PART ONE.

INTRODUCTORY MATERIALS
SECTION 6. WORK RELATIONSHIP
6.01. WORK RELATIONSHIP
A. Definitions: Employer and Employee
Employer A person who controls and directs a worker under an
express or implied contract of hire and who pays the workers salary
or wages. Blacks Law Dictionary
Employee A person who works in the service of another person (the
employer) under an express or implied contract of hire, under which
the employer has the right to control the details of work performance.
Blacks Law Dictionary
97 (a), (b), (c);
Article 97. Definitions. As used in this Title;
(a) Person
means
an
individual,
partnership,
association,
corporation,
business
trust,
legal
representative, or any organized group of persons.
(b) Employer includes any person acting directly or
indirectly in the interest of an employer in relation to
an employee and shall include the government and all
its branches, subdivisions and instrumentalities, all
government-owned or controlled corporations and
institutions, as well as non-profit private institutions or
organizations.
(c) Employee includes any individual employed by an
employer.
Person
Individual
Partnership
Association
Corporation
Business trust
Legal representative
Any organized group of persons
Individual or single proprietorship
Refers to a business unit owned and controlled by only one person
Partnership
Refers to an association of two or more persons who bind themselves
to contribute money, property or industry to a common fund with the
intention of dividing the profits among themselves or for the exercise
of a profession

Corporation
1. Stock Corporation refers to one organized for profit and
issues shares of stock to its stockholders.
2. Non-stock, non-profit corporation refers to one organized
principally for public purposes such as charitable, educational,
cultural or similar purposes and does not issue shares of stock
to its members.
Business trust, legal representatives or any organized group of
persons
A business trust is neither a corporation nor a partnership. It is
a practice that originated in Massachusetts where a business
or certain real estate is vested in a group of trustees which
manages it for the benefit of the beneficial owners; the
ownership
of
the
latter
is
evidenced
by
negotiable/transferable shares.
Legal representatives may refer to agents under the principle
of agency in the Civil Code
Any organized group of persons refers to a duly registered
association of persons who voluntarily join together to form
business establishments which they own, control and
patronize. E.g. Cooperatives (credit, consumers, producers,
marketing, service or multi-purpose)
167 (f), (g);
Article 167. Definition of Terms. As used in this Title, unless
the context indicates otherwise:
(f) Employer means any person, natural or juridical,
employing the services of the employee.
(g) Employee means any person compulsorily covered by
the GSIS under Commonwealth Act Numbered One
hundred eighty-six, as amended, including the
members of the Armed Forces of the Philippines, and
any person employed as casual, emergency, temporary,
substitute or contractual, or any person compulsorily
covered by the SSS under Republic Act Numbered
Eleven hundred sixty-one, as amended.
Employer
Any person, natural or juridical, domestic or foreign, who
carries on in the Philippines any trade, business, industry,
undertaking or activity of any kind and uses the services of
another person who is under his orders as regards the
employment.
Classification of employer
o Public Sector: covered by the GSIS, comprising the
National Government, including GOCCs, the Phil.

Tuberculosis Society, the Phil. Natl Red Cross, and the

Phil. Veterans Bank
Private Sector: covered by the SSS, comprising all
employees other than those defined above

Employee
Any person who performs services for an employer
Classification of employee
o Public Sector: covered by the GSIS, including members
of the AFP, elective officials who are receiving regular
salary, and any person employed as casual,
emergency, temporary, substitute or contractual
o Private Sector: comprising the employed workers who
are covered by the SSS
212 (e), (f)
Article 212.
(e) Employer includes any person acting in the interest
of an employer, directly or indirectly. The term shall not
include any labor organization or any of its officers or
agents except when acting as employer.
(f) Employee includes any person in the employ of an
employer. The term shall not be limited to the
employees of a particular employer, unless the Code so
explicitly states. It shall include any individual whose
work has ceased as a result of or in connection with
any current labor dispute or because of any unfair
labor practice if he has no obtained any other
substantially equivalent and regular employment.
Employee
UY v. VILLANUEVA
UNITED
PEPSI-COLA
LAGUESMA

SUPERVISORY

UNION

(UPSU)

V.

Date: March 25, 1998

Ponente: Mendoza
Doctrine: A distinction exists between those who have the authority
to devise, implement and control strategic and operational policies
(top and middle managers) and those whose task is simply to ensure
that such policies are carried out by the rank-and-file employees of an
organization (first-level managers/supervisors). What distinguishes
them from the rank-and-file employees is that they act in the interest
of the employer in supervising such rank-and-file employees.

Facts:

UPSU, a union of supervisory employees, filed a petition for

certification election on behalf of the route managers at Pepsi.

The petition was denied by the med-arbiter and the Secretary

of Labor and Employment on the ground that the route
managers are managerial employees, and, therefore,
ineligible for union membership under Art. 245.
Issues:
1. W/N route managers at Pepsi are managerial employees, not
supervisors.
2. W/N Art. 245 violates the Constitution as it prohibits
managerial employees from forming, joining or assisting labor
unions
Ratio:
1. Yes, route managers at Pepsi are managerial employees.

A distinction exists between those who have the

authority to devise, implement and control strategic and
operational policies (top and middle managers) and those
whose task is simply to ensure that such policies are
carried out by the rank-and-file employees of an
organization (first-level managers/supervisors). What
distinguishes them from the rank-and-file employees is
that they act in the interest of the employer in supervising
such rank-and-file employees.

The nature of the job of a route manager, as given in a

four-page pamphlet prepared by Pepsi states that a route
manager manages his job and his people. They are
responsible for the success of the companys main line of
business through management of their respective sales
teams. They are not mere functionaries with simple
oversight functions but business administrators in their
own right. Route managers also perform operational, HR,
financial and marketing functions for the company. Route
managers, therefore, protect and expand the companys
business.
2. No, Art. 245 is not unconstitutional.

Art. 245, in relation to Art. 212 (m), faithfully carries

out the intent of the Constitutional Commission of not
allowing top-level and middle managers to organize for
labor purposes.

Those who qualify as top or middle managers are

executives who receive from their employers information
that not only is confidential but also is not generally

available to the public, to their competitors, or to other

employees.

B. Employer-Employee Relationship
Factual Test
TAPE v SERVAA | Tinga, J.
GR No. 167648 | January 28, 2008
Nature: Petition for Review on Certiorari of the Decision and Resolution
of the CA
Petitioner: Television and Production Exponents (TAPE), Antonio
Tuviera
Respondent: Roberto Servaa
Quick Summary: Servaa, a security guard of TAPE stationed at
Broadway Centrum, was dismissed due to redundancy and the
companys decision to engage the services of a professional security
agency. The Court held that although the existence of an employeremployee relationship is a factual issue, the Court can still assume
jurisdiction especially if the findings of lower courts/ agencies are
conflicting (NLRC with those of CA and Labor Arbiters).
Looking at the following facts, the Court held that Servaa is an
employee of TAPE:

Vis--vis the four fold test

o Servaa was absorbed by TAPE, thus, he was hired by
TAPE.
o He received a fixed amount as monthly compensation
for the services he rendered to TAPE.
o The Memorandum informing respondent of the
discontinuance of his service proves that TAPE had the
power to dismiss respondent.
o Control is manifested in the bundy cards submitted by
respondent in evidence. He was required to report
daily and observe definite work hours.

Identification card of Servaa shows he is an employee.

TAPE failed to adduce any evidence to prove that it complied
with the requirements laid down in Policy Instruction No. 40 for
Servaa to qualify as Independent contractor. (did not present
contract , did not comply with contract registration
requirement)

Facts:

He had been continuously under the employ of TAPE from

1995 until his termination in March 2000, or for a span of 5
years. He is considered a regular employee under Article 280
of the Labor Code.
Roberto Servaa had served as a security guard for TAPE from
March 1987 until he was terminated on March 3, 2000.
He was first connected with Agro-Commercial Security
Agency, which assigned him to assist TAPE in its live
productions. When the security agencys contract with RPN-9
expired in 1995, respondent was absorbed by TAPE.
The parties have agreed that Servaa would render his
services until such time that TAPE shall have engaged the
services of a professional security agency.
TAPE started negotiations for the engagement of a
professional security agency, Sun Shield Security Agency.
TAPE issued a memorandum to Servaa informing him of his
impending dismissal due to TAPEs decision to contract the
services of Sun Shield and redundancy.
Servaa filed a complaint for illegal dismissal and nonpayment of benefits against TAPE.

Labor Arbiter: declared Servaa regular employee of TAPE citing

nature of his work as necessary and desirable in the usual business
activity of TAPE. Termination was valid on the ground of redundancy
and ordered the payment of respondents separation pay.
NLRC: reversed the Labor Arbiters decision and considered Servaa a
mere program employee.
CA: regular employee of TAPE.
Issue:
WON an employer-employee relationship exists between TAPE and
Servaa
Held/ Ratio:
YES. Employee-Employer relationship exists. CA decision modified,
exempted Antonio Tuviera from liability absent bad faith.
The factors to be considered in determining the existence of
employer-employee relationship are:

Selection and engagement of the employee

Payment of wages

Power of dismissal

Employers power to control the employee with respect to the

means and method by which the work is to be accomplished

The most important factor involves the control test under which an
employer-employee relationship exists 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 the end.
Factual Considerations:

In 1995, Servaa was absorbed by TAPE or, in TAPEs

language, retained as talent. Thus, he was hired by TAPE.

He presented his identification card to prove that he is indeed

an employee of TAPE. It has been 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.

The Memorandum informing Servaa of the discontinuance of

his service proves that TAPE had the power to dismiss him.

Control is manifested in the Bundy cards submitted by

Servaa in evidence. These showed that he was required to
report daily and observe definite work hours.

NOT Independent Contractor. Servaa cannot be considered

as an independent contractor1 as TAPE alleges.

TAPEs reliance on Dept. of Labor Policy No. 40 in classifying

Servaa as a program employee2 and equating him to be an
independent contractor is misplaced. The aforementioned
theories of TAPE run counter to each other. An independent
contractor is not an employee of the employer, while a talent
or program employee is an employee.

Servaa had been continuously under the employ of TAPE

from 1995 until his termination. Regardless of whether or not
Servaa had been performing work that is necessary or
desirable to the usual business of TAPE, he is still considered a
regular employee by virtue of A280 of LC. As such, he cannot
1

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.
TAPE failed to show that Servaa has substantial capital or investment to be
qualified as an independent contractor.
2
Program employees are 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.

be terminated except for just cause or when authorized by

law.
REMINGTON INDUSTRIAL SALES CORP. v. CASTANEDA
A.
Facts:
1.Erlinda Castaneda had instituted a complaint for illegal
dismissal, underpayment of wages, non-payment of overtime
service incentive leave pay and non-payment of 13th month pay
against Remington (a trading business) before the NLRC.
2.Arguments:
a. Castaneda alleged:
She started working in August 1983 as company cook

for Remington, worked for six days a week. 6 am as

she markets until 5:30 pm after employees leave.
She continuously worked with Remington until

unceremoniously prevented from reporting for work

when it transferred to a new site. When she reported
for work at the new site but was informed that
Remington no longer needed her services.
She was illegally dismissed because she was not given

the notices required by law. So she filed her complaint

for reinstatement without loss of seniority rights etc.
b.

Remington:
denied that it dismissed Erlinda illegally, saying she
was a domestic helper, not a regular employee
Her job did not have anything to do with the business

of trading in construction or hardware materials.

She did not work eight hours. After cooking lunch and

snack, her time was hers.

Remington did not exercise any degree of control over

her work.
She did not even need to punch any time card.

3.Labor Arbiter: dismissed Castaneda complaint. She was a

domestic helper.
4.NLRC: reversed Labor Arbiter.
Not a domestic helper. No allegation that she worked

in the house of director or Remington, Mr. Tan.

Facts-wise, she worked as a cook in the office so that it

benefited not the family of Mr. Tan but his employees.

There is a certification issued by the corporate

secretary certifying that she was a bonafide

employee.

Her work schedule and the fact of being paid a

monthly salary indicate that she is a company
employee. The food she prepares are part of the
benefit the business provides for the employees.
5.CA: affirmed NLRC.
B. Issues/Decision: Was Castaneda a regular employee in
Remington? YES.

Facts:
- Nov. 29, 1996: A fire destroyed a large portion of the Wack-wack Golf
and Country Club, including its kitchen. Due to the need for
reconstruction of the clubhouse, Wack-wack had to suspend the
operations of the Food and Beverage Department, requiring the
suspension of 54 employees. The Wack-wack Employees Union found
the suspension arbitrary and constitutive of union-busting, and went
on strike.

C. Rationale:
Apex Mining Co., Inc. v. NLRC: a househelper in the staf
houses of an industrial company was a regular employee of
the said firm. The criterion is the personal comfort and
enjoyment of the family of the employer in the home of said
employer.
That she works within company premises and that she does

not cater exclusively to the personal comfort of Mr. Tan and his
family reflects the existence of Remington's right of control
over her functions, which is the primary indicator of the
existence of an employer-employee relationship.
Wrong to say that if the work is not directly related to the

employer's business, then the person performing such work

could not be considered an employee. The existence of the
employer-employee relationship is defined by law according to
the facts of each case, regardless of the nature of the
activities involved.

The parties soon entered into an amicable settlement to resolve the

dispute, whereby a special separation benefit/retirement package
was formulated. The terms and conditions of the package include the
following:

Doctrine, also laid out in Apex:

The mere fact that the househelper or domestic servant is
working within the premises of the business , as in stafhouses
for its guest or even for its officers and employees, warrants the
conclusion that such househelper or domestic servant is and
should be considered as a regular employee of the employer.

4. . All qualified employees who may have been

separated from the service under the above package
shall be considered under a priority basis for
employment by concessionaires and/or contractors,
and even by the Club upon full resumption of
operations, upon the recommendation of the UNION.
The Club may even persuade an employee-applicant for
availment under the package to remain on his/her job,
or be assigned to another position.

NOTE: It was held she was illegally dismissed. She enjoys

security of tenure. She may not be dismissed in the absence of
just or authorized cause.

Established
MIGUEL v. JCT GROUP, INC.
WACK-WACK GOLF AND COUNTRY CLUB v. NLRC

1. The UNION and the afected employees of F & B who are

members of the UNION hereby agree to accept the special
separation benefit package agreed upon between the CLUB
management on the one hand, and the UNION officers and the
UNION lawyer on the other, in the amount equivalent to oneand-one-half months salary for every year of service,
regardless of the number of years of service rendered. That,
in addition, said employees shall also receive the other
benefits due them, namely, the cash equivalent of unused
th
vacation and sick leave credits, proportionate 13 month pay;
and other benefits, if any, computed without premium;
XXX

- The package was availed of by 3 employees (Cagasan, Dominguez,

and Baluyot), who received large sums of money as separation pay.
- Soon after, WW entered into a Management Contract with Business
Staffing and Management Inc (BSMI), whereby the latter will provide
management services for WW.
- Cagasan and Dominguez filed their application for employment with
BMSI. They, by reason of the priority given by the separation package,

were rehired on probationary status by BMSI. Cagasan was made a

personnel officer and Dominguez, a telephone operator.
- WW also engaged other contractors in the operations of the club (like
janitorial services, Finance and accounting services). Because of the
various management service contracts, BMSI made an organizational
analysis and manpower evaluation to streamline its operations. It
found the positions of Cagasan and Domiguez redundant. In
the case of respondent Cagasan, her tasks as personnel officer were
likewise taken care of by the diferent management service
contractors; on the other hand, Dominguezs work as telephone
operator was taken over by the personnel of the accounting
department. BMSI subsequently terminated them.
- They then filed complaints in the NLRC for illegal dismissal against
WW. NLRC ordered reinstatement
ISSUE:
1. WON BMSI is an independent contractor (which will answer the
question as WON there was an employer-employee relationship)
2. WON the employees were illegally dismissed
HELD
1. YES
Reasoning
- 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, equipments, machineries, work premises and other materials
which are necessary in the conduct of the business. Jurisprudence
shows that determining the existence of an independent contractor
relationship, several factors may be considered, such as, but not
necessarily confined to, whether or not the contractor is carrying on
an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign
the performance of specified pieces of work; the control and
supervision of the work to another; the employers power with respect
to the hiring, firing, and payment of the contractors workers; the

control of the premises; the duty to supply premises, tools,

appliances, materials and labor; and the mode, manner and terms of
payment.
- There is indubitable evidence showing that BSMI is an independent
contractor, engaged in the management of projects, business
operations, functions, jobs and other kinds of business ventures, and
has sufficient capital and resources to undertake its principal business.
It had provided management services to various industrial and
commercial business establishments.
- In December 1993, Labor Sec. Laguesma, in a case, recognized BSMI
as an independent contractor. As a legitimate job contractor, there
can be no doubt as to the existence of an employer-employee
relationship between the contractor and the workers.
Thus, there is no employer-employee relation between WW and the
workers.
2. NO
Ratio As there was no employer-employee relationship between WW
and the complainants, there can be no illegal dismissal.
Reasoning
- The complainants (private respondents herein) were validly
terminated upon their option to take the separation package provided
by WW. Thus, the same have no cause of action against WW.
- When the respondents voluntarily signed their quitclaims and
accepted the separation package ofered by the petitioner, they,
thenceforth, already ceased to be employees of the petitioner.
Nowhere does it appear in the Agreement that the petitioner assured
the respondents of continuous employment in Wack Wack. Qualified
employees were given priority in being hired by its concessionaires
and/or contractors such as BSMI when it entered into a management
contract with the petitioner.
Disposition

Petition granted. CA and NLRC decisions set aside

Factors
PACIFIC
CONSULTANTS
SCHONFELD

INTERNATIONAL

ASIA,

INC.

v.

Facts:

In 1997, PCIJ, a Japan-based company, decided to set itself up in the

Philippines. In October 1997, respondent (a Canadian citizen) was
employed by PCIJ, through its president, Henrichsen, as Sector
Manager of PPI (PCIJs subsidiary in Phil) in its Water and Sanitation
Department. However, PCIJ assigned him as PPI sector manager in the
Philippines. His salary was to be paid partly by PPI and PCIJ.
Henrichsen transmitted a letter of employment to respondent in
Canada, requesting him to accept the same and affix his conformity
thereto. Respondent made some revisions in the letter of employment
and signed the contract which he subsequently sent to Henrichsen.
Respondent arrived in the Philippines and assumed his position as PPI
Sector Manager. He was accorded the status of a resident alien.
As required by Rule XIV (Employment of Aliens) of the Omnibus Rules
Implementing the Labor Code, PPI applied for an Alien Employment
Permit (Permit) for respondent before the Department of Labor and
Employment (DOLE). It appended respondents contract of
employment to the application.
On May 5, 1999, respondent received a letter from Henrichsen
informing him that his employment had been terminated efective
August 4, 1999 for the reason that PCIJ and PPI had not been
successful in the water and sanitation sector in the Philippines.
However, on July 24, 1999, Henrichsen, by electronic mail, requested
respondent to stay put in his job after August 5, 1999 , until such time
that he would be able to report on certain projects and discuss all the
opportunities he had developed. Respondent continued his work with
PPI until October 1, 1999.
Respondent filed with PPI several money claims, including unpaid
salary, leave pay, air fare from Manila to Canada, and cost of
shipment of goods to Canada. PPI partially settled some of his claims
(US$5,635.99), but refused to pay the rest.
Arguments:
Petitioners contend that it was the PCIJ which employed respondent as
an employee; it merely seconded him to petitioner PPI in the
Philippines, and assigned him to work in Manila as Sector Manager.
Petitioner PPI, being a wholly-owned subsidiary of PCIJ, was never the
employer of respondent. They insist that PCIJ paid respondents
salaries and only coursed the same through petitioner PPI. PPI, being
its subsidiary, had supervision and control over respondents work,
and had the responsibilities of monitoring the "daily administration" of
respondent. Petitioners further contend that, although Henrichsen was
both a director of PCIJ and president of PPI, it was he who signed the
termination letter of respondent upon instructions of PCIJ. This is
buttressed by the fact that PCIJs letterhead was used to inform him
that his employment was terminated. Petitioners further assert that all

work instructions came from PCIJ and that petitioner PPI only served
as a "conduit."
Respondent averred that the absence or existence of a written
contract of employment is not decisive of whether he is an employee
of PPI. He said that PPI, through its president Henrichsen, directed his
work/duties as Sector Manager of PPI. He emphasized that as gleaned
from Alien Employment Permit (AEP) No. M-029908-5017 issued to
him by DOLE on February 26, 1999, he is an employee of PPI. It was
PPI president Henrichsen who terminated his employment; PPI also
paid his salary. The two corporations have separate and distinct
personalities.

