LVN Pictures v. Phil. Musicians Guild

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12582
January 28, 1961
LVN PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondentsappellees.
x---------------------------------------------------------x
G.R. No. L-12598
January 28, 1961
SAMPAGUITA PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondentsappellees.
Nicanor S. Sison for petitioner-appellant.
Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.
CONCEPCION, J.:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order
of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the Philippine Musicians Guild
(FFW), petitioner therein and respondent herein, as the sole and exclusive bargaining agency of all
musicians working with said companies, as well as with the Premiere Productions, Inc., which has not
appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R. No. L12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the same order, the two cases have
been jointly heard in this Court, and will similarly be disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild,
averred that it is a duly registered legitimate labor organization; that LVN Pictures, Inc., Sampaguita
Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under the Philippine laws,
engaged in the making of motion pictures and in the processing and distribution thereof; that said companies
employ musicians for the purpose of making music recordings for title music, background music, musical
numbers, finale music and other incidental music, without which a motion picture is incomplete; that ninetyfive (95%) percent of all the musicians playing for the musical recordings of said companies are members of
the Guild; and that the same has no knowledge of the existence of any other legitimate labor organization
representing musicians in said companies. Premised upon these allegations, the Guild prayed that it be
certified as the sole and exclusive bargaining agency for all musicians working in the aforementioned
companies. In their respective answers, the latter denied that they have any musicians as employees, and
alleged that the musical numbers in the filing of the companies are furnished by independent contractors.
The lower court, however, rejected this pretense and sustained the theory of the Guild, with the result
already adverted to. A reconsideration of the order complained of having been denied by the Court en
banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for review forcertiorari.
Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged
employees of the film companies, the LVN Pictures, Inc., maintains that a petition for certification cannot be
entertained when the existence of employer-employee relationship between the parties is contested.
However, this claim is neither borne out by any legal provision nor supported by any authority. So long as,
after due hearing, the parties are found to bear said relationship, as in the case at bar, it is proper to pass
upon the merits of the petition for certification.
It is next urged that a certification is improper in the present case, because, "(a) the petition does not allege
and no evidence was presented that the alleged musicians-employees of the respondents constitute a
proper bargaining unit, and (b) said alleged musicians-employees represent a majority of the other
numerous employees of the film companies constituting a proper bargaining unit under section 12 (a) of
Republic Act No. 875."
The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is
fatal proceeding, for the same is not a "litigation" in the sense in which this term is commonly understood,
but a mere investigation of a non-adversary, fact finding character, in which the investigating agency plays
the part of a disinterested investigator seeking merely to ascertain the desires of employees as to the matter
of their representation. In connection therewith, the court enjoys a wide discretion in determining the
procedure necessary to insure the fair and free choice of bargaining representatives by
employees.1 Moreover, it is alleged in the petition that the Guild it a duly registered legitimate labor
organization and that ninety-five (95%) percent of the musicians playing for all the musical recordings of the
film companies involved in these cases are members of the Guild. Although, in its answer, the LVN Pictures,
Inc. denied both allegations, it appears that, at the hearing in the lower court it was merely the status of the
musicians as its employees that the film companies really contested. Besides, the substantial difference
between the work performed by said musicians and that of other persons who participate in the production
of a film, and the peculiar circumstances under which the services of that former are engaged and rendered,
suffice to show that they constitute a proper bargaining unit. At this juncture, it should be noted that the
action of the lower court in deciding upon an appropriate unit for collective bargaining purposes is
discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this
respect is entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall Field & Co.
v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar.
Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the
musicians working in the aforesaid film companies. It does not intend to represent the other employees
therein. Hence, it was not necessary for the Guild to allege that its members constitute a majority of all the
employees of said film companies, including those who are not musicians. The real issue in these cases, is
whether or not the musicians in question are employees of the film companies. In this connection the lower
court had the following to say:
As a normal and usual course of procedure employed by the companies when a picture is to be
made, the producer invariably chooses, from the musical directors, one who will furnish the musical
background for a film. A price is agreed upon verbally between the producer and musical director
for the cost of furnishing such musical background. Thus, the musical director may compose his
own music specially written for or adapted to the picture. He engages his own men and pays the
corresponding compensation of the musicians under him.
When the music is ready for recording, the musicians are summoned through 'call slips' in the
name of the film company (Exh 'D'), which show the name of the musician, his musical instrument,
and the date, time and place where he will be picked up by the truck of the film company. The film
company provides the studio for the use of the musicians for that particular recording. The
musicians are also provided transportation to and from the studio by the company. Similarly, the
company furnishes them meals at dinner time.
During the recording sessions, the motion picture director, who is an employee of the company,
supervises the recording of the musicians and tells what to do in every detail. He solely directs the
performance of the musicians before the camera as director, he supervises the performance of all
the action, including the musicians who appear in the scenes so that in the actual performance to
be shown on the screen, the musical director's intervention has stopped.
And even in the recording sessions and during the actual shooting of a scene, the technicians,
soundmen and other employees of the company assist in the operation. Hence, the work of the
musicians is an integral part of the entire motion picture since they not only furnish the music but
are also called upon to appear in the finished picture.
The question to be determined next is what legal relationship exits between the musicians and the
company in the light of the foregoing facts.
We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned
after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of the United States.
Hence, reference to decisions of American Courts on these laws on the point-at-issue is called for.
Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied.
(U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .
In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United
States Supreme Court said the Wagner Act was designed to avert the 'substantial obstruction to the
free flow of commerce which results from strikes and other forms of industrial unrest by eliminating
the causes of the unrest. Strikes and industrial unrest result from the refusal of employers' to
bargain collectively and the inability of workers to bargain successfully for improvement in their
working conditions. Hence, the purposes of the Act are to encourage collective bargaining and to
remedy the workers' inability to bargaining power, by protecting the exercise of full freedom of
association and designation of representatives of their own choosing, for the purpose of negotiating
the terms and conditions of their employment.'
The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to
'employees' within the traditional legal distinctions, separating them from 'independent contractor'.
Myriad forms of service relationship, with infinite and subtle variations in the term of employment,
blanket the nation's economy. Some are within this Act, others beyond its coverage. Large numbers
will fall clearly on one side or on the other, by whatever test may be applied. Inequality of
bargaining power in controversies of their wages, hours and working conditions may characterize
the status of one group as of the other. The former, when acting alone may be as helpless in
dealing with the employer as dependent on his daily wage and as unable to resist arbitrary and
unfair treatment as the latter.'
To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to
create a balance of forces in certain types of economic relationship. Congress recognized those
economic relationships cannot be fitted neatly into the containers designated as 'employee' and
'employer'. Employers and employees not in proximate relationship may be drawn into common
controversies by economic forces and that the very dispute sought to be avoided might involve
'employees' who are at times brought into an economic relationship with 'employers', who are not
their 'employers'. In this light, the language of the Act's definition of 'employee' or 'employer' should
be determined broadly in doubtful situations, by underlying economic facts rather than technically
and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.)
In other words, the scope of the term 'employee' must be understood with reference to the
purposes of the Act and the facts involved in the economic relationship. Where all the conditions of
relation require protection, protection ought to be given .
By declaring a worker an employee of the person for whom he works and by recognizing and
protecting his rights as such, we eliminate the cause of industrial unrest and consequently we
promote industrial peace, because we enable him to negotiate an agreement which will settle
disputes regarding conditions of employment, through the process of collective bargaining.
The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term
embraces 'any employee' that is all employees in the conventional as well in the legal sense expect
those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by
protecting the exercise of their right to self-organization for the purpose of collective bargaining. (b)
To promote sound stable industrial peace and the advancement of the general welfare, and the
best interests of employers and employees by the settlement of issues respecting terms and
conditions of employment through the process of collective bargaining between employers and
representatives of their employees.
The primary consideration is whether the declared policy and purpose of the Act can be effectuated
by securing for the individual worker the rights and protection guaranteed by the Act. The matter is
not conclusively determined by a contract which purports to establish the status of the worker, not
as an employee.
The work of the musical director and musicians is a functional and integral part of the enterprise
performed at the same studio substantially under the direction and control of the company.
In other words, to determine whether a person who performs work for another is the latter's
employee or an independent contractor, the National Labor Relations relies on 'the right to control'
test. Under this test an employer-employee relationship exist where the person for whom the
services are performed reserves the right to control not only the end to be achieved, but also the
manner and means to be used in reaching the end. (United Insurance Company, 108, NLRB No.
115.).
Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.
'We find that the independent contractors and persons working under them are
employees' within the meaning of Section 2 (3) of its Act. However, we are of the opinion
that the independent contractors have sufficient authority over the persons working under
their immediate supervision to warrant their exclusion from the unit. We shall include in
the unit the employees working under the supervision of the independent contractors, but
exclude the contractors.'
'Notwithstanding that the employees are called independent contractors', the Board will hold them
to be employees under the Act where the extent of the employer's control over them indicates that
the relationship is in reality one of employment. (John Hancock Insurance Co., 2375-D, 1940,
Teller, Labor Dispute Collective Bargaining, Vol.).
The right of control of the film company over the musicians is shown (1) by calling the musicians
through 'call slips' in 'the name of the company; (2) by arranging schedules in its studio for
recording sessions; (3) by furnishing transportation and meals to musicians; and (4) by supervising
and directing in detail, through the motion picture director, the performance of the musicians before
the camera, in order to suit the music they are playing to the picture which is being flashed on the
screen.
Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts
on the matter to the facts established in this case, we cannot but conclude that to effectuate the
policies of the Act and by virtue of the 'right of control' test, the members of the Philippine Musicians
Guild are employees of the three film companies and, therefore, entitled to right of collective
bargaining under Republic Act No. 875.
In view of the fact that the three (3) film companies did not question the union's majority, the
Philippine Musicians Guild is hereby declared as the sole collective bargaining representative for all
the musicians employed by the film companies."
We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are
substantially in line with the spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated
Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the employers in
the Maligaya cases, to the effect that they had dealt with independent contractors, was stronger than that of
the film companies in these cases. The third parties with whom the management and the workers contracted
in the Maligaya cases were agencies registered with the Bureau of Commerce and duly licensed by the City
of Manila to engage in the business of supplying watchmen to steamship companies, with permits to engage
in said business issued by theCity Mayor and the Collector of Customs. In the cases at bar, the musical
directors with whom the film companies claim to have dealt with had nothing comparable to the business
standing of said watchmen agencies. In this respect, the status of said musical directors is analogous to that
of the alleged independent contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the
particularity that the Caro case involved the enforcement of the liability of an employer under the Workmen's
Compensation Act, whereas the cases before us are merely concerned with the right of the Guild
to represent the musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and
technical in these cases, than in the Caro case.
Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc
vs. CIR (46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968
(November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The
Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said petitioners-appellants, the case
of the Sunripe Coconut Product Co., Inc. is authority for herein respondents-appellees. It was held that,
although engaged as piece-workers, under the "pakiao" system, the "parers" and "shellers" in the case
were, not independent contractor, butemployees of said company, because "the requirement imposed on the
'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted,' in effect limits or
controls the means or details by which said workers are to accomplish their services" as in the cases
before us.
The nature of the relation between the parties was not settled in the Viana case, the same having been
remanded to the Workmen's Compensation Commission for further evidence.
The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia,
who undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio Geronimo, a
laborer, who fell while painting the tank and died in consequence of the injuries thus sustained by him.
Inasmuch as the company was engaged in the manufacture of soap, vegetable lard, cooking oil and
margarine, it was held that the connection between its business and the painting aforementioned was
purely casual; that Eliano Garcia was an independent contractor; that Geronimo was not an employee of the
company; and that the latter was not bound, therefore, to pay the compensation provided in the Workmen's
Compensation Act. Unlike the Philippine Manufacturing case, the relation between the business of herein
petitioners-appellants and the work of the musicians is not casual. As held in the order appealed from which,
in this respect, is not contested by herein petitioners-appellants "the work of the musicians is an integral
part of the entire motion picture." Indeed, one can hardly find modern films without music therein. Hence, in
the Caro case (supra), the owner and operator of buildings for rent was held bound to pay the indemnity
prescribed in the Workmen's Compensation Act for the injury suffered by a carpenter while working as such
in one of said buildings even though his services had been allegedly engaged by a third party who had
directly contracted with said owner. In other words, the repair work had not merely a casual connection with
the business of said owner. It was a necessary incident thereof, just as music is in the production of motion
pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from
the present cases. It involved the interpretation of Republic Act No. 660, which amends the law creating and
establishing the Government Service Insurance System. No labor law was sought to be construed in that
case. In act, the same was originally heard in the Court of First Instance of Manila, the decision of which
was, on appeal, affirmed by the Supreme Court. The meaning or scope if the term "employee," as used in
the Industrial Peace Act (Republic Act No. 875), was not touched therein. Moreover, the subject matter of
said case was a contract between the management of the Manila Hotel, on the one hand, and Tirso Cruz, on
the other, whereby the latter greed to furnish the former the services of his orchestra, consisting of 15
musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of this court in that
case, "what pieces the orchestra shall play, and how the music shall be arranged or directed, the intervals
and other details such are left to the leader'sdiscretion."
This is not situation obtaining in the case at bar. The musical directors above referred to have no such
control over the musicians involved in the present case. Said musical directors control neither the music to
be played, nor the musicians playing it. The film companies summon the musicians to work, through the
musical directors. The film companies, through the musical directors, fix the date, the time and the place of
work. The film companies, not the musical directors, provide the transportation to and from the studio. The
film companies furnish meal at dinner time.
What is more in the language of the order appealed from "during the recording sessions, the motion
picture director who is an employee of the company" not the musical director "supervises the recording
of the musicians and tells them what to do in every detail". The motion picture director not the musical
director "solely directs and performance of the musicians before the camera". The motion picture director
"supervises the performance of all the actors, including the musicians who appear in the scenes, so that in
the actual performance to be shown in the screen, the musical director's intervention has stopped." Or, as
testified to in the lower court, "the movie director tells the musical director what to do; tells the music to be
cut or tells additional music in this part or he eliminates the entire music he does not (want) or he may want
more drums or move violin or piano, as the case may be". The movie director "directly controls the activities
of the musicians." He "says he wants more drums and the drummer plays more" or "if he wants more violin
or he does not like that.".
It is well settled that "an employer-employee relationship exists . . .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 . . . ." (Alabama Highway Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The
decisive nature of said control over the "means to be used", is illustrated in the case of Gilchrist Timber Co.,
et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by reason of said control, the
employer-employee relationship was held to exist between the management and the workers,
notwithstanding the intervention of an alleged independent contractor, who had, and exercise, the power to
hire and fire said workers. The aforementioned control over the means to be used" in reading the desired
end is possessed and exercised by the film companies over the musicians in the cases before us.
WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so
ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and Dizon,
JJ., concur.
Gutierrez David, J., took no part.
Footnotes
N.L.R.B. v. Botany Worsted Mils, 319 U.S. 751, 87 L. ed. 1705; Southern S.S. Co. v. N.L.R.B., 316
U.S. 31, 86 L. ed. 1246; N.L.R.B. v. A.J. Tower Co., 66 Sup. Ct. 1011; ". . . 'certification' and 'decertification' proceedings under this section of the Act are a non-adversary nature. Such
proceedings are not predicated upon an allegation of misconduct requiring relief, but, rather, are
merely of an inquisitorial nature. The Board's functions are not judicial in nature, but merely of an
investigative character. The object of the proceedings is not the decision of an alleged commission
of wrongs nor asserted deprivation of rights but merely the determination of proper bargaining units
and the ascertainment if the will and choice of the employees in respect of the election of a
bargaining representative. The determination of the proceeding does not entail the entry of
remedial orders to redress rights, but culminates solely in an official designation of bargaining units
and an affirmation of the employees' expressed choice of bargaining agent." (Rothenberg on Labor
Relations, p. 514.)
1
FIRST DIVISION
G.R. No. L-32245 May 25, 1979
DY KEH BENG, Petitioner, vs. INTERNATIONAL LABOR and
MARINE UNION OF THE PHILIPPINES, ET
AL., Respondents.
A. M Sikat for petitioner.
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D. A. Hernandez for respondents.

