitling him the benefits
granted under the labor code.
Decision
No, 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 employers power to
control the employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is the most
important element.
A. Selection and engagement of employee
- 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.
B. Payment of wages All the talent fees and benefits paid to SONZA were the result of negotiations
that led to the Agreement. If SONZA were ABS-CBNs employee, there would be
no need for the parties to stipulate on

Benefits such as SSS, Medicare,13th month pay etc., which the

law automatically incorporates into every employer-employee contract.
Whatever benefits SONZA enjoyed arose from contract and not because of an
employer-employee relationship.
C. Power of Dismissal
- Even if ABS-CBN suffered severe business losses, ABS-CBN could not retrench SONZA
because ABS-CBN remained obligated to pay SONZAs talent fees during the life
of the Agreement. This circumstance indicates an independent contractual
relationship between SONZA and ABS-CBN.
D. Control
- In Alberty Vlez v. Corporacin De Puerto Rico Para La Difusin
Pblica (WIPR) the US CA held that a television program host is an independent
contractor on the ff. grounds: First, a television actress is as killed position
requiring talent and training not available on-the-job. Second, Alberty (talent)
provided thetools and instrumentalities necessary for her to perform. 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 servicesas Hostess for the Program Desde Mi Pueblo.In this
case, ABS-CBN did not assign any other work to Sonza. To perform his work,
SONZA only neededhis skills and talent. How SONZA delivered his lines,
appeared on television, and sounded on radio were outside ABS-CBNs control..
Second, although ABS-CBN has the power to not broadcast the programs of
Sonza, this does
not mean it has power to over the means and methods over Sonzas work since
its still bound to pay Sonza by virtueof the contract between them and that
although ABS-CBN has rules and regulations regarding its talents,
the Agreement does not require SONZA to comply with the rules and standards
of performance prescribed foremployees of ABS-CBN.
3
Considered a landmark case because 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.
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, th
labor-onlycontractor is the agent of the principal. MJMDC, is a corporation
organized and owned by Sonza and Tianco. The President and General Manager
of MJMDC is SONZA himself. It is absurd to hold that MJMDC, whichis 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 andSONZA. All of these

being the case, the court agrees with the findings of the Labor Arbiter and the
Court of Appeals
that SONZAs claims
(regarding benefits) are all based on the May 1994 Agreement and stock option
plan, and not onthe Labor Code.Petition dismissed

Decision of the National Labor Relations Commission (NLRC) dated April 15,
2003,[3] in NLRC NCR CA No. 032766-02 which affirmed with modification the
decision of the Labor Arbiter dated July 31, 2002, [4] in NLRC-NCR Case No. 3010-0-489-01, finding that private respondents were liable for constructive
dismissal.

FIRST DIVISION
In 1995, petitioner was hired by Kasei Corporation during its incorporation
ANGELINA FRANCISCO,
Petitioner,

- versus -

G.R. No. 170087

Present:
Panganiban, C.J. (Chairperson),
Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.

NATIONAL LABOR RELATIONS

COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA
Promulgated:
and RAMON ESCUETA,
Respondents.
August 31, 2006
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:

stage. She was designated as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the company.
[5]

Although she was designated as Corporate Secretary, she was not

entrusted with the corporate documents; neither did she attend any board
meeting nor required to do so. She never prepared any legal document and
never represented the company as its Corporate Secretary. However, on some
occasions, she was prevailed upon to sign documentation for the company. [6]
In 1996, petitioner was designated Acting Manager. The corporation also
hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager,
petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings
with government agencies, especially with the Bureau of Internal Revenue (BIR),

This petition for review on certiorari under Rule 45 of the Rules of Court
seeks to annul and set aside the Decision and Resolution of the Court of Appeals
dated October 29, 2004[1] and October 7, 2005,[2] respectively, in CA-G.R. SP No.
78515 dismissing the complaint for constructive dismissal filed by herein
petitioner Angelina Francisco. The appellate court reversed and set aside the

Social Security System (SSS) and in the city government of Makati; and to
administer all other matters pertaining to the operation of Kasei Restaurant
which is owned and operated by Kasei Corporation.[7]

For five years, petitioner performed the duties of Acting Manager. As of

technical consultants on accounting matters and act concurrently as Corporate

December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing

Secretary. As technical consultant, petitioner performed her work at her own

allowance and a 10% share in the profit of Kasei Corporation.[8]

discretion without control and supervision of Kasei Corporation. Petitioner had

no daily time record and she came to the office any time she wanted. The

In January 2001, petitioner was replaced by Liza R. Fuentes as

company never interfered with her work except that from time to time, the

Manager. Petitioner alleged that she was required to sign a prepared resolution

management

would

ask

her

opinion

on

matters

relating

to

her

for her replacement but she was assured that she would still be connected with

profession. Petitioner did not go through the usual procedure of selection of

Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a

employees, but her services were engaged through a Board Resolution

meeting of all employees of Kasei Corporation and announced that nothing had

designating her as technical consultant. The money received by petitioner from

changed and that petitioner was still connected with Kasei Corporation as

the corporation was her professional fee subject to the 10% expanded

Technical Assistant to Seiji Kamura and in charge of all BIR matters. [9]

withholding tax on professionals, and that she was not one of those reported to
the BIR or SSS as one of the companys employees.[12]