Issue: Are the factors in determining the existence of an employeremployee relationship between respondent and petitioner attendant
in this case?
Held: Yes.
Ratio:
The SC agreed with the conclusion of the CA that there was an
employer-employee relationship between petitioner PPI and
respondent using the four-fold test. Jurisprudence is firmly settled
that whenever the existence of an employment relationship is in
dispute, four elements constitute the reliable yardstick: (a) the
selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employers power to
control the employees conduct. It is the so-called "control test"
which constitutes the most important index of the existence of the
employer-employee relationshipthat is, whether the employer
controls or has reserved the right to control the employee not only as
to the result of the work to be done but also as to the means and
methods by which the same is to be accomplished. Stated otherwise,
an employer-employee relationship exists where the person for whom
the services are performed reserves the right to control not only the
end to be achieved but also the means to be used in reaching such
end.
The SC quoted the CA: There is, indeed, substantial evidence on
record which would erase any doubt that the respondent company is
the true employer of petitioner. In the case at bar, the power to
control and supervise petitioners work performance devolved upon
the respondent company. Likewise, the power to terminate the
employment relationship was exercised by the President of the
respondent company. It is not the letterhead used by the company in
the termination letter which controls, but the person who exercised

the power to terminate the employee. It is also inconsequential if the

second letter of employment executed in the Philippines was not
signed by the petitioner. An employer-employee relationship may
indeed exist even in the absence of a written contract, so long as the
four elements are all present.
GABRIEL v. BILON
PHILIPPINE GLOBAL COMMUNICATIONS INC V DE VERA
459 SCRA 260

- On 22 January 1997, De Vera filed a complaint for illegal dismissal

before the National Labor Relations Commission (NLRC), alleging that
that he had been actually employed by Philcom as its company
physician since 1981 and was dismissed without due process. He
averred that he was designated as a company physician on retainer
basis for reasons allegedly known only to Philcom. He likewise
professed that since he was not conversant with labor laws, he did not
give much attention to the designation as anyway he worked on a fulltime basis and was paid a basic monthly salary plus fringe benefits,
like any other regular employees of Philcom.

FACTS

- On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came

out with a decision dismissing De Veras complaint for lack of merit,
on the rationale that as a retained physician under a valid contract
mutually agreed upon by the parties, De Vera was an independent
contractor and that he was not dismissed but rather his contract
with [PHILCOM] ended when said contract was not renewed after
December 31, 1996.

- Petitioner Philippine Global Communications, Inc. (PhilCom), is a

corporation engaged in the business of communication services and
allied activities, while respondent Ricardo De Vera is a physician by
profession whom petitioner enlisted to attend to the medical needs of
its employees.

NLRC reversed (the word used is modified) that of the Labor Arbiter,
on a finding that De Vera is Philcoms regular employee and
accordingly directed the company to reinstate him to his former
position without loss of seniority rights and privileges and with full
backwages from the date of his dismissal until actual reinstatement.

- It appears that on 15 May 1981, De Vera, via a letter dated 15 May

1981, ofered his services to the petitioner, therein proposing his plan
of works required of a practitioner in industrial medicine.

- Court of Appeals modified NLRCs decision that of the NLRC by

deleting the award of traveling allowance, and ordering payment of
separation pay to De Vera in lieu of reinstatement.

- The parties agreed and formalized respondents proposal in a

document denominated as RETAINERSHIP CONTRACT which will be for
a period of one year subject to renewal, it being made clear therein
that respondent will cover the retainership the Company previously
had with Dr. K. Eulau and that respondents retainer fee will be at
P4,000.00 a month. Said contract was renewed yearly. The
retainership arrangement went on from 1981 to 1994 with changes in
the retainers fee. However, for the years 1995 and 1996, renewal of
the contract was only made verbally. On December 1996 Philcom, thru
a letter bearing on the subject boldly written as TERMINATION
RETAINERSHIP CONTRACT, informed De Vera of its decision to
discontinue the latters retainers contract with the Company
efective at the close of business hours of December 31, 1996
because management has decided that it would be more practical to
provide medical services to its employees through accredited
hospitals near the company premises.

ISSUES

GARCIA; June 7, 2005

NATURE petition for review on certiorari

WON an employer-employee relationship exists between petitioner

and respondent
HELD
NO
- De Vera was an independent contractor beinf the retained physician
of petitioner company.
- In a long line of decisions, the Court, in determining the
existence of an employer-employee relationship, has invariably
adhered to the four-fold test, to wit: the selection and engagement of
the employee; the payment of wages; the power of dismissal; and
the power to control the employees conduct, or the so-called control
test, considered to be the most important element.

- Applying the four-fold test to this case, we initially find that it was
respondent himself who sets the parameters of what his duties would
be in ofering his services to petitioner in the letter which he sent to
petitioner.
- The letter was substantially the basis of the labor arbiters finding
that there existed no employer-employee relationship between
petitioner and respondent, in addition to the following factual settings:
- The fact that the complainant was not considered an employee was
recognized by the complainant himself in a signed letter, the tenor of
which indicated that the complainant was proposing to extend his
time with the respondent and seeking additional compensation for
said extension. This shows that the respondent PHILCOM did not have
control over the schedule of the complainant as it [is] the complainant
who is proposing his own schedule and asking to be paid for the
same. This is proof that the complainant understood that his
relationship with the respondent PHILCOM was a retained physician
and not as an employee. If he were an employee he could not
negotiate as to his hours of work.
- De Veras service for the respondent was covered by a retainership
contract [which] was renewed every year from 1982 to 1994. Upon
reading the contract dated September 6, 1982, signed by the
complainant himself (Annex C of Respondents Position Paper), it
clearly states that is a retainership contract. The retainer fee is
indicated thereon and the duration of the contract for one year is also
clearly indicated in paragraph 5 of the Retainership Contract. The
complainant cannot claim that he was unaware that the contract was
good only for one year, as he signed the same without any
objections. The complainant also accepted its renewal every year
thereafter until 1994. As a literate person and educated person, the
complainant cannot claim that he does not know what contract he
signed and that it was renewed on a year to year basis.
- The labor arbiter added the indicia, not disputed by respondent, that
from the time he started to work with petitioner, he never was
included in its payroll; was never deducted any contribution for
remittance to the Social Security System (SSS); and was in fact
subjected by petitioner to the ten (10%) percent withholding tax for
his professional fee, in accordance with the National Internal Revenue
Code, matters which are simply inconsistent with an employeremployee relationship.
- Clearly, the elements of an employer-employee relationship are
wanting in this case. We may add that the records are replete with
evidence showing that respondent had to bill petitioner for his

monthly professional fees It simply runs against the grain of common

experience to imagine that an ordinary employee has yet to bill his
employer to receive his salary.
- We note, too, that the power to terminate the parties relationship
was mutually vested on both. Either may terminate the arrangement
at will, with or without cause.Finally, remarkably absent from the
parties arrangement is the element of control, whereby the employer
has reserved the right to control the employee not only as to the
result of the work done but also as to the means and methods by
which the same is to be accomplished.
- Here, petitioner had no control over the means and methods by
which respondent went about performing his work at the company
premises. He could even embark in the private practice of his
profession, not to mention the fact that respondents work hours and
the additional compensation therefor were negotiated upon by the
parties. In fine, the parties themselves practically agreed on every
terms and conditions of respondents engagement, which thereby
negates the element of control in their relationship. For sure,
respondent has never cited even a single instance when petitioner
interfered with his work.
Disposition petition is GRANTED and the challenged decision of the
Court of Appeals REVERSED and SET ASIDE. The 21 December 1998
decision of the labor arbiter is REINSTATED.

Control Test
LOPEZ v. METROPOLITAN
SYSTEM (MWSS)

WATERWORKS

and

SEWERAGE

Facts:
Petitioners were engaged by the MWSS as collectors-contractors by
virtue of an Agreement wherein the petitioners agreed to collect from
the concessionaires of MWSS charges, fees, assessments of rents for
water, etc. However, when MWSS entered into a Concession
Agreement with Manila Water and Benpress-Lyonnaise, the collection
of the bills was transferred to said private concessionaires. Regular
employees of the MWSS (except those who chose to remain with
MWSS or retired) were absorbed by the concessionaires.
Relying on a Civil Service Commission Resolution, MWSS refused to
give the petitioners retirement benefits, saying that they were

contract-collectors and not employees. On the other hand, the

petitioners claim that they are employees, saying that with the nature
and extent of their work at the MWSS, they served as collectors of
MWSS only, and that they never provided collections services to
customers as an independent business.
Issue:
W/N petitioners are regular employees.
Held and Ratio:
According to the Court, they are indeed regular employees of MWSS.
The primary standard of determining regular employment is the
reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the
employer, which can be determined by looking at the nature of the
work performed and its relation to the scheme of the particular
business or trade in its entirety.

research output. The nature of the contracts of resident physicians

meet
traditional
tests
for
determining
employer-employee
relationships, but because the focus of residency is training, they are
neither here nor there.
Finally, it is crystal clear, from the facts of the case at bench, that the
petitioner accepted a temporary appointment (Medical Specialist I). As
respondent Civil Service Commission has correctly pointed out 23, the
appointment was for a definite and renewable period which, when it
was not renewed, did not involve a dismissal but an expiration of the
petitioner's term.
R TRANSPORT CORP V EJANDRA
NATURE Petition for review of the decision of the CFI of Iloilo
FACTS
- Rogelio Ejandra worked for petitioner bus company as a driver.

UERMMMC R.D.U. V. LAGUESMA (AS CITED IN FELIX V.

BUENASEDA)
Quick Facts (Felix v. Buenaseda):
Felix was employed as a resident physician (temporary status) by the
National Mental Hospital. When NMH reorganized itself as the National
Center for Mental Health, upon review of the board of the NCMH an in
pursuit of new requirements laid down, Felix was dismissed. Felix filed
for illegal dismissal.
Issue: WON he was legally dismissed.
Held: Yes
Ratio: (UERMMMC Doctrine used in case):
Under this system, residents, specialty those in university teaching
hospitals 18 enjoy their right to security of tenure only to the extent
that they periodically make the grade, making the situation quite
unique as far as physicians undergoing post-graduate residencies and
fellowships are concerned. While physicians (or consultants) of
specialist rank are not subject to the same stringent evaluation
procedures, 19 specialty societies require continuing education as a
requirement for accreditation for good standing, in addition to peer
review processes based on performance, mortality and morbidity
audits, feedback from residents, interns and medical students and

- On Jan 31 1996, he was apprehended for obstruction of traffic. His

license was confiscated. He reported this to his manager, Oscar
Pasquin, who gave him P500 to redeem the license. He was able to
retrieve the license after a week since the apprehending officer turned
it in only then.
- On feb 8, 1996, he reported for work. The company said they were
reviewing if they were going to allow him drive again. Also, he was
being blamed for damage to the bus. Ejandra said the bus was
damaged during the week he wasnt able to drive.
- Petitioner, on the other hand, claims that Ejandra is a habitual
absentee and has abandoned his job. To belie private respondents
allegation that his license had been confiscated, petitioner asserted
that, had it been true, he should have presented an apprehension
report and informed petitioner of his problems with the LTO. But he did
not. Petitioner further argued that private respondent was not an
employee because theirs was a contract of lease and not of
employment, with petitioner being paid on commission basis
- The labor arbiter ruled in favor of Ejandra. It was held that he didnt
abandon his work, since there was valid reason for his 1 week
absence. He also was not aforded due process. NLRC and CA
affirmed.
ISSUES

10

1. WON there was an employee employer relationship

2. WON Ejandra was dismissed for a just cause
HELD
1. YES. Petitioner is barred to negate the existence of an employeremployee relationship. In its petition filed before this Court, petitioner
invoked our rulings on the right of an employer to dismiss an
employee for just cause. Petitioner maintained that private
respondent was justifiably dismissed due to abandonment of work. By
adopting said rulings, petitioner impliedly admitted that it was in fact
the employer of private respondent. According to the control test,
the power to dismiss an employee is one of the indications of
an employer-employee relationship. Petitioners claim that
private respondent was legally dismissed for abandonment
was in fact a negative pregnant: an acknowledgement that
there was no mutual termination of the alleged contract of
lease and that private respondent was its employee. The fact
that petitioner paid private respondent on commission basis
did not rule out the presence of an employee-employer
relationship. Article 97(f) of the Labor Code clearly provides
that an employees wages can be in the form of commissions.
2. NO. To constitute abandonment, two elements must concur: (1) the
failure to report for work or absence without valid or justifiable reason
and (2) a clear intention to sever the employer-employee relationship.
Petitioner did not fulfill the requisites. First, Ejandras absence was
justified since his license wasnt release until after a week. Second,
Ejandra did not want to sever their relationship when he got his
license back. Third, labor arbiter Yulo correctly observed that, if
private respondent really abandoned his work, petitioner should have
reported such fact to the nearest Regional Office of the Department of
Labor and Employment in accordance with Section 7, Rule XXIII, Book
V of Department Order No. 9, series of 1997 (Rules Implementing
Book V of the Labor Code). Petitioner made no such report.
- In addition, he wasnt also given due process by not giving him
notice and hearing.

SEVILLA v. CA | Sarmiento, J.
G.R. No. L-41182-3 | April 16, 1988
Petitioner: Dr. Carlos Sevilla and Lina Sevilla
Respondent: CA, Tourism World Service, Inc.
Quick Summary:
Sevilla and Tourism World Service (TWS) entered into a contract
involving the management of a branch office of the latter. The issue
here is the nature of the relationship between the parties. This stems
from the unilateral disconnection of phone lines and padlocking of the
said offices by TWS, wherein Sevilla feeling aggrieved, filed a
complaint under Articles 19, 20 and 21 of the Civil Code.
In this case the petitioner Lina Sevilla claims that a joint business
venture was entered into by and between her and Tourist World
Service with offices at the Ermita branch office and that she was not
an employee of the TWS to the end that her relationship with TWS
was one of a joint business venture. TWS contends that she is an
employee, and therefore bound by the acts of TWS, the employer.
The Court held, using the Economic test, that she is not an employee:
(USING the existing economic conditions prevailing between
the parties, like the inclusion of the employee in the payrolls, in
determining
the
existence
of
an
employer-employee
relationship)

a true employee cannot be made to part with his own money

in pursuance of his employer's business (Sevilla bound herself
in solidumas and for rental payments of the said office)

unlike an employee then, who earns a fixed salary usually,

she earned compensation in fluctuating amounts depending
on her booking successes.BUT, also held that it is not a joint
venture but a contract of agency, thus the unilateral
rescission of TWS made it liable for damages.
Facts:

Disposition Decision reversed

INSULAR LIFE v. NLRC (1989)

Economic Test

Sevilla and TWS entered into a contract in relation to the

management of a branch office of the latter.
TWS appears to have been informed that Lina Sevilla was
connected with a rival firm, the Philippine Travel Bureau, and,
since the branch office was anyhow losing, the Tourist World
Service considered closing down its office.
TWS indeed, closed down the premises. Hence Sevillas action
for damages.
Lina Sevilla claims that a joint business venture was entered
into by and between her and appellee TWS with offices at the
Ermita branch office and that she was not an employee of the

11

TWS to the end that her relationship with TWS was one of a
joint business venture. TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as
such was designated manager.
RTC: TWS, being the true lessee, it was within its prerogative
to terminate the lease and padlock the premises. It likewise
found the petitioner, Lina Sevilla, to be a mere employee of
said Tourist World Service, Inc. and as such, she was bound by
the acts of her employer
Hence this appeal

Issue: WON employee-employer relationship exist (important in the

matter of jurisdiction)
Held/ Ratio: NO. It is a Contract of Agency, thus lower court has
jurisdiction. Court awarded damages to Sevilla. In this jurisdiction,
there has been no uniform test to determine the evidence of an
employer-employee relation. In general, we have relied on the socalled right of control test, "where the person for whom the
services are performed reserves a right to control not only the end to
be achieved but also the means to be used in reaching such end."
Subsequently, however, we have considered, in addition to the
standard of right-of control, the existing economic conditions
prevailing between the parties, like the inclusion of the
employee in the payrolls, in determining the existence of an
employer-employee relationship.
The records will show that the petitioner, Lina Sevilla, was not subject
to control by the private respondent Tourist World Service, Inc., either
as to the result of the enterprise or as to the means used in
connection therewith. In the first place, under the contract of lease
covering the Tourist Worlds Ermita office, she had bound herself in
solidumas and for rental payments, an arrangement that would be like
claims of a master-servant relationship.
True the respondent Court would later minimize her participation in
the lease as one of mere guaranty, that does not make her an
employee of Tourist World, since in any case, a true employee
cannot be made to part with his own money in pursuance of
his employer's business, or otherwise, assume any liability thereof.
In that event, the parties must be bound by some other relation, but
certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen the
branch office was opened, the same was run by the herein appellant
Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for
any fare brought in on the efort of Mrs. Lina Sevilla. Under these
circumstances, it cannot be said that Sevilla was under the control of
Tourist World Service, Inc. "as to the means used." Sevilla in pursuing
the business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's
payroll. For her eforts, she retained 4% in commissions from airline
bookings, the remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her
booking successes.
FRANCISCO v. NLRC | Ynares-Santiago, J.
G.R. No. 170087 | August 31, 2006
Petitioner: Angelina Francisco
Respondent: NLRC, KASEI Corp.
Quick Summary:
Angelina Francisco filed a complaint for constructive dismissal. Kaseis
defense was that no employee-employer relationship exist since he
was only hired as a technical consultant. The Court held, using
economic test that she is an employee and DEPENDENT to the
company since:

she had served the company for six years before her
dismissal,
receiving
check
vouchers
indicating
her
salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security
When petitioner was designated General Manager, respondent
corporation made a report to the SSS signed by Irene
Ballesteros. Petitioners membership in the SSS as manifested
by a copy of the SSS specimen signature card which was
signed by the President of Kasei Corporation and the inclusion
of her name in the on-line inquiry system of the SSS evinces
the existence of an employer-employee relationship between
petitioner and respondent corporation.

IMPORTANT NOTES:
In addition to the control test, economic realities of the employment
relations help provide a comprehensive analysis of the true
classification of the individual, whether as employee, independent
contractor, corporate officer or some other capacity.

12

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

involving: (1) the putative employers power to control the employee
with respect to the means and methods by which the work is to be
accomplished; and (2) the underlying economic realities of the activity
or relationship.
The determination of the relationship between employer and
employee depends upon the circumstances of the whole economic
activity, such as:
(1) the extent to which the services performed are an integral
part of the employers business;
(2) the extent of the workers investment in equipment and
facilities;
(3) the nature and degree of control exercised by the employer;
(4) the workers opportunity for profit and loss;
(5) the amount of initiative, skill, judgment or foresight required
for the success of the claimed independent enterprise;
(6) the permanency and duration of the relationship between the
worker and the employer; and
(7) the degree of dependency of the worker upon the employer
for his continued employment in that line of business.
The proper standard of economic dependence : whether the
worker is dependent on the alleged employer for his continued
employment in that line of business.

Labor Arbiter: The private respondents complaint is DISMISSED for

lack of merit. The law allows for job contracting. NLRC: Appeal is
DISMISSED. Sunflower was an independent contractor. CA: Petition is
GRANTED reversing and setting aside the NLRC decision.

Agreement

Although, the parties to the contract disavowed the existence of an

employer-employee relationship, that did not prevent the Court from
examining the totality of the facts and the surrounding circumstances.
The relationship between SMC and Sunflower was a labor-only
contractorship as inferred from the following indicia: (1) Sunflower
does not have substantial capitalization or investment in the form of
tools, equipment, machineries, work premises and other materials to
qualify it as an independent contractor; (2) The lot, building,
machineries and all other working tools utilized by respondents were
owned by SMC, not to mention that the alleged office of Sunflower is
found within the confines of a carinderia with a typewriter (in
hindsight, this must be very precious) as the only property; (3) the
work assigned to private respondents was directly related to the
operations of SMC; (4) Sunflower did not carry an independent
business or undertake the performance of its service contract
according to its own manner and method, free from control and
supervision. To reiterate, in labor-only contracting, the statute creates
an employer-employee relationship for a comprehensive purpose: to
prevent a circumvention of labor laws.

CHAVEZ v. NLRC
SAN MIGUEL CORPORATION v. ABELLA
Penned by J. Carpio-Morales
Facts: Petitioner SMC entered into a one-year Contract of Services
(renewable) with Sunflower Multi-Purpose Cooperative. The latter
undertakes to provide janitorial, shrimp harvesting, sanitation, and
storage services for the Bacolod Shrimp Processing Plant. Noteworthy
is the explicit stipulation in the contract that there is no employeremployee relationship between the company and the cooperative or
the company and the cooperatives employees. Pursuant to the
contract Sunflower engaged the services of private respondents. After
sometime, private respondents filed a complaint praying that they be
declared as regular employees which was amended subsequently to
include illegal dismissal. In the meantime, SMC filed before the DOLE a
Notice of Closure.