DE CASTRO, J.:
Petitioner Dy Keh Beng seeks a review by certiorari of the
decision of the Court of Industrial Relations dated March 23,
1970 in Case No. 3019-ULP and the Court's Resolution en
banc of June 10, 1970 affirming said decision. The Court of
Industrial Relations in that case found Dy Keh Beng guilty of
the unfair labor practice acts alleged and order him to
reinstate Carlos Solano and Ricardo Tudla to their former jobs
with backwages from their respective dates of dismissal until
fully reinstated without loss to their right of seniority and of
such other rights already acquired by them and/or allowed by
law. 1
Now, Dy Keh Beng assigns the following errors 2as having been
committed by the Court of Industrial Relations:
I
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS
SOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS
SOLANO AND TUDLA WERE DISMISSED FROM THEIR
EMPLOYMENT BY PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE
TESTIMONIES ADDUCED BY COMPLAINANT ARE CONVINCING
AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY
THE PETITIONER HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER
GUILTY OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND
DESCRIBED IN THE COMPLAINT.
V
RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE
RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES
FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL
FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF
SENIORITY AND OF SUCH OTHER RIGHTS ALREADY ACQUIRED
BY THEM AND/OR ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:
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A charge of unfair labor practice was filed against Dy Keh

Beng, proprietor of a basket factory, for discriminatory acts
within the meaning of Section 4(a), sub-paragraph (1) and (4).
Republic Act No. 875, 3 by dismissing on September 28 and
29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for
their union activities. After preliminary investigation was
conducted, a case was filed in the Court of Industrial Relations
for in behalf of the International Labor and Marine Union of the
Philippines and two of its members, Solano and Tudla In his
answer, Dy Keh Beng contended that he did not know Tudla
and that Solano was not his employee because the latter came
to the establishment only when there was work which he did
on pakiaw basis, each piece of work being done under a
separate contract. Moreover, Dy Keh Beng countered with a
special defense of simple extortion committed by the head of
the labor union, Bienvenido Onayan.
chanroblesvirtualawlibrary
After trial, the Hearing Examiner prepared a report which was

subsequently adopted in toto by the Court of Industrial
Relations. An employee-employer relationship was found to
have existed between Dy Keh Beng and complainants Tudla
and Solano, although Solano was admitted to have worked on
piece basis. 4 The issue therefore centered on whether there
existed an employee employer relation between petitioner Dy

Keh Beng and the respondents Solano and Tudla .
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According to the Hearing Examiner, the evidence for the

complainant Union tended to show that Solano and Tudla
became employees of Dy Keh Beng from May 2, 1953 and July
15, 1955, 5 respectively, and that except in the event of
illness, their work with the establishment was continuous
although their services were compensated on piece basis.
Evidence likewise showed that at times the establishment had
eight (8) workers and never less than five (5); including the
complainants, and that complainants used to receive ?5.00 a
day. sometimes less. 6
According to Dy Keh Beng, however, Solano was not his

employee for the following reasons:
(1) Solano never stayed long enought at Dy's establishment;
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library
(2) Solano had to leave as soon as he was through with the

(3) order given him by Dy;
(4) When there were no orders needing his services there was
nothing for him to do;
(5) When orders came to the shop that his regular workers
could not fill it was then that Dy went to his address in
Caloocan and fetched him for these orders; and
(6) Solano's work with Dy's establishment was not continuous.

,7
According to petitioner, these facts show that respondents

Solano and Tudla are only piece workers, not employees under
Republic Act 875, where an employee 8 is referred to as
shall include any employee and shag not be limited to the
employee of a particular employer unless the Act explicitly
states otherwise and shall include any individual whose work
has ceased as a consequence of, or in connection with any
current labor dispute or because of any unfair labor practice
and who has not obtained any other substantially equivalent
and regular employment.
while an employer
includes any person acting in the interest of an employer,

directly or indirectly but shall not include any labor
organization (otherwise than when acting as an employer) or
anyone acting in the capacity of officer or agent of such labor
organization.
Petitioner really anchors his contention of the non-existence of

employee-employer relationship on the control test. He points
to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del
Rosario, et al., L-13130, October 31, 1959, where the Court
ruled that:
The test ... of the existence of employee and employer
relationship is whether there is an understanding between the
parties that one is to render personal services to or for the
benefit of the other and recognition by them of the right of one
to order and control the other in the performance of the work
and to direct the manner and method of its performance.
Petitioner contends that the private respondents "did not meet
the control test in the fight of the ... definition of the terms
employer and employee, because there was no evidence to
show that petitioner had the right to direct the manner and
method of respondent's work. 10 Moreover, it is argued that
petitioner's evidence showed that "Solano worked on
apakiaw basis" and that he stayed in the establishment only
when there was work.
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While this Court upholds the control test 11 under which an

employer-employee relationship exists "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, " it finds no merit with petitioner's
arguments as stated above. It should be borne in mind that
the control test calls merely for the existence of the right to
control the manner of doing the work, not the actual exercise
of the right. 12Considering the finding by the Hearing Examiner
that the establishment of Dy Keh Beng is "engaged in the
manufacture of baskets known as kaing, 13it is natural to
expect that those working under Dy would have to observe,
among others, Dy's requirements of size and quality of
the kaing. Some control would necessarily be exercised by Dy
as the making of the kaing would be subject to Dy's
specifications. Parenthetically, since the work on the baskets is
done at Dy's establishments, it can be inferred that the
proprietor Dy could easily exercise control on the men he
employed.
As to the contention that Solano was not an employee because

he worked on piece basis, this Court agrees with the Hearing
Examiner that
circumstances must be construed to determine indeed if
payment by the piece is just a method of compensation and
does not define the essence of the relation. Units of time ...
and units of work are in establishments like respondent (sic)
just yardsticks whereby to determine rate of compensation, to
be applied whenever agreed upon. We cannot construe
payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to

turn him out and take in another at pleasure.
At this juncture, it is worthy to note that Justice Perfecto,
concurring with Chief Justice Ricardo Paras who penned the
decision in "Sunrise Coconut Products Co. v. Court of
Industrial Relations" (83 Phil..518, 523), opined that
judicial notice of the fact that the so-called "pakyaw" system
mentioned in this case as generally practiced in our country, is,
in fact, a labor contract -between employers and employees,
between capitalists and laborers.
Insofar as the other assignments of errors are concerned,
there is no showing that the Court of Industrial Relations
abused its discretion when it concluded that the findings of fact
made by the Hearing Examiner were supported by evidence on
the record. Section 6, Republic Act 875 provides that in unfair
labor practice cases, the factual findings of the Court of
Industrial Relations are conclusive on the Supreme Court, if
supported by substantial evidence. This provision has been put
into effect in a long line of decisions where the Supreme Court
did not reverse the findings of fact of the Court of Industrial
Relations when they were supported by substantial
evidence. 14
Nevertheless, considering that about eighteen (18) years have

already elapsed from the time the complainants were
dismissed, 15and that the decision being appealed ordered the
payment of backwages to the employees from their respective
dates of dismissal until finally reinstated, it is fitting to apply in
this connection the formula for backwages worked out by
Justice Claudio Teehankee in "cases not terminated
sooner." 16 The formula cans for fixing the award of backwages
without qualification and deduction to three years, "subject to
deduction where there are mitigating circumstances in favor of
the employer but subject to increase by way of exemplary
damages where there are aggravating
circumstances. 17Considering there are no such circumstances
in this case, there is no reason why the Court should not apply
the abovementioned formula in this instance.
WHEREFORE; the award of backwages granted by the Court of

Industrial Relations is herein modified to an award of
backwages for three years without qualification and deduction
at the respective rates of compensation the employees
concerned were receiving at the time of dismissal. The
execution of this award is entrusted to the National Labor
Relations Commission. Costs against petitioner.
SO ORDERED.
Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ.,

concur.
Fernandez, J., took no part.

Endnotes:
1 Rollo, p. 48.
2 petitioner's Brief, pp. 1-2.
3 Republic Act 875, as amended, Section 4. Unfair Labor Practices. a) It will be unfair labor practice for an employer:
(1) To interfere with, restrain or coerce employees in the exercise of their rights guaranteed in section three;
xxx xxx xxx
(4) To discriminate in regard to hire or tenure of employment or any term or condition of employment to
encourage or discourage membership in any labor organization; ...
4 Rollo, p. 32.
5 Id., p. 23.
6 Id.
7 Rollo, Annex A, p. 22.
8 Section 2(d), Republic Act 875, As Amended, otherwise known as the Industrial Peace Act.
9 Id., Section 2(c).
10 Petitioner's Brief, pp. 5-7.
11 LVN Pictures v. Philippine Musicians Guild, et. al., 110 Phil.
12 Feati University v. Bautista, et al., L-21500, December 27 1966, 18 SCRA 1966,

13 Rollo, p. 46.
14 Among them are: Philippine Newspapers' Guild v. Evening News, Inc., 86 Phil 303; GPTC Employees Union v.
Court of Industrial Relations, et. all 102 Phil 538; Community Sawmill Company v. Court of Industrial Relations
and Community Effort Labor Union, L-24347, March 27, 1979; Gonzalo, Puyat & Sorts, Inc. v. Labayo, 62 SCRA
488; De Leon, et al., v. Pampanga Development Co., Inc., L-26844, September 30, 1969, 29 SCRA 628; Castillo,
et al., v. Court of Industrial Relations, L-26124, May 29, 1971, 39 SCRA 75.
15 Rollo, p. 36.
16 Mercury Drug Co., et al. v. Court of Industrial Relations, L-23357, April 30, 1974, 56 SCRA 694, 712.
17 Id.
SECOND DIVISION
[G.R. No. 129315. October 2, 2000.]
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS,
PATRICIA NAS, and TERESITA FLORES, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION, LAO
ENTENG COMPANY, INC. and/or TRINIDAD LAO ONG,Respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public respondent
National Labor Relations Commission (First Division), 1 in NLRC NCR Case No. 00-04-03163-95, and the Resolution
dated March 5, 1997 denying the motion for reconsideration.
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The aforecited October 17th Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter Potenciano S.
Caizares dismissing the petitioners complaint for illegal dismissal and declaring that petitioners are not regular
employees of private respondent Lao Enteng Company, Inc..
The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino, Manuel
Caparas, Elpidio Lacap, and Simplicio Pedelos worked as barbers, while the two female petitioners, Teresita Flores and
Patricia Nas worked as manicurists in New Look Barber Shop located at 651 P. Paterno Street, Quiapo, Manila owned by
private respondent Lao Enteng Co. Inc.. Petitioner Nas alleged that she also worked as watcher and marketer of
private Respondent.
Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single proprietorship
owned and managed by Mr. Vicente Lao. In or about January 1982, the children of Vicente Lao organized a corporation
which was registered with the Securities and Exchange Commission as Lao Enteng Co. Inc. with Trinidad Ong as
President of the said corporation. Upon its incorporation, the respondent company took over the assets, equipment, and
properties of the New Look Barber Shop and continued the business. All the petitioners were allowed to continue
working with the new company until April 15, 1995 when respondent Trinidad Ong informed them that the building
wherein the New Look Barber Shop was located had been sold and that their services were no longer needed. 2
On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal, illegal
deduction, separation pay, non-payment of 13th month pay, and salary differentials. Only petitioner Nas asked for
payment of salary differentials as she alleged that she was paid a daily wage of P25.00 throughout her period of
employment. The petitioners also sought the refund of the P 1.00 that the respondent company collected from each of
them daily as salary of the sweeper of the barber shop.
Private respondent in its position paper averred that the petitioners were joint venture partners and were receiving fifty
percent commission of the amount charged to customers. Thus, there was no employer-employee relationship between
them and petitioners. And assuming arguendo, that there was an employer-employee relationship, still petitioners are
not entitled to separation pay because the cessation of operations of the barber shop was due to serious business
losses.
Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her affidavit dated
September 06, 1995 that Lao Enteng Company, Inc. did not take over the management of the New Look Barber Shop,
that after the death Lao Enteng petitioner were verbally informed time and again that the partnership may fold up
anytime because nobody in the family had the time to be at the barber shop to look after their interest; that New Look
Barber Shop had always been a joint venture partnership and the operation and management of the barber shop was
left entirely to petitioners; that her fathers contribution to the joint venture included the place of business, payment for
utilities including electricity, water, etc. while petitioners as industrial partners, supplied the labor; and that the barber
shop was allowed to remain open up to April 1995 by the children because they wanted to give the partners a chance at
making it work. Eventually, they were forced to close the barber shop because they continued to lose money while
petitioners earned from it. Trinidad also added that private respondents had no control over petitioners who were free to
come and go as they wished. Admittedly too by petitioners they received fifty percent to sixty percent of the gross paid
by customers. Trinidad explained that some of the petitioners were allowed to register with the Social Security System
as employees of Lao Enteng Company, Inc. only as an act of accommodation. All the SSS contributions were made by
petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita Flores were not among those registered with the Social
Security System. Lastly, Trinidad avers that without any employee-employer relationship petitioners claim for 13th
month pay and separation pay have no basis in fact and in law. 3
In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Caizares, Jr. ordered the dismissal of the
complaint on the basis of his findings that the complainants and the respondents were engaged in a joint venture and
that there existed no employer-employee relation between them. The Labor Arbiter also found that the barber shop was
closed due to serious business losses or financial reverses and consequently declared that the law does not compel the
establishment to pay separation pay to whoever were its employees. 4
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit,
ratiocinating thus:
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Indeed, complainants failed to show the existence of employer-employee relationship under the four-way test
established by the Supreme Court. It is a common practice in the Barber Shop industry that barbers supply their own
scissors and razors and they split their earnings with the owner of the barber shop. The only capital of the owner is the
place of work whereas the barbers provide the skill and expertise in servicing customers. The only control exercised by
the owner of the barber shop is to ascertain the number of customers serviced by the barber in order to determine the
sharing of profits. The barbers maybe characterized as independent contractors because they are under the control of
the barber shop owner only with respect to the result of the work, but not with respect to the details or manner of
performance. The barbers are engaged in an independent calling requiring special skills available to the public at large.
5
Its motion for reconsideration denied in the Resolution 6 dated March 5, 1997, petitioners filed the instant petition
assigning that the NLRC committed grave abuse of discretion in:
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I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE EMPLOYEES OF

RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT CONTRACTORS.
II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR MONEY CLAIMS. 7
Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners were
independent contractors. They contend that they were employees of the respondent company and cannot be considered
as independent contractors because they did not carry on an independent business. They did not cut hair, manicure,
and do their work in their own manner and method. They insist they were not free from the control and direction of
private respondents in all matters, and their services were engaged by the respondent company to attend to its
customers in its barber shop. Petitioners also stated that, individually or collectively, they do not have substantial capital
nor investments in tools, equipments, work premises and other materials necessary in the conduct of the barber shop.
What the barbers owned were merely combs, scissors, and razors, while the manicurists owned only nail cutters, nail
polishes, nippers and cuticle removers. By no standard can these be considered "substantial capital" necessary to
operate a barbers shop.
Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that petitioners
Pedro Tolentino, Manuel Caparas, Simplicio Pedelos, and Patricia Nas were registered with the Social Security System as
regular employees of the respondent company. The SSS employment records in common show that the employers ID
No. of Vicente Lao/Barber and Pawn Shop was 03-0606200-1 and that of the respondent company was 03-8740074-7.
All the foregoing entries in the SSS employment records were painstakingly detailed by the petitioners in their position
paper and in their memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the
respondent NLRC which did not even mention said employment records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded respect
and finality on appeal. We have long settled that this Court will not uphold erroneous conclusions unsupported by
substantial evidence. 8 We must also stress that where the findings of the NLRC contradict those of the labor arbiter,
the Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned
findings. 9
The issues raised by petitioners boil down to whether or not an employer-employee relationship existed between
petitioners and private respondent Lao Enteng Company, Inc. The Labor Arbiter has concluded that the petitioners and
respondent company were engaged in a joint venture. The NLRC concluded that the petitioners were independent
contractors.
The Labor Arbiters findings that the parties were engaged in a joint venture is unsupported by any documentary
evidence. It should be noted that aside from the self-serving affidavit of Trinidad Lao Ong, there were no other
evidentiary documents, nor written partnership agreements presented. We have ruled that even the sharing of proceeds
for every job of petitioners in the barber shop does not mean they were not employees of the respondent company. 10
Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors simply because
they supplied their own working implements, shared in the earnings of the barber shop with the owner and chose the
manner of performing their work. They stressed that as far as the result of their work was concerned the barber shop
owner controlled them.
An independent contractor is one who undertakes "job contracting", i.e., a person who (a) carries on an independent
business and undertakes the contract work on his own account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof, and (b) has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of the business.
11
Juxtaposing this provision vis-a-vis the facts of this case, we are convinced that petitioners are not "independent
contractors." They did not carry on an independent business. Neither did they undertake cutting hair and manicuring
nails, on their own as their responsibility, and in their own manner and method. The services of the petitioners were
engaged by the respondent company to attend to the needs of its customers in its barber shop. More importantly, the
petitioners, individually or collectively, did not have a substantial capital or investment in the form of tools, equipment,
work premises and other materials which are necessary in the conduct of the business of the respondent company.
What the petitioners owned were only combs, scissors, razors, nail cutters, nail polishes, the nippers - nothing else. By
no standard can these be considered substantial capital necessary to operate a barber shop. From the records, it can be
gleaned that petitioners were not given work assignments in any place other than at the work premises of the New Look
Barber Shop owned by the respondent company. Also, petitioners were required to observe rules and regulations of the
respondent company pertaining, among other things, observance of daily attendance, job performance, and regularity
of job output. The nature of work performed by were clearly directly related to private respondents business of
operating barber shops. Respondent company did not dispute that it owned and operated three (3) barber shops.
Hence, petitioners were not independent contractors.
Did an employee-employer relationship exist between petitioners and private respondent? The following elements must
be present for an employer-employee relationship to exist: (1) the selection and engagement of the workers; (2) power
of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the workers conduct, with the
latter assuming primacy in the overall consideration. Records of the case show that the late Vicente Lao engaged the
services of the petitioners to work as barbers and manicurists in the New Look Barber Shop, then a single proprietorship
owned by him; that in January 1982, his children organized a corporation which they registered with the Securities and
Exchange Commission as Lao Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment,
and properties of the New Look Barber Shop and continued the business; that the respondent company retained the
services of all the petitioners and continuously paid their wages. Clearly, all three elements exist in petitioners and
private respondents working arrangements.
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Private respondent claims it had no control over petitioners. The power to control refers to the existence of the power
and not necessarily to the actual exercise thereof, nor is it essential for the employer to actually supervise the
performance of duties of the employee. It is enough that the employer has the right to wield that power. 12 As to the
"control test", the following facts indubitably reveal that respondent company wielded control over the work
performance of petitioners, in that: (1) they worked in the barber shop owned and operated by the respondents; (2)
they were required to report daily and observe definite hours of work; (3) they were not free to accept other
employment elsewhere but devoted their full time working in the New Look Barber Shop for all the fifteen (15) years
they have worked until April 15, 1995; (4) that some have worked with respondents as early as in the 1960s; (5) that
petitioner Patricia Nas was instructed by the respondents to watch the other six (6) petitioners in their daily task.
Certainly, respondent company was clothed with the power to dismiss any or all of them for just and valid cause.
Petitioners were unarguably performing work necessary and desirable in the business of the respondent company.
While it is no longer true that membership to SSS is predicated on the existence of an employee-employer relationship
since the policy is now to encourage even the self-employed dressmakers, manicurists and jeepney drivers to become
SSS members, we could not agree with private respondents that petitioners were registered with the Social Security
System as their employees only as an accommodation. As we have earlier mentioned private respondent showed no
proof to their claim that petitioners were the ones who solely paid all SSS contributions. It is unlikely that respondents
would report certain persons as their workers, pay their SSS premium as well as their wages if it were not true that
they were indeed their employees. 13
Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed due to serious
business losses and respondent company closed its barber shop because the building where the barber shop was
located was sold. An employer may adopt policies or changes or adjustments in its operations to insure profit to itself or
protect investment of its stockholders. In the exercise of such management prerogative, the employer may merge or
consolidate its business with another, or sell or dispose all or substantially all of its assets and properties which may
bring about the dismissal or termination of its employees in the process. 14
Prescinding from the above, we hold that the seven petitioners are employees of the private respondent company; as
such, they are to be accorded the benefits provided under the Labor Code, specifically Article 283 which mandates the
grant of separation pay in case of closure or cessation of employers business which is equivalent to one (1) month pay
for every year of service. 15 Likewise, they are entitled to the protection of minimum wage statutes. Hence, the
separation pay due them may be computed on the basis of the minimum wage prevailing at the time their services were
terminated by the respondent company. The same is true with respect to the 13th month pay. The Revised Guidelines
on the Implementation of the 13th Month Pay Law states that "all rank and file employees are now entitled to a 13th
month pay regardless of the amount of basic salary that they receive in a month. Such employees are entitled to the
benefit regardless of their designation or employment status, and irrespective of the method by which their wages are
paid, provided that they have worked for at least one (1) month during a calendar year" and so all the seven (7)
petitioners who were not paid their 13th month pay must be paid accordingly. 16
Anent the other claims of the petitioners, (such as the P10,000.00 as penalty for non-compliance with procedural
process; P10,000.00 as moral damages; refund of P1.00 per day paid to the sweeper; salary differentials for petitioner
Nas; attorneys fees), we find them without basis.
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IN VIEW WHEREOF, the petition is GRANTED. The public respondents Decision dated October 17, 1996 and Resolution
dated March 05, 1997 are SET ASIDE. Private respondents are hereby ordered to pay, severally and jointly, the seven
(7) petitioners their (1) 13th month pay and (2) separation pay equivalent to one month pay for every year of service,
to be computed at the then prevailing minimum wage at the time of their actual termination which was April 15, 1995.
Costs against private respondents.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.
Endnotes:
1. Per Commissioner Alberto R. Quimpo and concurred in by Presiding Commissioner Bartolome S. Carale and
Commissioner Vicente S E. Veloso.
2. Rollo, pp. 5-7.
3. Rollo, pp. 115-119.
4. Id. at 84-85.
5. Id. at 122.
6. Id. at 128-130.
7. Id. at 11.
8. Anino v. NLRC, 290 SCRA 489, 499-500 (1998).
9. Paz Martin Jo v. NLRC, G.R. No. 121605, February 02, 2000, p.7.
10. Labor Congress of the Philippines v. NLRC, 290 SCRA 509, 528 (1998); San Miguel Jeepney Service v. NLRC, 265
SCRA 35 (1998).
11. Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code; Ponce v. NLRC, 293 SCRA 366,
374-375 (1998).
12. Paz Martin Jo and Cesar Jo v. NLRC, G.R. No. 121605, February 02, 2000, p. 5.
13. Nagusara v. NLRC, 290 SCRA 245, 251 (1998).
14. Associated Labor Unions-VIMCONTU v. NLRC, 204 SCRA 913, 923 (1991).
15. Phil. Tobacco Flue-Curing & Redrying Corp. v. NLRC, 300 SCRA 37, 55 (1998)
16. See Sec. 1, P.D. 851; Osias Academy v. DOLE, 192 SCRA 612, 619 (1990); Dentech Mfg. Corp. v. NLRC, 172 SCRA
588 (1989).
FIRST DIVISION
[G.R. NO. 138051 : June 10, 2004]
JOSE Y. SONZA, Petitioner, v. ABS-CBN BROADCASTING CORPORATION, Respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a Petition for Review on Certiorari 1 assailing the 26 March 1999 Decision 2 of the Court of Appeals in
CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza (SONZA) .The Court of Appeals affirmed the findings
of the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broasting 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 SONZAs services exclusively to ABS-CBN as
talent for radio and television.The Agreement listed the services SONZA would render to ABS-CBN, as follows:
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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
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cralawre d
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year andP317,000 for the
second and third year of the Agreement.ABS-CBN would pay the talent fees on the 10 th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
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Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABSCBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career.We
consider these acts of the station violative of the Agreement and the station as in breach thereof.In this connection, we
hereby serve notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of
the Agreement but reserves the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
cralawred
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National
Capital Region in Quezon City.SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock Option Plan
(ESOP).cralawlibrary
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City.In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited
SONZAs talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 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 respondents 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 Respondents Position Paper with Motion to Expunge Respondents Annex 4 and
Annex 5 from the Records.Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz.
These witnesses stated in their affidavits that the prevailing practice in the television and broast industry is to treat
talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction. 6 The pertinent
parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the contract of a talent, it stands
to reason that a talent as above-described cannot be considered as an employee by reason of the peculiar circumstances
surrounding the engagement of his services. cra
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a
TV host and a radio broaster.Unlike an ordinary employee, he was free to perform the services he undertook
to render in accordance with his own style.The benefits conferred to complainant under the May 1994 Agreement
are certainly very much higher than those generally given to employees.For one, complainant Sonzas monthly talent fees
amount to a staggeringP317,000.Moreover, his engagement as a talent was covered by a specific contract.Likewise, he
was not bound to render eight (8) hours of work per day as he worked only for such number of hours as may be
necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is
inconsequential.Whatever benefits complainant enjoyed arose from specific agreement by the parties and not
by reason of employer-employee relationship. As correctly put by the respondent,All these benefits are merely
talent fees and other contractual benefits and should not be deemed as salaries, wages and/or other remuneration
accorded to an employee, notwithstanding the nomenclature appended to these benefits.Apropos to this is the rule that
the term or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the Agreement
conferring such benefit.
The fact that complainant was made subject to respondents 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 employeremployee relationship unlike the second, which address both the result and the means to achieve it.(Insular Life
Assurance Co., Ltd. v. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
cralawre d
SONZA appealed to the NLRC.On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters
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
cralawred
Hence, this petition.

The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between SONZA and
ABS-CBN. Adopting the NLRCs 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 broast 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 ABSCBN 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.crvll
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] employeremployee relationship between the latter and Mr. Sonza.On the contrary, We find it indubitable, that MJMDC is an agent,
not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same
being in the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee.As
squarely apparent from complainant-appellants Position Paper, his claims for compensation for services, 13 th 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 stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he was
receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to at
least One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABSCBN 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-CBNs 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-appellants 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 v. Villarama, 238 SCRA 267, 21 November 1994, an action for
breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied)
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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 NLRCs 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 NLRCS 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 Courts 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 Arbiters 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 broast station.
The instant case involves big names in the broast 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
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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 employers 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
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A.Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar skills, talent
and celebrity status.SONZA contends that the discretion used by respondent in specifically selecting and hiring
complainant over other broasters of possibly similar experience and qualification as complainant belies respondents claim
of independent contractorship.crvl1
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees.The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent
contractual relationship.If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have
entered into the Agreement with SONZA but would have hired him through its personnel department just like any other
employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status.We must consider
all the circumstances of the relationship, with the control test being the most important element.
B.Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABS-CBN.SONZA also points out that ABS-CBN granted him
benefits and privileges which he would not have enjoyed if he were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were
ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as SSS, Medicare, x x x and
13th month pay20 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
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SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary
that they indicate more an independent contractual relationship rather than an employer-employee relationship.ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZAs 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 mayterminate 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
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During the life of the Agreement, ABS-CBN agreed to pay SONZAs 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 SONZAs 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 broasting his programs, ABS-CBN still paid him his talent fees.Plainly,
ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees during the remaining life of
the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA. 25
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SONZA assails the Labor Arbiters 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.SONZAs letter clearly bears this out.26However, 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-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica (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 masters 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.Albertys 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.Albertys 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 x 28 (Emphasis supplied)
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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
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First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZAs argument is misplaced.ABS-CBN engaged SONZAs services specifically to co-host the Mel & Jay programs. ABSCBN 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-CBNs 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 SONZAs 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 SONZAs
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-CBNs 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 SONZAs work.
SONZA claims that ABS-CBNs power not to broast his shows proves ABS-CBNs power over the means and methods of the
performance of his work.Although ABS-CBN did have the option not to broast SONZAs show, ABS-CBN was still obligated
to pay SONZAs talent fees...Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZAs
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 broast SONZAs show but ABS-CBN must still pay his talent fees in full. 35
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Clearly, ABS-CBNs right not to broast SONZAs show, burdened as it was by the obligation to continue paying in full
SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs work.ABSCBN 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-CBNs approval.This proves that ABS-CBNs control was
limited only to the result of SONZAs work, whether to broast the final product or not.In either case, ABS-CBN must still
pay SONZAs 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
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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 broast 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 hiswork. ABS-CBNs sole concern was for SONZA to display his talent during the airing of the
programs.39
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A radio broast specialist who works under minimal supervision is an independent contractor.40SONZAs 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-CBNs employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates ABS-CBNs 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 performancecovering talents41 of ABSCBN. 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 Broaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its
Code of Ethics.42 The KBP code applies to broasters, not to employees of radio and television stations.Broasters 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. v. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or
fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote
the result, create no employer-employee relationship unlike the second, which address both the result and the means
used to achieve it.44
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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
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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 broast industry, exclusivity is
not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46This practice is not
designed to control the means and methods of work of the talent, but simply to protect the investment of the broast
station.The broast 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.47Normally, 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 Arbiters 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 SONZAs agent.The Agreement expressly states that MJMDC acted as the AGENT of SONZA. The records do not show
that MJMDC acted as ABS-CBNs agent.MJMDC, which stands for Mel and Jay Management and Development Corporation,
is a corporation organized and owned by SONZA and TIANGCO.The President and General Manager of MJMDC is SONZA
himself.It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of
ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC.That would make MJMDC the
agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his
broast 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 broast and television
industry.49
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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 broast industry.Under this policy, the types of employees in the broast 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 SONZAs status.A mere executive issuance cannot exclude
independent contractors from the class of service providers to the broast industry.The classification of workers in the
broast 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-CBNs 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-CBNs witnesses, he was never prevented from denying or refuting the
allegations in the affidavits.The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the
submission of the position papers of the parties, thus:
Section 3.Submission of Position Papers/Memorandum

xxx
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 latters 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
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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 broast 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 Broasters
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 broasters 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 broasters 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 SONZAs 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 SONZAs 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, SONZAs cause of action is for breach of
contract which is intrinsically a civil dispute cognizable by the regular courts. 58
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WHEREFORE, we DENY the petition.The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP
No. 49190 is AFFIRMED.Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.
Endnotes:
Under Rule 45 of the Rules of Court.
Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M. Elbinias and Marina L. Buzon
concurring.
2
Rollo, p. 150.
Ibid., p. 204.
Donato G. Quinto, Jr.
Rollo, pp. 114-130.
Ibid., pp. 123-125.
Ibid., p. 39.
Rollo, pp. 37-39.
10
Ibid., p. 39.
11
Ibid.
12
Ibid.
13
Ibid.
14
Ibid., p. 269.
Fleischer Company, Inc. v. National Labor Relations Commission, G.R. No. 121608, 26 March 2001, 355 SCRA 105; AFP
Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47; Cathedral School of
Technology v. NLRC, G.R. No. 101438, 13 October 1992, 214 SCRA 551. See also Ignacio v. Coca-Cola Bottlers Phils.,
Inc., 417 Phil. 747 (2001); Gonzales v. National Labor Relations Commission, G.R. No. 131653, 26 March 2001, 355
SCRA 195; Sandigan Savings and Loan Bank, Inc. v. NLRC, 324 Phil. 348 (1996); Magnolia Dairy Products Corporation v.
NLRC, 322 Phil. 508 (1996).
15
16
Madlos v. NLRC, 324 Phil. 498 (1996).
17
Domasig v. National Labor Relations Commission, G.R. No. 118101, 16 September 1996, 261 SCRA 779.
De Los Santos v. NLRC, 423 Phil. 1020 (2001); Traders Royal Bank v. NLRC, 378 Phil. 1081 (1999); Aboitiz Shipping
Employees Association v. National Labor Relations Commission, G.R. No. 78711, 27 June 1990, 186 SCRA 825; Ruga v.
National Labor Relations Commission, G.R. NOS. 72654-61, 22 January 1990, 181 SCRA 266.
18
19
Ibid.
Paragraph 10 of the Agreement provides:The COMPANY shall provide him with the following benefits: SSS, Medicare,
Healthcare, executive life and accident insurance, and a 13th-month pay based on an amount not lower than the amount
he was receiving prior to the effectivity of this Agreement.
20
PresidentialDecreeNo. 851 (RequiringAllEmployers to Pay their Employees a 13 th-month Pay) for the 13th month pay;
Republic Act No. 1161 (Social Security Law) for the SSS benefits; and Republic Act No. 7875 (National Health Insurance
Act of 1995) for the Philhealth insurance.
21
22
Article 1157 of the Civil Code explicitly provides:
Obligations arise from:

(1) Law;
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(2) Contracts;
(3) Quasi-contracts;
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(4) Acts or omissions punished by law; and

(5) Quasi-delicts. (Emphasis supplied)
23
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See Article 283, Labor Code.
Paragraph 7 of the Agreement states: Provided that the AGENT and Jay Sonza shall faithfully and completely perform
each condition of this Agreement for and in consideration of the aforesaid services by the AGENT and its talent, the
COMPANY agrees to pay the AGENT for the first year of this Agreement the amount of THREE HUNDRED TEN THOUSAND
PESOS ONLY (P310,000.00) per month, payable on the 10thand 25th of each month.For the second and third year of this
Agreement, the COMPANY shall pay the amount of THREE HUNDRED SEVENTEEN THOUSAND PESOS ONLY (P317,000.00)
per month, payable likewise on the 10th and 25th of the each month.
24
Paragraph 11 of the Agreement states: In the event of cancellation of this Agreement through no fault of the AGENT
and its talent, COMPANY agrees to pay the full amount specified in this Agreement for the remaining period covered by
this Agreement, provided that the talentshall not render any service for or in any other radio or television production of
any person, firm, corporation or any entity competing with the COMPANY until the expiry hereof.
25
26
The opening sentence of the second paragraph ofSONZAs letter reads:
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career.
xxx
27
361 F.3d 1, 2 March 2004.
28
See also Spirides v. Reinhardt, 486 F. Supp. 685 (1980).
In the United States, aside from the right of control test, there are the economic reality test and the multi-factor test.
The tests are drawn from statutes, regulations, rules, policies, rulings, case law and the like. The right of control test
applies under the federal Internal Revenue Code (IRC). The economic reality test applies to the federal Fair Labor
Standards Act (FLSA). [29] The California Division of Labor Standards Enforcement (DLSE) uses a hybrid of these two
tests often referred to as the multi-factor test in determining who an employee is.
29
Most courts in theUnited States have utilized the control test to determine whether one is an employee. Under this test, a
court must consider the hiring partys right to control the manner and means by which the product is
accomplished.Among other factors relevant to this inquiry are the skills required; the source of the instrumentalities and
tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the
right to assign additional projects to the hired party; the extent of the hired partys discretion over when and how long to
work; the method of payment; the hired partys role in hiring and paying assistants; whether the work is part of the
regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the
tax treatment of the hired party. (www.piercegorman.com, quoted from the article entitled Management-side employment
law advice for the entertainment industry with subtitle Classification of Workers:Independent Contractors v. Employee by
David Albert Pierce, Esq.)
www.piercegorman.com, quoted from the article entitled Management-side employment law advice for the
entertainment industry with subtitle Classification of Workers:Independent Contractors v. Employee by David Albert
Pierce, Esq.
30
Paragraph 4 of the Agreement provides: AGENT will make available Jay Sonza for rehearsals and tapings of the
Programs on the day and time set by the producer and director of the Programs and to attend pre and post production
staff meetings.
31
Paragraph 15 of the Agreement provides: AGENT, talent shall not use the Programs as a venue to broast or announce
any criticism on any operational, administrative, or legal problems, situations or other matter which may occur, exist or
alleged to have occurred or existed within the COMPANY.Likewise, AGENT, talent shall, in accordance with good broast
management and ethics, take up with the proper officers of the COMPANY suggestions or criticisms on any matter or
condition affecting the COMPANY or its relation to the public or third parties.
32
In Zhengxing v. Nathanson, 215 F.Supp.2d 114, citing Redd v. Summers, 232 F.3d 933 (D.C. Cir.), plaintiffs superior
was not involved in the actual performance that produced the final product.
33
Paragraph 3 of the Agreement provides: The COMPANY reserves the right to modify the program format and likewise
change airtime schedule for more effective programming.
34
The right not to broast an independent contractors show also gives the radio and television station protection in case it
deems the contents of the show libelous.
35
36
157 F.2d 26, 8 August 1946.
37
Ibid.
In Zhengxing v. Nathanson, 215 F.Supp.2d 114, 5 August 2002, plaintiff was also provided with the place of work
and equipment to be used.
38
In the Alberty case, the US Court of Appeals rejected Albertys contention that WIPR provided the equipment necessary
to tape the show. The court held there that the equipment necessary for Alberty to conduct her job as program host
related to her appearance on the show.Others provided equipment for filming and producing the show, but these were not
the primary tools that Alberty used to perform her particular function.Since Alberty provided, or obtained sponsors to
provide, the costumes, jewelry, and other image-related supplies and services necessary for her appearance, she
provided the tools and instrumentalities necessary for her to perform.The US Court of Appeals added that if it accepted
Albertys argument, independent contractors could never work on collaborative projects because other individuals often
provide the equipment required for different aspects of the collaboration.
39
The Alberty case further ruled that while control over the manner, location, and hours of work is often critical to the
independent contractor/employee analysis, it must be considered in light of the work performed and the industry at issue.
Considering the tasks that an actor performs, the court does not believe that the sort of control identified by Alberty
necessarily indicates employee status.
In Zhengxing, a Chinese language broaster and translator was deemed an independent contractor because she worked
under minimal supervision.The U.S. court also found that plaintiff was required to possess specialized knowledge before
commencing her position as a broaster.
40
Paragraph 13 of the Agreement provides: AGENT agrees that talent shall abide by the rules, regulations and standards
of performance of the COMPANY covering talents, and that talent is bound to comply with the Television and Radio Code
of the Kapisanan ng mga Broaster sa Pilipinas (KBP), which has been adopted by the COMPANY as its Code of
Ethics.AGENT shall perform and keep all of the duties and obligations assumed or entered by the AGENT hereunder using
its best talents and abilities. Any violation of or non-conformity with this provision by talent shall be a valid and sufficient
ground for the immediate termination of the Agreement. (Emphasis supplied)
41
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42
Ibid.
43
AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47.
44
Ibid.
45
Supra note 36.
46
Rollo, p. 302.
47
Ibid.
48
The second paragraph of Article 106 of the Labor Code reads:
There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and
placed by such persons are performing activities which are directly related to the principal business of such employer.In
such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly employed by him.
49
Rollo, p. 90.
50
New Rules of Procedure of the National Labor Relations Commission, as amended by Resolution 3-99, series of 1999.
University of the Immaculate Concepcion v. U.I.C. Teaching and Non-Teaching Personnel and Employees Union, 414
Phil. 522 (2001).
51
52
Columbus Philippine Bus Corp. v. NLRC, 417 Phil. 81 (2001).
53
Section 3, Article XIII of the Constitution.
54
Republic Act No. 8424. BIR Revenue Regulations No. 19-99 also provides the following:
SECTION 1.Scope. Pursuant to the provisions of Sections 244 and 108 of the National Internal Revenue Code of 1997, in
relation to Section 17 of Republic Act No. 7716, as amended by Section 11 of Republic Act 8241, these Regulations are
hereby promulgated to govern the imposition of value-added tax on sale of services by persons engaged in the practice of
profession or calling and professional services rendered by general professional partnerships; services rendered
by actors, actresses, talents, singers and emcees, radio and television broasters and choreographers; musical, radio,
movie, television and stage directors; and professional athletes.
SECTION 2.Coverage. Beginning January 1, 2000, general professional partnerships, professionals and persons described
above shall be governed by the provisions of Revenue Regulation No. 7-95, as amended, otherwise known as the
Consolidated Value-Added Tax Regulations. xxx
55
Otherwise known as the Expanded Value-Added Tax Law.
Act amending Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax Law and other pertinent
provisions of the National Internal Revenue Code, as amended (December 20, 1996).
56
57
Section 109 of the NIRC provides:
Exempt transactions. The following shall be exempt from the value-added tax:
xxx
(o) Services rendered by individuals pursuant to an employer-employee relationship; xxx
58
Singapore Airlines Ltd. v. Hon. Cruz, etc., et al., 207 Phil. 585 (1983).
FIRST DIVISION
[G.R. NO. 164156 : September 26, 2006]
ABS-CBN BROADCASTING CORPORATION, Petitioner, v. MARLYN NAZARENO, MERLOU GERZON, JENNIFER
DEIPARINE, and JOSEPHINE LERASAN, Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and
the Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision 2 and Resolution3 of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which
likewise affirmed, with modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou
Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broasting Corporation (ABS-CBN) is engaged in the broasting business and owns a network of
television and radio stations, whose operations revolve around the broast, transmission, and relay of telecommunication
signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio and television operations. It has a
franchise as a broasting company, and was likewise issued a license and authority to operate by the National
Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different
dates. They were assigned at the news and public affairs, for various radio programs in the Cebu Broasting Station, with a
monthly compensation of P4,000. They were issued ABS-CBN employees' identification cards and were required to work
for a minimum of eight hours a day, including Sundays and holidays. They were made to perform the following tasks and
duties:
a) Prepare, arrange airing of commercial broasting based on the daily operations log and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;
e) Assist, anchor program interview, etc; and
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f) Record, log clerical reports, man based control radio. 4

Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7'
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7'
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager Leo
Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from December 11, 1996 to December 11, 1999. However, since
petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included to the CBA. 6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1,
2000, they would be assigned to non-drama programs, and that the DYAB studio operations would be handled by the
studio technician. Thus, their revised schedule and other assignments would be as follows:
Monday - Saturday
4:30 A.M. - 8:00 A.M. - Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. - 12:00 MN - Jennifer Deiparine
Sunday
5:00 A.M. - 1:00 P.M. - Jennifer Deiparine
1:00 P.M. - 10:00 P.M. - Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of
Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages
against the petitioner before the NLRC. The Labor Arbiter directed the parties to submit their respective position papers.
Upon respondents' failure to file their position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez
issued an Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the case.
Respondents received a copy of the Order on May 16, 2001.7 Instead of re-filing their complaint with the NLRC within 10
days from May 16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit
Position Paper and Motion to Submit Case For Resolution. 8 The Labor Arbiter granted this motion in an Order dated June
18, 2001, and forthwith admitted the position paper of the complainants. Respondents made the following allegations:
1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous period of
more than five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the
filing of this complaint on November 20, 2000.
Machine copies of complainants' ABS-CBN Employee's Identification Card and salary vouchers are hereto attached as
follows, thus:
I. Jennifer Deiparine:
Exhibit "A" - ABS-CBN Employee's Identification Card
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon - ABS-CBN Employee's Identification Card
Exhibit "C"
Exhibit "D"
Exhibit "D-1" &
Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months
III. Marlene Nazareno
Exhibit "E" - ABS-CBN Employee's Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.

Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employee's Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month 9
Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific
assignments at its discretion, and were thus under its direct supervision and control regardless of nomenclature. They
prayed that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling
defendants to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN as a
condition precedent for their admission into the existing union and collective bargaining unit of respondent company
where they may as such acquire or otherwise perform their obligations thereto or enjoy the benefits due therefrom.
Complainants pray for such other reliefs as are just and equitable under the premises. 10
For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct of a
particular program ran by an anchor or talent. Among their duties include monitoring and receiving incoming calls from
listeners and field reporters and calls of news sources; generally, they perform leg work for the anchors during a program
or a particular production. They are considered in the industry as "program employees" in that, as distinguished from
regular or station employees, they are basically engaged by the station for a particular or specific program broasted by
the radio station. Petitioner asserted that as PAs, the complainants were issued talent information sheets which are
updated from time to time, and are thus made the basis to determine the programs to which they shall later be called on
to assist. The program assignments of complainants were as follows:
A. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)
b. Complainant Deiparine assists in the programs:
1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu
6) Pangutana Lang
c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan11
Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce,
such as drama talents in other productions. As program employees, a PA's engagement is coterminous with the
completion of the program, and may be extended/renewed provided that the program is on-going; a PA may also be
assigned to new programs upon the cancellation of one program and the commencement of another. As such program
employees, their compensation is computed on a program basis, a fixed amount for performance services irrespective of
the time consumed. At any rate, petitioner claimed, as the payroll will show, respondents were paid all salaries and
benefits due them under the law.12
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially
since respondents were not covered by the bargaining unit.
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular
employees of petitioner; as such, they were awarded monetary benefits. The fallo of the decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular
employees of the respondent ABS-CBN Broasting Corporation and directing the same respondent to pay complainants as
follows:
I - Merlou A. Gerzon P12,025.00