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month

beginning January up to September 2001 for a total reduction of P22,500.00 as

Petitioners designation as technical consultant depended solely upon

of September 2001. Petitioner was not paid her mid-year bonus allegedly

the will of management. As such, her consultancy may be terminated any time

because the company was not earning well. On October 2001, petitioner did

considering that her services were only temporary in nature and dependent on

not receive her salary from the company. She made repeated follow-ups with

the needs of the corporation.

the company cashier but she was advised that the company was not earning
well.[10]

To prove that petitioner was not an employee of the corporation, private

respondents submitted a list of employees for the years 1999 and 2000 duly
On October 15, 2001, petitioner asked for her salary from Acedo and the

received by the BIR showing that petitioner was not among the employees

rest of the officers but she was informed that she is no longer connected with

reported to the BIR, as well as a list of payees subject to expanded withholding

the company.[11]

tax which included petitioner. SSS records were also submitted showing that
petitioners latest employer was Seiji Corporation.[13]

Since she was no longer paid her salary, petitioner did not report for
work and filed an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its

The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:

1.
finding complainant an employee of respondent
corporation;
2.
declaring complainants dismissal as illegal;
3.
ordering respondents to reinstate complainant to
her former position without loss of seniority rights and jointly and
severally pay complainant her money claims in accordance with
the following computation:
a.
Backwages
10/2001

07/2002
275,000.00
(27,500 x 10 mos.)
b.
Salary
Differentials
(01/2001

09/2001)
22,500.00
c.
Housing
Allowance
(01/2001

07/2002)
57,000.00
d.
Midyear
Bonus
2001
27,500.00
e.
13th Month
Pay
27,500.00
f.
10% share in the profits of Kasei
Corp. from 1996-2001
361,175.00
g.
Moral and exemplary damages
100,000.00
h.
10%
Attorneys
fees
87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are
ordered to pay complainant separation pay with additional
backwages that would accrue up to actual payment of separation
pay.
SO ORDERED.[14]

2)
The awards representing moral and exemplary
damages and 10% share in profit in the respective accounts of
P100,000.00 and P361,175.00 are deleted;
3)
The award of 10% attorneys fees shall be based
on salary differential award only;
4)
The awards representing salary differentials,
housing allowance, mid year bonus and 13th month pay are
AFFIRMED.
SO ORDERED.[15]
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The
decision of the National Labor Relations Commissions dated April
15, 2003 is hereby REVERSED and SET ASIDE and a new one is
hereby rendered dismissing the complaint filed by private
respondent against Kasei Corporation, et al. for constructive
dismissal.
SO ORDERED.[16]
The appellate court denied petitioners motion for reconsideration, hence,
the present recourse.
The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent

On April 15, 2003, the NLRC affirmed with modification the Decision of
the Labor Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is
hereby MODIFIED as follows:
1)
Respondents are directed to pay complainant
separation pay computed at one month per year of service in
addition to full backwages from October 2001 to July 31, 2002;

Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.
Considering the conflicting findings by the Labor Arbiter and the National
Labor Relations Commission on one hand, and the Court of Appeals on the
other, there is a need to reexamine the records to determine which of the

propositions espoused by the contending parties is supported by substantial

nature of the relationship between the parties. This is especially appropriate in

evidence.[17]

this case where there is no written agreement or terms of reference to base the
relationship on; and due to the complexity of the relationship based on the

We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has

been no uniform test to determine the existence of an employer-employee

various positions and responsibilities given to the worker over the period of the
latters employment.

relation. Generally, courts have relied on the so-called right of control test
where the person for whom the services are performed reserves a right to

The control test initially found application in the case of Viaa v. Al-

control not only the end to be achieved but also the means to be used in

Lagadan and Piga,[19] and lately in Leonardo v. Court of Appeals,[20] where we

reaching such end. In addition to the standard of right-of-control, the existing

held that there is an employer-employee relationship when the person for whom

economic conditions prevailing between the parties, like the inclusion of the

the services are performed reserves the right to control not only the end

employee in the payrolls, can help in determining the existence of an employer-

achieved but also the manner and means used to achieve that end.

employee relationship.
However, in certain cases the control test is not sufficient to give a
complete picture of the relationship between the parties, owing to the
complexity of such a relationship where several positions have been held by the
worker. There are instances when, aside from the employers power to control

In Sevilla v. Court of Appeals,[21] we observed the need to consider the

existing economic conditions prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the employee in the payrolls, to
give a clearer picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic circumstances of
the worker.

the employee with respect to the means and methods by which the work is to
be accomplished, economic realities of the employment relations help provide a

Thus, the determination of the relationship between employer and

comprehensive analysis of the true classification of the individual, whether as

employee depends upon the circumstances of the whole economic activity,

employee, independent contractor, corporate officer or some other capacity.

