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Labor Standards Finals Case Digest

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University of San
Carlos

College of Law
Labor Standards

Finals Case Digests

Ma. Cecelia
Timbal LlB

2 Rm 402

| 36
within the jurisdiction
of the SSC which is
primarily charged with
the duty of settling

disputes arising
underthe Social
Security Law of
1997.On the basis
thereof, considering
that the petitioncomplaint of the
petitioner SSS
involved the issue of
compulsorycoverage
of the owners-

members of the
respondent
cooperative, this Court
agrees with the
petitioner SSC when
itdeclared in its Order
dated 17 February
2004 that as an
incident to the issue of
compulsory coverage,
it may inquireinto the

presence or absence of
an employer-employee
relationship without
need of waiting for a
priorpronouncement
or submitting the issue
to the NLRC for prior
determination.Since
both the petitioner
SSC and theNLRC are
independent bodies

and their jurisdiction

are well-defined by
the separate statutes
creating
them,petitioner SSC
has the authority to
inquire into the
relationship existing
between the worker
and the person or
entityto whom he

renders service to
determine if the
employment, indeed,
is one that is excepted
by the Social
SecurityLaw of 1997
from compulsory
coverage.In
determining the
existence of an
employer-employee

relationship, the
following elements are
considered: (1)
theselection and
engagement of the
workers; (2) the
payment of wages by
whatever means; (3)
the power of
dismissal;and (4) the
power to control the

workers conduct, with

the latter assuming
primacy in the overall
consideration.
Themost important
element is the
employers control of
the employees
conduct, not only as to
the result of the work
tobe done, but also as

to the means and

methods to
accomplish.
The power of control
refers to the existence
of thepower and not
necessarily to the
actual exercise
thereof.It is not
essential for the
employer to actually

supervise
theperformance of
duties of the
employee; it is enough
that the employer has
the right to wield that
power. All
theaforesaid elements
are present in this
case.
First

.It is expressly
provided in the
Service Contracts that
it is the respondent
cooperative which has
the
exclusivediscretion in
the
selection and
engagement of the

owners-members as
well as its team
leaders who will
beassigned at Stanfilco
.
Second
.
Wages are defined as
remuneration or
earnings, however
designated

, capable of
beingexpressed in
terms of money,
whether fixed or
ascertained, on a time,
task, piece or
commission basis, or
othermethod of
calculating the same,
which is

payable by an
employer to an
employee under a
written or
unwrittencontract of
employment for work
done or to be done, or
for service rendered or
to be rendered
. In this case, the
weekly

stipends or the socalled shares in the

service surplus given
by the respondent
cooperative to its
owners-members were
in reality wages, as the
same were equivalent
to an amount not
lower than that
prescribed by

existinglabor laws,
rules and regulations,
including the wage
order applicable to the
area and industry; or
the same shall not be
lower than the
prevailing rates of
wages. It cannot be
doubted then that
those stipends or

shares in the
servicesurplus are
indeed wages, because
these are given to the
owners-members as
compensation in
rendering services
torespondent
cooperatives client,
Stanfilco.
Third

.It is also stated in the

above-mentioned
Service Contracts that
it is therespondent
cooperative which has
the
power to investigate,
discipline and remove
the owners-members
and itsteam leaders

who were rendering

services at Stanfilco.
Fourth
.As earlier opined, of
the four elements of
theemployeremployee relationship,
the control test is the
most important.In the
case at bar, it is the

respondentcooperative
which has the sole
control over the
manner and means of
performing the
services under the
ServiceContracts with
Stanfilco as well as the
means and methods of
work

. Also, the respondent

cooperative is solely
andentirely
responsible for its
owners-members,
team leaders and other
representatives at
Stanfilco. All these
clearlyprove that,
indeed, there is an
employer-employee

relationship between
the respondent
cooperative and its
owners-members.It is
true that the Service
Contracts executed
between the
respondent
cooperative and
Stanfilco expressly
providethat there shall

be no employeremployee relationship
between the
respondent
cooperative and its
owners-members.This
Court, however,
cannot give the said
provision force and
effect.