II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
_________
P48,100.00
plus ten (10%) percent Attorney's Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED
TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED.13
However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no jurisdiction
to interpret and apply the agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as provided in
Article 261 of the Labor Code.
Respondents' counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy on
August 27, 2001, while the other respondents received theirs on September 8, 2001. Respondents signed and filed their
Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal,
conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the
NLRC, while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for
more than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;
3. That the Labor Arbiter erred in denying respondent's Motion for Reconsideration on an interlocutory order on the
ground that the same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive
leave pay and salary differential; and
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6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorney's fees. 14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the decision
reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and
VACATED and a new one is entered ORDERING respondent ABS-CBN Broasting Corporation, as follows:
1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in the
aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
A. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing
their rice subsidy in the CBA, broken down as follows:
A. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
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3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents' motion to
refile the complaint and admit their position paper. Although respondents were not parties to the CBA between petitioner
and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and computed respondents' monetary
benefits based on the 1999 CBA, which was effective until September 2002. The NLRC also ruled that the Labor Arbiter
had jurisdiction over the complaint of respondents because they acted in their individual capacities and not as members
of the union. Their claim for monetary benefits was within the context of Article 217(6) of the Labor Code. The validity of
respondents' claim does not depend upon the interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees who
contributed to the profits of petitioner through their labor. The NLRC cited the ruling of this Court in New Pacific Timber &
Supply Company v. National Labor Relations Commission.16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural and
substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in admitting the appeal of respondents;
(b) whether the NLRC committed palpable error in scrutinizing the reopening and revival of the complaint of respondents
with the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the
Labor Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without jurisdiction in
entertaining and resolving the claim of the respondents under the CBA instead of referring the same to the Voluntary
Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave abuse of discretion when it awarded
monetary benefits to respondents under the CBA although they are not members of the appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall be
upon the expiration of the last day to appeal by all parties, should there be several parties to a case. Since respondents
received their copies of the decision on September 8, 2001 (except respondent Nazareno who received her copy of the
decision on August 27, 2001), they had until September 18, 2001 within which to file their Appeal Memorandum.
Moreover, the CA declared that respondents' failure to submit their position paper on time is not a ground to strike out
the paper from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular
employees who perform tasks necessary and desirable in the usual trade and business of petitioner and not just its
project employees. Moreover, the CA added, the award of benefits accorded to rank-and-file employees under the 19961999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular employees.
Finding no merit in petitioner's motion for reconsideration, the CA denied the same in a Resolution 17dated June 16, 2004.
Petitioner thus filed the instant Petition for Review on Certiorari and raises the following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE
NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF THE LATTER'S DECISION AND
RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING
RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA
BENEFITS TO RESPONDENTS.18
Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of the
NLRC, and entertained respondents' appeal from the decision of the Labor Arbiter despite the admitted lapse of the
reglementary period within which to perfect the same. Petitioner likewise maintains that the 10-day period to appeal must
be reckoned from receipt of a party's counsel, not from the time the party learns of the decision, that is, notice to counsel
is notice to party and not the other way around. Finally, petitioner argues that the reopening of a complaint which the
Labor Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such order of
dismissal had already attained finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioner's own timely appeal
that empowered the NLRC to reopen the case. They assert that although the appeal was filed 10 days late, it may still be
given due course in the interest of substantial justice as an exception to the general rule that the negligence of a counsel
binds the client. On the issue of the late filing of their position paper, they maintain that this is not a ground to strike it
out from the records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioner's contention that the perfection of an appeal within the statutory or reglementary period is not
only mandatory, but also jurisdictional; failure to do so renders the assailed decision final and executory and deprives the
appellate court or body of the legal authority to alter the final judgment, much less entertain the appeal. However, this
Court has time and again ruled that in exceptional cases, a belated appeal may be given due course if greater injustice
may occur if an appeal is not given due course than if the reglementary period to appeal were strictly followed. 19 The
Court resorted to this extraordinary measure even at the expense of sacrificing order and efficiency if only to serve the
greater principles of substantial justice and equity.20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 223 21 of the Labor Code a
liberal application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the way of equitably
and completely resolving the rights and obligations of the parties. 22 We have held in a catena of cases that technical rules
are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the workingman. 23
Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary
period therefor. However, petitioner perfected its appeal within the period, and since petitioner had filed a timely appeal,
the NLRC acquired jurisdiction over the case to give due course to its appeal and render the decision of November 14,
2002. Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the NLRC can still
participate in a separate appeal timely filed by the adverse party as the situation is considered to be of greater benefit to
both parties.24
We find no merit in petitioner's contention that the Labor Arbiter abused his discretion when he admitted respondents'
position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use every
reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure,
all in the interest of due process. 25 Indeed, as stressed by the appellate court, respondents' failure to submit a position
paper on time is not a ground for striking out the paper from the records, much less for dismissing a
complaint.26 Likewise, there is simply no truth to petitioner's assertion that it was denied due process when the Labor
Arbiter admitted respondents' position paper without requiring it to file a comment before admitting said position paper.
The essence of due process in administrative proceedings is simply an opportunity to explain one's side or an opportunity
to seek reconsideration of the action or ruling complained of. Obviously, there is nothing in the records that would
suggest that petitioner had absolute lack of opportunity to be heard.27 Petitioner had the right to file a motion for
reconsideration of the Labor Arbiter's admission of respondents' position paper, and even file a Reply thereto. In fact,
petitioner filed its position paper on April 2, 2001. It must be stressed that Article 280 of the Labor Code was encoded in
our statute books to hinder the circumvention by unscrupulous employers of the employees' right to security of tenure by
indiscriminately and absolutely ruling out all written and oral agreements inharmonious with the concept of regular
employment defined therein.28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor Arbiter's order dated 18 June 2001 as
violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process. That while
suggesting that an Order be instead issued by the Labor Arbiter for complainants to refile this case, respondents impliedly
submit that there is not any substantial damage or prejudice upon the refiling, even so, respondents' suggestion
acknowledges complainants right to prosecute this case, albeit with the burden of repeating the same procedure, thus,
entailing additional time, efforts, litigation cost and precious time for the Arbiter to repeat the same process twice.
Respondent's suggestion, betrays its notion of prolonging, rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without
prejudice beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule V, Rules
Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from
receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in the
arbitration branch of origin."
the same is not a serious flaw that had prejudiced the respondents' right to due process. The case can still be refiled
because it has not yet prescribed. Anyway, Article 221 of the Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law
or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and
the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively
and without regard to technicalities of law or procedure, all in the interest of due process."
The admission by the Labor Arbiter of the complainants' Position Paper and Supplemental Manifestation which were
belatedly filed just only shows that he acted within his discretion as he is enjoined by law to use every reasonable means
to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the
interest of due process. Indeed, the failure to submit a position paper on time is not a ground for striking out the paper
from the records, much less for dismissing a complaint in the case of the complainant. (University of Immaculate
Conception v. UIC Teaching and Non-Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents' position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is
enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without
technicalities of law or procedure, all in the interest of due process". (Panlilio v. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had
filed their position paper on 2 April 2001. What is material in the compliance of due process is the fact that the parties are
given the opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the opportunities to submit position papers".
(Laurence v. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of law.29
We reject, as barren of factual basis, petitioner's contention that respondents are considered as its talents, hence, not
regular employees of the broasting company. Petitioner's claim that the functions performed by the respondents are not
at all necessary, desirable, or even vital to its trade or business is belied by the evidence on record.
Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they
coincide with those of the Labor Arbiter and the National Labor Relations Commission, when supported by substantial
evidence.30 The question of whether respondents are regular or project employees or independent contractors is
essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous effects to the
legions of production assistants working in the Philippine broasting industry.
We agree with respondents' contention that where a person has rendered at least one year of service, regardless of the
nature of the activity performed, or where the work is continuous or intermittent, the employment is considered regular
as long as the activity exists, the reason being that a customary appointment is not indispensable before one may be
formally declared as having attained regular status. Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT. The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer except where the employment has been fixed for a specific project or undertaking the completion or termination
of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is a regular
employee:
The primary standard, therefore, of determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the
former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined
by considering the nature of work performed and its relation to the scheme of the particular business or trade in its
entirety. Also, if the employee has been performing the job for at least a year, even if the performance is not continuous
and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the
necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only
with respect to such activity and while such activity exists. 32
As elaborated by this Court in Magsalin v. National Organization of Working Men: 33
Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a
"regular" worker's security of tenure, however, can hardly be doubted. In determining whether an employment should be
considered regular or non-regular, the applicable test is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law
itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that
can be assessed by looking into the nature of the services rendered and its relation to the general scheme under which
the business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is divorced from
the normal activities required in carrying on the particular business or trade. But, although the work to be performed is
only for a specific project or seasonal, where a person thus engaged has been performing the job for at least one year,
even if the performance is not continuous or is merely intermittent, the law deems the repeated and continuing need for
its performance as being sufficient to indicate the necessity or desirability of that activity to the business or trade of the
employer. The employment of such person is also then deemed to be regular with respect to such activity and while such
activity exists.34
Not considered regular employees are "project employees," the completion or termination of which is more or less
determinable at the time of employment, such as those employed in connection with a particular construction project,
and "seasonal employees" whose employment by its nature is only desirable for a limited period of time. Even then, any
employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with
respect to the activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent
fees" instead of salaries, that they did not observe the required office hours, and that they were permitted to join other
productions during their free time are not conclusive of the nature of their employment. Respondents cannot be
considered "talents" because they are not actors or actresses or radio specialists or mere clerks or utility employees. They
are regular employees who perform several different duties under the control and direction of ABS-CBN executives and
supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are
necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have
rendered at least one year of service, whether continuous or broken, with respect to the activities in which they are
employed.35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation
necessitates the succor of the State. What determines whether a certain employment is regular or otherwise is not the
will or word of the employer, to which the worker oftentimes acquiesces, much less the procedure of hiring the employee
or the manner of paying the salary or the actual time spent at work. It is the character of the activities performed in
relation to the particular trade or business taking into account all the circumstances, and in some cases the length of time
of its performance and its continued existence. 36 It is obvious that one year after they were employed by petitioner,
respondents became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees because no evidence was presented to
show that the duration and scope of the project were determined or specified at the time of their engagement. Under
existing jurisprudence, project could refer to two distinguishable types of activities. First, a project may refer to a
particular job or undertaking that is within the regular or usual business of the employer, but which is distinct and
separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends
at determined or determinable times. Second, the term project may also refer to a particular job or undertaking that is
not within the regular business of the employer. Such a job or undertaking must also be identifiably separate and distinct
from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at
determined or determinable times.38
The principal test is whether or not the project employees were assigned to carry out a specific project or undertaking,
the duration and scope of which were specified at the time the employees were engaged for that project. 39
In this case, it is undisputed that respondents had continuously performed the same activities for an average of five
years. Their assigned tasks are necessary or desirable in the usual business or trade of the petitioner. The persisting need
for their services is sufficient evidence of the necessity and indispensability of such services to petitioner's business or
trade.40 While length of time may not be a sole controlling test for project employment, it can be a strong factor to
determine whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are
vital, necessary and indispensable to the usual trade or business of the employer.41 We note further that petitioner did not
report the termination of respondents' employment in the particular "project" to the Department of Labor and
Employment Regional Office having jurisdiction over the workplace within 30 days following the date of their separation
from work, using the prescribed form on employees' termination/ dismissals/suspensions. 42
As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier
pleadings, petitioner classified respondents as program employees, and in later pleadings, independent contractors.
Program employees, or project employees, are different from independent contractors because in the case of the latter,
no employer-employee relationship exists.
Petitioner's reliance on the ruling of this Court in Sonza v. ABS-CBN Broasting Corporation 43 is misplaced. In that case, the
Court explained why Jose Sonza, a well-known television and radio personality, was an independent contractor and not a
regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA'S services to co-host its television and radio programs because of SONZA'S peculiar skills,
talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring
complainant over other broasters of possibly similar experience and qualification as complainant belies respondent's claim
of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status
not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered
into the Agreement with SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider
all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him
benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were
ABS-CBN's employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and
13th month pay which the law automatically incorporates into every employer-employee contract. Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-employee relationship.
SONZA's talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary
that they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZA'S unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and
receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent
contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of
SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement. 44
In the case at bar, however, the employer-employee relationship between petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required
from them because they were merely hired through petitioner's personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee
relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance negating independent
contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly
dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates
the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer and when the
worker, relative to the employer, does not furnish an independent business or professional service, such work is a regular
employment of such employee and not an independent contractor.45 The Court will peruse beyond any such agreement to
examine the facts that typify the parties' actual relationship. 46
It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its
rank-and-file employees. As regular employees, respondents are entitled to the benefits granted to all other regular
employees of petitioner under the CBA.47 We quote with approval the ruling of the appellate court, that the reason why
production assistants were excluded from the CBA is precisely because they were erroneously classified and treated as
project employees by petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN under
the 1996-1999 CBA is a necessary consequence of public respondent's ruling that private respondents as production
assistants of petitioner are regular employees. The monetary award is not considered as claims involving the
interpretation or implementation of the collective bargaining agreement. The reason why production assistants were
excluded from the said agreement is precisely because they were classified and treated as project employees by
petitioner.
As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee
but the nature of the activities performed by such employee in relation to the particular business or trade of the
employer. Considering that We have clearly found that private respondents are regular employees of petitioner, their
exclusion from the said CBA on the misplaced belief of the parties to the said agreement that they are project employees,
is therefore not proper. Finding said private respondents as regular employees and not as mere project employees, they
must be accorded the benefits due under the said Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the union representing the employees and the employer.
However, even the non-member employees are entitled to the benefits of the contract. To accord its benefits only to
members of the union without any valid reason would constitute undue discrimination against non-members. A collective
bargaining agreement is binding on all employees of the company. Therefore, whatever benefits are given to the other
employees of ABS-CBN must likewise be accorded to private respondents who were regular employees of petitioner.48
Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of the
respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living of the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario, JJ., concur.
Endnotes:
Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices Rodrigo V. Cosico and Rosalinda AsuncionVicente, concurring, rollo, pp. 9-34.
1
Id. at 170-219.
Id. at 220-227.
Rollo, p. 180.
Id. at 183.
Id. at 213.
Id. at 174.
Id. at 248-250.
CA rollo, pp. 128-129.
10
Id. at 138-139.
11
See CA rollo, pp. 7-8.
12
Rollo, pp. 229-233.
13
Id. at 257-258.
14
Rollo, p. 172.
15
Rollo, p. 218.
16
385 Phil. 93 (2000).
17
Rollo, p. 36.
18
Id. at 58-59.
Mabuhay Development Industries v. National Labor Relations Commission, 351 Phil. 227, 234-235 (1998), citing City
Fair Corporation v. National Labor Relations Commission, 313 Phil. 464, 465 (1995).
19
20
Sublay v. National Labor Relations Commission, 381 Phil. 198, 204 (2000).
21
Art. 223. APPEAL
Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or
both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. x x x
22
Buenaobra v. Lim King Guan, G.R. No. 150147, January 20, 2004, 420 SCRA 359, 364 (2004).
Huntington Steel Products, Inc. v. National Labor Relations Commission, G.R. No. 158311, November 14, 2004, 442
SCRA 551, 560.
23
24
See Sandol v. Pilipinas Kao, Inc., et al., G.R. No. 87530, June 13, 1990, 186 SCRA 491.
25
Panlilio v. National Labor Relations Commission, 346 Phil. 30, 35-36 (1997).
26
U.I.C. v. U.I.C. Teaching & Non-Teaching Personnel and Employees Union, 414 Phil. 522, 533 (2001).
27
Mayon Hotel & Restaurant v. Adana, G.R. No. 157634, May 16, 2005, 458 SCRA 609, 629-630.
28
Philips Semiconductors (Phils.), Inc. v. Fadriquela, Infra note 35, at 418.
29
CA rollo, pp. 51-52.
30
Lopez v. National Steel Corporation, G.R. No. 149674, February 16, 2004, 423 SCRA 109, 113.
31
G.R. No. 164736, October 14, 2005, 473 SCRA 189.
Id. at 203-204, citing Abasolo v. National Labor Relations Commission, 400 Phil. 86, 103 (2000), De Leon v. National
Labor Relations Commission, G.R. No. 70705, August 21, 1989, 176 SCRA 615, 621.
32
33
451 Phil. 254 (2003).
34
Id. at 260-261.
35
Philips Semiconductors (Phils.), Inc. v. Fadriquela, G.R. No. 141717, April 14, 2004, 427 SCRA 408, 419.
36
De Leon v. National Labor Relations Commission, supra note 32, at 624.
Kimberly Independent Labor Union for Solidarity v. Drilon, et al., G.R. NOS. 77629 and 78791, May 9, 1990, 185 SCRA
190, 204.
37
38
Villa v. National Labor Relations Commission, 348 Phil. 116, 143 (1998).
39
ALU-TUCP, et al. v. National Labor Relations Commission, G.R. No. 109902, August 2, 1994, 234 SCRA 678, 685.
40
Samson v. National Labor Relations Commission, 323 Phil 135, 148 (1996).
41
Tomas Lao Construction v. National Labor Relations Commission, 344 Phil. 268, 279 (1997).
Section 2.2 of Department Order No. 19, cited in Integrated Contractor and Plumbing Works, Inc. v. National Labor
Relations Commission, G.R. No. 152427, August 9, 2005, 466 SCRA 265, 273-274 and Samson v. National Labor
Relations Commission, supra note 40, at 147.
42
43
G.R. No. 138051, June 10, 2004, 431 SCRA 538.
44
Id. at 595-596.
David Albert Pierce, Esq., "Management-side employment law advice for entertainment industry" with subtitle
"Classification of Workers: Independent Contractor v.
Employee" http://www.piercegorman.com/Classification_of_Workers.html (visited July 14, 2006).
45
46
Id.
Cinderella Marketing Corporation v. National Labor Relations Commission, Second Division, G.R. NOS. 112535 and
113758, June 22, 1998, 291 SCRA 91, 96.
47
48
Rollo, pp. 121-122.