[22]

such as: (1) the extent to which the services performed are an integral part

of the employers business; (2) the extent of the workers investment in

The better approach would therefore be to adopt a two-tiered test

equipment and facilities; (3) the nature and degree of control exercised by the

involving: (1) the putative employers power to control the employee with

employer; (4) the workers opportunity for profit and loss; (5) the amount of

respect to the means and methods by which the work is to be accomplished;

initiative, skill, judgment or foresight required for the success of the claimed

and (2) the underlying economic realities of the activity or relationship.

independent enterprise; (6) the permanency and duration of the relationship

between the worker and the employer; and (7) the degree of dependency of the

This two-tiered test would provide us with a framework of analysis, which

would take into consideration the totality of circumstances surrounding the true

worker upon the employer for his continued employment in that line of
business.[23]

SSS evinces the existence of an employer-employee relationship between

The proper standard of economic dependence is whether the worker is

petitioner and respondent corporation.[27]

dependent on the alleged employer for his continued employment in that line of
business.[24] In the United States, the touchstone of economic reality in

It is therefore apparent that petitioner is economically dependent on

analyzing possible employment relationships for purposes of the Federal Labor

respondent corporation for her continued employment in the latters line of

Standards Act is dependency.[25] By analogy, the benchmark of economic reality

business.

in analyzing possible employment relationships for purposes of the Labor Code

In Domasig v. National Labor Relations Commission,[28] we held that in a

ought to be the economic dependence of the worker on his employer.

business establishment, an identification card is provided not only as a security

By applying the control test, there is no doubt that petitioner is an

measure but mainly to identify the holder thereof as a bona fide employee of

employee of Kasei Corporation because she was under the direct control and

the firm that issues it. Together with the cash vouchers covering petitioners

supervision of Seiji Kamura, the corporations Technical Consultant. She

salaries for the months stated therein, these matters constitute substantial

reported for work regularly and served in various capacities as Accountant,

evidence adequate to support a conclusion that petitioner was an employee of

Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary,

private respondent.

with substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for

We likewise ruled in Flores v. Nuestro[29] that a corporation who registers

the proper operation of the corporation such as securing business permits and

its workers with the SSS is proof that the latter were the formers

other licenses over an indefinite period of engagement.

employees. The coverage of Social Security Law is predicated on the existence

of an employer-employee relationship.

Under the broader economic reality test, the petitioner can likewise be
said to be an employee of respondent corporation because she had served the

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has

company for six years before her dismissal, receiving check vouchers indicating

clearly established that petitioner never acted as Corporate Secretary and that

her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well

her designation as such was only for convenience. The actual nature of

as deductions and Social Security contributions from August 1, 1999 to

petitioners job was as Kamuras direct assistant with the duty of acting as

December 18, 2000.[26] When petitioner was designated General Manager,

Liaison Officer in representing the company to secure construction permits,

respondent

Irene

license to operate and other requirements imposed by government agencies.

Ballesteros. Petitioners membership in the SSS as manifested by a copy of the

Petitioner was never entrusted with corporate documents of the company, nor

SSS specimen signature card which was signed by the President of Kasei

required to attend the meeting of the corporation. She was never privy to the

corporation

made

report

to

the

SSS

signed

by

Corporation and the inclusion of her name in the on-line inquiry system of the

preparation of any document for the corporation, although once in a while she
was required to sign prepared documentation for the company. [30]

The corporation constructively dismissed petitioner when it reduced her

salary by P2,500 a month from January to September 2001. This amounts to an
illegal termination of employment, where the petitioner is entitled to full

The second affidavit of Kamura dated March 7, 2002 which repudiated

backwages. Since the position of petitioner as accountant is one of trust and

the December 5, 2001 affidavit has been allegedly withdrawn by Kamura

confidence, and under the principle of strained relations, petitioner is further

himself from the records of the case. [31] Regardless of this fact, we are

entitled to separation pay, in lieu of reinstatement.[34]

convinced that the allegations in the first affidavit are sufficient to establish that
petitioner is an employee of Kasei Corporation.