Issue: Whether private respondents should be considered as

employees of SMC. Intertwined to the resolution of this main issue is
whether Sunflower is an independent as an independent contractor.
Held: Private respondents are employees of SMC. In this case,
procedural objections where presented by SMC but the Court brushed
away technical infirmities in deference with the time-honored liberality
when it comes to labor cases and proceeded to dispose the
substantive part. The test to determine the existence of independent
contractorship is whether one claiming to be an independent
contractor has contracted to do the work according to his own
methods and without being subject to the control of employer, except
only as to the results of the work. In legitimate labor contracting, the
law creates an employer-employee relationship for a limited purpose
(w/c is to ensure the employees are paid their wages). In labor-only
contracting, the statute creates an employer-employee relationship for
a comprehensive purpose: to prevent a circumvention of labor laws.
The contractor is considered merely an agent of the principal
employer.

(I think this is the relevant part with respect to the topic). The law of
course provides for two kinds of regular employees: (1) those who are

13

engaged to perform activities which are usually necessary or desirable

in the usual business or trade of the employer; and (2) those who
have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which
they are employed. As for those of private respondents who were
engaged in janitorial and managerial tasks, they fall under the second
category and are thus entitled to diferential pay and benefits.
There was also a discussion about retrenchment but let us not belabor
ourselves and just await the wisdom of time for it is still of-topic.
By: Mark Xavier Oyales
LOPEZ v. METROPOLITAN
SYSTEM (MWSS)

WATERWORKS

and

SEWERAGE

Facts:
Petitioners were engaged by the MWSS as collectors-contractors by
virtue of an Agreement wherein the petitioners agreed to collect from
the concessionaires of MWSS charges, fees, assessments of rents for
water, etc. However, when MWSS entered into a Concession
Agreement with Manila Water and Benpress-Lyonnaise, the collection
of the bills was transferred to said private concessionaires. Regular
employees of the MWSS (except those who chose to remain with
MWSS or retired) were absorbed by the concessionaires.
Relying on a Civil Service Commission Resolution, MWSS refused to
give the petitioners retirement benefits, saying that they were
contract-collectors and not employees. On the other hand, the
petitioners claim that they are employees, saying that with the nature
and extent of their work at the MWSS, they served as collectors of
MWSS only, and that they never provided collections services to
customers as an independent business.
Issue:
W/N petitioners are regular employees.
Held and Ratio:
According to the Court, they are indeed regular employees of MWSS.
The primary standard of determining regular employment is the
reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the
employer, which can be determined by looking at the nature of the
work performed and its relation to the scheme of the particular
business or trade in its entirety.

SONZA vs. ABS-CBN

Facts: ABS-CBN signed an agreement with the Mel and Jay
Management and Development Corporation where MJMDC as agent
agreed to provide Sonzas services exclusively to ABS-CBN as talent
for radio and television. Sonza is also the President and General
Manager of MJMDC. ABS-CBN agreed to pay for Sonzas services a
monthly talent fee. Eventually, Sonza wrote a letter to ABS-CBNs
President tendering his irrevocable resignation in view of recent
events concerning his programs and career. The letter also served as
notice of the rescission of the agreement between the parties.
Issue: W/N an employer-employee relationship existed between
Sonza and ABS-CBN
Held/Ratio: NO. Sonzas claims are all based on the agreement and
not on the Labor Code. The present case does not call for an
application of the Labor Code provisions but an interpretation and
implementation of the parties agreement. Sonzas cause of action is
for breach of contract, a civil dispute cognizable by the regular courts.
Sonza
The discretion used
by
ABS-CBN
in
specifically selecting
and hiring Sonza over
other broadcasters of
possibly
similar
experience
and
qualification as his
belies the claim of
independent
contractorship.
ABS-CBN directly paid
Sonza his monthly
talent
fees
and
benefits with no part
of his fees going to
MJMDC.

Four-fold Test as Applied by SC

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, ABSCBN would not have entered into the
agreement with Sonza but would have hired
him through its personnel department just like
any other employee. The method of selecting
and engaging Sonza does not conclusively
determine his status.
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 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.

14

Sonzas rescission of
the agreement was
not an admission of
his status as a nonemployee.

ABS-CBN
exercised
control
over
the
means and methods
of his work, subjected
him to its rules and
standards
of
performance, and his
exclusivity
as
a
talent.

Moreover, Sonzas talent fees are so huge and

out of the ordinary that they indicate more an
independent contractual relationship rather
than an employer-employee relationship.
Such 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.
For violation of any provision of the
agreement, either party may terminate their
relationship. Sonza failed to show that ABSCBN could not terminate his services on
grounds other than breach of contract. Such
a circumstance indicates an independent
contractual relationship between Sonza and
ABS-CBN.
Whether Sonza rescinded the
agreement or resigned from work does not
determine his status as employee or
independent contractor.
Sonza is not an employee but an independent
contractor. The greater the supervision
and control the hirer exercises, the more
likely
the
worker
is
deemed
an
employee.
The less control the hirer
exercises, the more likely the worker is
considered an independent contractor.
Sonza had a free hand on what to say or
discuss in his shows provided that he did not
attack ABS-CBN or his interests. ABS-CBNs
control was limited only to the result of
Sonzas work, whether to broadcast the final
product or not.
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 KBP which
has been adopted by ABS-CBN as its Code of
Ethics. 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.

General rules are merely guidelines towards

the achievement of the mutually desired
result, which are top-rating television and
radio programs.
Lastly, being an exclusive talent does not by
itself mean that Sonza is an employee of ABSCBN. Even an independent contractor can
validly provide his services exclusively to the
hiring party.
In the broadcast industry,
exclusivity is not necessarily the same as
control.
This practice is not designed to
control the means and methods of work of the
talent, but simply to protect the investment of
the broadcast station.

INSULAR LIFE ASSURANCE CO. LTD. V. NLRC (1998)

Facts:
Petitioner Insular Life entered into an agency contract with respondent
Pantaleon de los Reyes authorizing the latter to solicit within the
Philippines applications for life insurance and annuities for which he
would be paid compensation in the form of commissions. It contained
the stipulation that no employer-employee relationship shall be
created between the parties and that the agent shall be free to
exercise his own judgment as to time, place and means of soliciting
insurance. De los Reyes however was prohibited by petitioner from
working for any other life insurance company, and violation of this
stipulation was sufficient ground for termination of the contract.
Private respondent was later appointed as Acting Unit Manager under
its office and was also expressly obliged to participate in the
companys conservation program. Private respondent worked
concurrently as agent and Acting Unit Manager until he was notified
by petitioner that his services were terminated. He filed a complaint
before the Labor Arbiter on the ground that he was illegally dismissed
and that he was not paid his salaries and separation pay.
Issue: W/N there is an employer-employee relationship.
Held/Ratio:
Four-fold test, i.e., (a) selection and engagement of employee, (b)
payment of wages, (c) power of dismissal, and, (d) power of control

15

most important element. De los Reyes was under the efective control
of petitioner in the critical and most important aspects of his work as
Unit Manager. This conclusion was derived from the provisions in the
contract which appointed private respondent as Acting Unit Manager,
to wit: (a) De los Reyes was to serve exclusively the company,
therefore, he was not an independent contractor; (b) he was required
to meet certain manpower and production quota; and, (c) petitioner
controlled the assignment to and removal of soliciting agents from his
unit.
Doctrine: Not every form of control over the conduct of the party
hired in relation to the service rendered establishes employeremployee relationship.
Broadcasts Talents - Performers
TELEVISION ETC. v. SERVANA, supra

When petitioner and the Rank-and-File Employees Union executed a

CBA, petitioner refused to recognize PAs as part of the bargaining unit,
and thus, they were not included under the CBA. Thereafter,
respondents filed a Complaint with the NLRC for Recognition of
Regular Employment Status, Underpayment of OT Pay, Holiday Pay,
etc. with Damages against petitioner. As proof of their regular status,
they presented machine copies of their Employee IDs and salary
vouchers. They want to be declared regular and permanent
employees so as to be covered under the CBA and avail of the
benefits thereof. On the other hand, petitioner asserts that the
respondents are merely considered as talents, not regular
employees.
Issue:
W/N respondents are regular employees.

Issue/Held: W/N she is a fixed employee or regular employee?

REGULAR EMPLOYEE

Held and Ratio:

The Court gave credence to respondents assertions that where a
person has rendered at least 1 year of service, regardless of the
nature of the activity performed, or where the work is continuous, the
employment is considered regular as long as the activity exists. A
customary appointment is not a requisite before one can be formally
declared to have attained regular status. The primary standard of
determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation
to the usual trade or business of the employer. The test is whether the
former is usually necessary or desirable in the employers business.

Ratio: A 280 provides regular employees are those who were

engaged to perform activities w/c are usually necessary or desirable in
the usual business or trade of the employer her work as an anchor is
obviously desirable for the business of news and public dissemination,
also being hired for 4 years is a manifestation of her necessity in the
company. Also fixed term contract are only valid when it is not used
to circumvent the acquisition of tenurial security and it is shown that
both parties agreed to it voluntarily.

In this case, it doesnt matter if the respondents were hired as

talents. The factual circumstances (i.e. that they received pre-agreed
talent fees instead of salaries, that they did not observe the
required office hours, and were permitted to join other productions in
their free time) werent conclusive proof of the nature of their
employment. They are not talents; rather, they are regular employees
who perform several diferent duties under the control and direction of
ABS-CBN executives and supervisors.

DUMAPIT-MURLLO v. CA
Facts: Dumapit-Murillo hired as co-anchor for ABC. Her fixed-term
contract was for a period of 3 mos but it was renewed by ABC
continually for 4 yrs. LA dismissed her complaint for illegal dismissal.
NLRC reversed LAs decision, CA reversed NLRC.

ABS-CBN v. NAZARENO 503 SCRA 204 (06)

Facts:
Petitioner ABS-CBN hired respondents (Nazareno, Gerzon, Deiparine,
and Lerasan) as Production Assistants (PAs), with a monthly
compensation of P4,000, were issued IDs, and were required to work
for a minimum of 8 hours per day, including Sundays and holidays.
They were under the control and supervision of the Assistant Station
Manager and News Manager.

Method Wage Payment

ALMIREZ v. INFINITE CORP. TECHNOLOGY CORP.
LAZARO v. SSS

Hours of Work

16

LAZARO v. SSS, supra

Proof
TELEVISION AND PRODUCTION EXPONENTS, INC. v. SERVANA,
supra
LOPEZ v. BODEGA CITY
MCLEOD v NLRC
Jan 23, 2007
Carpio, J:

Facts: John F. McLeod filed a complaint for retirement benefits,

vacation and sick leave benefits, non-payment of unused airline
tickets, holiday pay, underpayment of salary and 13th month pay,
moral and exemplary damages, attorneys fees plus interest against
Filipinas Synthetic Corporation (Filsyn), Far Eastern Textile Mills, Inc.,
Sta. Rosa Textiles, Inc., Patricio Lim and Eric Hu. He alleges that at the
time of his retirement complainant was receiving P60,000.00 monthly
with vacation and sick leave benefits; 13th month pay, holiday pay
and two round trip business class tickets on a Manila-London-Manila
itinerary every three years which is convertible to cash if unused.
Respondents accordingly failed to pay vacation and leave credits and
requested complainant to wait as it was short of funds but the same
remain unpaid at present. Respondents likewise failed to pay
complainants holiday pay up to the present. There were more
benefits which were not honored.
The Labor Arbiter, held all respondents jointly and severally liable for
the money claims of Mcleod. However, the NLRC reversed and made
Peggy Mills as the sole entity liable for the retirement pay of Mcleod.
This was affirmed by the CA.

Held: No employer-employee relationship, McLeod was a managerial

employee of PMI from 20 June 1980 to 31 December 1992.
Ratio: McLeod could have presented evidence to support his
allegation of employer-employee relationship between him and any of
Filsyn, SRTI, and FETMI, but he did not. Appointment letters or
employment contracts, payrolls, organization charts, SSS registration,
personnel list, as well as testimony of co-employees, may serve as
evidence of employee status. It is a basic rule in evidence that parties
must prove their affirmative allegations. While technical rules are not
strictly followed in the NLRC, this does not mean that the rules on
proving allegations are entirely ignored. Bare allegations are not
enough. They must be supported by substantial evidence at the very
least
McLeods reliance on Annex M can hardly carry the day for him. Annex
M, which is McLeods letter addressed to "Philip Lim, VP
Administration," merely contains McLeods proposals for the grant of
some benefits to supervisory and confidential employees. Contrary to
McLeods allegation, Patricio did not sign the letter. Hence, the letter
does not embody any agreement between McLeod and the
management that would entitle McLeod to his money claims. Neither
can McLeods assertions find support in Annex U. Annex U is the
Agreement which McLeod and Universal Textile Mills, Inc. executed in
1959. The Agreement merely contains the renewal of the service
agreement which the parties signed in 1956.
DOMASIG v. NLRC
Doctrine: Substantial evidence is enough to prove the existence of an
employer-employee relationship. Substantial evidence defined below.
Facts:

Issue: WON an employer-employee relationship exists between the

private respondents and the petitioner for purposes of determining
employer liability to the petitioner.

Eddie Domasig said he started working for Cata Garments

Corporation even when its name was still Cato Garments
Corporation
The management of the said corporation dismissed him when
they learned that he was being pirated by a rival corporation
which had an ofer he refused.
Domasig went to the Labor Arbiter which ruled in favor of him.
Management appealed to the NLRC and the NLRC ruled in
favor of the management.
The Labor Arbiter found the identification card issued by Cata
as well as the salary vouchers of Domasig as sufficient

17

evidence to prove that there was an employer-employee

relationship between them.

The NLRC on the other hand, said that the Labor Arbiter acted
arbitrarily on ruling in favor of Domasig since Cata was
asserting that Domasig was merely a commissions agent
evidenced by the list of sales collections which included the
commissions due, expenses incurred and cash advances
received.
Issue: Whether or not there enough/sufficient/substantial evidence as
to establish the employee-employer relationship between Domasig
and Cata Garments.
Held:
There was enough evidence to establish the employeremployee relationship.
It has long been established that substantial evidence is enough to
prove the existence of an employer-employee relationship.
Substantial evidence has been defined to be such relevant
evidence as a reasonable mind might accept as adequate to
support a conclusion, and its absence is not shown by
stressing that there is contrary evidence on record, direct or
circumstantial, for the appellate court cannot substitute its
own judgment or criterion for that of the trial court in
determining wherein lies the weight of evidence or what
evidence is entitled to belief.
It was wrong for the NLRC to be not convinced with the uncontested
issuance of the identification card which petitioners submitted to
prove that there was evidence of an employer-employee relationship.
Also, Domasig was employed for more than one year and under the
law, he is considered to be a regular employee. Domasig was
reinstated in this case.

Absence of Relationship

LOPEZ v. BODEGA CITY, supra

Respondents: Lamadrid Bearing & Parts Corp and its President Jose
Lamadrid
Facts:
Abante was employed by the Lamadrid company in 1985 as a
salesman for Mindanao w/ a commission of 3% of the total paid-up
sales.
Petitioner had 5 bad accounts worth P687K in 1998 & Jose warned him
that if he doesnt issue his own checks to cover the bad accounts, his
commissions wont be released & he will lose his job. He issued
checks on condition that these will not be deposited for clearing &
that the deficiencies shall be charged against his commissions. The
company tricked him into signing a Promissory Note and a Deed of
Real Estate Mortgage. Some checks were returned to Abante.
Abante was to apply for a salary loan w/ SSS but learned that he
wasnt covered. When he inquired w/ Jose, the latter berated & hurled
invectives at him. Jose deposited the remaining checks, contrary to
their agreement. These were dishonored due to Account Closed.
Company demanded that he make good his checks. Abante replied
committing his commissions as payment for the balance of the sales.
Abantes customer handed to him a letter from the company
informing clients that Abante is no longer recognized as a salesman.
Abante received a subpoena for violation of BP 22.
ABante filed a complaint for illegal dismissal w/ money claims before
the NLRC. The respondents aver that Abante is a freelance salesman,
not an employee because he was on commission basis, he doesnt
have a monthly salary, he doesnt report to work daily, he didnt have
a pay-slip, he is not enrolled w/ the SSS, he is also a salesman for 5
other companies, and he shouldnt have executed a Promissory Note
& Deed of Real Estate Mortgage..
The Labor Arbiter ruled in favor of Abante. The NLRC reversed the
NLRCs decision for lack of cause of action. The CA denied Abantes
petition for review.
Issue/Held: WON Abante is an employee of Lamadrid. NO

ABANTE v. LAMADRID
Petitioner: Empermaco B Abante, Jr

Ratio:
Abante allege that he was doing work that is necessary or desirable in
Lamadrids usual business or trade (pursuant to Art 280, Labor Code).
He also said that the company had the power of control over him. He

18

collected payments from sales. The company directs him to report in

Mindanao for sales & collection activities and sends him to
conferences. He says that even though he doesnt report daily to
work, it doesnt mean that hes not an employee.
The court applied the four-fold test and found out that there was no
ER-EE relationship between Lamadrid & Abante.
1. Selection & engagement
he was free to ofer his services to other companies
2. Payment of wages
he was paid on commission
3. Power of dismissal
he had no sales quote w/c, if not reached, would be a
ground for his dismissal
4. Power of control
he was not required to submit a period report on his sales
& activities
he was not assigned to particular areas only, he was
assigned to the whole of Mindanao
he was left alone to adopt any style/strategy to sell his
products
the things he learned from the marketing conferences in
Manila served only as guidelines
Art 280 is not a crucial factor in determining the existence of an ER-EE
relationship. It merely distinguishes between two kinds of employees,
i.e., regular employees and casual employees, for purposes of
determining their rights to certain benefits, such as to join or form a
union, or to security of tenure. Article 280 does not apply where the
existence of an employment relationship is in dispute.
While in Songco v NLRC the court said that commission under Art. 96
of the Labor Code was construed as being included in the definition of
wage, there is no categorical pronouncement that the payment of
compensation on commission basis is conclusive proof of the
existence of an employer-employee relationship.
After all,
commission, as a form of remuneration, may be availed of by both an
employee or a non-employee.
CA decision affirmed in toto.

Denial Negative Pregnant Rule

R TRANSPORT CORP. v. EJANDRA, supra

6.02. INDEPENDENT CONTRACTOR AND LABOR ONLY CONTRACTOR

106 Contractor or Subcontractor
ART. 106. Contractor or subcontractor. - Whenever an
employer enters into a contract with another person for the
performance of the formers work, the employees of the
contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same
manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor and Employment may, by appropriate
regulations, restrict or prohibit the contracting-out of labor to
protect the rights of workers established under this Code. In
so prohibiting or restricting, he may make appropriate
distinctions
between
labor-only
contracting
and
job
contracting as well as differentiations within these types of
contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this
Code.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and
placed by such person are performing activities which are
directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter
were directly employed by him.
107 Indirect Employer
ART. 107. Indirect employer. - The provisions of the
immediately preceding article shall likewise apply to any
person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor
for the performance of any work, task, job or project.
109 Solidary Liability

19

ART. 109. Solidary liability. - The provisions of existing laws to

the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code.
For purposes of determining the extent of their civil liability
under this Chapter, they shall be considered as direct
employers.
Contracting and Subcontracting Arrangements
Expressly allowed by law
Arrangement whereby a principal or indirect or statutory
employer agrees to put out or farm out with a contractor or
subcontractor the performance or completion of a specific job,
work or service within a definite or predetermined period,
regardless of whether such job, work or service is to be
performed or completed w/in or outside the premises of the
principal.
Subject to regulation for the promotion of employment and
the observance of the rights of workers to just and humane
conditions of work, security of tenure, self-organization and
collective bargaining.
Trilateral arrangement:
o Contract for a specific job, work or service bet.
principal and contractor/subcontractor
o Contract
of
employment
bet.
contractor/subcontractor and its workers
Principal farms out work, job, task, project or service to a
contractor or subcontractor; not the direct employer of the
workers employed by the contractor/subcontractor and
assigned to the principal; indirect employer; statutory
employer; employer
Contractor/Subcontractor has the capacity to independently
undertake the performance of the work, job, etc.; exercises
independent employment and contracts to do a piece of work
accdg to its own methods and w/o being subject of control by
the principal, except as to the results thereof; direct employer
of the contractual employees who are supplied to the principal
Contractual
workers

engaged
by
the
contractor/subcontractor to accomplish the work, job, etc.
Legitimate Job Contracting
Conditions to be met:

1.