University of San
Carlos

College of Law
Labor Standards
Finals Case Digests
Ma. Cecelia
Timbal LlB

2 Rm 402

| 37
As previously pointed
out by this Court, an
employee-employer
relationship actually
exists between the
respondentcooperative
and its ownersmembers.The four
elements in the four-

fold test for the

existence of an
employmentrelationsh
ip have been complied
with.The respondent
cooperative must not
be allowed to deny its
employmentrelationsh
ip with its ownersmembers by invoking
the questionable

Service Contracts
provision, when in
actuality, itdoes exist.
The existence of an
employer-employee
relationship cannot be
negated by expressly
repudiating it in
acontract, when the
terms and surrounding
circumstances show

otherwise.The
employment status of
a person isdefined and
prescribed by law and
not by what the parties
say it should be
.

It is settled that the

contracting parties
may establish such

stipulations, clauses,
terms and conditions
as they want,and their
agreement would have
the force of law
between
them.However,
the
agreed terms and
conditions must notbe

contrary to law,
morals, customs,
public policy or public
order
. The Service Contract
provision in question
must be struck down
for being contrary to
law and public policy
since it is apparently
being used by the

respondentcooperative
merely to circumvent
the compulsory
coverage of its
employees, who are
also its ownersmembers, bythe Social
Security Law.This
Court is not unmindful
of the pronouncement
it made in

Cooperative Rural
Bank of Davao City,
Inc. v. Ferrer-Calleja
wherein it held that:A
cooperative, therefore,
is by its nature
different from an
ordinary business
concern, being run
either by
persons,partnerships,

or corporations. Its
owners and/or
members are the ones
who run and operate
the business while
theothers are its
employees x x x.
An employee therefore
of such a cooperative
who is a member and
co-owner thereof

cannot invoke the right

tocollective bargaining
for certainly an owner
cannot bargain with
himself or his coowners
. In the opinion
ofAugust 14, 1981 of
the Solicitor General
he correctly opined that
employees of

cooperatives who are

themselvesmembers of
the cooperative have
no right to form or
join labor
organizations for
purposes of collective
bargaining for being
themselves co-owners
of the
cooperative.However,

in so far as it involves
cooperatives with
employees who are
not members or coowners
thereof,certainly such
employees are entitled
to exercise the rights
of all workers to
organization,
collective bargaining,

negotiations and
others as are enshrined
in the Constitution and
existing laws of the
country.The situation
in the aforesaid case is
very much different
from the present
case.The declaration
made by theCourt in
the aforesaid case was

made in the context of

whether an employee
who is also an ownermemberof a
cooperative can
exercise the right to
bargain collectively
with the employer
who is the
cooperativewherein he
is an owner-member.

Obviously, an ownermember cannot

bargain collectively
with thecooperative of
which he is also the
owner because an
owner cannot bargain
with himself.In the
instant case,there is no
issue regarding an
owner-members right

to bargain collectively
with the
cooperative.Thequesti
on involved here is
whether an employeremployee relationship
can exist between the
cooperativeand an
owner-member.In fact,
a closer look at

Cooperative Rural
Bank of Davao City,
Inc.
will show that
itactually recognized
that an owner-member
of a cooperative can
be its own employee.It
bears stressing, too,
that a cooperative
acquires juridical

personality upon its

registration with
theCooperative
Development
Authority. It has its
Board of Directors,
which directs and
supervises its
business;meaning, its
Board of Directors is
the one in charge in

the conduct and

management of its
affairs. With that,a
cooperative can be
likened to a
corporation with a
personality separate
and distinct from its
owners-

University of San
Carlos

College of Law
Labor Standards
Finals Case Digests
Ma. Cecelia
Timbal LlB

2 Rm 402

| 38
members.Consequentl
y, an owner-member
of a cooperative can
be an employee of the
latter and anemployeremployee relationship
can exist between
them.In the present
case, it is not disputed

that the respondent

cooperative had
registered itself with
theCooperative
Development
Authority, as
evidenced by its
Certificate of
Registration No. 0623-2460. In its bylaws, its Board of

Directors directs,
controls, and
supervises the
business and manages
the property of
therespondent
cooperative.Clearly
then, the management
of the affairs of the
respondent
cooperative is vestedin

its Board of Directors

and not in its ownersmembers as a
whole.Therefore, it is
completely logical
thatthe respondent
cooperative, as a
juridical person
represented by its
Board of Directors,
can enter into

anemployment with its

owners-members.In
sum, having declared
that there is an
employer-employee
relationship between
the
respondentcooperative
and its ownersmember, we conclude
that the petitioner SSC

has jurisdiction over

the petition-complaint
filed before it by the
petitioner SSS
Jaguar Security and
Investigation Agency
vs Sales (2008) G.R.
162420Facts:
Petitioner Jaguar
Security and
Investigation Agency