SECOND DIVISION
[G.R. No. 169207 : March 25, 2010]
WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK WEBSTER, AND NOMINADA LANSANG,
PETITIONERS, VS. JOCELYN M. GALERA, RESPONDENT.
[G.R. NO. 169239]
JOCELYN M. GALERA, PETITIONER, VS. WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK
WEBSTER, AND NOMINADA LANSANG, RESPONDENTS.
DECISION
CARPIO, ACTING CJ.:
The Case
G.R. Nos. 169207 and 169239 are petitions for review[1] assailing the Decision [2] promulgated on 14 April 2005 as well as
the Resolution[3] promulgated on 1 August 2005 of the Court of Appeals (appellate court) in CA-G.R. SP No. 78721. The
appellate court granted and gave due course to the petition filed by Jocelyn M. Galera (Galera). The appellate court's
decision reversed and set aside that of the National Labor Relations Commission (NLRC), and directed WPP Marketing
Communications, Inc. (WPP) to pay Galera backwages, separation pay, unpaid housing benefit, unpaid personal and
accident insurance benefits, cash value under the company's pension plan, 30 days paid holiday benefit, moral damages,
exemplary damages, 10% of the total judgment award as attorney's fees, and costs of the suit.
The Facts
The appellate court narrated the facts as follows:
Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited from the United States of America by
private respondent John Steedman, Chairman-WPP Worldwide and Chief Executive Officer of Mindshare, Co., a
corporation based in Hong Kong, China, to work in the Philippines for private respondent WPP Marketing Communications,
Inc. (WPP), a corporation registered and operating under the laws of Philippines. GALERA accepted the offer and she
signed an Employment Contract entitled "Confirmation of Appointment and Statement of Terms and Conditions" (Annex B
to Petition for Certiorari). The relevant portions of the contract entered into between the parties are as follows:
Particulars:
Name: Jocelyn M. Galera
Address: 163 Mediterranean Avenue
Hayward, CA 94544
Position: Managing Director
Mindshare Philippines
Annual Salary: Peso 3,924,000
Start Date: 1 September 1999
Commencement Date: 1 September 1999
(for continuous service)
Office: Mindshare Manila
6. Housing Allowance
The Company will provide suitable housing in Manila at a maximum cost (including management fee and other associated
costs) of Peso 576,000 per annum.
7. Other benefits.
The Company will provide you with a fully maintained company car and a driver.
The Company will continue to provide medical, health, life and personal accident insurance plans, to an amount not
exceeding Peso 300,000 per annum, in accordance with the terms of the respective plans, as provided by JWT Manila.
The Company will reimburse you and your spouse one way business class air tickets from USA to Manila and the related
shipping and relocation cost not exceeding US$5,000 supported by proper documentation. If you leave the Company
within one year, you will reimburse the Company in full for all costs of the initial relocation as described therein.
You will participate in the JWT Pension Plan under the terms of this plan, the Company reserves the right to transfer this
benefit to a Mindshare Pension Plan in the future, if so required.
8. Holidays
You are entitled to 20 days paid holiday in addition to public holidays per calendar year to be taken at times agreed with
the Company. Carry-over of unused accrued holiday entitlement into a new holiday year will not normally be allowed. No
payment will be made for holidays not taken. On termination of your employment, unless you have been summarily
dismissed, you will be entitled to receive payment for unused accrued holiday pay. Any holiday taken in excess of your
entitlement shall be deducted from your final salary payment.
9. Leave Due to Sickness or Injury
The maximum provision for sick leave is 15 working days per calendar year.
12. Invention/Know-How
Any discovery, invention, improvement in procedure, trademark, trade name, designs, copyrights or get-ups made,
discovered or created by you during the continuance of your employment hereunder relating to the business of the
Company shall belong to and shall be the absolute property of the Company. If required to do so by the Company
(whether during or after the termination of your employment) you shall at the expense of the company execute all
instruments and do all things necessary to vest in ownership for all other rights, title and interests (including any
registered rights therein) in such discovery, invention, improvement in procedure, trademark, trade name, design,
copyright or get-up in the Company (or its Nominee) absolutely and as sole beneficial owner.
14. Notice.
The first three months of your employment will be a trial period during which either you or the Company may terminate
your employment on one week's notice. If at the end of that period, the Company is satisfied with your performance, you
will become a permanent employee. Thereafter you will give Company and the Company will give you three months
notice of termination of employment. The above is always subject to the following: (1) the Company's right to terminate
the contract of employment on no or short notice where you are in breach of contract; (2) your employment will at any
event cease without notice on your retirement date when you are 60 years of age.
SIGNED JOCELYN M. GALERA 8-16-99
Date of Borth [sic] 12-25-55
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction
of the CEO and upon signing of the contract, without any further action from the Board of Directors of private.
respondent. WPP.
Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for
petitioner GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner alleged that
she was constrained to sign the application in order that she could remain in the Philippines and retain her employment.
Then, on December 14, 2000, petitioner GALERA alleged she was verbally notified by private respondent STEEDMAN
that her services had been terminated from private respondent WPP. A termination letter followed the next day.[4]
On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service incentive leave pay, 13 th month pay,
incentive plan, actual and moral damages, and attorney's fees against WPP and/or John Steedman (Steedman), Mark
Webster (Webster) and Nominada Lansang (Lansang). The case was docketed as NLRC NCR Case No. 30-01-00044-01.
The Labor Arbiter's Ruling
In his Decision dated 31 January 2002, Labor Arbiter Edgardo M. Madriaga (Arbiter Madriaga) held WPP, Steedman,
Webster, and Lansang liable for illegal dismissal and damages. Arbiter Madriaga stated that Galera was not only illegally
dismissed but was also not accorded due process. Arbiter Madriaga explained, thus:
[WPP] failed to observe the two-notice rule. [WPP] through respondent Steedman for a five (5) minute meeting on
December 14, 2000 where she was verbally told that as of that day, her employment was being terminated. [WPP] did
not give [Galera] an opportunity to defend herself and explain her side. [Galera] was even prohibited from reporting for
work that day and was told not to report for work the next day as it would be awkward for her and respondent Steedman
to be in the same premises after her termination. [WPP] only served [Galera] her written notice of termination only on 15
December 2001, one day after she was verbally apprised thereof.
The law mandates that the dismissal must be properly done otherwise, the termination is gravely defective and may be
declared unlawful as we hereby hold [Galera's] dismissal to be illegal and unlawful. Where 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. The law mandates that both
the substantive and procedural aspects of due process should be observed. The facts clearly show that respondents were
remiss on both aspects. Perforce, the dismissal is void and unlawful.
xxxx
Considering the work performance and achievements of [Galera] for the year 2000, we do not find any basis for the
alleged claim of incompetence by herein respondents. Had [Galera] been really incompetent, she would not have been
able to generate enormous amounts [sic] of revenues and business for [WPP]. She also appears to be well liked as a
leader by her subordinates, who have come forth in support of [Galera]. These facts remain undisputed by respondents.
A man's job being a property right duly protected by our laws, an employer who deprives an employee [of] the right to
defend himself is liable for damages consistent with Article 32 of the Civil Code. To allow an employer to terminate the
employment of his worker based merely on allegations without proof places the [employee] in an uncertain situation. The
unflinching rule in illegal dismissal cases is that the employer bears the burden of proof.
In the instant case, respondents have not been able to muster evidence to counter [Galera's] allegations. [Galera's]
allegations remain and stand absent proof from respondents rebutting them. Hence, our finding of illegal dismissal
against respondents who clearly have conspired in bad faith to deprive [Galera] of her right to substantive and procedural
due process.[5]
The dispositive portion of Arbiter Madriaga's decision reads as follows:
WHEREFORE, premises considered, we hereby hold herein respondents liable for illegal dismissal and damages, and
award to [Galera], by virtue of her expatriate status, the following:
a. Reinstatement without loss of seniority rights.

b. Backwages amounting to $120,000 per year at P50.00 to US $1 exchange rate, 13 th
c. Remuneration for business acquisitions amounting to Two Million Eight Hundred Fifty Thousand Pesos (P2,850,000.00)
and Media Plowback Incentive equivalent to Three Million Pesos (P3,000,000.00) or a total of not less than One Hundred
Thousand US Dollars ($100,000.00).
d. US Tax Protection of up to 35% coverage equivalent to Thirty Eight Thousand US Dollars ($38,000).
e. Moral damages including implied defamation and punitive damages equivalent to Two Million Dollars
(US$2,000,000.00).
f. Exemplary damages equivalent to One Million Dollars ($1,000,000.00).
g. Attorney's fees of 10% of the total award herein.
month pay, transportation and housing benefits.
SO ORDERED.[6]
The Ruling of the NLRC
The First Division of the NLRC reversed the ruling of Arbiter Madriaga. In its Decision [7] promulgated on 19 February 2003,
the NLRC stressed that Galera was WPP's Vice-President, and therefore, a corporate officer at the time she was removed
by the Board of Directors on 14 December 2000. The NLRC stated thus:
It matters not that her having been elected by the Board to an added position of being a member of the Board of
Directors did not take effect as her May 31, 2000 election to such added position was conditioned to be effective upon
approval by SEC of the Amended By-Laws, an approval which took place only in February 21, 2001, i.e., after her removal
on December 14, 2000. What counts is, at the time of her removal, she continued to be WPP's Vice-President, a corporate
officer, on hold over capacity.
Ms. Galera's claim that she was not a corporate officer at the time of her removal because her May 31, 2000 election as
Vice President for Media, under WPP's Amended By-Laws, was subject to the approval by the Securities and Exchange
Commission and that the SEC approved the Amended By-Laws only in February 2001. Such claim is unavailing. Even if
Ms. Galera's subsequent election as Vice President for Media on May 31, 2000 was subject to approval by the SEC, she
continued to hold her previous position as Vice President under the December 31, 1999 election until such time that her
successor is duly elected and qualified. It is a basic principle in corporation law, which principle is also embodied in WPP's
by-laws, that a corporate officer continues to hold his position as such until his successor has been duly elected and
qualified. When Ms. Galera was elected as Vice President on December 31, 1999, she was supposed to have held that
position until her successor has been duly elected and qualified. The record shows that Ms. Galera was not replaced by
anyone. She continued to be Vice President of WPP with the same operational title of Managing Director for Mindshare
and continued to perform the same functions she was performing prior to her May 31, 2000 election.
In the recent case of Dily Dany Nacpil v. International Broadcasting Corp., the definition of corporate officer for purposes
of intra-corporate controversy was even broadened to include a Comptroller/Assistant Manager who was appointed by the
General Manager, and whose appointment was later approved by the Board of Directors. In this case, the position of
comptroller was not even expressly mentioned in the By-Laws of the corporation, and yet, the Supreme Court found him
to be a corporate officer. The Court ruled that -(since) petitioner's appointment as comptroller required the approval and formal action of IBC's Board of Directors to
become valid, it is clear therefore that petitioner is a corporate officer whose dismissal may be the subject of a
controversy cognizable by the SEC... Had the petitioner been an ordinary employee, such board action would not have
been required.
Such being the case, the imperatives of law require that we hold that the Arbiter below had no jurisdiction over Galera's
case as, again, she was a corporate officer at the time of her removal.
WHEREFORE, the appeals of petitioner from the Decision of Labor Arbiter Edgardo Madriaga dated January 31, 2002 and
his Order dated March 21, 2002, respectively, are granted. The January 31, 2002 decision of the Labor Arbiter is set aside
for being null and void and the temporary restraining order we issued on April 24, 2002 is hereby made permanent. The
complaint of Jocelyn Galera is dismissed for lack of jurisdiction.
SO ORDERED.[8]
In its Resolution [9] promulgated on 4 June 2003, the NLRC further stated:
We are fully convinced that this is indeed an intra-corporate dispute which is beyond the labor arbiter's jurisdiction. These
consolidated cases clearly [involve] the relationship between a corporation and its officer and is properly within the
definition of an intra-corporate relationship which, under P.D. No. 902-A, is within the jurisdiction of the SEC (now the
commercial courts). Such being the case, We are constrained to rule that the Labor Arbiter below had no jurisdiction over
Ms. Galera's complaint for illegal dismissal.
WHEREFORE, the motion for reconsideration filed by Ms. Galera is hereby denied for lack of merit. We reiterate our
February 19, 2003 Decision setting aside the Labor Arbiter's Decision dated January 31, 2002 for being null and void.
SO ORDERED.[10]
Galera assailed the NLRC's decision and resolution before the appellate court and raised a lone assignment of error.
The National Labor Relations Commission acted with grave abuse of discretion amounting to lack or excess of jurisdiction
when it reversed the decision of the Labor Arbiter not on the merits but for alleged lack of jurisdiction. [11]
The Decision of the Appellate Court
The appellate court reversed and set aside the decision of the NLRC. The appellate court ruled that the NLRC's dismissal
of Galera's appeal is not in accord with jurisprudence. A person could be considered a "corporate officer" only if appointed
as such by a corporation's Board of Directors, or if pursuant to the power given them by either the Articles of
Incorporation or the By-Laws. [12]
The appellate court explained:
A corporation, through its board of directors, could only act in the manner and within the formalities, if any, prescribed by
its charter or by the general law. If the action of the Board is ultra vires such is motu proprio void ab initio and without
legal effect whatsoever. The by-laws of a corporation are its own private laws which substantially have the same effect as
the laws of the corporation. They are, in effect, written into the charter. In this sense, they beome part of the
fundamental law of the corporation with which the corporation and its directors and officers must comply.
Even if petitioner GALERA had been appointed by the Board of Directors on December 31, 1999, private respondent
WPP's By-Laws provided for only one Vice-President, a position already occupied by private respondent Webster. The
same defect also stains the Board of Directors' appointment of petitioner GALERA as a Director of the corporation,
because at that time the By-Laws provided for only five directors. In addition, the By-laws only empowered the Board of
Directors to appoint a general manager and/or assistant general manager as corporate officers in addition to a chairman,
president, vice-president and treasurer. There is no mention of a corporate officer entitled "Managing Director."
Hence, when the Board of Directors enacted the Resolutions of December 31, 1999 and May 31, 2000, it exceeded its
authority under the By-Laws and are, therefore, ultra vires. Although private respondent WPP sought to amend these
defects by filing Amended By-Laws with the Securities and Exchange Commission, they did not validate the ultra
vires resolutions because the Amended By-Laws did not take effect until February 16, 2001, when it was approved by the
SEC. Since by-laws operate only prospectively, they could not validate the ultra vires resolutions.[13]
The dispositive portion of the appellate court's decision reads:
WHEREFORE, the petition is hereby GRANTED and GIVEN DUE COURSE. The assailed Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered DIRECTING private respondent WPP
MARKETING COMMUNICATIONS, INC. to:
1.
Pay [Galera] backwages at the peso equivalent of US$120,000.00 per annum plus three months from her
summary December 14, 2000 dismissal up to March 14, 2001 because three months notice is required under
the contract, plus 13thmonth pay, bonuses and general increases to which she would have been normally
entitled, had she not been dismissed and had she not been forced to stop working, including US tax protection
of up to 35% coverage which she had been enjoying as an expatriate;
2.
3.
Pay x x x GALERA the peso equivalent of US$185,000.00 separation pay (1 years);