Right of Control Test. The contractor/subcontractor

carries on an independent business and undertakes the
contract work on his own account under his own
responsibility accdg to his own manner and method, free
from the control and direction of his employer or principal
in all matters connected w/ the performance of the work
except as to the results thereof
2. Substantial
Capital
or
Investment
Test.
The
contractor/subcontractor 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
3. Legal Rights and Benefits Compliance Test. The
agreement
between
the
principal
and
contractor/subcontractor
assures
the
contractual
employees entitlement to all labor and occupational safety
and health standards, free exercise of the right to selforganization, security of tenure, and social and welfare
benefits
Absence of any of the requisites makes it a labor-only
contracting arrangement
Other
factors
indicative
of
permissible
job
contracting/subcontracting arrangement
1. Whether the C/SC is carrying on an independent business;
2. Nature and extent of the work;
3. Skill required;
4. Term and duration of relationship;
5. Right to assign the performance of specified pieces of
work;
6. Control and supervision of the workers;
7. Power of the employer with respect to the hiring, firing
and payment of workers of the contractor;
8. Control of the premises;
9. Duty to supply premises, tools, appliances, materials, and
labor; and
10. Mode, manner and terms of payment.

Labor-only Contracting (PROHIBITED)

A labor-only contractor is one who presents himself as an
employer even if he does not have capital to run a business or
capacity to ensure that his workers are paid their wages and
other benefits as prescribed by law.
He cannot independently undertake to perform a
subcontracted job or service.
To allow a labor-only contractor to operate is to give him an
opportunity to circumvent the law and to exploit workers.

20

Elements:
1. The C/SC does not have substantial capital or investment
which relates to the job, work or service to be performed
and the employees recruited, supplied or placed by such
c/sc are performing activities w/c are directly related to
the main business of the principal, OR
2. The C/SC does not exercise the right of control over the
performance of the work of the contractual employee.
Even if only one of the two elements is present, there is laboronly contracting
Bases in prohibiting labor-only contracting:
a. 3, Art. XIII, 1987 Consti. Section 3. The State shall aford
full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality
of employment opportunities for all. X X X
b. Art. 106, Labor Code.
o Objective:

Ensure that labor laws are followed

Prevent exploitation of workers

governed by Articles 25 to 39 of the Labor Code are not

covered by these Rules.

DOLE Order No. 18-02, Series of 2002

DEPARTMENT ORDER NO. 18 - 02
(Series of 2002)
.
.
RULES IMPLEMENTING ARTICLES 106 TO 109
OF THE LABOR CODE, AS AMENDED
.
.
By virtue of the power vested in the Secretary of Labor and
Employment under Articles 5 (Rule-making) and 106
(Contractor or Subcontractor) of the Labor Code of the
Philippines, as amended, the following regulations governing
contracting and subcontracting arrangements are hereby
issued:
Section
1.
Guiding
principles.
Contracting
and
subcontracting arrangements are expressly allowed by law
and are subject to regulation for the promotion of
employment and the observance of the rights of workers to
just and humane conditions of work, security of tenure, selforganization,
and
collective
bargaining.
Labor-only
contracting as defined herein shall be prohibited.
Section 2 . Coverage. - These Rules shall apply to all parties of
contracting
and
subcontracting
arrangements
where
employer-employee relationship exists. Placement activities
through private recruitment and placement agencies as

(a)
"Contracting"
or
"subcontracting"
refers
to
an
arrangement whereby a principal agrees to put out or farm
out with a contractor or subcontractor the performance or
completion of a specific job, work or service within a definite
or predetermined period, regardless of whether such job,
work or service is to be performed or completed within or
outside the premises of the principal.
(b) "Contractor or subcontractor" refers to any person or
entity engaged in a legitimate contracting or subcontracting
arrangement.

Section
3.
Trilateral
Relationship
in
Contracting
Arrangements. - In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a
specific job, work or service between the principal and the
contractor or subcontractor, and a contract of employment
between the contractor or subcontractor and its workers.
Hence,
there
are
three
parties
involved
in
these
arrangements, the principal which decides to farm out a job or
service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently
undertake the performance of the job, work or service, and
the contractual workers engaged by the contractor or
subcontractor to accomplish the job work or service.
Section 4. Definition of Basic Terms. - The following terms as
used in these Rules, shall mean:

(c) "Contractual employee" includes one employed by a

contractor or subcontractor to perform or complete a job,
work or service pursuant to an arrangement between the
latter and a principal.
(d) "Principal" refers to any employer who puts out or farms
out a job, service or work to a contractor or subcontractor.
Section 5. Prohibition against labor-only contracting. - Laboronly contracting is hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an arrangement
where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service
for a principal, and any of the following elements are present:

21

(i) The contractor or subcontractor does not have substantial

capital or investment which relates to the job, work or service
to be performed and the employees recruited, supplied or
placed by such contractor or subcontractor are performing
activities which are directly related to the main business of
the principal; or
(ii) the contractor does not exercise the right to control over
the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the
application of Article 248 (C ) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks
and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work
premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job,
work or service contracted out.
The "right to control" shall refer to the right reserved to the
person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but
also the manner and means to be used in reaching that end.
Section 6. Prohibitions. - Notwithstanding Section 5 of these
Rules, the following are hereby declared prohibited for being
contrary to law or public policy:
(a) Contracting out of a job, work or service when not done in
good faith and not justified by the exigencies of the business
and the same results in the termination of regular employees
and reduction of work hours or reduction or splitting of the
bargaining unit;
(b) Contracting out of work with a "cabo" as defined in Section
1 (ii), Rule I, Book V of these Rules. "Cabo" refers to a person
or group of persons or to a labor group which, in the guise of
a labor organization, supplies workers to an employer, with or
without any monetary or other consideration whether in the
capacity of an agent of the employer or as an ostensible
independent contractor;
(c) Taking undue advantage of the economic situation or lack
of bargaining strength of the contractual employee, or
undermining his security of tenure or basic rights, or
circumventing the provisions of regular employment, in any of
the following instances:

(i) In addition to his assigned functions, requiring the

contractual employee to perform functions which are
currently being performed by the regular employees of the
principal or of the contractor or subcontractor;
(ii) Requiring him to sign, as a precondition to employment or
continued employment, an antedated resignation letter; a
blank payroll; a waiver of labor standards including minimum
wages and social or welfare benefits; or a quitclaim releasing
the principal, contractor or subcontractor from any liability as
to payment of future claims; and
(iii) Requiring him to sign a contract fixing the period of
employment to a term shorter than the term of the contract
between the principal and the contractor or subcontractor,
unless the latter contract is divisible into phases for which
substantially different skills are required and this is made
known to the employee at the time of engagement;
(d) Contracting out of a job, work or service through an inhouse agency which refers to a contractor or subcontractor
engaged in the supply of labor which is owned, managed or
controlled by the principal and which operates solely for the
principal;
(e) Contracting out of a job, work or service directly related to
the business or operation of the principal by reason of a strike
or lockout whether actual or imminent;
(f) Contracting out of a job, work or service being performed
by union members when such will interfere with, restrain or
coerce employees in the exercise of their rights to self
organization as provided in Art. 248 (c) of the Labor Code, as
amended.
Section 7. Existence of an employer-employee relationship. The contractor or subcontractor shall be considered the
employer of the contractual employee for purposes of
enforcing the provisions of the Labor Code and other social
legislation. The principal, however, shall be solidarily liable
with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay
wages.
The principal shall be deemed the employer of the contractual
employee in any of the following cases as declared by a
competent authority:
(a) where there is labor-only contracting; or

22

(b) where the contracting arrangement falls within the

prohibitions provided in Section 6 (Prohibitions) hereof.
Section 8. Rights of Contractual Employees. - Consistent with
Section 7 of these Rules, the contractual employee shall be
entitled to all the rights and privileges due a regular
employee as provided for in the Labor Code, as amended, to
include the following:
(a) Safe and healthful working conditions;
(b) Labor standards such as service incentive leave, rest days,
overtime pay, holiday pay, 13th month pay and separation
pay;
(c) Social security and welfare benefits;
(d) Self-organization, collective bargaining and peaceful
concerted action; and
(e) Security of tenure.
Section 9. Contract between contractor or subcontractor and
contractual employee. - Notwithstanding oral or written
stipulations to the contrary, the contract between the
contractor or subcontractor and the contractual employee,
which shall be in writing, shall include the following terms and
conditions:
(a) The specific description of the job, work or service to be
performed by the contractual employee;
(b) The place of work and terms and conditions of
employment, including a statement of the wage rate
applicable to the individual contractual employee; and
(c) The term or duration of employment, which shall be
coextensive with the contract of the principal and
subcontractor, or with the specific phase for which the
contractual employee is engaged, as the case may be.
The contractor or subcontractor shall inform the contractual
employee of the foregoing terms and conditions on or before
the first day of his employment.
Section 10. Effect of Termination of Contractual Employment. In cases of termination of employment prior to the expiration
of the contract between the principal and the contractor or
subcontractor, the right of the contractual employee to
separation pay or other related benefits shall be governed by
the applicable laws and jurisprudence on termination of
employment.

subcontractor, or from the completion of the phase of the job,

work or service for which the contractual employee is
engaged, the latter shall not be entitled to separation pay.
However, this shall be without prejudice to completion
bonuses or other emoluments, including retirement pay as
may be provided by law or in the contract between the
principal and the contractor or subcontractor.
Section 11. Registration of Contractors or Subcontractors. Consistent with the authority of the Secretary of Labor and
Employment to restrict or prohibit the contracting out of labor
through appropriate regulations, a registration system to
govern contracting arrangements and to be implemented by
the Regional Offices is hereby established.
The registration of contractors and subcontractors shall be
necessary for purposes of establishing an effective labor
market information and monitoring.
Failure to register shall give rise to the presumption that the
contractor is engaged in labor-only contracting.
Section 12. Requirements for registration. - A contractor or
subcontractor shall be listed in the registry of contractors and
subcontractors upon completion of an application form to be
provided by the DOLE. The applicant contractor or
subcontractor shall provide in the application form the
following information:
(a) The name and business address of the applicant and the
area or areas where it seeks to operate;
(b) The names and addresses of officers, if the applicant is a
corporation, partnership, cooperative or union;
(c) The nature of the applicant's business and the industry or
industries where the applicant seeks to operate;
(d) The number of regular workers; the list of clients, if any;
the number of personnel assigned to each client, if any and
the services provided to the client;
(e) The description of the phases of the contract and the
number of employees covered in each phase, where
appropriate; and

Where the termination results from the expiration of the

contract between the principal and the contractor or

23

(f) A copy of audited financial statements if the applicant is a

corporation, partnership, cooperative or a union, or copy of
the latest ITR if the applicant is a sole proprietorship.
The application shall be supported by:
(a) A certified copy of a certificate of registration of firm or
business name from the Securities and Exchange Commission
(SEC), Department of Trade and Industry (DTI), Cooperative
Development Authority (CDA), or from the DOLE if the
applicant is a union; and
(b) A certified copy of the license or business permit issued by
the local government unit or units where the contractor or
subcontractor operates.
The application shall be verified and shall include an
undertaking that the contractor or subcontractor shall abide
by all applicable labor laws and regulations.
Section 13. Filing and processing of applications. - The
application and its supporting documents shall be filed in
triplicate in the Regional Offices where the applicant
principally operates. No application for registration shall be
accepted unless all the foregoing requirements are complied
with. The contractor or subcontractor shall be deemed
registered upon payment of a registration fee of P100.00 to
the Regional Office.
Where all the supporting documents have been submitted, the
Regional Office shall deny or approve the application within
seven (7) working days after its filing.
Upon registration, the Regional Office shall return one set of
the duly-stamped application documents to the applicant,
retain one set for its file, and transmit the remaining set to
the Bureau of Local Employment. The Bureau shall devise the
necessary forms for the expeditious processing of all
applications for registration.
Section 14. Duty to produce copy of contract between the
principal and the contractor or subcontractor. - The principal
or the contractor or subcontractor shall be under an
obligation to produce a copy of the contract between the
principal and the contractor in the ordinary course of
inspection. The contractor shall likewise be under an
obligation to produce a copy of the contract of employment of
the contractual worker when directed to do so by the Regional
Director or his authorized representative.

A copy of the contract between the contractual employee and

the contractor or subcontractor shall be furnished the
certified bargaining agent, if there is any.
Section 15. Annual Reporting of Registered Contractors. - The
contractor or subcontractor shall submit in triplicate its
annual report using a prescribed form to the appropriate
Regional Office not later than the 15th of January of the
following year. The report shall include:
(a) A list of contracts entered with the principal during the
subject reporting period;
(b) The number of workers covered by each contract with the
principal;
(c) A sworn undertaking that the benefits from the Social
Security System (SSS), the Home Development Mutual Fund
(HDMF), PhilHealth, Employees Compensation Commission
(ECC), and remittances to the Bureau of Internal Revenue
(BIR) due its contractual employees have been made during
the subject reporting period.
The Regional Office shall return one set of the duly-stamped
report to the contractor or subcontractor, retain one set for its
file, and transmit the remaining set to the Bureau of Local
Employment within five (5) days from receipt thereof.
Section 16. Delisting of contractors or subcontractors. Subject to due process, the Regional Director shall cancel the
registration of contractors or subcontractors based on any of
the following grounds:
(a) Non-submission of contracts between the principal and the
contractor or subcontractor when required to do so;
(b) Non-submission of annual report;
(c) Findings through arbitration that the contractor or
subcontractor has engaged in labor-only contracting and the
prohibited activities as provided in Section 6 (Prohibitions)
hereof; and
(d) Non-compliance
conditions.

with

labor

standards

and

working

Section 17. Renewal of registration of contractors or

subcontractors. - All registered contractors or subcontractors

24

may apply for renewal of registration every three years. For

this purpose, the Tripartite Industrial Peace Council (TIPC) as
created under Executive Order No. 49, shall serve as the
oversight committee to verify and monitor the following:
(a) Engaging in allowable contracting activities; and
(b) Compliance with administrative reporting requirements.
Section 18. Enforcement of Labor Standards and Working
Conditions. - Consistent with Article 128 (Visitorial and
Enforcement Power) of the Labor Code, as amended, the
Regional Director through his duly authorized representatives,
including labor regulation officers shall have the authority to
conduct routine inspection of establishments engaged in
contracting or subcontracting and shall have access to
employer's records and premises at any time of the day or
night whenever work is being undertaken therein, and the
right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be
necessary to determine violations or which may aid in the
enforcement of the Labor Code and of any labor law, wage
order, or rules and regulations issued pursuant thereto.
The findings of the duly authorized representative shall be
referred to the Regional Director for appropriate action as
provided for in Article 128, and shall be furnished the
collective bargaining agent, if any.

Section 20. Supersession. - All rules and regulations issued by

the Secretary of Labor and Employment inconsistent with the
provisions of this Rule are hereby superseded. Contracting or
subcontracting arrangements in the construction industry,
under the licensing coverage of the PCAB and shall not
include shipbuilding and ship repairing works, however, shall
continue to be governed by Department Order No. 19, series
of 1993.
Section 21. Effectivity. - This Order shall be effective fifteen
(15) days after completion of its publication in two (2)
newspapers of general circulation.

A. Independent Contractor

Management Function Determination Need

MANILA ELECTRIC COMPANY v. QUISUMBING

FACTS:

Based on the visitorial and enforcement power of the

Secretary of Labor and Employment in Article 128 (a), (b), (c)
and (d), the Regional Director shall issue compliance orders to
give effect to the labor standards provisions of the Labor
Code, other labor legislation and these guidelines.

1.

Section 19. Solidary liability. - The principal shall be deemed

as the direct employer of the contractual employees and
therefore,
solidarily
liable
with
the
contractor
or
subcontractor for whatever monetary claims the contractual
employees may have against the former in the case of
violations as provided for in Sections 5 (Labor-Only
contracting), 6 (Prohibitions), 8 (Rights of Contractual
Employees) and 16 (Delisting) of these Rules. In addition, the
principal shall also be solidarily liable in case the contract
between the principal and contractor or subcontractor is
preterminated for reasons not attributable to the fault of the
contractor or subcontractor.

Meralco Workers Association (MEWA) is the duly recognized

labor organization of the rank-and-file employees of MERALCO.
LOn September 7, 1995, MEWA informed MERALCO of its
intention to re-negotiate the terms and conditions of their
existing 1992-1997 Collective Bargaining Agreement (CBA)
covering the remaining period of two years starting from
December 1, 1995 to November 30, 1997.

2.

MERALCO signified its willingness to re-negotiate through its

letter dated October 17, 1995 and formed a CBA negotiating
panel for the purpose. On November 10, 1995, MEWA
submitted its proposal to MERALCO, which, in turn, presented
a
counter-proposal.
Thereafter,
collective
bargaining
negotiations proceeded. Despite the series of meetings
between the negotiating panels of MERALCO and MEWA, the
parties failed to arrive at "terms and conditions acceptable to
both of them."

25

3.

4.

MEWA filed a Notice of Strike with the National Capital Region

Branch of the National Conciliation and Mediation Board
(NCMB) of the Department of Labor and Employment (DOLE)
which was docketed as NCMB-NCR-NS-04-152-96, on the
grounds of bargaining deadlock and unfair labor practices. The
NCMB then conducted a series of conciliation meetings but the
parties failed to reach an amicable settlement. Faced with the
imminence of a strike, MERALCO on May 2, 1996, filed an
Urgent Petition with the Department of Labor and Employment
which was docketed as OS-AJ No. 0503[1]96 praying that the
Secretary assume jurisdiction over the labor dispute and to
enjoin the striking employees to go back to work.

The Labor Secretary granted the petition through its Order of

May 8, 1996. Thereafter, the parties submitted their
respective memoranda and on August 19, 1996, the Secretary
resolved the labor dispute through an Order, but both parties
were not satisfied with the results, ultimately MERALCO filed a
petition contending that the Secretary acted with grave abuse
of discretion.

ISSUE: Whether the Secretary's consultation requirement is

reasonable or unduly restrictive of the company's management
prerogative.
HELD: We recognize that contracting out is not unlimited; rather, it is
a prerogative that management enjoys subject to well-defined legal
limitations. As we have previously held, the company can determine
in its best business judgment whether it should contract out the
performance of some of its work for as long as the employer is
motivated by good faith, and the contracting out must not have been
resorted to circumvent the law or must not have been the result of
malicious or arbitrary action.
Given these realities, we recognize that a balance already exists in the
parties' relationship with respect to contracting out; MERALCO has its
legally defined and protected management prerogatives while workers
are guaranteed their own protection through specific labor provisions
and the recognition of limits to the exercise of management
prerogatives. From these premises, we can only conclude that the
Secretary's added requirement only introduces an imbalance in the
parties' collective bargaining relationship on a matter that the law

already sufficiently regulates. Hence, we rule that the Secretary's

added requirement, being unreasonable, restrictive and potentially
disruptive should be struck down.
Trilateral Relationship
PAL V. LIGON (2008)
Ponente: Carpio-Morales, J.
Facts:
PAL as owner and Synergy as contractor entered into an agreement
whereby Synergy undertook to provide loading, unloading, delivery of
baggage and cargo and other related services to and from PALs
aircraft at the Mactan Station. As provided in the Scope of Services,
contractor Synergy shall furnish all the necessary capital, workers,
loading, unloading and delivery materials, facilities, supplies,
equipment and tools for the satisfactory performance and execution of
services. It was also expressly provided that Synergy was an
independent contractor and... that there would be no employeremployee relationship between contractor synergy
and/or its
employees on the one hand, and owner on the other.
Respondent Benedicto Auxtero filed a complaint at the NLRC against
PAL , Synergy and their respective officers for regularization of
employment and later, when he was allegedly illegally dismissed, he
filed a complaint against the said parties for illegal dismissal and
reinstatement with full backwages. The other respondents filed a
complaint at the NLRC against PAL, Synergy and their respective
officials
for underpayment , non-payment of premium pay for
holidays, premium pay for rest days, service incentive leave pay, 13 th
month pay and allowances, and for regularization of employment
status with PAL. They claimed that they are performing duties for the
benefit of PAL since their job is directly connected with its business.
NLRC declared Synergy as a labor-only contractor and ordered PAL to
accept all the respondents as its regular employees entitled to
salaries, allowances and other employment benefits.
Issue:/Held:
Is Synergy an independent contractor or a labor-only contractor?
(This issue resolves whether PAL has an employer-employee
relationship with the respondents)
Synergy is a labor-only contractor. Thus, respondents could be
considered as regular employees of PAL.
Ratio:

26

If Synergy is found to be a mere job-only contractor, respondents

could be considered as regular employees of petitioner as Synergy
would then be a mere agent of PAL in which case respondents would
be entitled to all the benefits granted to petitioners regular
employees; otherwise, if Synergy is found to be a legitimate
contractor, respondents claims against PAL must fail as they would
then be considered employees of Synergy.