A diminution of pay is prejudicial to the employee and amounts to

constructive dismissal. Constructive dismissal is an involuntary resignation

Granting arguendo, that the second affidavit validly repudiated the first

resulting in cessation of work resorted to when continued employment becomes

one, courts do not generally look with favor on any retraction or recanted

impossible, unreasonable or unlikely; when there is a demotion in rank or a

testimony, for it could have been secured by considerations other than to tell

diminution in pay; or when a clear discrimination, insensibility or disdain by an

the truth and would make solemn trials a mockery and place the investigation

employer becomes unbearable to an employee.[35] In Globe Telecom, Inc. v.

of the truth at the mercy of unscrupulous witnesses. [32] A recantation does not

Florendo-Flores,[36] we ruled that where an employee ceases to work due to a

necessarily cancel an earlier declaration, but like any other testimony the same

demotion of rank or a diminution of pay, an unreasonable situation arises which

is subject to the test of credibility and should be received with caution. [33]

creates an adverse working environment rendering it impossible for such

employee to continue working for her employer. Hence, her severance from the

Based on the foregoing, there can be no other conclusion that petitioner

is an employee of respondent Kasei Corporation. She was selected and

company was not of her own making and therefore amounted to an illegal
termination of employment.

engaged by the company for compensation, and is economically dependent

upon respondent for her continued employment in that line of business. Her

In affording full protection to labor, this Court must ensure equal work

main job function involved accounting and tax services rendered to respondent

opportunities regardless of sex, race or creed. Even as we, in every case,

corporation

on

regular

period

of

attempt to carefully balance the fragile relationship between employees and

petitioner

for

employers, we are mindful of the fact that the policy of the law is to apply the

compensation, with the power to dismiss her for cause. More importantly,

Labor Code to a greater number of employees. This would enable employees to

respondent corporation had the power to control petitioner with the means and

avail of the benefits accorded to them by law, in line with the constitutional

methods by which the work is to be accomplished.

mandate giving maximum aid and protection to labor, promoting their welfare

engagement. Respondent

basis

over

an

corporation

hired

and

indefinite
engaged

and reaffirming it as a primary social economic force in furtherance of social

justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of

the Court of Appeals dated October 29, 2004 and October 7, 2005, respectively,
in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the
National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No.
032766-02, isREINSTATED. The case is REMANDED to the Labor Arbiter for
the recomputation of petitioner Angelina Franciscos full backwages from the
time she was illegally terminated until the date of finality of this decision, and
separation pay representing one-half month pay for every year of service,
where a fraction of at least six months shall be considered as one whole year.
SO ORDERED.
ANGELINA

FRANCISCO,

Petitioner,

versus

NATIONAL

LABOR

RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI,

TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA
and RAMON ESCUETA, Respondents., G.R. No. 170087, 2006 Aug 31.
FACTS:
1995, Petitioner was hired by Kasei Corporation during its incorporation
stage. She was designated as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the company.
Although she was designated as Corporate Secretary, she was not
entrusted with the corporate documents; neither did she attend any board
meeting nor required to do so. She never prepared any legal document and
never represented the company as its Corporate Secretary.
1996, petitioner
was designated Acting Manager. Petitioner was assigned to handle recruitment
of all employees and perform management administration functions; represent
the company in all dealings with government agencies, especially with the BIR,
SSS and in the city government of Makati; and to administer all other matters
pertaining to the operation of Kasei Restaurant which is owned and operated by
Kasei Corporation.
January 2001, petitioner was replaced by a certain Liza R. Fuentes as
Manager. Kasei Corporation reduced her salary, she was not paid her mid-year

bonus allegedly because the company was not earning well. On October 2001,
petitioner did not receive her salary from the company. She made repeated
follow-ups with the company cashier but she was advised that the company was
not earning well. Eventually she was informed that she is no longer connected
with the company.
Since she was no longer paid her salary, petitioner did not report for
work and filed an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its
technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her work at her own
discretion without control and supervision of Kasei Corporation. Petitioner had
no daily time record and she came to the office any time she wanted and that
her services were only temporary in nature and dependent on the needs of the
corporation.
The Labor Arbiter found that petitioner was illegally dismissed, NLRC
affirmed with modification the Decision of the Labor Arbiter. On appeal, CA
reversed the NLRC decision. CA denied petitioners MR, hence, the present
recourse.
ISSUES:
1. WON there was an employer-employee relationship between petitioner and
private respondent; and if in the affirmative,
2. Whether petitioner was illegally dismissed.
RULING:
1. Generally, courts have relied on the so-called right of control test
where the person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to be used in
reaching such end. In addition to the standard of right-of-control, the existing
economic conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, can help in determining the existence of an employeremployee relationship.
There are instances when, aside from the employers power to control
the employee, economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as
employee, independent contractor, corporate officer or some other capacity.
It is better, therefore, to adopt a two-tiered test involving: (1) the
employers power to control; and (2) the economic realities of the activity or
relationship.
The control test means that there is an employer-employee relationship
when the person for whom the services are performed reserves the right to
control not only the end achieved but also the manner and means used to
achieve that end.