Pay x x x GALERA any unpaid housing benefit for the 18 months of her employment in the service to the
Company as an expatriate in Manila, Philippines at the rate of P576,000 per year; unpaid personal and accident
insurance benefits for premiums at the rate of P300,000.00 per year; whatever cash value in the JWT Pension
Plan; and thirty days paid holiday benefit under the contract for the 1 calendar years with the Company;
Pay x x x GALERA the reduced amount of PhP2,000,000.00 as moral damages;
Pay [Galera] the reduced amount of PhP1,000,000.00 as exemplary damages;
Pay [Galera] an amount equivalent to 10% of the judgment award as attorney's fees;
Pay the cost of the suit.
4.
5.
6.
7.
SO ORDERED.[14]
Respondents filed a motion for reconsideration on 5 May 2005. Galera filed a motion for partial reconsideration and/or
clarification on the same date. The appellate court found no reason to revise or reverse its previous decision and
subsequently denied the motions in a Resolution promulgated on 1 August 2005.[15]
The Issues
WPP, Steedman, Webster, and Lansang raised the following grounds in G.R. No. 169207:
I.
The Court of Appeals seriously erred in ruling that the NLRC has jurisdiction over [Galera's] complaint because
she was not an employee. [Galera] was a corporate officer of WPP from the beginning of her term until her
removal from office.
II.
Assuming arguendo that the Court of Appeals correctly ruled that the NLRC has jurisdiction over [Galera's]
complaint, it should have remanded the case to the Labor Arbiter for reception of evidence on the merits of the
case.
[Galera] is an alien, hence, can never attain a regular or permanent working status in the Philippines.
[Galera] is not entitled to recover backwages, other benefits and damages from WPP.[16]
III.
IV.
On the other hand, in G.R. No. 169239, Galera raised the following grounds in support of her petition:
The CA decision should be consistent with Article 279 of the Labor Code and applicable jurisprudence, that full backwages
and separation pay (when in lieu of reinstatement), should be reckoned from time of dismissal up to time of
reinstatement (or payment of separation pay, in case separation instead of reinstatement is awarded).
Accordingly, petitioner Galera should be awarded full backwages and separation pay for the period from 14 December
2000 until the finality of judgment by the respondents, or, at the very least, up to the promulgation date of the CA
decision.
The individual respondents Steedman, Webster and Lansang must be held solidarily liable with respondent WPP for the
wanton and summary dismissal of petitioner Galera, to be consistent with law and jurisprudence as well as the specific
finding of the CA of bad faith on the part of respondents. [17]
This Court ordered the consolidation of G.R. Nos. 169207 and 169239 in a resolution dated 16 January 2006. [18]
The Ruling of the Court
In its consolidated comment, the Office of the Solicitor General (OSG) recommended that (A) the Decision dated 14 April
2005 of the appellate court finding (1) Galera to be a regular employee of WPP; (2) the NLRC to have jurisdiction over the
present case; and (3) WPP to have illegally dismissed Galera, be affirmed; and (B) the case remanded to the Labor
Arbiter for the computation of the correct monetary award. Despite the OSG's recommendations, we see that Galera's
failure to seek an employment permit prior to her employment poses a serious problem in seeking relief before this
Court. Hence, we settle the various issues raised by the parties for the guidance of the bench and bar.
Whether Galera is an Employee or a Corporate Officer
Galera, on the belief that she is an employee, filed her complaint before the Labor Arbiter. On the other hand, WPP,
Steedman, Webster and Lansang contend that Galera is a corporate officer; hence, any controversy regarding her
dismissal is under the jurisdiction of the Regional Trial Court. We agree with Galera.
Corporate officers are given such character either by the Corporation Code or by the corporation's by-laws. Under Section
25 of the Corporation Code, the corporate officers are the president, secretary, treasurer and such other officers as may
be provided in the by-laws.[19] Other officers are sometimes created by the charter or by-laws of a corporation, or the
board of directors may be empowered under the by-laws of a corporation to create additional offices as may be
necessary.
An examination of WPP's by-laws resulted in a finding that Galera's appointment as a corporate officer (Vice-President
with the operational title of Managing Director of Mindshare) during a special meeting of WPP's Board of Directors is an
appointment to a non-existent corporate office. WPP's by-laws provided for only one Vice-President. At the time of
Galera's appointment on 31 December 1999, WPP already had one Vice-President in the person of Webster. Galera cannot
be said to be a director of WPP also because all five directorship positions provided in the by-laws are already occupied.
Finally, WPP cannot rely on its Amended By-Laws to support its argument that Galera is a corporate officer. The Amended
By-Laws provided for more than one Vice-President and for two additional directors. Even though WPP's stockholders
voted for the amendment on 31 May 2000, the SEC approved the amendments only on 16 February 2001. Galera was
dismissed on 14 December 2000. WPP, Steedman, Webster, and Lansang did not present any evidence that Galera's
dismissal took effect with the action of WPP's Board of Directors.
The appellate court further justified that Galera was an employee and not a corporate officer by subjecting WPP and
Galera's relationship to the four-fold test: (a) the selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employer's power to control the employee with respect to the means and methods
by which the work is to be accomplished. The appellate court found:
x x x Sections 1 and 4 of the employment contract mandate where and how often she is to perform her work; sections 3,
5, 6 and 7 show that wages she receives are completely controlled by x x x WPP; and sections 10 and 11 clearly state
that she is subject to the regular disciplinary procedures of x x x WPP.
Another indicator that she was a regular employee and not a corporate officer is Section 14 of the contract, which clearly
states that she is a permanent employee -- not a Vice-President or a member of the Board of Directors.
xxxx
Another indication that the Employment Contract was one of regular employment is Section 12, which states that the
rights to any invention, discovery, improvement in procedure, trademark, or copyright created or discovered by petitioner
GALERA during her employment shall automatically belong to private respondent WPP. Under Republic Act 8293, also
known as the Intellectual Property Code, this condition prevails if the creator of the work subject to the laws of patent or
copyright is an employee of the one entitled to the patent or copyright.
Another convincing indication that she was only a regular employee and not a corporate officer is the disciplinary
procedure under Sections 10 and 11 of the Employment Contract, which states that her right of redress is through
Mindshare's Chief Executive Officer for the Asia-Pacific. This implies that she was not under the disciplinary control of
private respondent WPP's Board of Directors (BOD), which should have been the case if in fact she was a corporate officer
because only the Board of Directors could appoint and terminate such a corporate officer.
Although petitioner GALERA did sign the Alien Employment Permit from the Department of Labor and Employment and
the application for a 9(g) visa with the Bureau of Immigration - both of which stated that she was private respondent's
WPP' Vice President - these should not be considered against her. Assurming arguendo that her appointment as VicePresident was a valid act, it must be noted that these appointments occurred afater she was hired as a regular employee.
After her appointments, there was no appreciable change in her duties. [20]
Whether the Labor Arbiter and the NLRC
have jurisdiction over the present case
Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction over the present case. Article 217 of the
Labor Code provides:
Jurisdiction of Labor Arbiters and the Commission. -- (a) Except as otherwise provided under this Code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide x x x the following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours
of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and
lockouts;
6. Except claims for Employees Compensation, Social Security, Medicare and other maternity benefits, all other claims,
arising from employer-employee relations, including those of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation of collective bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in said agreements.
In contrast, Section 5.2 of Republic Act No. 8799, or the Securities Regulation Code, states:
The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby
transferred to the courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court
in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these
cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final
resolution which should be resolved within one year from the enactment of this Code. The Commission shall retain
jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
The pertinent portions of Section 5 of Presidential Decree No. 902-A, mentioned above, states:
b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or
associates; between any or all of them and the corporation, partnership or association of which they are stockholders,
members or associates, respectively; and between such corporation, partnership or association and the state insofar as it
concerns their individual franchise or right to exist as such entity;
c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations,
partnerships or associations.
Whether WPP illegally dismissed Galera
WPP's dismissal of Galera lacked both substantive and procedural due process.
Apart from Steedman's letter dated 15 December 2000 to Galera, WPP failed to prove any just or authorized cause for
Galera's dismissal. Steedman's letter to Galera reads:
The operations are currently in a shamble. There is lack of leadership and confidence in your abilities from within, our
agency partners and some clients.
Most of the staff I spoke with felt they got more guidance and direction from Minda than yourself. In your role as
Managing Director, that is just not acceptable.
I believe your priorities are mismanaged. The recent situation where you felt an internal strategy meeting was more
important than a new business pitch is a good example.
You failed to lead and advise on the two new business pitches. In both cases, those involved sort (sic) Minda's input. As I
discussed with you back in July, my directive was for you to lead and review all business pitches. It is obvious [that]
confusion existed internally right up until the day of the pitch.
The quality output is still not to an acceptable standard, which was also part of my directive that you needed to focus on
back in July.
I do not believe you understand the basic skills and industry knowledge required to run a media special operation. [21]
WPP, Steedman, Webster, and Lansang, however, failed to substantiate the allegations in Steedman's letter. Galera, on
the other hand, presented documentary evidence [22] in the form of congratulatory letters, including one from Steedman,
which contents are diametrically opposed to the 15 December 2000 letter.
The law further requires that the employer must furnish the worker sought to be dismissed with two written notices
before termination of employment can be legally effected: (1) notice which apprises the employee of the particular acts
or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the
employer's decision to dismiss him. Failure to comply with the requirements taints the dismissal with illegality.[23] WPP's
acts clearly show that Galera's dismissal did not comply with the two-notice rule.
Whether Galera is entitled to the monetary award
WPP, Steedman, Webster, and Lansang argue that Galera is not entitled to backwages because she is an alien. They
further state that there is no guarantee that the Bureau of Immigration and the Department of Labor and Employment
will continue to grant favorable rulings on the applications for a 9(g) visa and an Alien Employment Permit after the
expiry of the validity of Galera's documents on 31 December 2000. WPP's argument is a circular argument, and assumes
what it attempts to prove. Had WPP not dismissed Galera, there is no doubt in our minds that WPP would have taken
action for the approval of documents required for Galera's continued employment.
This is Galera's dilemma: Galera worked in the Philippines without a proper work permit but now wants to claim
employee's benefits under Philippine labor laws.
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction
of the CEO and upon signing of the contract, without any further action from the Board of Directors of private.
respondent. WPP.
Four months had passed when private respondent WPP filed before the Bureau of Immigration an application
for petitioner GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner
alleged that she was constrained to sign the application in order that she could remain in the Philippines and retain her
employment.[24]
The law and the rules are consistent in stating that the employment permit must be acquired prior to employment. The
Labor Code states: "Any alien seeking admission to the Philippines for employment purposes and any domestic or foreign
employer who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the
Department of Labor."[25] Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations provides:
Employment permit required for entry. -- No alien seeking employment, whether as a resident or non-resident, may enter
the Philippines without first securing an employment permit from the Ministry. If an alien enters the country under a nonworking visa and wishes to be employed thereafter, he may only be allowed to be employed upon presentation of a duly
approved employment permit.
Galera cannot come to this Court with unclean hands. To grant Galera's prayer is to sanction the violation of the Philippine
labor laws requiring aliens to secure work permits before their employment. We hold that the status quo must prevail in
the present case and we leave the parties where they are. This ruling, however, does not bar Galera from seeking relief
from other jurisdictions.
WHEREFORE, we PARTIALLY GRANT the petitions in G.R. Nos. 169207 and 169239. We SETASIDE. the Decision of
the Court of Appeals promulgated on 14 April 2005 as well as the Resolution promulgated on 1 August 2005 in CA-G.R.
SP No. 78721.
SO ORDERED.
Brion, Del Castillo, Abad, and Perez, JJ., concur.
Endnotes:
[1]
Under Rule 45 of the 1997 Rules of Civil Procedure.
Rollo (G.R. No. 169207), pp. 10-43; rollo, (G.R. No. 169239), pp. 40-73. Penned by Associate Justice Vicente Q. Roxas
with Associate Justices Renato C. Dacudao and Lucas P. Bersamin, concurring; Associate Justice Jose Catral Mendoza,
concurring and dissenting; and Associate Justice Celia C. Librea-Leagogo, dissenting.
[2]
Rollo (G.R. No. 169207), pp. 63-64; rollo, (G.R. No. 169239), pp. 93-94. Penned by Associate Justice Vicente Q. Roxas
with Associate Justices Renato C. Dacudao and Lucas P. Bersamin, concurring; Associate Justice Jose Catral Mendoza,
concurring and dissenting; and Associate Justice Celia C. Librea-Leagogo, dissenting.
[3]
[4]
Rollo (G.R. No. 169207), pp. 12-15; rollo (G.R. No. 169239), pp. 42-45.
[5]
[6]
Rollo (G.R. No. 169207), p. 344; rollo (G.R. No. 169239), p. 306.
Rollo (G.R. No. 169239), pp. 140-150. Per Curiam decision signed by Commissioners Roy V. Seeres and Victoriano
R. Calaycay.
[7]
[8]
Id. at 148-150.
[9]
[10]
[11]
Rollo (G.R. No. 169207), p. 18.
[12]
[13]
[14]
[15]
[16]
Rollo (G.R. No. 169207), pp. 83-84.
[17]
Rollo (G.R. No. 169239), pp. 18-19.
[18]
[19]
Easycall Communications Phils., Inc. v. King, G.R. No. 145901, 15 December 2005, 478 SCRA 102.
[20]
[21]
Rollo (G.R. No. 169239), p. 267.
[22]
Id. at 237-266.
[23]
Pepsi-Cola Bottling Co. v. NLRC, G.R. No. 101900, 23 June 1992, 210 SCRA 277, 286.
[24]
[25]
First paragraph, Article 40, Labor Code of the Philippines.
SECOND DIVISION
[G.R. NO. 167648 - January 28, 2008]
TELEVISION AND PRODUCTION EXPONENTS, INC. and/or ANTONIO P. TUVIERA, Petitioners, v.ROBERTO C.
SERVAA, Respondent.
DECISION
TINGA, J.:
This Petition for Review under Rule 45 assails the 21 December 2004 Decision 1 and 8 April 2005 Resolution2 of the Court
of Appeals declaring Roberto Servaa (respondent) a regular employee of petitioner Television and Production
Exponents, Inc. (TAPE). The appellate court likewise ordered TAPE to pay nominal damages for its failure to observe
statutory due process in the termination of respondent's employment for authorized cause.
TAPE is a domestic corporation engaged in the production of television programs, such as the long-running variety
program, "Eat Bulaga!". Its president is Antonio P. Tuviera (Tuviera). Respondent Roberto C. Servaa had served as a
security guard for TAPE from March 1987 until he was terminated on 3 March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of benefits against TAPE. He alleged that he was first
connected with Agro-Commercial Security Agency but was later on absorbed by TAPE as a regular company guard. He
was detailed at Broadway Centrum in Quezon City where "Eat Bulaga!" regularly staged its productions. On 2 March
2000, respondent received a memorandum informing him of his impending dismissal on account of TAPE's decision to
contract the services of a professional security agency. At the time of his termination, respondent was receiving a
monthly salary of P6,000.00. He claimed that the holiday pay, unpaid vacation and sick leave benefits and other
monetary considerations were withheld from him. He further contended that his dismissal was undertaken without due
process and violative of existing labor laws, aggravated by nonpayment of separation pay.3
In a motion to dismiss which was treated as its position paper, TAPE countered that the labor arbiter had no jurisdiction
over the case in the absence of an employer-employee relationship between the parties. TAPE made the following
assertions: (1) that respondent was initially employed as a security guard for Radio Philippines Network (RPN-9); (2) that
he was tasked to assist TAPE during its live productions, specifically, to control the crowd; (3) that when RPN-9 severed
its relationship with the security agency, TAPE engaged respondent's services, as part of the support group and thus a
talent, to provide security service to production staff, stars and guests of "Eat Bulaga!" as well as to control the audience
during the one-and-a-half hour noontime program; (4) that it was agreed that complainant would render his services
until such time that respondent company shall have engaged the services of a professional security agency; (5) that in
1995, when his contract with RPN-9 expired, respondent was retained as a talent and a member of the support group,
until such time that TAPE shall have engaged the services of a professional security agency; (6) that respondent was not
prevented from seeking other employment, whether or not related to security services, before or after attending to his
"Eat Bulaga!" functions; (7) that sometime in late 1999, TAPE started negotiations for the engagement of a professional
security agency, the Sun Shield Security Agency; and (8) that on 2 March 2000, TAPE issued memoranda to all talents,
whose functions would be rendered redundant by the engagement of the security agency, informing them of the
management's decision to terminate their services. 4
TAPE averred that respondent was an independent contractor falling under the talent group category and was working
under a special arrangement which is recognized in the industry.5
Respondent for his part insisted that he was a regular employee having been engaged to perform an activity that is
necessary and desirable to TAPE's business for thirteen (13) years. 6
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular employee of TAPE. The
Labor Arbiter relied on the nature of the work of respondent, which is securing and maintaining order in the studio, as
necessary and desirable in the usual business activity of TAPE. The Labor Arbiter also ruled that the termination was valid
on the ground of redundancy, and ordered the payment of respondent's separation pay equivalent to one (1)-month pay
for every year of service. The dispositive portion of the decision reads:
WHEREFORE, complainant's position is hereby declared redundant. Accordingly, respondents are hereby ordered to pay
complainant his separation pay computed at the rate of one (1) month pay for every year of service or in the total
amount ofP78,000.00.7
On appeal, the National Labor Relations Commission (NLRC) in a Decision 8 dated 22 April 2002 reversed the Labor Arbiter
and considered respondent a mere program employee, thus:
We have scoured the records of this case and we find nothing to support the Labor Arbiter's conclusion that complainant
was a regular employee.
xxx
The primary standard to determine regularity of employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer. This connection can be determined
by considering the nature and work performed and its relation to the scheme of the particular business or trade in its
entirety. x x x Respondent company is engaged in the business of production of television shows. The records of this case
also show that complainant was employed by respondent company beginning 1995 after respondent company transferred
from RPN-9 to GMA-7, a fact which complainant does not dispute. His last salary was P5,444.44 per month. In such
industry, security services may not be deemed necessary and desirable in the usual business of the employer. Even
without the performance of such services on a regular basis, respondent's company's business will not grind to a halt.
xxx
Complainant was indubitably a program employee of respondent company. Unlike [a] regular employee, he did not
observe working hours x x x. He worked for other companies, such as M-Zet TV Production, Inc. at the same time that he
was working for respondent company. The foregoing indubitably shows that complainant-appellee was a program
employee. Otherwise, he would have two (2) employers at the same time.9
Respondent filed a motion for reconsideration but it was denied in a Resolution 10 dated 28 June 2002.
Respondent filed a petition for certiorari with the Court of Appeals contending that the NLRC acted with grave abuse of
discretion amounting to lack or excess of jurisdiction when it reversed the decision of the Labor Arbiter. Respondent
asserted that he was a regular employee considering the nature and length of service rendered.11
Reversing the decision of the NLRC, the Court of Appeals found respondent to be a regular employee. We quote the
dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision dated 22 April 2002 of the public
respondent NLRC reversing the Decision of the Labor Arbiter and its Resolution dated 28 June 2002 denying petitioner's
motion for reconsideration are REVERSED and SET ASIDE. The Decision dated 29 June 2001 of the Labor Arbiter
is REINSTATED with MODIFICATION in that private respondents are ordered to pay jointly and severally petitioner the
amount of P10,000.00 as nominal damages for non-compliance with the statutory due process.
SO ORDERED.12
Finding TAPE's motion for reconsideration without merit, the Court of Appeals issued a Resolution 13dated 8 April 2005
denying said motion.
TAPE filed the instant Petition for Review raising substantially the same grounds as those in its petition
for certiorari before the Court of Appeals. These matters may be summed up into one main issue: whether an employeremployee relationship exists between TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition and considered the case submitted for decision. 14
At the outset, it bears emphasis that the existence of employer-employee relationship is ultimately a question of fact.
Generally, only questions of law are entertained in appeals by certiorari to the Supreme Court. This rule, however, is not
absolute. Among the several recognized exceptions is when the findings of the Court of Appeals and Labor Arbiters, on
one hand, and that of the NLRC, on the other, are conflicting, 15 as obtaining in the case at bar.
Jurisprudence is abound with cases that recite the factors to be considered in determining the existence of employeremployee relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee with respect to the means and method by
which the work is to be accomplished.16 The most important factor involves the control test. Under the control test, there
is an employer-employee relationship when the person for whom the services are performed reserves the right to control
not only the end achieved but also the manner and means used to achieve that end. 17
In concluding that respondent was an employee of TAPE, the Court of Appeals applied the "four-fold test" in this wise:
First. The selection and hiring of petitioner was done by private respondents. In fact, private respondents themselves
admitted having engaged the services of petitioner only in 1995 after TAPE severed its relations with RPN Channel 9.
By informing petitioner through the Memorandum dated 2 March 2000, that his services will be terminated as soon as the
services of the newly hired security agency begins, private respondents in effect acknowledged petitioner to be their
employee. For the right to hire and fire is another important element of the employer-employee relationship.
Second. Payment of wages is one of the four factors to be considered in determining the existence of employer-employee
relation. . . Payment as admitted by private respondents was given by them on a monthly basis at a rate of P5,444.44.
Third. Of the four elements of the employer-employee relationship, the "control test" is the most important. x x x
The bundy cards representing the time petitioner had reported for work are evident proofs of private respondents' control
over petitioner more particularly with the time he is required to report for work during the noontime program of "Eat
Bulaga!" If it were not so, petitioner would be free to report for work anytime even not during the noontime program of
"Eat Bulaga!" from 11:30 a.m. to 1:00 p.m. and still gets his compensation for being a "talent." Precisely, he is being paid
for being the security of "Eat Bulaga!" during the above-mentioned period. The daily time cards of petitioner are not just
for mere record purposes as claimed by private respondents. It is a form of control by the management of private
respondent TAPE.18
TAPE asseverates that the Court of Appeals erred in applying the "four-fold test" in determining the existence of
employer-employee relationship between it and respondent. With respect to the elements of selection, wages and
dismissal, TAPE proffers the following arguments: that it never hired respondent, instead it was the latter who offered his
services as a talent to TAPE; that the Memorandum dated 2 March 2000 served on respondent was for the discontinuance
of the contract for security services and not a termination letter; and that the talent fees given to respondent were the
pre-agreed consideration for the services rendered and should not be construed as wages. Anent the element of control,
TAPE insists that it had no control over respondent in that he was free to employ means and methods by which he is to
control and manage the live audiences, as well as the safety of TAPE's stars and guests. 19
The position of TAPE is untenable. Respondent was first connected with Agro-Commercial Security Agency, which assigned
him to assist TAPE in its live productions. When the security agency's contract with RPN-9 expired in 1995, respondent
was absorbed by TAPE or, in the latter's language, "retained as talent."20 Clearly, respondent was hired by TAPE.
Respondent presented his identification card21 to prove that he is indeed an employee of TAPE. It has been in held that in
a business establishment, an identification card is usually provided not just as a security measure but to mainly identify
the holder thereof as a bona fide employee of the firm who issues it.22
Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE prefers to designate such amount
as talent fees. Wages, as defined in the Labor Code, are remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or other method
of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or to be rendered. It is beyond dispute that respondent
received a fixed amount as monthly compensation for the services he rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his service proves that TAPE had the power to dismiss
respondent.
Control is manifested in the bundy cards submitted by respondent in evidence. He was required to report daily and
observe definite work hours. To negate the element of control, TAPE presented a certification from M-Zet Productions to
prove that respondent also worked as a studio security guard for said company. Notably, the said certificate categorically
stated that respondent reported for work on Thursdays from 1992 to 1995. It can be recalled that during said period,
respondent was still working for RPN-9. As admitted by TAPE, it absorbed respondent in late 1995. 23
TAPE further denies exercising control over respondent and maintains that the latter is an independent contractor.24 Aside
from possessing substantial capital or investment, a legitimate job contractor or subcontractor carries on a distinct and
independent business and undertakes to perform the job, work or service on its own account and under its own
responsibility according to its own manner and method, and free from the control and direction of the principal in all
matters connected with the performance of the work except as to the results thereof.25 TAPE failed to establish that
respondent is an independent contractor. As found by the Court of Appeals:
We find the annexes submitted by the private respondents insufficient to prove that herein petitioner is indeed an
independent contractor. None of the above conditions exist in the case at bar. Private respondents failed to show that
petitioner has substantial capital or investment to be qualified as an independent contractor. They likewise failed to
present a written contract which specifies the performance of a specified piece of work, the nature and extent of the work
and the term and duration of the relationship between herein petitioner and private respondent TAPE. 26
TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in classifying respondent as a program
employee and equating him to be an independent contractor.
Policy Instruction No. 40 defines program employees as'
x x x those whose skills, talents or services are engaged by the station for a particular or specific program or undertaking
and who are not required to observe normal working hours such that on some days they work for less than eight (8)
hours and on other days beyond the normal work hours observed by station employees and are allowed to enter into
employment contracts with other persons, stations, advertising agencies or sponsoring companies. The engagement of
program employees, including those hired by advertising or sponsoring companies, shall be under a written contract
specifying, among other things, the nature of the work to be performed, rates of pay and the programs in which they will
work. The contract shall be duly registered by the station with the Broast Media Council within three (3) days from its
consummation.27
TAPE failed to adduce any evidence to prove that it complied with the requirements laid down in the policy instruction. It
did not even present its contract with respondent. Neither did it comply with the contract-registration requirement.
Even granting arguendo that respondent is a program employee, stills, classifying him as an independent contractor is
misplaced. The Court of Appeals had this to say:
We cannot subscribe to private respondents' conflicting theories. The theory of private respondents that petitioner is an
independent contractor runs counter to their very own allegation that petitioner is a talent or a program employee. An
independent contractor is not an employee of the employer, while a talent or program employee is an employee. The only
difference between a talent or program employee and a regular employee is the fact that a regular employee is entitled to
all the benefits that are being prayed for. This is the reason why private respondents try to seek refuge under the concept
of an independent contractor theory. For if petitioner were indeed an independent contractor, private respondents will not
be liable to pay the benefits prayed for in petitioner's complaint. 28
More importantly, respondent had been continuously under the employ of TAPE from 1995 until his termination in March
2000, or for a span of 5 years. Regardless of whether or not respondent had been performing work that is necessary or
desirable to the usual business of TAPE, respondent is still considered a regular employee under Article 280 of the Labor
Code which provides:
Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of engagement of the employee or where the work or service to be
performed is seasonal in nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph. Provided, that, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists.
As a regular employee, respondent cannot be terminated except for just cause or when authorized by law.29 It is clear
from the tenor of the 2 March 2000 Memorandum that respondent's termination was due to redundancy. Thus, the Court
of Appeals correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that the employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year or service, whichever is higher.
xxx
We uphold the finding of the Labor Arbiter that "complainant [herein petitioner] was terminated upon [the]
management's option to professionalize the security services in its operations. x x x" However, [we] find that although
petitioner's services [sic] was for an authorized cause, i.e., redundancy, private respondents failed to prove that it
complied with service of written notice to the Department of Labor and Employment at least one month prior to the
intended date of retrenchment. It bears stressing that although notice was served upon petitioner through a
Memorandum dated 2 March 2000, the effectivity of his dismissal is fifteen days from the start of the agency's take over
which was on 3 March 2000. Petitioner's services with private respondents were severed less than the month requirement
by the law.
Under prevailing jurisprudence the termination for an authorized cause requires payment of separation pay. Procedurally,
if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the
Deparment of Labor and Employment written notice 30 days prior to the effectivity of his separation. Where the dismissal
is for an authorized cause but due process was not observed, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be liable for noncompliance with procedural requirements of due process.
xxx
Under recent jurisprudence, the Supreme Court fixed the amount of P30,000.00 as nominal damages. The basis of the
violation of petitioners' right to statutory due process by the private respondents warrants the payment of indemnity in
the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into
account the relevant circumstances. We believe this form of damages would serve to deter employer from future
violations of the statutory due process rights of the employees. At the very least, it provides a vindication or recognition
of this fundamental right granted to the latter under the Labor Code and its Implementing Rules. Considering the
circumstances in the case at bench, we deem it proper to fix it atP10,000.00.30
In sum, we find no reversible error committed by the Court of Appeals in its assailed decision.
However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he acted with
malice or bad faith in terminating respondent, he cannot be held solidarily liable with TAPE. 31 Thus, the Court of Appeals
ruling on this point has to be modified.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with MODIFICATION in that only
petitioner Television and Production Exponents, Inc. is liable to pay respondent the amount of P10,000.00 as nominal
damages for non-compliance with the statutory due process and petitioner Antonio P. Tuviera is accordingly absolved from
liability.
SO ORDERED.
Endnotes:
Rollo, pp. 47-64. Penned by Associate Justice Japar B. Dimaampao and concurred in by Associate Justices Renato C.
Dacudao and Edgardo F. Sundiam.
1
Id. at 66-67.
Id. at 98.
Id. at 100-102.
Id. at 98, 103.
Id. at 103.
Id. at 106.
Id. at 107-118.
Id. at 115-117.
10
Id. a t 119-120.
11
Id. at 130.
12
Id. at 63.
13
Id. at 66-67.
14
Id. at 284.
15
Molina v. Pacific Plans, Inc., G.R. No. 165476, 10 March 2006, 484 SCRA 498.
Dumpit-Murillo v. Court of Appeals, G.R. No. 164652, 8 June 2007, 524 SCRA 290, 302 citing Manila Water Company,
Inc. v. Pena, G.R. No. 158255, 8 July 2004, 434 SCRA 53; Coca-Cola Bottlers v. Climaco, G.R. No. 146881, 5 February
2007, 514 SCRA 164, 177; Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggagawang Promo ng
Burlingame v. Burlingame Corporation, G.R. No. 162833, 15 June 2007, 524 SCRA 690, 695.
16
17
Leonardo v. Court of Appeals, G.R. No. 152459, 15 June 2006.
18
Rollo, pp. 56-57.
19
Id. at 30-34.
20
Id. at 101.
21
CA rollo, p. 37.
22
Villamaria v. Court of Appeals, G.R. No. 165881, 19 April 2006.
23
Id. at 16-17.
24
Id. at 28.
25
Department of Labor and Employment, Department Order No. 10 (1997).
26
Rollo, p. 55.
27
Department of Labor and Employment Policy Instruction No. 40 (1979).
28
Id. at 57-58.
29
Labor Code, Art. 279.
30
Rollo, pp. 60-63.
31
Kay Products, Inc. v. Court of Appeals, G.R. No. 162472, 28 July 2005, 464 SCRA 544.