Requirements Independent Contractor

Legitimate contracting and labor-only contracting are defined in

Department Order No. 18-02, Series of 2002 or the Rules
Implementing Articles 106 to 109 of the Labor Code:

Facts: Petitioners, LAKAS SA INDUSTRIYA NG KAPATIRANG HALIGI NG

ALYANSA-PINAGBUKLOD
NG
MANGGAGAWANG
PROMO
NG
BURLINGAME (Lakas) filed a petition in DOLE to represent all rank-andfile promo employees of respondent numbering about 70 in all.
Respondent, Burlingame Corp. then claimed that there was no
emplyer-employee relationship between the workers and itself. It
claimed that the workers are really employees of F. Garil Manpower
Services (F. Garil), a duly licensed local employment agency.

Sec. 3. Trilateral relationship in contracting arrangements- In

legitimate contracting, there exists a trilateral relationship under
which there is a contract for a specific job, work or or service between
the principal and the contractor or subcontractor and its workers.
Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or
subcontractor, the contractor or subcontractor which has the capacity
to independently undertake the performance of the job, work or
service, and the contractual workers engaged by the contractor or
subcontractor to accomplish the job, work or service.
Section 5 thereof provides that labor-only contracting is prohibited.
Labor contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies, or places workers to
perform a job, work or service for a principal, and any of the following
elements are present: (1) the contractor or subcontractor does not
have substantial capital or investment which relates to the job, work
or service to be performed and the employees recruited, supplied or
placed by such contractor or subcontractor are performing activities
which are directly related to the main business or the principal; OR (2)
the contractor does not exercise the right to control over the
performance of the work of the contractual employee.
In this case, there is no showing that Synergy has a substantial capital
to engage in legitimate contracting. Pal also failed to present evidence
that it was Synergys supervisors who actually supervised
respondents. PAL even admitted to fixing the work schedule of
respondents . Just like the regular employees, respondents were
referred to as station attendants. Having performed tasks which are
usually necessary and desirable in the air transportation business of
PAL, they should be deemed its regular employees and Synergy as
labor-only contractor.

PAL v. LIGON, supra

BIG AA MANUFACTURER v. ANTONIO
LAKAS v. BURLINGAME CORP.

1. WON F. Garil is an independent contractor?

2. WON the workers have an employer-employee relationship with the
respondents.
1. Held and Ratio: No, F Garil fails the control test, Their contract
provides that "any personnel found to be inefficient, troublesome,
uncooperative and not observing the rules and regulations set forth by
Burlingame shall be reported to F. Garil and may be replaced upon
request." Corollary to this circumstance would be the exercise of
control and supervision by Burlingame over workers supplied by F. Garil
in order to establish the inefficient, troublesome, and uncooperative
nature of undesirable personnel. Also implied in the provision on
replacement of personnel carried upon request by Burlingame is the
power to fire personnel. These are indications that F. Garil was not left
alone in the supervision and control of its alleged employees.
Consequently, it can be concluded that F. Garil was not an
independent contractor since it did not carry a distinct
business free from the control and supervision of Burlingame.
2. Held and Ratio: No, F. Garil was engaged in labor-only contracting,
and as such, is considered merely an agent of Burlingame. In laboronly contracting, the law creates an employer-employee relationship
to prevent a circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is responsible
to the employees of the labor-only contractor as if such employees
had been directly employed by the principal employer. Since F. Garil is

27

a labor-only contractor, the workers it supplied should be considered

as employees of Burlingame in the eyes of the law.
Desirable - Unnecessary
MANILA ELECTRIC C. v. BENAMIRA
COCA COLA BOTTLERS PHIL. V NLRC
FACTS:
COCA COLA entered into a contract of janitorial services with Bacolod
Janitorial Services (BJS) stipulating that Coca Cola desires to engage
the services of BJS as an independent contractor, to perform and
provide for the maintenance, sanitation and cleaning services within
the building of Coca Cola. Every year thereafter a service contract was
entered into between the parties under similar terms and conditions
until about May 1994.
In 1989, Coca Cola hired private respondent Canonicato as a casual
employee and assigned him to the bottling crew as a substitute for
absent employees. In April 1990 COCA COLA terminated Canonicato's
casual employment.
Later that year COCA COLA availed of
Canonicato's services, this time as a painter in contractual projects
which lasted from 15-30 days. In 1991 Canonicato was hired as a
janitor by BJS which assigned him to COCA COLA considering his
familiarity with its premises.
Goaded by information that COCA COLA employed previous BJS
employees who filed a complaint against the company for
regularization pursuant to a compromise agreement, Canonicato
submitted a similar complaint against COCA COLA to the Labor
Arbiter. Without notifying BJS, Cnonicato no longer reported to his
Coca Cola assignment since 1993. Canonicato amended his complaint
against COCA COLA by citing instead as grounds therefore illegal
dismissal and underpayment of wages. He included BJS therein as a
co-respondent.
Labor Arbiter ruled that there was no employer-employee relationship
between COCA COLA and Canonicato because BJS was Canonicato's
real employer and that BJS was a legitimate job contractor, hence, any
liability of COCA COLA as to Canonicato's salary or wage diferentials
was solidary with BJS in accordance with pars. 1 and 2 of Art. 106,
Labor Code. The NLRC rejected on appeal the decision of the Labor
Arbiter on the ground that the janitorial services of Canonicato were
found to be necessary or desirable in the usual business or trade of
COCA COLA.

ISSUE: whether or not BJS is a legitimate job contractor of Canonicato

RATIO:
Although janitorial services may be considered directly related to the
principal business of an employer, as with every business, we deemed
them unnecessary in the conduct of the employer's principal business.
This judicial notice rests on the assumption that the independent
contractor is a legitimate job contractor so that there can be no doubt
as to the existence of an employer-employee relationship between
contractor and the worker.
In Singer Sewing Machine Company v. Drilon that x x x x [t]he definition that regular employees are those who perform
activities which are desirable and necessary for the business of the
employer is not determinative in this case. Any agreement may
provide that one party shall render services for and in behalf of
another for a consideration (no matter how necessary for the latter's
business) even without being hired as an employee. This is precisely
true in the case of an independent contractorship as well as in an
agency agreement. The Court agrees with the petitioner's argument
that Article 280 is not the yardstick for determining the existence of
an employment relationship because it merely distinguishes between
two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to
certain benefits, to join or form a union, or to security of tenure.
Article 280 does not apply where the existence of an employment
relationship is in dispute.
In determining the existence of an employer-employee relationship it
is necessary to determine whether the factors in the four-fold test are
present, which were all found in the relationship between BJS and
Canonicato and not between Canonicato and petitioner COCA COLA.
1) selection and engagement of the janitors for petitioner were done
by BJS; 2) BJS paid the wages of private respondent; 3) BJS is the one
that assigns the janitors to its clients and transfers them when it sees
fit and, 4) BJS has the power to control the conduct of the janitors.
BJS was truly a legitimate job-contractor and could by itself hire its
own employees considering that BJS satisfied all the requirements of a
job-contractor under the law, namely, (a) the ability to carry on an
independent business and undertake the contract work on its own
account under its own responsibility according to its manner and
method, free from the control and direction of its principal or client in
all matters connected with the performance of the work except as to
the results thereof; and, (b) the substantial capital or investment in

28

the form of tools, equipment, machinery, work premises, and other

materials which are necessary in the conduct of its business.

Proof
OREGAS v. NLRC

Employer-Employee Relationship
MERCURY DRUG CORPORATION v. LIBUNAO
GR No. 144458 | 14 July 2004 | Callejo, Sr., J. | Petition for review on
certiorari of the decision and resolution of the CA
Relevant Topic:
Where the security agency recruits, hires and assigns the works of its
watchmen or security guards to a client, the employer of such guards
or watchmen is such agency, and not the client, since the latter has
no hand in selecting the security guards.
SYNOPSIS
In the complaint for damages filed by Atty. Rodrigo B. Libunao
for the delictual and harmful acts committed by Security Guard
Remegio Sido, the trial court rendered judgment holding Sido and
Mercury Drug Corporation liable for moral damages, exemplary
damages, attorney's fees and costs of suits in favor of Atty. Libunao.
On appeal, the Court of Appeals rendered judgment affirming with
modification the decision of the trial court as it deleted the award of
attorney's fees. It ruled that Sido was an employee of Mercury Drug
Corporation, and that there was no sufficient evidence to prove that
he was an employee of Black Shield Security Services Corporation
(BSSC). Thus, Mercury Drug Corporation was jointly and severally,
liable with Sido. Mercury Drug Corporation filed this petition for review
on certiorari.
The Court ruled that where the security agency recruits, hires
and assigns the works of its watchmen or security guards to a client,
the employer of such guards or watchmen is such agency, and not the
client, since the latter has no hand in selecting the security guards.
Thus, the duty to observe the diligence of a good father of a family
cannot be demanded from the said client. The fact that a client
company may give instructions or directions to the security guards
assigned to it, does not, by itself, render the client responsible as an
employer of the security guards concerned and liable for their
wrongful acts or omissions. Accordingly, the petition was granted.

FACTS
Atty. Libunao, herein respondent, bought items from the selfservice section of Mercury Drug in Robinsons Galleria with a
friend
When they were about to exit, Mercury Drugs Security Guard
Sido asked for the receipt, saying, Yong resibo niyan. It took
Libunao some time to produce said receipt because Sido was
holding his right arm. Libunao uttered, Wala yatang resibo yan!
When Libunao found the receipt, he held it up to Sidos face
and said, Satisfied ka na? Sido replied, Putang-ina mo! Which
was Libunaos reply as well.
Sido allegedly lunged at Libunao, hit him on the face twice,
and pointed his revolver at Libunao saying, Putang-ina mo, pag
hindi kayo lumabas ditto papuputukin ko to sa iyo!
Libunao fled the scene but returned with the chief of security
of Robinsons Galleria to arrest Sido. The store manager, Vilma
Santos, allegedly said, Ako ang manager dito, hindi ninyo
puedeng arestuhin ang security guard kasi on duty pa siya. Magsialis nga kayo dito mga buwisit kayo!
But Santos relented and as they were leaving, all the sales
ladies of the store surrounded Sido and tried to protect him.
They were able to arrest Sido but Libunao was later found to
be sufering from post-traumatic depression syndrome due to the
altercation.
Libunao filed a complaint for damages against Mercury Drug
Corporation, its president, Vilma Santos, and Sido.
TC and CA found in favor of Libunao
Mercury drug alleges that it is not Sidos employer and that
his direct employer was the security agency, Black Shield Security
Services Corporation; hence, Mercury Drug Corp. could not be
held liable for the damages under A2180 CC.
ISSUE/HELD
W/N Mercury Drug is liable for damages to the respondent for the
tortuous and delictual acts of Sido [NO]
RATIO
Based on the evidence on record, the petitioner was not Sido's
employer; hence, the trial and appellate courts erred in applying
Article 2180 of the New Civil Code against the petitioner and
holding it liable for Sido's harmful acts.
In Soliman, Jr. v. Tuazon, we held that where the security
agency recruits, hires and assigns the works of its watchmen or
security guards to a client, the employer of such guards or
watchmen is such agency, and not the client, since the latter has
no hand in selecting the security guards. Thus, the duty to

29

observe the diligence of a good father of a family cannot be

demanded from the said client.
DISPOSITIVE: Petition granted.
PAL v. NLRC

Liability
JAGUAR SECURITY AND INVESTIGATION AGENCY V. SALES
Date: April 22, 2008
Ponente: Austria-Martinez
Doctrine: Under Articles 106, 107 and 108 of the Labor Code, the
joint and several liability of the contractor and principal is mandated
to assure compliance of the provisions therein including statutory
minimum wage. Jaguar, the contractor, is liable as a direct employer.
Delta, as principal, is liable as the indirect employer of the
contractors employees for purposes of paying the employees their
wages should the contractor be unable to pay them.
Facts:

Rodolfo Sales and 5 others were hired as security guards by

Jaguar. They were assigned at the premises of Delta Milling
Industries, Inc. in Libis.

2 were terminated. They alleged that their dismissals were

arbitrary and illegal.

All the guard-employees claim for monetary benefits, such as

underpayment, overtime pay, rest day and holiday premium
pay, etc. In addition, the 2 who were terminated argue that
they were entitled to separation pay and back wages, from the
time they were illegally dismissed until finality of the decision.

The Labor Arbiter rendered a decision in favor of the guards,

ordering Jaguar and Delta to jointly and severally pay the
guards.

Jaguar filed a petition arguing that as principal, Delta is liable

for the awarded wage increases, and that Jaguar should be
reimbursed of any payments to be made.
Issues:
1. Topical: W/N both Jaguar and Delta are liable to pay the
guards.
2. Side issue: If both parties are liable, can Jaguar claim
reimbursement from Delta through a cross-claim filed with the
labor court?

Ratio:
1. Yes, both companies are liable.

Under Articles 106, 107 and 108 of the Labor Code,

the joint and several liability of the contractor and
principal is mandated to assure compliance of the
provisions therein including statutory minimum wage.
Jaguar, the contractor, is liable as a direct employer. Delta,
as principal, is liable as the indirect employer of the
contractors employees for purposes of paying the
employees their wages should the contractor be unable to
pay them.
2. No, Jaguar cannot claim reimbursement from Delta in that
way.

There is no employer-employee relationship between

Jaguar and Delta. Also, there is no labor dispute involved
in the cross-claim against Delta, only a civil dispute.
Lastly, the liability of Delta to reimburse Jaguar will only
arise if and when Jaguar pays its employees the adjudged
liabilities.
Date: April 22, 2008
Ponente: Austria-Martinez
Doctrine: Under Articles 106, 107 and 108 of the Labor Code, the
joint and several liability of the contractor and principal is mandated
to assure compliance of the provisions therein including statutory
minimum wage. Jaguar, the contractor, is liable as a direct employer.
Delta, as principal, is liable as the indirect employer of the
contractors employees for purposes of paying the employees their
wages should the contractor be unable to pay them.
Facts:

Rodolfo Sales and 5 others were hired as security guards by

Jaguar. They were assigned at the premises of Delta Milling
Industries, Inc. in Libis.

2 were terminated. They alleged that their dismissals were

arbitrary and illegal.

All the guard-employees claim for monetary benefits, such as

underpayment, overtime pay, rest day and holiday premium
pay, etc. In addition, the 2 who were terminated argue that
they were entitled to separation pay and back wages, from the
time they were illegally dismissed until finality of the decision.

The Labor Arbiter rendered a decision in favor of the guards,

ordering Jaguar and Delta to jointly and severally pay the
guards.

30

Jaguar filed a petition arguing that as principal, Delta is liable

for the awarded wage increases, and that Jaguar should be
reimbursed of any payments to be made.

Issues:
3. Topical: W/N both Jaguar and Delta are liable to pay the
guards.
4. Side issue: If both parties are liable, can Jaguar claim
reimbursement from Delta through a cross-claim filed with the
labor court?
Ratio:
3. Yes, both companies are liable.

Under Articles 106, 107 and 108 of the Labor Code,

the joint and several liability of the contractor and
principal is mandated to assure compliance of the
provisions therein including statutory minimum wage.
Jaguar, the contractor, is liable as a direct employer. Delta,
as principal, is liable as the indirect employer of the
contractors employees for purposes of paying the
employees their wages should the contractor be unable to
pay them.
4. No, Jaguar cannot claim reimbursement from Delta in that
way.

There is no employer-employee relationship between

Jaguar and Delta. Also, there is no labor dispute involved
in the cross-claim against Delta, only a civil dispute.
Lastly, the liability of Delta to reimburse Jaguar will only
arise if and when Jaguar pays its employees the adjudged
liabilities.

Facts:

NLRC: Affirmed Labor Arbiter but held MERALCO solidarily liable

with LANDRITO. Also issued Order noting surety bond posted by
Landrito, and directed the Labor Arbiter to enforce the monetary
award against Landritos surety bond and to determine who
should finally shoulder the liability
SC: Dismissed petition for certiorari. Labor Arbiter to proceed.
Labor Arbiter (on liability): underpayment and on the nonpayment of overtime pay (solidarily liable: Meralco and Landrito);
Separation pay: Landrito

Quick Summary:

The petitioner may be considered an indirect employer only

for purposes of unpaid wages.

MERALCO and LANDRITO executed Contract Order No. 166-84,

[4] whereby the latter would supply
MERALCO janitorial
services, which include labor, materials, tools and equipment,
as well as supervision of its assigned employees, at
MERALCOs Rockwell Thermal Plant in Makati City.
49 employees (complainants) filed Complaint for illegal
deduction, underpayment, non-payment of overtime pay,
legal holiday pay, premium pay for holiday and rest day and
night diferentials, which was latter amended to include illegal
dismissal and MERALCO as respondent.

Labor Arbiter: dismissed the Complaint against MERALCO for lack

of merit, ordered LANDRITO to pay unpaid wages, separation pay
and overtime pay; as well as attorneys fees.

MERALCO v NLRC | Chico Nazario, J.

G.R. No. 145402 | March 14, 2008
Nature: Petition for Review on Certiorari of the Decision of CA
Petitioner: MERALCO Industrial Engineering Services Corp.
Respondent: Ofelia Landrito General Services/ Ofelia Landrito, NLRC

MERALCO as a principal of an independent contractor (Landrito for

janitorial services) cannot be held liable for payment separation pay of
dismissed employees (of the independent contractor).

There was no employer-employee relationship that existed

between the petitioner and the complainants and, thus, the
former could not have dismissed the latter from employment. 3
If the contract order (between MERALCO and Landrito) does
not provide for such a liability, this Court cannot just read the
same into the contract without possibly violating the intention
of the parties.
MERALCO is solidarily liable with the Landrito for the judgment
awards for underpayment of wages and non-payment of
overtime pay (see ratio for discussion). But Landrito have
nothing more to recover from MERALCO.

NLRC: Affirmed
3

The only instance when the principal can also be held liable with the
independent contractor or subcontractor for the backwages and separation pay
of the latters employees is when there is proof that the principal conspired
with the independent contractor or subcontractor in the illegal dismissal of the
employees

31

complainants, Landrito should now solely bear the liability for

the underpayment of wages and non-payment of the overtime
pay.

CA: Solidarily liable on all: (1) underpayment and on the nonpayment of (2) overtime pay plus (3) separation pay
Issue:

EPARWA SECURITY v. LICEO DE CAGAYAN

WON MERALCO should be held liable for complainants separation

pay

A. Facts
1.

Held/ Ratio:
NO. MERALCO as a principal of an independent contractor
(Landrito for janitorial services) cannot be held liable for
payment separation pay of dismissed employees (of the
independent contractor).

The petitioner may be considered an indirect employer only

for purposes of unpaid wages.
There was no employer-employee relationship that existed
between the petitioner and the complainants and, thus, the
former could not have dismissed the latter from employment. 4
If the contract order (between MERALCO and Landrito) does
not provide for such a liability, this Court cannot just read the
same into the contract without possibly violating the intention
of the parties.

ON LIABILITY

MERALCO is solidarily liable with the Landrito for the judgment

awards for underpayment of wages and non-payment of
overtime pay.
o The joint and several liability of the principal with the
contractor and subcontractor were enacted to ensure
compliance with the provisions of the Labor Code,
principally those on statutory minimum wage. This
liability facilitates, if not guarantees, payment of the
workers compensation, thus, giving the workers
ample protection as mandated by the 1987
Constitution

BUT with the Courts findings that Landrito having already

received from MERALCO the correct amount of wages and
benefits, but having failed to turn them over to the
4

The only instance when the principal can also be held liable with the
independent contractor or subcontractor for the backwages and separation pay
of the latters employees is when there is proof that the principal conspired
with the independent contractor or subcontractor in the illegal dismissal of the
employees

2.
3.
4.

5.
6.

7.