There has to be analysis of the totality of economic circumstances of the

worker. Thus, the determination of the relationship between employer and
employee depends upon the circumstances of the whole economic activity,
such as: (1) the extent to which the services performed are an integral part of
the employers business; (2) the extent of the workers investment in
equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the workers opportunity for profit and loss; (5) the amount of
initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the relationship
between the worker and the employer; and (7) the degree of dependency of the
worker upon the employer for his continued employment in that line of
business. The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that line of
business
By applying the control test, it can be said that petitioner is an employee
of Kasei Corporation because she was under the direct control and supervision
of Seiji Kamura, the corporations Technical Consultant. She reported for work
regularly and served in various capacities as Accountant, Liaison Officer,
Technical Consultant, Acting Manager and Corporate Secretary, with
substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for
the proper operation of the corporation such as securing business permits and
other licenses over an indefinite period of engagement. Respondent corporation
had the power to control petitioner with the means and methods by which the
work is to be accomplished.
Under the economic reality test, the petitioner can also be said to be an
employee of respondent corporation because she had served the company for 6
yrs. before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions from. When petitioner was
designated General Manager, respondent corporation made a report to the SSS.
Petitioners membership in the SSS evinces the existence of an employeremployee relationship between petitioner and respondent corporation. The
coverage of Social Security Law is predicated on the existence of an employeremployee relationship.
2. The corporation constructively dismissed petitioner when it reduced
her. This amounts to an illegal termination of employment, where the petitioner
is entitled to full backwages
A diminution of pay is prejudicial to the employee and amounts to
constructive dismissal. Constructive dismissal is an involuntary resignation
resulting in cessation of work resorted to when continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to an employee. Petition is GRANTED.

1997 holding petitioner liable for illegal dismissal and directing private
respondents reinstatement.
Private respondent Rogelio Ejandra alleged that, for almost six years,
from July 15, 1990 to January 31, 1996, he worked as a bus driver of petitioner R
Transport Corporation. He plied the route Muntilupa-Alabang-MalandayMonumento-UE-Letre-Sangandaan from 5:00 a.m. up to 2:00 a.m. the next day
and was paid 10% of his daily earnings.
On January 31, 1996, an officer of the Land Transportation Office (LTO),
Guadalupe Branch, Makati City, apprehended him for obstruction of traffic for
which his license was confiscated. Upon his arrival at petitioners garage, he
immediately reported the incident to his manager, Mr. Oscar Pasquin, who gave
him P500 to redeem his license. The following day, he went to LTO, Guadalupe
Branch, to claim it but he was told that it had not yet been turned over by the
officer who apprehended him. He was able to retrieve his license only after a
week.

THIRD DIVISION
[G.R. No. 148508. May 20, 2004]
R

TRANSPORT
CORPORATION, petitioner,
EJANDRA, respondent.

vs.

ROGELIO

DECISION
CORONA, J.:
Before us is a petition for review of the decision [1] of the Court of
Appeals[2] dated December 22, 2000 dismissing the petition for certiorari of the
decision of the National Labor Relations Commission [3] (NLRC) dated May 30,
1997. The latter affirmed the decision [4] of the labor arbiter dated February 27,

On February 8, 1996, private respondent informed Mr. Pasquin that he was

ready to report for work. However, he was told that the company was still
studying whether to allow him to drive again. Private respondent was likewise
accused of causing damage to the bus he used to drive. Denying the charge,
private respondent blamed the person who drove the said bus during his
absence, considering that the damage was sustained during the week that he
did not drive the bus. Mr. Pacquin nonetheless told him Magpahinga ka muna
at tatawagin ka na lang namin kung kailangan ka na para magmaneho.
Magbakasyon ka muna, bata. When respondent asked how long he had to rest,
the manager did not give a definite time.
Petitioner denied private respondents allegations and claimed that private
respondent, a habitual absentee, abandoned his job. To belie private
respondents allegation that his license had been confiscated, petitioner
asserted that, had it been true, he should have presented an apprehension
report and informed petitioner of his problems with the LTO. But he did
not. Petitioner further argued that private respondent was not an employee
because theirs was a contract of lease and not of employment, with petitioner
being paid on commission basis.

On February 23, 1997, labor arbiter Rogelio Yulo rendered his decision in
favor of private respondent. The dispositive portion of the decision read:
PREMISES CONSIDERED, judgment is hereby rendered finding the dismissal of
Rogelio Ejandra to be without just cause and, therefore, illegal and ORDERING RTransport to REINSTATE him to his former position without loss of seniority and
other benefits and to pay him backwages from the time of his dismissal until
actual reinstatement.
SO ORDERED.[5]
Labor arbiter Yulo gave no weight to petitioners claim that private
respondent abandoned his work. His one-week absence did not constitute
abandonment of work considering that it took him the whole week to reclaim his
license. Private respondent could not retrieve it unless and until the
apprehending officer first transmitted it to their office. His inability to drive for
petitioner that whole week was therefore not his fault and petitioner could be
held liable for illegal dismissal. Due process was not accorded to private
respondent who was never given the opportunity to contest the charge of
abandonment. Moreover, assuming actual abandonment, petitioner should
have reported such fact to the nearest employment office of the Department of
Labor and Employment. But no such report was ever made.
On May 30, 1997, the NLRC rendered a decision affirming the decision of
the labor arbiter:
WHEREFORE, premises considered, the appeal is hereby DISMISSED and the
appealed decision AFFIRMED in toto.