LVN Pictures v. Phil. Musicians Guild

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LVN Pictures v. Phil. Musicians Guild

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Republic of the Philippines

January 28, 1961

LVN PICTURES, INC., petitioner-appellant,

January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant,

chanrobles virtual law library

D. A. Hernandez for respondents.

chanroble s virtual law library

A charge of unfair labor practice was filed against Dy Keh

chanrobles virtual law library

After trial, the Hearing Examiner prepared a report which was

existed an employee employer relation between petitioner Dy

According to the Hearing Examiner, the evidence for the

According to Dy Keh Beng, however, Solano was not his

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(2) Solano had to leave as soon as he was through with the

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(6) Solano's work with Dy's establishment was not continuous.

According to petitioner, these facts show that respondents

includes any person acting in the interest of an employer,

Petitioner really anchors his contention of the non-existence of

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While this Court upholds the control test 11 under which an

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As to the contention that Solano was not an employee because

establishment so as to put the worker completely at liberty to

Nevertheless, considering that about eighteen (18) years have

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WHEREFORE; the award of backwages granted by the Court of

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Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ.,

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Fernandez, J., took no part.

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2 petitioner's Brief, pp. 1-2.

chanroble s virtual law library

chanrobles virtual law library

chanrobles virtual law library

chanroble s virtual law library

chanrobles virtual law library

chanroble s virtual law library

10 Petitioner's Brief, pp. 5-7.

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11 LVN Pictures v. Philippine Musicians Guild, et. al., 110 Phil.

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12 Feati University v. Bautista, et al., L-21500, December 27 1966, 18 SCRA 1966,

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I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE EMPLOYEES OF

Dear Mr. Lopez,

Hence, this petition.

Employee or Independent Contractor?

A.Selection and Engagement of Employee

Policy Instruction No. 40

Section 3.Submission of Position Papers/Memorandum

Under Rule 45 of the Rules of Court.

Donato G. Quinto, Jr.

Rollo, pp. 114-130.

Ibid., pp. 123-125.

Rollo, pp. 37-39.

Madlos v. NLRC, 324 Phil. 498 (1996).