Eparwa and LCDU, through their representatives, entered into

a Contract for Security Services: in consideration of the
security services, LCDU shall pay Eparwa for a certain amount
per guard per month, etc.
A number of the said security guards filed a complaint before
the NLRC against both Eparwa and LDCU for underpayment of
salary among other payments.
LDCU made a cross-claim and prayed that Eparwa should
reimburse LDCU for any payment to the security guards.
Labor Arbiter: Security guards entitled to some of the
payments claimed and held Eparwa and LDCU solidarily liable
pursuant to A109/Labor Code. Eparwa is ordered to reimburse
LDCU for whatever amount LDCU may be required to pay the
security guards.
Eparwa filed an appeal before the NLRC questioning its liability
for the security guards claims.
NLRC: Eparwa and LDCU solidarily liable for the wage
diferentials and premium for holiday and rest day work. But
Eparwa is not required to reimburse LDCU for its payments to
the guards.
a. Motion for reconsideration:

LDCU questioned NLRCs deletion of LDCUs

entitlement to reimbursement by Eparwa.

Eparwa prayed that LDCU be made to reimburse it

for whatever amount it may pay to the guards.

NLRC: although Eparwa and LDCU are solidarily

liable to the guards for the monetary award, LDCU
alone is ultimately liable. LDCU is ordered to
reimburse Eparwa for whatever amount the latter
may have paid to complainants arising from the
case.
CA: found favor in LDCU and reinstated Labor Arbiter decision.

B. Issue/Decision: Is LDCU alone ultimately liable to the security

guards for the wage diferentials and premium for holiday and rest day
pay? YES.

32

C. Rationale:

A106/Labor Code. Contractor or subcontractor.- Whenever an

employer enters into a contract with another person for the
performance of the formers work, the employees of the
contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provision of the Code.
In the event that the contractor or subcontractor fails to pay
the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with this
contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same
manner and extent that he is liable to employees directly
employed by him.

The Secretary of Labor may, by appropriate regulations,

restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code.
In so
prohibiting or restricting, he may make appropriate
distinctions
between labor-only contracting and job
contracting as well as diferentiations within these types of
contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this
Code.
There is labor-only contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and
placed by such persons are performing activities which are
directly related to the principal business of the 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.

A107/Labor Code. Indirect employer. The provisions of the

immediately preceding Article shall likewise apply to any
person, partnership or association or corporation which, not
being an employer, contracts with an independent contractor
for the performance of any work, task, job or project.
A109/Labor Code. Solidary liability.- The provisions of existing
laws to the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his contractor
or subcontractor for any violation of any provision of this

Code. For purposes of determining the extent of their civil

liability under this Chapter, they shall be considered as direct
employers.
Eagle Security Agency, Inc. v. NLRC (on all fours with the case
at hand):
o The solidary liability of PTSI and Eagle however does
not preclude reimbursement from co-debtor by the
one who paid (A1217/NCC).

The Wage Orders are explicit that payment of

the increases are to be borne by the
principal or client. But to be borne does not
mean that the principal, PTSI, would directly
pay the security guards the wage and
allowance increases because there is no
privity of contract between them.
The
security guards contractual relationship is
with their immediate employer, Eagle. As an
employer, Eagle is tasked among others with
the payment of their wages.

The Wage Orders made specific provision to

amend existing contracts for security services
by
allowing
the
adjustment
of
the
consideration paid by the principal to the
security agency concerned.
So, what the
Wage Orders require thus is the amendment of
the contract as to the consideration to cover
the service contractors payment of the
increases mandated.
In the end, ultimate
liability for the payment of the increases rests
with the principal.

But the contract had already expired without

being amended consonant with the Wage
Orders. So now, if PTSI pays the security
guards, it cannot claim reimbursement from
Eagle. But in case it is Eagle that pays them,
the latter can claim reimbursement from PTSI
in stead of an adjustment in the contract of
the money to be paid the contractor, since the
contract had already expired.
In the case at hand: for the security guards, the actual source
of the payment of their wage diferentials and premium for
holiday and rest day work does not matter as long as they are
paid. This is the import of Eparwa and LDCUs solidary
liability. Creditors, such as the security guards, may collect
from anyone of the soliday debtors. Solidary liability does not

33

mean that as between themselves, two solidary debtors are

liable for only half of the payment.
o LDCUs ultimate liability comes into play because of
the expiration of the contract. There is no privity of
contract between the guards and LDCU but LDCUs
liability to the guards remains because of A106, 107
and 109/ Labor Code. Eparwa is already precluded
from asking LDCU for an adjustment in the contract
price because of the expiration of the contract, but
Eparwas liability to the security guards remains
because of their employer-employee relationship.
Instead of an adjustment in the contract price, Eparwa
may claim reimbursement from LDCU for any payment
it may make to the guards. But LDCU cannot claim
any reimbursement from Eparwa for any payment it
may make to the guards (as payment of the increases
is to be borne by the principal or client).
Doctrine: In the payment of increases in the salary of employees
working via a contractor, the ultimate liability lies upon the
principal/indirect employer. So that when adjustment of payment to
the contractor may not be done for such increases for reason of
expiration of contract, the principal becomes liable alone. However,
this does not remove the rule that the contractor is also made
solidarily liable with the principal by virtue of A106, 107 and 109 of
the Labor Code. Thus to operationalize all the foregoing, when the
contractor pays as solidary debtor, he may be reimbursed; when the
principal does so, he may not be reimbursed.

B. Labor Contractor Only Requisites and Prohibition

MANDAUE v. ANDALES
ABOITIZ HAULERS v. DIMAPATOI
Facts:

Private respondents Monaorai Dimapatoi, Cecilia Agawin, Raul

Mamate, Emmanuel Guerrero and Gemeniano Bigaw worked
as checkers in the Mega Warehouse, which is owned by the
petitioner, Aboitiz Haulers, Inc.
Petitioner claims that respondents are not its employees,
rather they are the employees of Grigio Security Agency and
General Services (Grigio), a manpower agency that supplies

security guards, checkers and stufers. It allegedly entered

into a Written Contract of Service with Grigio on 1 March 1994.
By virtue of the aforementioned Written Contract of Service,
Grigio supplied petitioner with security guards, checkers and
stufers for petitioners Mega Warehouse. The respondents
were among the checkers that were assigned to the
petitioners warehouse.
Petitioner emphasizes that Grigio retained control over the
respondents by providing their own supervisors to oversee
Grigios personnel, as well as time cards to monitor the
attendance of its personnel.
Petitioner also alleges that on 9 May 1996, the respondents
left the warehouse and did not report to work thereafter. As a
result of the respondents sudden abandonment of their work,
there was no orderly and proper turnover of papers and other
company property in connection with the termination of the
Written Contract for Services. Respondents, on the other hand,
claim that most of them worked as checkers in petitioners
warehouse even before 1 March 1994.
Respondents allege that on 15 May 1996, petitioner Aboitiz
dismissed them on the pretext that the Written Contract of
Service between Grigio and the petitioner had been
terminated. The resepondents thereafter filed a complaint for
Illegal Dismissal before the Arbitration Branch of the NLRC.
The Labor Arbiter ruled that the complainants failure to ofer
any evidence showing that Grigio had no substantial capital
denotes that Grigio was a legitimate independent job
contractor. Thus, the employer-employee relationship existed
between Grigio and the respondents, not between the
petitioner and the respondents. Nevertheless, petitioner and
Grigio were held solidarily liable for the unpaid wages of the
respondents. The labor arbiter also ruled that the respondents
were not illegally dismissed by Grigio. NLRC affirmed the
findings of the Labor Arbiter.
Respondents filed an appeal for certiorari, which was granted
by the Court of Appeals. The CA determined that Grigio
was not an independent job contractor, despite its
claim that it has sufficient capital. Grigio does not carry
on an independent business, since the respondents
work as warehouse checkers is necessary and desirable
to the petitioners business of forwarding and
distribution of cargoes. Grigio also does not undertake
the performance of its contract free from the control
and supervision of its principal since respondents
work is performed in the petitioners warehouse under

34

the direct supervision and control of the petitioners

officials.
The CA ruled that respondents would be dismissed and
ordered that the respondents be reinstated, with full status
and rights of regular employees, as well as back wages and
other benefits.
Petitioner filed a Motion for Reconsideration, but the CA
denied the same. Petitioner sought relief from the SC.

Issue:
(1) whether or not Grigio is a "labor-only" contractor; YES
(2) whether the
abandonment.

respondents

were

lawfully

dismissed

due

to

Held/Ratio:
(1) YES.
The first issue that needs to be resolved is whether Grigio is a "laboronly" contractor, which is tantamount to a finding that the petitioner is
the employer of the respondents.
Article 106 of the Labor Code explains the relations which may arise
between an employer, a contractor and the contractors employees
thus:
ART. 106. Contractor or subcontractor. Whenever an
employer enters into a contract with another person for the
performance of the formers work, the employees of the
contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent
of the work performed under the contract in the same manner
and extent that he is liable to employees directly employed by
him.
The Secretary of Labor may, by appropriate regulations,
restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so prohibiting
or restricting, he may make appropriate distinctions between
labor only contracting and job contracting as well as
diferentiations within these types of contracting and
determine who among the parties involved shall be

considered the employer for purposes of this Code, to prevent

any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers
to an employer does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others,
and the workers recruited and placed by such persons are performing
activities which 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.
Section 7. Existence of an employer-employee relationship.
The contractor or subcontractor shall be considered the
employer of the contractual employee for purposes of
enforcing the provisions of the Labor Code and other social
legislation. The principal, however, shall be solidarily liable
with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay
wages.
The principal shall be deemed the employer of the contractual
employee in any of the following cases, as declared by a
competent authority:
a. where there is a labor-only contracting; or
b. where the contracting arrangement falls within the
prohibitions provided in Section 6 (Prohibitions) hereof.
In determining whether or not a "labor-only" contracting exists, Art.
106 of the Labor Code and Section 5 of the Rules Implementing
Articles 106 to 109 of the Labor Code, as amended, provides the
following criteria: (1) 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 other things; (2) the workers recruited and placed by
such persons are performing activities which are directly
related to the principal business of such employer; and (3) the
contractor does not exercise the right to control the
performance of the work of the contractual employee. In order
that one is considered by law as a "labor-only" contractor, all three
aforementioned criteria need not be present. If the contractor enters
into an arrangement characterized by any one of the criteria provided,
this would be a clear case of "labor-only contracting."
The allegation of the petitioner that Grigio is an independent
job contractor, and, therefore, this case is one of permissible

35

job contracting, is without basis. In this case, the

respondents work, as warehouse checkers, is directly related
to the principal business of the petitioner. Petitioner also
exercises the right to control and determines not only the end
to be achieved, but also the manner and means to be used in
reaching that end. Lastly, petitioner failed to sufficiently
prove that Grigio had "substantial capital or investment."
The respondents, as checkers, were employed to check and
inspect these cargoes, a task which is clearly necessary for
the petitioners business of forwarding and distributing of
cargoes. The petitioner did not dispute the fact that the
respondents were hired as checkers as early as 1992. The fact
that they were employed before the Written Contract of
Services took effect on 24 February 1994, and continued with
their jobs until 1996, after the said contract had already
expired on 24 February 1995, indicates that the respondents
work was indeed necessary for the petitioners business.
In addition, Grigio did not undertake the performance of its
service contract according to its own manner and method,
free from the control and supervision of its principal. The
work activities, work shifts, and schedules of the respondents,
including the time allowed for "recess" were set under the
Written Contract of Services. This clearly indicates that these
matters, which consist of the means and methods by which
the work is to be accomplished, were not within the absolute
control of Grigio. By stipulating these matters in a contract,
Grigio is constrained to follow these provisions and would no
longer be able to exercise the freedom to alter these work
shifts and schedules at its own convenience. Such being the
case, Grigio cannot be considered as an independent job
contractor.
Thus, Grigio is obviously a "labor-only contractor since it did
not have substantial capital or investment which relates to
the service performed; the respondents performed activities
which were directly related to the main business of the
petitioner; and Grigio did not exercise control over the
performance of the work of the respondents. Consequently,
the petitioner is considered as the employer of the
respondents.
(2) YES.
The second issue raised was whether the respondents have been
illegally dismissed. The petitioner alleges that the respondents were
lawfully dismissed for abandoning their work on 9 May 1996, six days

before the contract between Grigio and the petitioner was terminated
on 15 May 1996. This allegation was supported by the complaint by
one of the respondents, Mamate, for unpaid salaries from 22 April
1996 to 9 May 1996.
However, respondents submitted copies of the pertinent pages of the
logbook showing that they had in fact reported for work on the dates
they were supposed to have abandoned their jobs, from 9 May 1996
until 15 May 1996. One of the respondents, Monaorai Dimapatoi, even
submitted a Certification issued by petitioners very own Warehouse
Supervisor, Roger R. Borromeo, that Dimapatoi efectively performed
her job as warehouse checker and documentation clerk from 16
September 1992 to 15 May 1996.
Petitioners allegation that respondents abandoned their work is
therefore devoid of legal and factual bases. The Court has repeatedly
held that abandonment as a just and valid ground for dismissal
requires the deliberate and unjustified refusal of the employee to
resume his employment. Mere absence of failure to report for work,
after notice to return, is not enough to amount to such abandonment.
For a valid finding of abandonment, two factors must be present: (1)
the failure to report for work or absence without valid or justifiable
reason; and (2) a clear intention to sever employer-employee
relationship, with the second element as the more determinative
factor being manifested by some overt acts. In abandonment, there
must be a concurrence of the intention to abandon and some overt
acts from which an employee may be deduced as having no more
intention to work.
MARAGUINOT v. NLRC
FACTS:
1.

Petitioners'
were
employed
by
private
respondents(Maraguinot aince 1989 and Enero since 1990),
their tasks consisted of loading, unloading and arranging
movie equipment in the shooting area as instructed by the
cameraman, returning the equipment to Viva Films'
warehouse, assisting in the "fixing" of the lighting system, and
performing other tasks that the cameraman and/or director
may assign.

2.

Sometime in May 1992, petitioners sought the assistance of

their supervisor, Mrs. Alejandria Cesario, to facilitate their
request that private respondents adjust their salary in
accordance with the minimum wage law. In June 1992, they
were informed that the private respondents would agree to
increase their salary only if they signed a blank employment
contract.

36

3.

4.

5.

As petitioners refused to sign, private respondents forced

Enero to go on leave in June 1992, then refused to take him
back when he reported for work on 20 July 1992. Meanwhile,
Maraguinot was dropped from the company payroll from 8 to
21 June 1992, but was returned on 22 June 1992. He was
again asked to sign a blank employment contract, and when
he still refused, private respondents terminated his services
on 20 July 1992. Petitioners thus sued for illegal dismissal
before the Labor Arbiter.
Private respondents assert that they contract persons called
"producers" also referred to as "associate producers" to
"produce" or make movies for private respondents; and
contend that petitioners are project employees of the
associate producers who, in turn, act as independent
contractors. As such, there is no employer-employee
relationship
between
petitioners
and
private
respondents.Private respondents further contend that it was
the associate producer of the film "Mahirap Maging Pogi," who
hired petitioner Maraguinot. The movie shot from 2 July up to
22 July 1992, and it was only then that Maraguinot was
released upon payment of his last salary, as his services were
no longer needed. Anent petitioner Enero, he was hired for the
movie entitled "Sigaw ng Puso," later re-titled "Narito ang
Puso." He went on vacation on 8 June 1992, and by the time
he reported for work on 20 July 1992, shooting for the movie
had already been completed.
Petitioners Maraguinot and Enero obtained a favorable
judgment from the Labor Arbiter in an illegal dismissal case
they filed against Viva Films. The Labor Arbiter dismissed the
claims of Viva that petitioners were not its employees finding
that petitioners were doing activities necessary and essential
to the business of Viva which is movie making. When Viva
brought the matter to the NLRC, the latter reversed the Labor
Arbiter's ruling and ruled that the work activities of the
petitioners were that of "project employees," pointing to
petitioners' irregular work load and work schedules, and
emphasizing its finding that petitioners never controverted the
allegation that they were not prohibited from working with
other movie companies.

ISSUE: WON the petitioners were regular employees

HELD: The Supreme Court on appeal annulled the NLRC decision and
reinstated the Labor Arbiter's decision with modification in the
computation of backwages. In disposing of the case, the Supreme
Court applied the control test in determining whether there exists an

employer-employee relationship or not between petitioners and Viva.

While initially, petitioners were hired possibly as project employees,
they had attained the status of regular employees in view of Viva's
conduct of continuously rehiring them even after cessation of a
project.
A project employee or a member of a work pool may acquire the
status of a regular employee when the following concur: 1) There is a
continuous rehiring of project employees even after cessation of a
project; and 2) The tasks performed by the alleged "project employee"
are vital, necessary and indispensable to the usual business or trade
of the employer.
However, the length of time during which the employee was
continuously re-hired is not controlling, but merely serves as a badge
of regular employment.
In the instant case, the evidence on record shows that petitioner
Enero was employed for a total of two (2) years and engaged in at
least eighteen (18) projects, while petitioner Maraguinot was
employed for some three (3) years and worked on at least twentythree (23) projects. Moreover, as petitioners' tasks involved, among
other chores, the loading, unloading and arranging of movie
equipment in the shooting area as instructed by the cameramen,
returning the equipment to the Viva Films' warehouse, and assisting in
the "fixing" of the lighting system, it may not be gainsaid that these
tasks were vital, necessary and indispensable to the usual business or
trade of the employer. As regards the underscored phrase, it has
been held that this is ascertained by considering the nature of the
work performed and its relation to the scheme of the particular
business or trade in its entirety.

C. Efect of Finding
MANDAUE V. ANDALES, supra
SAN MIGUEL CORPORATION V. NATIONAL LABOR RELATIONS
COMMISSIONS
SMC, petitioner, versus, NLRC and Rafael Maliksi, respondents
Penned by J. Garcia
Facts: Rafael Maliksi filed a complaint against the San Miguel
Corporation-Magnolia Division, herein referred to as SMC and
Philippine Software Services and Education Center to compel them to
recognize him as a regular employer. He amended the complaint

37

afterwards to include the charge of illegal dismissal. Maliksis

employment record shows that he rendered services with Lipercon
Services from April 1, 1981 to February 1982 as budget head assigned
to SMC- Beer Division, then from July 1983 to April 1985 with Skill
Power Inc., as accounting clerk assigned to SMC-Magnolia Division,
then from October 1988 to 1989 also with Skill Power, Inc as acting
clerk assigned to SMC-Magnolia Finance, and from October 1989 to
October 31, 1990 with PHILSSEC assigned to Magnolia Finance as
accounting clerk. He alleged that Lipercon, Skillpower, and PHILSSEC
are labor-only contractors and any one of which had never been his
employer.

of the petitioner therein conclusively shows the necessity of

petitioners service to the respondents company and that his service
(though broken) for more than a year warranted regularization.

PHILSSEC has contracted with Magnolia to computerize the

latters manual accounting reporting systems of its provincial sales.
Maliksi was one of those employed by PHILSSEC whose principal
function was the manual control of data needed for computerization.
The respondents work was controlled by PHILSSECs supervisors, his
salary was paid by the agency and he reported directly to the latter.
The computerization was terminated in Oct 31, 1990 and so he was
terminated. On the other hand, it is SMCs contention that there was
no employer-employee relationship between the corporation and
Maliksi.

However, the supervening event that SMCs Magnolia Division

was acquired by another entity, reinstatement is no longer feasible.

Also, the Court was at loss to understand why Maliksi should

be included in the computerization project as a project employee
when he is not a computer expert. To the mind of the Court, his
placement in the project was for the purpose of circumventing labor
laws. There are various means contrived by employers to
countermand labor laws granting regular employment status to
workers by tossing them from one job contractor to another.

Dispositive: Petition DENIED and the assailed decision of CA AFFIRMED

with modification that if reinstatement is no longer possible, then
petitioner be awarded separation pay. REMANDED for computation of
monetary awards.
By: Mark Xavier Oyales
ABOITIZ HAULERS v. DIMAPATOI, supra

Labor Arbiter: Maliksi is a regular employee of PHILSSEC.

NLRC: Maliksi is a regular employee of SMC.
Court of Appeals: NLRCs decision was Affirmed.
Aggrieved, petitioner appealed the issue for resolution to the
Supreme Court.
Issue: Whether the respondent is a regular employee of petitioner.
Held: Respondent is a regular employee of the petitioner. The court
took judicial notice of the fact that Lipercon and Skillpower were
declared to be labor-only contractors. In deference to the factual
findings of the NLRC and CA, the Court did not detain itself on the
issue of whether there was an employer-employee relationship
between SMC and Maliksi. It concluded that there was. Indeed, having
served SMC for an aggregate period of more than 3 years through
employment contracts with these 2 labor contractors, Maliksi should
be considered as SMCs regular employee. It is undisputed that he was
hired and rehired by SMC to perform administrative and clerical work
that was necessary to SMCs business on a daily basis. The Court
threaded to jurisprudence as its basis, inter alia, Bustamante v. NLRC
where the Court in that case ruled in sum that the hiring and rehiring

SECTION 7. EMPLOYEE CLASSIFICATION

STATUTORY REFERENCE
Book VI Rule 1 Sec 5 Omnibus Rule
(a) Regular employment - The provisions of written agreements to
the contrary notwithstanding and regardless of the oral agreements of
the parties, employment shall be considered to be regular
employment for purposes of Book VI of the Labor Code 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 job, work or service to be performed is seasonal in nature and the
employment is for the duration of the season.
(b) Casual Employment There is casual employment where an
employee is engaged to perform a job, work or service which is merely
incidental to the business of the employer, and such job, work or
service is for a definite period made known to the employee at the

38

time of the engagement; provided, that any employee who has

rendered at least one year of service, whether such service is
continuous or not, 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.

reasonable standards made known by the employer to the employee

at the time of his engagement. An employee who is allowed to work
after a probationary period shall be considered a regular employee.