Appellants defense of denying the existence of employer-employee relationship

with the complainant based on the manner by which complainant was being
paid his salary, cannot hold water.
xxx

xxx

xxx

While employees paid on piece-rate and commission basis are not covered by
the provisions of the Labor Code, as amended, on hours of work, these
employees however, for all intents and purposes, are employees of their
employers.
xxx

xxx

xxx[7]

Petitioner filed in the Court of Appeals a petition for certiorari on the ground
that the NLRC committed grave abuse of discretion in affirming the decision of
the labor arbiter. OnDecember 22, 2000, the Court of Appeals rendered a
decision, the dispositive portion of which read:
WHEREFORE, the instant petition is hereby DENIED for lack of merit.
SO ORDERED.[8]
Categorizing the issues raised by petitioner as factual, the appellate court
held that the findings of fact of the labor arbiter (affirmed by the NLRC) were
entitled to great respect because they were supported by substantial
evidence. The Court of Appeals also ruled that petitioner was barred from
denying the existence of an employer-employee relationship because petitioner
invoked its rights under the law and jurisprudence as an employer in dismissing
private respondent.

SO ORDERED.[6]
Hence, this appeal based on the following assignments of errors:
In disputing petitioners claim that private respondent was not its employee
and was not therefore entitled to notice and hearing before termination, the
NLRC held that:
It is very clear that (sic) from no less than appellants admission, that
complainant was not afforded his right to due process prior to the severance of
his employment with respondents. (First par. p.3, respondents Appeal
Memorandum, p. 45, Rollo)

A
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS, TENTH DIVISION
COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT AFFIRMED/ADOPTED IN
TOTO THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION (NLRC)
BASED PURELY ON A SPECULATION, SURMISE OR CONJECTURE.

B
THE FINDINGS OF FACTS ARE MERE CONCLUSIONS WITHOUT CITATION OR
SPECIFIC EVIDENCE ON WHICH THEY ARE BASED.
C
FURTHER, THE HONORABLE COURT OF APPEALS, TENTH DIVISION COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT
RULING THAT THE RELATIONSHIP IN LAW OCCURRING BETWEEN THE
PETITIONER R TRANSPORT CORPORATION AND THE PRIVATE RESPONDENT WAS
IN A NATURE OF LESSOR AND LESSEE.
D
MOREOVER, THERE IS A NEED BY THIS HONORABLE COURT TO GIVE A SECOND
LOOK ON THE RECORDS OF NLRC NCR CASE RAB NO. IV-2-7910-R / NLRC NCR
CA-012-605-97 TO AVOID MISCARRIAGE OF JUSTICE AND FURTHERANCE OF THE
STATUTORY REQUIREMENTS OF DUE PROCESS.
E
FINALLY, THE HONORABLE COURT OF APPEALS, TENTH DIVISION GRAVELY
ERRED IN DENYING THE PETITION IN CA-G.R. SP. NO. 51962 IN ITS DECISION
PROMULGATED ONDECEMBER 22, 2000 (ANNEXES G AND G-1) AND IN ITS
RESOLUTION DATED JUNE 4, 2001 (ANNEX B), HAS ACTED CONTRARY TO LAW
AND THE RULES OF COURT.[9]
According to the petitioner, the appellate court erred in not finding that
private respondent abandoned his work; that petitioner was not the lessor of
private respondent; that, as such, the termination of the contract of lease of
services did not require petitioner to respect private respondents rights to
notice and hearing; and, that private respondents affidavit was hearsay and
self-serving.
We deny the appeal.
Under Section 1, Rule 45 of the 1997 Rules of Civil Procedure, a petition for
review shall only raise questions of law considering that the findings of fact of

the Court of Appeals are, as a general rule, conclusive upon and binding on this
Court.[10] This doctrine applies with greater force in labor cases where the
factual findings of the labor tribunals are affirmed by the Court of Appeals. The
reason is because labor officials are deemed to have acquired expertise in
matters within their jurisdiction and therefore, their factual findings are
generally accorded not only respect but also finality, and are binding on this
Court.[11]
In the case at bar, the labor arbiter, the NLRC and the Court of Appeals
were unanimous in finding that private respondent worked as a driver of one of
the buses of petitioner and was paid on a 10% commission basis. After he was
apprehended for a traffic violation, his license was confiscated. When he
informed petitioners general manager of such fact, the latter gave him money
to redeem his license. He went to the LTO office everyday but it was only after
a week that he was able to get back his license. When he reported back to
work, petitioners manager told him to wait until his services were needed
again. Considering himself dismissed, private respondent filed a complaint for
illegal dismissal against petitioner.
We have no reason to disturb all these factual findings because they are
amply supported by substantial evidence.
Denying the existence of an employer-employee relationship, petitioner
insists that the parties agreement was for a contract of lease of services. We
disagree. Petitioner is barred to negate the existence of an employer-employee
relationship. In its petition filed before this Court, petitioner invoked our rulings
on the right of an employer to dismiss an employee for just cause. [12] Petitioner
maintained that private respondent was justifiably dismissed due to
abandonment of work. By adopting said rulings, petitioner impliedly admitted
that it was in fact the employer of private respondent. According to the control
test, the power to dismiss an employee is one of the indications of an employeremployee relationship.[13] Petitioners claim that private respondent was legally
dismissed for abandonment was in fact a negative pregnant: [14] an
acknowledgement that there was no mutual termination of the alleged contract
of lease and that private respondent was its employee. The fact that petitioner
paid private respondent on commission basis did not rule out the presence of an
employee-employer relationship. Article 97(f) of the Labor Code clearly provides
that an employees wages can be in the form of commissions.