("Jaguar") is a private
corporation engaged
in the business
ofproviding security
services to its clients,
one of whom is Delta
Milling Industries,
Inc. ("Delta").Private
respondents Rodolfo
Sales, Melvin
Tamayo, Dionisio

Caranyagan, Jesus
Silva, Jr., Jaime
Moron and
DanethFetalvero were
hired as security
guards by Jaguar.
They were assigned at
the premises of Delta
in Libis, Quezon
City.Caranyagan and
Tamayo were

terminated by Jaguar
on May 26, 1998 and
August 21, 1998,
respectively.
Allegedlytheir
dismissals were
arbitrary and illegal.
Sales, Moron,
Fetalvero and Silva
remained with Jaguar.
All the guard-

employees, claim for

monetary benefits
such as underpayment,
overtime pay, rest day
and holiday premium
pay,underpaid 13th
month pay, night shift
differential, five days
service and incentive
leave pay. In addition
to thesemoney claims,

Caranyagan and
Tamayo argue that
they were entitled to
separation pay and
back wages, for the
timethey were
illegally dismissed
until finality of the
decision. Furthermore,
all respondents claim
for moral

andexemplary
damages.On
September 18, 1998,
respondent security
guards instituted the
instant labor case
before the labor
arbiter.On May 25,
1999, the labor arbiter
rendered a decision in
favor of private

respondents Sales, et
al., the
dispositiveportion of
which
provides:"WHEREFO
RE, judgment is
hereby rendered
dismissing the charges
of illegal dismissal on
the part of
thecomplainants

MELVIN R.
TAMAYO and
DIONISIO C.
CARANYAGAN for
lack of merit but
ordering
respondents JAGUAR
SECURITY AND
INVESTIGATION
AGENCY and DELTA
MILLING

INDUSTRIES, INC.,
to jointly andseverally
pay all the six
complainants, namely:
RODOLFO A.
SALES, MELVIN R.
TAMAYO, JAIME
MORON
andDANETH
FETALVERO the
following money

claims for their

services rendered from
April 24, 1995 to
April 24, 1998:a)
wage differentials b)
overtime pay
differentials (4 hours a
day)c) rest day payd)
holiday paye) holiday
premium payf) 13th

month pay
differentials
University of San
Carlos

College of Law
Labor Standards
Finals Case Digests

Ma. Cecelia
Timbal LlB

2 Rm 402

| 39
g) five days service
incentive leave pay
per year subject to the
exception earlier
cited.The Research
and Information Unit

of this Commission is
hereby directed to
compute and quantify
the above awardsand
submit a report
thereon within 15 days
from receipt of this
decision.For purposes
of any appeal, the
appeal bond is
tentatively set at

P100,000.00.All other
claims are
DISMISSED for lack
of merit.SO
ORDERED."On July
1, 1999, petitioner
Jaguar filed a partial
appeal questioning the
failure of public
respondent NLRC to
resolveits cross-claim

against Delta as the

party ultimately liable
for payment of the
monetary award to the
security guards.In its
Resolution dated
September 19, 2000,
the NLRC dismissed
the appeal, holding
that it was not the
proper forumto raise

the issue. It went on to

say that Jaguar, being
the direct employer of
the security guards, is
the one
principallyliable to the
employees. Thus, it
directed petitioner to
file a separate civil
action for recovery of
the amount before

theregular court
having jurisdiction
over the subject
matter, for the purpose
of proving the liability
of Delta. Jaguar
sought reconsideration
of the dismissal, but
the Commission
denied the same in its
Resolution

datedNovember 9,
2001.Petitioner filed a
petition for certiorari
with the CA, which, in
the herein assailed
Decision dated
October 21, 2002
andResolution dated
February 13, 2004,
dismissed the petition
for lack of merit.