Notwithstanding the foregoing distinctions, every employee shall be

entitled to the rights and privileges, and shall be subject to the duties
and obligations, as may be granted by law to regular employees
during the period of their actual employment.

GLORY PHILIPPINES, INC. v. VERGARA

7.01 COVERAGE
Art 278 LC Coverage. The provisions of this Title shall apply to all
establishments or undertakings, whether for profit or not.
7.02 EMPLOYEE CLASSIFICATION
Art 280 LC 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 service to be
performed is seasonal in nature and the employment is for the
duration of the season.
An employment shall be deemed to be casual if it is not covered by
the preceding paragraph: Provided, That any employee who has
rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment
shall continue while such activity exists.

Art 281 LC Probationary employment. Probationary employment

shall not exceed six (6) months from the date the employee started
working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been
engaged on a probationary basis may be terminated for a just cause
or when he fails to qualify as a regular employee in accordance with

Recognition and Types

Quick Facts:
Respondents were employed by Glory on a month-to-month basis;
after the initial month, they were made to sign new contracts for
another month long extension. At one point, they were not made to
sign contracts for a period of several months but were still made to
continue their employment.
Later on, they were made to sign
contracts retroacting to around half of the months with no contracts
till the end of the month of April. Petitioners main branch (based in
Japan), ordered that respondents services would no longer be
required so petitioner dismissed them (at the end of the work day,
they were told my the security guard as they left not to report for
employment anymore since their contracts had already expired).
Respondents filed for illegal dismissal. Petitioner averred that they
were contractual employees and their term had already expired.
Respondents won at the CA. Hence this petition for review on
certiorari.
Issue: WON respondents were contractual employees
Held: No! They were regular employees hence illegally dismissed
Ratio (doctrine in blue highlights):
Article 280 of the Labor Code provides for three kinds of employees:
(1) regular employees or those who have been engaged to perform
activities which are usually necessary or desirable in the usual
business or trade of the employer; (2) project employees or those
whose 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 service to be performed is seasonal in nature and the
employment is for the duration of the season; and (3) casual
employees or those who are neither regular nor project employees . . .
.
In Grandspan Development Corporation v. Bernardo, 14 the Court held
that the principal test for determining whether particular employees

39

are properly characterized as 'project employees,' as distinguished

from 'regular employees,' 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. As defined, project employees are
those workers hired (1) for a specific project or undertaking, and (2)
the completion or termination of such project or undertaking has been
determined at the time of engagement of the employee.
In the instant case, respondents' employment contracts failed to state
the specific project or undertaking for which they were allegedly
engaged. While petitioner claims that respondents were hired for the
transaction with Glory Japan, the same was not indicated in the
contracts. As correctly observed by the Court of Appeals, nothing
therein suggested or even hinted that their employment was
dependent on the continuous patronage of Glory Japan
Further, the employment contracts did not indicate the duration and
scope of the project or undertaking as required by law. It is not enough
that an employee is hired for a specific project or phase of work to
qualify as a project employee. There must also be a determination of,
or a clear agreement on, the completion or termination of the project
at the time the employee was engaged, which is absent in this case.

The National Labor Federation, the labor union of the workers

of URSUMCO, of which Alejandro Cadalin was a member,
entered into a CBA with URSUMCO. Article XV of said CBA
particularly provided that the retirement benefits of the
members of the collective bargaining unit shall be in
accordance with law.

Agripino and Alejandro subsequently reached the age of 60

and were allegedly forced to retire. They accepted their
separation pays and applied for retirement benefits with the
SSS. Alejandro also executed a quitclaim in favor of URSUMCO.

They subsequently filed Complaints for illegal dismissal with

the Labor Arbiter of Dumaguete City.

URSUMCO claimed that Agripino and Alejandro voluntarily

retired, that the Memorandum was no longer in efect when
they did so, and that RA 7641 cannot be given retroactive
efect since there was an existing CBA that covered the
retirement benefits of the employees.

It further alleged that Agripino was merely a seasonal or

project worker and not a casual worker since the sugar milling
business is seasonal in nature. Thus, he was not actually
forced to retire. The termination of his employment was
essentially based on the fact that the period in his contract
had expired.

PANGILINAN v. GENERAL MILLING CORP.

Nature of Issue

Issues:

UNIVERSAL
ROBINA
SUGAR
MILLING
CORPORATION
(URSUMCO) V CABALLEDA, 156644, JULY 28, 2008, NACHURA,
J.

WoN RA 7641 has retroactive efect: Yes. The issue of the retroactive
efect of RA 7641 has long been settled. It is a curative statute.

Facts:

WoN Agripino is a seasonal or project employee: No. He is a

regular employee.

Agripino Caballeda was a welder for URSUMCO from March

1989 until June 23, 1997 with a salary of P124 per day while
Alejandro Cadalin was a crane operator from 1976 to June 15,
1997, with a salary of P209.30 per day.

WoN the Agripino and Alejandro voluntarily retired: No. The law
generally looks with disfavor on quitclaims and releases of employees
who have been inveigled or pressured into signing them by
unscrupulous employers seeking to evade their responsibilities.

John Gokongwei Jr., President of URSUMCO, issued a

Memorandum establishing the age of compulsory retirement
at 60. Subsequently, RA 7641 set the compulsory retirement
age, in the absence of a retirement plan or agreement, at 65
and that an employee may retire upon reaching 60.

Ratio: (On nature of issue to the best of my understanding)

Whether or not Agripino was a seasonal/project employee or a regular
employee is a question of fact. Time and again, we have held that the
Court is not a trier of facts.

40

In this case, it is noteworthy that the LA, the NLRC and the CA are one
in ruling that Agripino was not a casual employee, much less a
seasonal or project employee. In their findings, Agripino was
considered a regular employee of URSUMCO. Consequently, such
uniform finding of the LA, the NLRC, and the CA binds this Court.
Employer Determination - Effect
SAN MIGUEL CORP. v. NLRC
SMC, petitioner, versus, NLRC and Rafael Maliksi, respondents
Penned by J. Garcia
Facts: Rafael Maliksi filed a complaint against the San Miguel
Corporation-Magnolia Division, herein referred to as SMC and
Philippine Software Services and Education Center to compel them to
recognize him as a regular employer. He amended the complaint
afterwards to include the charge of illegal dismissal. Maliksis
employment record shows that he rendered services with Lipercon
Services from April 1, 1981 to February 1982 as budget head assigned
to SMC- Beer Division, then from July 1983 to April 1985 with Skill
Power Inc., as accounting clerk assigned to SMC-Magnolia Division,
then from October 1988 to 1989 also with Skill Power, Inc as acting
clerk assigned to SMC-Magnolia Finance, and from October 1989 to
October 31, 1990 with PHILSSEC assigned to Magnolia Finance as
accounting clerk. He alleged that Lipercon, Skillpower, and PHILSSEC
are labor-only contractors and any one of which had never been his
employer.
PHILSSEC has contracted with Magnolia to computerize the
latters manual accounting reporting systems of its provincial sales.
Maliksi was one of those employed by PHILSSEC whose principal
function was the manual control of data needed for computerization.
The respondents work was controlled by PHILSSECs supervisors, his
salary was paid by the agency and he reported directly to the latter.
The computerization was terminated in Oct 31, 1990 and so he was
terminated. On the other hand, it is SMCs contention that there was
no employer-employee relationship between the corporation and
Maliksi.

Aggrieved, petitioner appealed the issue for resolution to the

Supreme Court.
Issue: Whether the respondent is a regular employee of petitioner.
Held: Respondent is a regular employee of the petitioner. The court
took judicial notice of the fact that Lipercon and Skillpower were
declared to be labor-only contractors. In deference to the factual
findings of the NLRC and CA, the Court did not detain itself on the
issue of whether there was an employer-employee relationship
between SMC and Maliksi. It concluded that there was. Indeed, having
served SMC for an aggregate period of more than 3 years through
employment contracts with these 2 labor contractors, Maliksi should
be considered as SMCs regular employee. It is undisputed that he was
hired and rehired by SMC to perform administrative and clerical work
that was necessary to SMCs business on a daily basis. The Court
threaded to jurisprudence as its basis, inter alia, Bustamante v. NLRC
where the Court in that case ruled in sum that the hiring and rehiring
of the petitioner therein conclusively shows the necessity of
petitioners service to the respondents company and that his service
(though broken) for more than a year warranted regularization.
Also, the Court was at loss to understand why Maliksi should be
included in the computerization project as a project employee when
he is not a computer expert. To the mind of the Court, his placement
in the project was for the purpose of circumventing labor laws. There
are various means contrived by employers to countermand labor laws
granting regular employment status to workers by tossing them from
one job contractor to another.
However, the supervening event that SMCs Magnolia Division was
acquired by another entity, reinstatement is no longer feasible.
Dispositive: Petition DENIED and the assailed decision of CA AFFIRMED
with modification that if reinstatement is no longer possible, then
petitioner be awarded separation pay. REMANDED for computation of
monetary awards.
By: Mark Xavier Oyales
TABAS v. CALIFORNIA MANUFACTURING CO., INC.

Labor Arbiter: Maliksi is a regular employee of PHILSSEC.

NLRC: Maliksi is a regular employee of SMC.
Court of Appeals: NLRCs decision was Affirmed.

7.03 REGULAR EMPLOYEES

41

Art 280 LC 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 service to be
performed is seasonal in nature and the employment is for the
duration of the season.

when she garnered a performance rating of 3.15. Her contract was

repeatedly renewed for a total of 5 times over a period of 13 months.
However, she incurred a total of 12 absences from the period April to
June 1993. Line supervisor Velayo asked her why she incurred the
said absences but the latter failed to explain her side.
As a
consequence, Fadriquelas performance rating declined to 2.8 and
Velayo recommended to Philips that Fadriquelas employment be
terminated due to habitual absenteeism.

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.

Held/Ratio: NO. She was already a regular employee under Art. 280
of the Labor Code on the distinction between regular and casual or
contractual employment. Art. 280 was placed in our statute books to
prevent the circumvention by unscrupulous employers of the
employees right to be secure in his tenure by indiscriminately and
completely ruling out all written and oral agreements inconsistent with
the concept of regular employment defined therein. The language of
the law manifests the intent to protect the security of tenure of the
worker who may be denied the rights and benefits due a regular
employee because of lopsided agreements with the economically
powerful employer who can maneuver to keep an employee on a
casual or temporary status for as long as it is convenient to it. Art.
280 was designed to put an end to the pernicious practice of making
permanent casuals of our lowly employees by the simple expedient of
extending to them temporary or probationary appointments, ad
infinitum.

Art. 281. Probationary employment. An employee who is allowed

to work after a probationary period shall be considered a regular
employee. (last sentence)
Art. 75. Learnership agreement. Any employer desiring to employ
learners shall enter into a learnership agreement with them, which
agreement shall include: (d) A commitment to employ the learners if
they so desire, as regular employees upon completion of the
learnership. All learners who have been allowed or sufered to work
during the first two (2) months shall be deemed regular employees if
training is terminated by the employer before the end of the
stipulated period through no fault of the learners.
Types Regular Employees
PHILIPS SEMICONDUCTORS VS. FADRIQUELA
Facts: Philips Semiconductors employed contractual and regular
workers.
The employees were subject to periodic performance
appraisal based on output, quality, attendance and work attitude.
One was required to obtain a performance rating of at least 3.0 for the
period covered by the performance appraisal to maintain good
standing as an employee.
In May 1992, Fadriquela executed a Contract of Employment with
Philips in which she was hired as a production operator. Her initial
contract was for a period of 3 months but was extended for 2 months

Issue: W/N Fadriquela was still a contractual employee of Philips as of

June 1993

The two kinds of regular employees under the law are:

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.

The primary standard to determine a regular employment is

the reasonable connection between the particular activity
performed by the employee in relation to the business or
trade of the employer. The test is whether the former is
usually necessary or desirable in the usual business or trade
of the employer. If the employee has been performing the job for at
least one year, even if the performance is not continuous, the law
deems the repeated and continuing need for its performance as
sufficient evidence of the necessity, if not indispensability of that

42

activity to the business of the employer. Hence, the employment is

also considered regular, but only with respect to such activity and
while such activity exists. The law does not provide the qualification
that the employee must first be issued a regular appointment or must
be declared as such before he can acquire a regular employee status.

Nature of Work
UNIVERSAL ROBINA v. CABALLEDA, supra
MAGSALIN V. NATIONAL ORGANIZATION
Ponente: VITUG, J.
Facts: Coca-Cola Bottlers Phils., Inc., petitioner, engaged the services
of respondent workers as sales route helpers for a limited period of
five months. After five months, respondent workers were employed
by petitioner company on a day-to-day basis. According to petitioner
company, respondent workers were hired to substitute for regular
sales route helpers whenever the latter would be unavailable or when
there would be an unexpected shortage of manpower in any of its
work places or an unusually high volume of work. The practice was
for the workers to wait every morning outside the gates of the sales
office of petitioner company. If thus hired, the workers would then be
paid their wages at the end of the day.
Ultimately, respondent workers asked petitioner company to extend to
them regular appointments. Petitioner company refused. 58 of the
temporary workers (respondents) filed with NLRC a complaint for the
regularization of their employment with petitioner company and filed
a notice of strike and a complaint for illegal dismissal and unfair labor
practice with the NLRC.
Ratio:
Art. 280.
Regular and Casual Employment. The provisions of
written agreement to the contrary notwithstanding and regardless of
the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or services to be

performed is seasonal in nature and the employment is for the

duration of the season.
An employment shall be deemed to be casual if it is not covered by
the preceding paragraph: Provided, That, any employee who has
rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment
shall continue while such activity exists.
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. 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.
The repeated rehiring of respondent workers and the continuing need
for their services clearly attest to the necessity or desirability of their
services in the regular conduct of the business or trade of petitioner
company.
Doctrine:
The
standard
in
determining
whether
an
employment should be considered regular or non-regular, 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.
HACIENDA FATIMA v. NATIONAL FEDERATION OF SUGARCANE
WORKERS FOOD AND GENERAL TRADE
SKIPPERS UNITED v. NLRC

43

LOPEZ v. METROPOLITAN
SYSTEM, supra

WATERWORKS

AND

SEWERAGE

PNOC ENERGY DEVELOPMENT CORP., v. NLRC

SANTIAGO v. CF SHARP CREW MANAGEMENT INC.

Hiring Extend Period

HANJIN v. IBANEZ
SAN MIGUEL CORP. v. NLRC, supra
RAYCOR AIRCON SYSTEMS, INC. V SAN PEDRO
2007
Austria-Martinez, J.
Facts: Raycor Aircontrol Systems, Inc. hired Mario San Pedro as
tinsmith operator subject to the condition that his employment shall
commence on August 24, 1995 and shall be efective only for the
duration of the contract at Uniwide LasPias after completion of which
on November 18, 1995, it automatically terminates without necessity
of further notice. As theUniwide Las Pias project (first project) lasted
for
one
year,
Raycor
extended
respondent's
contract
beyond November 18, 1995. When this first project was finally
completed, Raycor again extended San Pedro's employment by
assigning him to its OlivarezPlaza, Bian, Laguna project (second
project) until December 1996. Subsequently, Raycor rehired San Pedro
as ducting man and assigned him to its Cabuyao, Laguna project
(third project) until April 1997. Thereafter, Raycor transferred San
Pedro to its Llanas, Alabang project (fourth project) and later, to
its Uniwide Coastal
project
in Baclaran, Paranaque (fifth
project). Raycor did not anymore issue new contracts to respondent
each time his employment was extended.
In a Memorandum dated October 30, 1997, Raycor declared that the
contract of employment of respondent was set to expire on November
1, 1997, the same to take efect on November 3, 1997. Thus, when
respondent reported for work on November 3, 1997, he was informed
by the company timekeeper that he had been terminated.
Issues: WON San Pedro is a regular employee or a mere project
employee.
Held: Regular
Ratio: Other than the 1995 employment contract it issued to
respondent, which contract we have held to be insufficient evidence of
project employment, petitioner utterly failed to adduce additional

evidence which would have convinced us that: 1) each time it hired

and rehired respondent, it intended for him to accomplish specific
tasks in the particular project to which he was assigned; 2) it intended
for respondent to carry out these specific tasks in accordance with the
project plan it had drawn out and within the limited time it had to
complete the same; and 3) it made such restrictions on each
engagement known to respondent, and the same were freely
accepted by him. Petitioner's failure to present such evidence is
inexcusable, given its access to such documents as project contracts,
payment remittances, employment records and payslips. Such lapse
is dismaying, considering that in Raycor v. National Labor Relations
Commission, the Court had signalled to petitioner that, given the
peculiar nature of its business, it had a strong case against the
regularization of some of its workers. The Court even enumerated the
kind of evidence petitioner should present to establish the project
employment of its workers.
SANTIAGO v. CF SHARP CREW MANAGEMENT INC., supra

Contract to Contract
BETA ELECTRIC CORP. v. NLRC
UNIVERSAL PLASTIC CORP. v. CATAPANG
Callejo, Sr | 2005
Petitioners: Universal Robina Corporation and/or Randy Gregorio
Respondents: Catapang, Ararao, Alcantara, Alcoran, Aristado, Cabrera,
Casano, Cervas, Cuidian, Comendador, Conchada, Coronado, Hiling,
Joyosa, Loria, Marikit, Pang-Ao, Platero, Roxas, Salazar, Trinidad,
Varela, Villanueva, Villegas
Facts:
The respondents were hired in Universals duck farim in Laguna under
an employment contract provided for a 5-month period. The company
would renew and re-employ respondents after expiration. This practice
continued from 1991 up to 1996 when the company informed them
that they will no longer renew their contracts.
Procedural5
5

Respondents filed separated complaints for illegal dismissal, reinstatement,

backwages, damages, and attys fees. The Labor Arbiter ruled in favor of
respondents.

44

Petitioners
They claim that the respondents are not regular employees because
they are covered by the 5-month contracts. Such contracts are not
intended to evade the law & the respondents voluntarily signed them,
under no moral dominance. They also claim that they cant be
compelled to physically reinstate the 13 other respondents because
no positions are available.
Respondents
They claim that they are regular employees after rendering 1 year of
service to the company. The fixed period of employment should be
struck down as contrary to public policy, morals, good customs or
public order as it was designed to preclude the acquisition of tenurial
security.
Issue/Held: WON the respondents, hired & re-hired through renewed 5month contracts, have acquired the status of regular employees

Company filed an appeal memorandum to NLRC saying that the

respondents are not regular employees.
Respondents filed a Motion for Enforcement of Reinstatement Order w/
the Labor Arbiter. The Labor Arbiter issued an Order in their favor, and later on
a Writ of Execution.
The company said that they can only reinstate 17 out of the 30
employees because the Agricultural Section of the company was phased out
and so no positions were available for the respondents.
The Sherif reported that some respondents have not yet been
reinstated. The Labor Arbiter directed the petitioner to reinstatement the
respondents under pain of contempt but only 17 were reinstated. The Sherif
was ordered to cause the immediate reinstatement of the 13 others.
The Labor Arbiter issued a writ to execute the withheld wages of the
17 who were reinstated. He also denied the petitioners motion to quash & the
motion to reconsider because of failure to reinstate the 13 other respondents.
The NLRC affirmed the NLRCs decision.
The CA held that the respondents became regular ecmployees by
operation of law after rendering more than 1 year of continuous service, saying
that the renewed 5-month contracts were used as subterfuge to prevent them
from becoming regular employees.