We now ask the next question: was private respondent, an employee of

petitioner, dismissed for just cause? We do not think so.

I. For termination of employment based on just causes as defined in Article 282

of the Code:

According to petitioner, private respondent abandoned his job and lied

about the confiscation of his license. To constitute abandonment, two elements
must concur: (1) the failure to report for work or absence without valid or
justifiable reason and (2) a clear intention to sever the employer-employee
relationship. Of the two, the second element is the more determinative factor
and should be manifested by some overt acts. Mere absence is not
sufficient. It is the employer who has the burden of proof to show a deliberate
and unjustified refusal of the employee to resume his employment without any
intention of returning.[15]

(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;

In the instant case, petitioner fell short of proving the requisites. To begin
with, petitioners absence was justified because the LTO, Guadalupe Branch, did
not release his license until after a week. This was the unanimous factual
finding of the labor tribunals and the Court of Appeals. As aptly held by labor
arbiter Yulo, the process of redeeming a confiscated license, based on common
experience, depended on when the apprehending officer turned over the
same. Second, private respondent never intended to sever his employment as
he in fact reported for work as soon as he got his license back. Petitioner
offered no evidence to rebut these established facts. Third, labor arbiter Yulo
correctly observed that, if private respondent really abandoned his work,
petitioner should have reported such fact to the nearest Regional Office of the
Department of Labor and Employment in accordance with Section 7, Rule XXIII,
Book V of Department Order No. 9, series of 1997 [16] (Rules Implementing Book
V of the Labor Code). Petitioner made no such report.

(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to
respond to the charge, present his evidence or rebut the evidence presented
against him; and
(c ) 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. In case of termination, the foregoing notices shall be
served on the employees last known address.
II. For termination of employment as based on authorized causes defined in
Article 283 of the Code, the requirements of due process shall be deemed
complied with upon service of a written notice to the employee and the
appropriate Regional Office of the Department at least thirty days before the
effectivity of the termination, specifying the ground or grounds for termination.
III. If termination is brought about by the completion of the contract or phase
thereof, no prior notice is required. If the termination is brought about by the
failure of an employee to meet the standards of the employer in case of
probationary employment, it shall be sufficient that a written notice is served
the employee within a reasonable time from the effective date of termination.

In addition to the fact that petitioner had no valid cause to terminate

private respondent from work, it violated the latters right to procedural due
process by not giving him the required notice and hearing. Section 2, Rule XXIII,
Book V of Department Order No. 9 provides for the procedure for dismissal for
just or authorized cause:

WHEREFORE, premises considered, the petition is hereby DENIED. Costs

against the petitioner.

SEC. 2. Standards of due process; requirement of notice. In all cases of

termination of employment, the following standards of due process shall be
substantially observed:

Vitug, (Chairman and Acting Chief Justice), Sandoval-Gutierrez, and CarpioMorales, JJ., concur.

SO ORDERED.

A. Power of Control - Evidence shows that the Lagrama performed his work as
painter and under the supervision and control of Tan.
1.

Tan vs. Lagrama

Tan vs. Lagrama

G.R. No. 151228, August 15, 2002

Facts

Lagrama works for Tan as painter of billboards and murals for the motion
pictures shown at the theaters managed by Tan for more than 10years
Lagrama was dismissed for having urinated in his working area
Lagrama filed a complaint for illegal dismissal and non payment of
benefits
Tan asserted that Lagrama was an independent contractor as he was
paid in piece-work basis
Issue
W/N Lagrama is an independent contractor or an employee of Tan?

Ruling
Lagrama is an employee not an independent contractor
Applying Four Fold Test

Lagrama worked in a designated work area inside the

theater of Tan for the use of which petitioner prescribed rules, which rules
included the observance of cleanliness and hygeine and prohibition against
urinating in the work area and any other place other than rest rooms and
2.
Tan's control over Lagrama's work extended not only the
use of work area but also the result of Lagrama;s work and the manner and
means by which the work was to be accomplished
3.
Lagrama is not an independent contractor because he did
not enjoy independence and freedom from the control and supervision of Tan
and he was subjected to Tan's control over the means and methods by which his
work is to be performed and accomplished
B. Payment of Wages
1.