Issue:
Whether or not
petitioner may claim
reimbursement from
Delta Milling through
a cross-claim filed
with thelabor court?
Held:
The Court ruled in the
negative.The
jurisdiction of labor

courts extends only to

cases where an
employer-employee
relationship exists.In
the present case, there
exists no employeremployee relationship
between petitioner and
Delta Milling. In its
cross-claim, petitioner
is not seeking any

relief under the Labor

Code but merely
reimbursement of the
monetary
benefitsclaims
awarded and to be
paid to the guard
employees. There is
no labor dispute
involved in the crossclaim againstDelta

Milling. Rather, the

cross-claim involves a
civil dispute between
petitioner and Delta
Milling. Petitioner's
cross-claim is within
the realm of civil law,
and jurisdiction over it
belongs to the regular
courts.Moreover, the
liability of Delta

Milling to reimburse
petitioner will only
arise if and when
petitioner actually
pays itsemployees the
adjudged liabilities.
Payment, which
means not only the
delivery of money but
also the
performance,in any

other manner, of the

obligation, is the
operative fact which
will entitle either of
the solidary debtors to
seekreimbursement
for the share which
corresponds to each of
the debtors. In this
case, it appears that
petitioner has yetto

pay the guard

employees.The
petition is DENIED.
Almeda et al., vs
Asahi Glass (2008)
G.R. 177785Facts:
This a complaint for
illegal dismissal with
claims for moral and
exemplary damages

and attorneys fees

filed by
Almeda, et al against
Asahi Glass and San
Sebastian Allied
Services, Inc. SSASI.
Petitioners alleged that
Asahi andSSASI
entered into a service
contract whereby
SSASI undertook to

provide Asahi with the

necessary manpower
forits operations.
Pursuant to such a
contract, SSASI
employed petitioners
Randy Almeda, Edwin
Audencial, Nolie
University of San
Carlos


College of Law
Labor Standards
Finals Case Digests
Ma. Cecelia
Timbal LlB

2 Rm 402

| 40

Ramirez and Ernesto

Calicagan as glass
cutters, and petitioner
Reynaldo Calicagan as
Quality Controller, all
assignedto work for
respondent. Asahi
terminated its service
contract with SSASI,
which in turn,
terminated the

employmentof
petitioners on the
same date. Believing
that SSASI was a
labor-only contractor,
and having
continuously worked
asglass cutters and
quality controllers for
the respondent functions which are

directly related to its

main line of business
as glass manufacturer
- for three to 11 years,
petitioners asserted
that they should be
considered
regularemployees of
the Asahi; and that
their dismissal from
employment without

the benefit of due

process of law
wasunlawful.Asahi
claimed that
petitioners were
employees of SSASI
and were merely
assigned by SSASI to
work for respondentto
perform intermittent
services pursuant to an

Accreditation
Agreement. SSASI
averred that it was the
one whohired
petitioners and
assigned them to work
for respondent on
occasions that the
latters work force
could not meet

the demands of its

customers. Eventually,
however, respondent
ceased to give job
orders to SSASI,
constraining the
latter to terminate
petitioners
employment.
Issue:

Are Almeda, et al
employees of Asahi
Glass even
considering that they
were originally hired
by San
SebastianAllied
Services, Inc.?
Held:

Yes. Almeda, et al are

employees of Asahi
Glass.
Permissible job
contracting or
subcontracting
refers to an
arrangement whereby a
principal agrees to put
out orfarm out to a
contractor or

subcontractor the
performance or
completion of a
specific job, work or
service within adefinite
or predetermined
period, regardless of
whether such job,
work or service is to
be performed or
completedwithin or

outside the premises

of the principal. A
person is considered
engaged in legitimate
job contracting
orsubcontracting if the
following conditions
concur:
(a) The contractor or
subcontractor carries
on a distinct and

independent business
and undertakes
toperform the job,
work or service on its
own account and
under its own
responsibility
according to its
ownmanner and
method, and free from
the control and

direction of the
principal in all matters
connected withthe
performance of the
work except as to the
results thereof;(b) The
contractor or
subcontractor has
substantial capital or
investment; and(c) The
agreement between

the principal and

contractor or
subcontractor assures
the contractual
employeesentitlement
to all labor and
occupational safety
and health standards,
free exercise of the
right to selforganization, security