Lagrama worked for Tan on a fixed piece work basis is of no moment.

Payment by result is a method of compensation and does not define the
essence of the relation.
2.
Tat Lagrama was not reported as an employee to the SSS is not
conclusive, on the question whether he was an employee, otherwise Tan would
be rewarded for his failure or even neglect to perform his obligation.
C. Power of Dismissal by Tan stating that he had the right to fire
Lagrama, Tan in effect acknowledged Lagrama to be his employee
D. Power of Selection and Engagement of Employees Tan engaged
the services of Lagrama without the intervention of third party

1. G.R. No. 103525. March 29, 1996MARCOPPER MINING CORPORATION, Petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION andNATIONAL MINES AND ALLIED WORKERS
UNION (NAMAWU-MIF), Respondents.Facts: On 23 August 1984, Marcopper Mining
Corporation, a corporation duly organized and existing under thelaws of the
Philippines, engaged in the business of mineral prospecting, exploration and
extraction, and privaterespondent NAMAWU-MIF, a labor federation duly
organized and registered with the Department of Labor andEmployment (DOLE),
to which the Marcopper Employees Union (the exclusive bargaining agent of all
rank-and-file workers of petitioner) is affiliated, entered into a Collective Bargaining
Agreement (CBA) effective from 1 May1984 until 30 April 1987.The COMPANY agrees to
grant general wage increase to all employees within the bargaining unit. It is
expresslyunderstood that this wage increase shall be exclusive of any increase in
the minimum wage and/or mandatory livingallowance that may be promulgated
during the life of this Agreement. Prior to the expiration of
the aforestatedAgreement, petitioner and private respondent executed a
Memorandum of Agreement (MOA) wherein the terms of the CBA, specifically on
matters of wage increase and facilities allowance, were modified as the COMPANY grantsa
wage increase of 10% of the basic rate to all employees and workers within the
bargaining units.This will meanthat the members of the bargaining unit will get an
effective increase of 10% from May 1, 1986.In compliance with the amended CBA,
petitioner implemented the initial 5% wage increase due on 1 May 1986.On 1
June 1987, Executive Order (E.O.) No. 178 was promulgated mandating the integration of the
cost of livingallowance into the basic wage of workers, its effectivity retroactive to 1 May 1987.
Consequently, effective on 1May 1987, the basic wage rate of petitioners laborers

categorized as non-agricultural workers was increased byP9.00 per day.Petitioner

implemented the second five percent (5%) wage increase due on 1 May 1987
and thereafter added theintegrated COLA. Private respondent, however,
assailed the manner in which the second wage increase waseffected. It argued
that the COLA should first be integrated into the basic wage before the 5%
wage increase iscomputed.Consequently, the union filed a complaint for
underpayment of wages before the Regional Arbitration Branch IV,Quezon City.
Labor Arbiter promulgated a decision in favor of the union. Petitioner appealed
the Labor Arbitersdecision and the NLRC rendered its decision sustaining the
Labor Arbiters ruling. Petitioners motion for reconsideration was denied by the
NLRC in its resolution.Hence,the present petition.Issue: What should be the
basis for the computation of the CBA increase, the basic wage without the COLA
or theso-called "integrated" basic wage which, by mandate of E.O. No. 178, includes the
COLA.Held: The principle that the CBA is the law between the contracting parties
stands strong and true. However, thepresent controversy involves not merely an
interpretation of CBA provisions. More importantly, it requires adetermination of
the effect of an executive order on the terms and the conditions of the CBA. This
is, and should be,the focus of the instant case. It is unnecessary to delve too much on the
intention of the parties as to what theyallegedly meant by the term "basic wage" at
the time the CBA and MOA were executed because there is no questionthat as of
1 May 1987, as mandated by E.O. No. 178, the basic wage of workers, or the statutory
minimum wage,was increased with the integration of the COLA. As of said date, then, the
term "basic wage" includes the COLA.This is what the law ordains and to which
the collective bargaining agreement of the parties must conform.There is evidently
nothing to construe and interpret because the law is clear and unambiguous. Unfortunately
for petitioner, said law, by some uncanny coincidence, retroactively took effect
on the same date the CBA increasebecame effective. Therefore, there cannot be
any doubt that the computation of the CBA increase on the basis of
the"integrated" wage does not constitute a violation of the CBA.While the terms
and conditions of the CBA constitute the law between the parties, it is not,
however, an ordinarycontract to which is applied the principles of law governing
ordinary contracts. A CBA, as a labor contract withinthe contemplation of Article
1700 of the Civil Code of the Philippines which governs the relations between labor and
capital, is not merely contractual in nature but impressed with public interest,
thus, it must yield to the commongood. As such, it must be construed liberally
rather than narrowly and technically, and the courts must place apractical and
realistic construction upon it, giving due consideration to the context in which it
is negotiated andpurpose which it is intended to serve.