of tenure, and social

and welfare
benefits.On the other
hand,
labor-only contracting
, a prohibited act, is
an arrangement in
which the contractor
orsubcontractor
merely recruits,
supplies or places

workers to perform a
job, work or service
for a principal. In
labor-only contracting,
the
following elements are
present:
(a) The contractor or
subcontractor does not
have substantial capital
or investment to

actually perform
the job, work or
service under its own
account and
responsibility;(b) The
employees recruited,
supplied or placed by
such contractor or
subcontractor is
performing
activitieswhich are

directly related to the

main business of the
principal.
In labor-only
contracting
, the statutes create an
employer-employee
relationship for a
comprehensive
purpose: toprevent

circumvention of labor
laws.
The contractor is
considered as merely
the agent of the
principal employerand
the latter is responsible
to the employees of
the labor-only
contractor as if such
employees are directly

University of San
Carlos

College of Law
Labor Standards
Finals Case Digests
Ma. Cecelia
Timbal LlB

2 Rm 402

| 41
employed by the
principal employer.
Therefore, if SSASI
was a labor-only
contractor, then
respondent shall
beconsidered as the
employer of
petitioners who must

bear the liability for

the dismissal of the
latter, if any.
An important element
of legitimate job
contracting is that the
contractor has
substantial capital or
investment
,which respondent
failed to prove. There

is a dearth of evidence
to prove that SSASI
possessed substantial
capital orinvestment
when respondent
began contractual
relations with it more
than a decade before
2003. The Court did
notfind a single
financial statement or

record to attest to the

economic status and
financial capacity of
SSASI to ventureinto
and sustain its own
business independent
from petitioner.
Furthermore, the Court
is unconvinced by
respondents argume

nt that petitioners
were performing jobs
that were
not directly related to
respondents main line
of business.
Respondent is
engaged in glass
manufacturing. One of
the

petitioners served as a
quality controller,
while the rest were
glass cutters. The only
excuse offered by
respondent that petitioners
services were required
only when there was
an increase in the

markets demand with

which
respondent could not
cope - only prove even
more that the services
rendered by
petitioners were
indeed part of themain
business of
respondent. It would
mean that petitioners

supplemented the
regular workforce
when the latter
could not comply with
the markets demand;
necessarily, therefore,
petitioners performed
the same functions as
the
regular workforce.
The indispensa

bility of petitioners
services was fortified
by the length and
continuity of their
performance, lasting
for periods ranging
from three to 11
years.More
importantly, the Court
finds that the crucial
element of control

over petitioners rested

in respondent.
Thepower of control
refers to the authority
of the employer to
control the employee
not only with regard to
the result ofwork to be
done, but also to the
means and methods by

which the work is to

be accomplished.
It should be borne
inmind that the power
of control refers
merely to the existence
of the power and not
to the actual exercise
thereof. Itis not
essential for the
employer to actually

supervise the
performance of duties
of the employee; it is
enough thatthe former
has a right to wield the
power.
Petitioners followed
the work schedule
prepared by
respondent. They were
required to observe all

rules andregulations of
the respondent
pertaining to, among
other things, the
quality of job
performance,
regularity of
joboutput, and the
manner and method of
accomplishing the
jobs. Other than being

the one who hired

petitioners, therewas
absolute lack of
evidence that SSASI
exercised control over
them or their
work.The fact that it
was SSASI which
dismissed petitioners
from employment is

irrelevant. It is hardly
proof of control,
since it was
demonstrated only at
the end of petitioners
employment. What is
more, the dismissal of
petitioners by
SSASI was a mere
result of the
termination by

respondent of its
contractual relations
with SSASI.
SSASI is a labor-only
contractor; hence, it is
considered as the
agent of respondent.
Respondent is deemed
by lawas the employer
of petitioners.

Equally unavailing is
respondents stance
that its relationship
with petitioners should
be governed by the
Accreditation
Agreement stipulating
that petitioners were
to remain employees
of SSASI and shall not
becomeregular

employees of the
respondent. A party
cannot dictate, by the
mere expedient of a
unilateral declaration
in acontract, the
character of its
business, i.e., whether
as labor-only
contractor or as job
contractor, it being

crucial that
itscharacter be
measured in terms of
and determined by the
criteria set by statute
Sasan, Sr et al, vs
NLRC and EPCIB
(2008) G.R.
176240Facts:
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