Ratio:
Procedural the appeal was filed way beyond the reglementary period
for filing an appeal.
Merits
In Abasolo v NLRC: 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.
The 5-month contracts was used by the company as a convenient
subterfuge from becoming regular employees. Such contractual
arrangement should be struck down or disregarded as contrary to
public policy or morals. To uphold the same would, in effect,
permit petitioners to avoid hiring permanent or regular
employees by simply hiring them on a temporary or casual
basis, thereby violating the employees security of tenure in
their jobs.
The act of the company in re-hiring the respondents for 3-5 years
negate their contention that the respondents were hired only for a
specific project/undertaking.
Petition denied due course. CA decision affirmed.
Length of Time
MARAGUINOT v. NLRC
Facts
Petitioner says that he was employed by respondents as part of the
filming crew. He was later promoted as an electrician. Petitioners
tasks contained of loading movie equipment in the shoothing area.

45

Petitioners sought the assistance of their supervisor, Cesario, to

facilitate their request that respondents adjust their salary in
accordance with the minimum wage law. Mrs. Cesario informed
petitioners that del Rosario would agree to increase their salary only if
they signed a blank employment contract.
As petitioner refused to sign, respondents forced Enero (the other
petitioner who worked as a crew member) to go on leave. However,
when he reported to work, respondent refused to take him back.
Maraguinot was dropped from the company payroll but when he
returned, he was again asked to sign a blank employment contract,
and when he still refused, respondents terminated his services.
Petitioners thus sued for illegal dismissal.
Private respondents assert that they contract persons called
producers to produce or make movies for private respondents and
contend that petitioners are project employees of the associate
producers, who act as independent contractors. Thus, there is no
employer-employee relationship.
However, petitioners cited that their performance of activities is
necessary in the usual trade or business of respondents and their
work in continuous.
Issue/s
Was there an employer-employee relationship between VIVA and
Maraguinot?
Held
YES
Ratio
With regards to VIVAs contention that it does not make movies but
merely distributes motion pictures, there is no sufficient proof to prove
this contention.
In respect to respondents allegation that petitioners are project
employees, it is a settled rule that the contracting out of labor is
allowed only in case of job contracting. However, assuming that the
associate producers are job contactors, they must then be engaged in
the business of making motion pictures. Associate producers must
have tools necessary to make motion pictures. However, the associate
producers in this case have none of these. The movie-making
equipment are supplied to the producers and owned by VIVA. Thus, it
is clear that the associate producer merely leases the equipment from
VIVA.
In addition, the associate producers of VIVA cannot be considered
labor-only contractors as they did not supply, recruit nor hire the
workers. It was Cesario, the Shooting Supervisor of VIVA, who

recruited crew members. Thus, the relationship between VIVA and its
producers or associate producers seems to be that of agency.
With regards to the issue of illegal dismissal, petitioners assert that
they were regular employees who were illegally dismissed. Petitioners
in this case had already attained the status of regular employees in
view of VIVAs conduct. Thus, petitioners are entitled to back wages.
A project employee or a member of a work pool may acquire the
status of a regular employee when:
a. there is a continuous rehiring of project employees even
after a cessation of project
b. the tasks performed by the alleged project employee are
vital and necessary to the business of employer
The tasks of petitioners in loading movie equipment and returning it to
VIVAs warehouse and fixing the lighting system were vital, necessary
and indispensable to the usual business or trade of the employer.
Petition granted.
ABESCO CONSTRUCTION
RAMIREZ

AND

DEVELOPMENT

CORP.

v.

Facts:
Abesco Construction hired respondents on diferent dates from 1976
to 1992 either as labourers, road roller operators, painters or drivers.
In 1977, respondents filed a complaint against Abesco Construction
for illegal dismissal and claims for non-payment of thirteenth month
pay, five days service incetive leave pay, premium pay for holidays
and rest days, and moral and exemplary damages. Abesco
Construction denied liability claiming that the respondents are just
project employees whose employments were coterminous with the
project to which they were assigned; that they were not regular
employees who enjoy security of tenure and entitled to separation pay
upon termination from work.
The Labor Arbiter declared that the respondents are employees of
Abesco Construction because they belong to a work pool from which
the company drew workers for assignment to diferent projects, at its
discretion. Because respondents were hired and rehired for over a
period of 18 years, they were deemed to be regular employees
Issue:/Held:
Whether respondents are regular employees? YES, they are regular
employees but not for the reasons given by the Labor Arbiter.
Ratio:
Employee who work under diferent project employment contracts for
several years do not automatically become regular employees; they

46

can remain as project employees regardless of the number of years

they work. Length of service is not a controlling factor in
determining the nature of ones employment. Moreover,
members of a workpool may either be project employees or work
employees.
The principal test for determining whether employees are project
employees or regular employees is whether they are assigned to
carry out a specific project or undertaking, the duration and scope of
which are specified at the time they are engaged for that project.
Such duration, as well as the particular work/service to be performed
is defined in an employment agreement and is made clear to the
employees at the time of hiring. In the case at bar, there was no such
agreement and Abesco Construction did not even inform respondents
of the nature of the latters work at the time of hiring. Due to this
failure, the respondents are considered by the Court as regular
employees.
Seafarers
DELA CRUZ v. MAERSK

Facts:
- NATIONAL STEEL CORPORATION (NSC), undertook the ambitious Five
Year Expansion Program I and II with the ultimate end in view of
expanding the volume and increasing the kinds of products that it
may ofer for sale to the public.
- NSC opted to execute and carry out its Five Yeear Expansion Projects
"in house," as it were, by administration
- NSC did the work here involved the construction of buildings and
civil and electrical works, installation of machinery and equipment and
the commissioning of such machinery only for itself. Private
respondent NSC was not in the business of constructing buildings and
installing plant machinery for the general business community, i.e.,
for unrelated, third party, corporations. NSC did not hold itself out to
the public as a construction company or as an engineering
corporation.
- The petitioners were released/dismissed from their jobs, thus they
filed separate complaints for unfair labor practice, regularization and
monetary benefits with the NLRC
- Petitioners argue that they are "regular" employees of NSC because:

7.04 PROJECT EMPLOYEES

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 service to be
performed is seasonal in nature and the employment is for the
duration of the season.
Defined
PNOC ENERGY DEVELOPMENT CORP. V. NLRC, supra
ALU-TUCP v. NLRC

(i) their jobs are "necessary, desirable and work-related to private

respondent's main business, steel-making"; and
(ii) they have rendered service for six (6) or more years to private
respondent NSC.
- However private respondents claim that the petitioners are merely
project employees.
- The basic issue of the case is thus whether or not petitioners are
properly characterized as "project employees" rather than "regular
employees" of NSC.
This issue relates, of course, to an important consequence:
1. the services of project employees are co-terminous with
the project and may be terminated upon the end or completion of the
project for which they were hired.
2. Regular employees, in contract, are legally entitled to
remain in the service of their employer until that service is terminated
by one or another of the recognized modes of termination of service

47

under the Labor Code.

PHILIPPINE JAI ALAI AND AMUSEMENT CORP. VS. CLAVE

FACTS:

Issue: WON the following employees are project-employees

Held: Yes, the petitioners are project-employees.
Ratio: The Court explained that "project" could refer to one or the
other of at least two (2) distinguishable types of activities.
Firstly, a project could refer to a particular job or undertaking that is
within the regular or usual business of the employer company, 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. Employees who are hired
for the carrying out of one of these separate projects, the scope and
duration of which has been determined and made known to the
employees at the time of employment, are properly treated as
"project employees," and their services may be lawfully terminated at
completion of the project.
Secondly, a particular job or undertaking that is not within the
regular business of the corporation. 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. The
case at bar presents what appears to our mind as a typical example of
this kind of "project."
During the time petitioners rendered services to NSC, their work was
limited to one or another of the specific component projects
which made up the FAYEP I and II. There is nothing in the record to
show that petitioners were hired for, or in fact assigned to, other
purposes, e.g., for operating or maintaining the old, or previously
installed and commissioned, steel-making machinery and equipment,
or for selling the finished steel products.
The Court therefore, agree with the basic finding of the NLRC
(and the Labor Arbiter) that the petitioners were indeed
"project employees."
KIAMEO v. NLRC

Project Employees

Phil. Jai Alai and Amusement Corp. is a corporation operating a jai-alai

fronton for sport and amusement. It has its own maintenance group
for the upkeep of its premises. For the renovation of its main building,
it hired Cadatal, Jr., Delgra and 30 other workers (private respondents)
for a period of one month, to continue even after that period should
their services be needed further in the renovation work. This
renovation was completed by October 1976. However, management
decided to construct an Annex to the Building, and private
respondents were assigned to work on a fire escape. On November 27,
1976, private respondents received notice of termination efective
November 29, 1976, but since minor repairs were still needed, they
worked up to December 11, 1976 and were fully paid for their labor up
to that date.
Petitioner filed with DOLE a report of termination of the services of
private respondents and 30 others, due to completion of the project
and listed them as "casual emergency workers." Private respondents
file a complaint alleging termination without cause.
DOLE ordered the reinstatement of private respondents with full
backwages, stating that the nature of the jobs performed by private
respondents was necessary and desirable in the usual business or
trade of petitioner; that they are regular employees pursuant to
Article 170 (now Article 281) of the Labor Code; and that their
termination was without just cause.
ISSUE: whether or not private respondents are regular employees
entitled to security of tenure
RATIO:
Art 281 (now 280) of the Labor Code provides:
(...) an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer,
except where the employment has been fixed for a specific project or
undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or where
the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by
the preceding paragraph: Provided, That, any employee who has

48

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 actually exists."
Private respondents were hired for a specific project - to renovate the
main building. It was made known and so understood at the start of
the hiring, that their services would last until the completion of the
renovation. There could be no other reason, however, than that the
termination of private respondents was because their services were
no longer needed and they had nothing more to do since the project
for which they were hired had been completed. The casual or limited
character of private respondents' employment, therefore, is evident.
They were engaged for a specific project or undertaking and fall within
the exception provided for in Article 281. Not being regular
employees. It cannot be justifiably said that petitioner had dismissed
them without just cause. They are not entitled to reinstatement with
full backwages.
SANDOVAL SHIPYARDS, INC. Vs. NLRC (1985)
This case made a clarification on what a project employee is and
what it includes.
FACTS
Private respondents were hired as workers in a shipping company in
the construction of a ship/vessel (which is considered as a project).
However, after the construction was finished, some of them were
dismissed. Others were employed again for another specific project
(construction of another ship).

They are project employees.

RATIO
The court anchored its decision on Policy Instructions No. 20 of the
Secretary of Labor, which was issued to stabilize employer-employee
relations in the construction industry, provides:
"Project employees are those employed in connection with a particular
construction project. Non-project (regular) employees are those
employed by a construction company without reference to any
particular project.
"Project employees are not entitled to termination pay if they are
terminated as a result of the completion of the project or any phase
thereof in which they are employed, regardless of the number of
projects in which they have been employed by a particular
construction company.
IMBUIDO v. NLRC6
G.R. No. 114734 | 31 March 2000 | Buena, J. | Special civil action for
certiorari
Petitioner: Vivian Imbuido
Respondents: National Labor Relations Commission, International
Information Services, Inc. and Gabriel Librando
Relevant Topic:

Whether the workers are project employees or regular employees.

FACTS
Petitioner was employed as data encoder by private
respondent.
From August 26, 1988 until October 18, 1991, she entered into
thirteen (13) separate employment contracts with private
respondent, each contract lasting only for a period of three (3)
months.
On October 18, 1991, her services were terminated due to low
volume of work.
Charging private respondent with unfair labor practices,
petitioner filed a complaint for illegal dismissal. Petitioner alleged
that her employment was terminated because she signed a
petition for certification election among the rank and file
employees of respondent.
Private respondent argued that petitioner's employment was
for a specific project with a specified period of engagement.

HELD

The dismissed workers filed a complaint for illegal dismissal.

The shipyard company contends that: each vessel is a separate
project and that the employment of the workers is terminated with the
completion of each project.
The workers contend otherwise: They claim to be regular workers and
that the termination of one project does not mean the end of their
employment since they can be assigned to unfinished projects.
ISSUE

Edited Lex Libris Synopsis

49

LABOR ARBITER: The Labor Arbiter found petitioner to be a

regular employee and that she was illegally dismissed because
the alleged reason for her termination is not among the just
causes for termination recognized by law.
Hence, he ordered her reinstatement without loss of seniority
rights and privileges, and the payment of backwages and service
incentive leave pay.
NLRC: On appeal, the NLRC dismissed the complaint holding
that petitioner's tenurial security is only up to the time the specific
project for which she was hired is completed. Hence, this petition
for certiorari.
ISSUE/HELD
W/N Imbuido is a regular employee [YES]
RATIO
Even as the Supreme Court concurred with the NLRC's findings
that petitioner is a project employee, it, however, reached a
diferent conclusion.
In the recent case of Maraguinot, Jr. vs. NLRC, the
Supreme Court held that "a project employee or a member
of a work pool may acquire the status of a regular
employee when the following concur:
1) There is a continuous rehiring of project employees
even after the cessation of a project; and
2) The tasks performed by the alleged "project employee"
are vital, necessary and indispensable to the usual
business or trade of the employer."
The evidence on record revealed that petitioner performs
activities which are usually necessary or desirable in the usual
business or trade of her employer, continuously for a period of
more than three (3) years, and contracted for a total of thirteen
(13) successive projects.
The Court had previously ruled that "however, the length of
time during which the employee was continuously re-hired is not
controlling, but merely serves as a badge of regular employment."
Based on the foregoing, the Court concluded that petitioner
has attained the status of a regular employee of private
respondent.
Being a regular employee, petitioner is entitled to security of
tenure and could only be dismissed for a just or authorized cause.
The alleged causes of petitioner's dismissal are not valid
causes for dismissal.
Accordingly, the Court reinstated the decision of the Labor
Arbiter with modification as to the computation of back wages and
service incentive leave pay.

DISPOSITIVE: Petition granted.

CHUA V CA (SOCIAL SECURITY COMMISSION, SSS, PAGUIO ET
AL)
440 SCRA 121
TINGA; October 6, 2004
NATURE
This is a petition for review of the Decision of the Court of Appeals in
CA-G.R. CV No. 38269 dated 06 March 1996, and its Resolution dated
30 July 1996 denying petitioners Motion for Reconsideration, affirming
the Order of the Social Security Commission (SSC) dated 1 February
1995 which held that private respondents were regular employees of
the petitioner and ordered petitioner to pay the Social Security
System (SSS) for its unpaid contributions, as well as penalty for the
delayed remittance thereof.
FACTS
- On 20 August 1985, private respondents Andres Paguio, Pablo
Canale, Ruel Pangan, Aurelio Paguio, Rolando Trinidad, Romeo Tapang
and Carlos Maliwat (hereinafter referred to as respondents) filed a
Petition with the SSC for SSS coverage and contributions against
petitioner Reynaldo Chua, owner of Prime Mover Construction
Development, claiming that they were all regular employees of the
petitioner in his construction business. Private respondents alleged
that petitioner dismissed all of them without justifiable grounds and
without notice to them and to the then Ministry of Labor and
Employment. They further alleged that petitioner did not report them
to the SSS for compulsory coverage in flagrant violation of the Social
Security Act.
- On the other hand, the petitioner claimed that private respondents
were project employees, whose periods of employment were
terminated upon completion of the project. Thus, he claimed, no
employer-employee relation existed between the parties. There being
no employer-employee relationship, private respondents are not
entitled to coverage under the Social Security Act. Moreover,
petitioner invokes the defense of good faith, or his honest belief that
project employees are not regular employees under Article 280 of the
Labor Code. The SSC and CA ruled in favor of the respondents.
ISSUE
WON private respondents were regular employees of the petitioner
HELD

50

YES
Ratio Elements of the control test: (a) selection and engagement of
the employee; (b) payment of wages; (c) the power of dismissal; and
(d) the power of control with regard to the means and methods by
which the work is to be accomplished, with the power of control being
the most determinative factor.
- Even though the employer does not admit, the existence of an
employer-employee relationship between the parties can easily be
determined by the application of the "control test, the elements of
which are: (a) selection and engagement of the employee; (b)
payment of wages; (c) the power of dismissal; and (d) the power of
control with regard to the means and methods by which the work is to
be accomplished, with the power of control being the most
determinative factor.
- There is no dispute that private respondents were employees of
petitioner. Petitioner himself admitted that they worked in his
construction projects, although the period of their employment was
allegedly co-terminus with their phase of work. It is clear that private
respondents are employees of petitioner, the latter having control
over the results of the work done, as well as the means and methods
by which the same were accomplished. Suffice it to say that
regardless of the nature of their employment, whether it is regular or
project, private respondents are subject of the compulsory coverage
under the SSS Law, their employment not falling under the exceptions
provided by the law. This rule is in accord with the Courts ruling in
Luzon Stevedoring Corp. v. SSS to the efect that all employees,
regardless of tenure, would qualify for compulsory membership in the
SSS, except those classes of employees contemplated in Section 8(j)
of the Social Security Act.
- In Violeta v. NLRC, this Court ruled that to be exempted from the
presumption of regularity of employment, the agreement between a
project employee and his employer must strictly conform to the
requirements and conditions under Article 280 of the Labor Code. It is
not enough that an employee is hired for a specific project or phase of
work. There must also be a determination of, or a clear agreement on,
the completion or termination of the project at the time the employee
was engaged if the objectives of Article 280 are to be achieved. This
second requirement was not met in this case.
- This Court has held that an employment ceases to be co-terminus
with specific projects when the employee is continuously rehired due
to the demands of the employers business and re-engaged for many
more projects without interruption. The Court likewise takes note of
the fact that, as cited by the SSC, even the National Labor Relations
Commission in a labor case involving the same parties, found that
private respondents were regular employees of the petitioner.

- Another cogent factor militates against the allegations of the

petitioner. In the proceedings before the SSC and the Court of
Appeals, petitioner was unable to show that private respondents were
appraised of the project nature of their employment, the specific
projects themselves or any phase thereof undertaken by petitioner
and for which private respondents were hired. He failed to show any
document such as private respondents employment contracts and
employment records that would indicate the dates of hiring and
termination in relation to the particular construction project or phases
in which they were employed. Moreover, it is peculiar that petitioner
did not show proof that he submitted reports of termination after the
completion of his construction projects, considering that he alleges
that private respondents were hired and rehired for various projects or
phases of work therein
- To be exempted from the presumption of regularity of employment,
the agreement between a project employee and his employer must
strictly conform to the requirements and conditions under Article 280
of the Labor Code. It is not enough that an employee is hired for a
specific project or phase of work. There must also be a determination
of, or a clear agreement on, the completion or termination of the
project at the time the employee was engaged if the objectives of
Article 280 are to be achieved.

Rationale
DE OCAMPO v. NLRC
Date: June 6, 1990
Ponente: Cruz
Doctrine: The rule in Cartagenas v. Romago Electric Co., that contract
workers are not considered regular employees, their services being
needed only when there are projects to be undertaken, is not
applicable in this case. The rationale of this rule is that if a project has
already been completed, it would be unjust to require the employer to
maintain them in the payroll while they are doing absolutely nothing
except waiting until another project is begun, if at all. In efect, these
stand-by workers would be enjoying the status of privileged retainers,
collecting payment for work not done, to be disbursed by the
employer from profits not earned. This is not fair by any standard and
can only lead to a coddling of labor at the expense of management.
Facts:

65 employees of Makati Development were terminated due to

the expiration of their contracts. The employees then filed a
complaint for illegal dismissal against MDC.

51

Due to the termination, the Philippine Transport and General

Workers Association, of which the complainants were
members, filed a notice of strike on the grounds of unionbusting, subcontracting of projects which could have been
assigned to the dismissed employees, and unfair labor
practice. They then declared a strike and established picket
lines in the perimeter of the MDC premises.
The MDC then filed with the Bureau of Labor Relations a
motion to declare the strike illegal and restrain the workers
from continuing the strike. The MDC then filed applications for
clearance to terminate 90 of the striking workers, whom it had
preventively suspended. 74 were project employees under
contract with the MDC.
The Labor Arbiter denied the applications for clearance filed
by MDC and directed it to reinstate the complainants. The
NLRC modified the decision: it granted the applications for
clearance to dismiss the union officers, considered severed
the project employees due to expiration of their contracts, and
reinstated the regular employees.

Topical issue:
W/N the separation of the project employees was justified.
Ratio: Yes, the separation of the project employees was justified.

The rule in Cartagenas v. Romago Electric Co., that contract

workers are not considered regular employees, their services
being needed only when there are projects to be undertaken,
is not applicable in this case. The rationale of this rule is that if
a project has already been completed, it would be unjust to
require the employer to maintain them in the payroll while
they are doing absolutely nothing except waiting until another
project is begun, if at all. In efect, these stand-by workers
would be enjoying the status of privileged retainers, collecting
payment for work not done, to be disbursed by the employer
from profits not earned. This is not fair by any standard and
can only lead to a coddling of labor at the expense of
management.

Although the contracts of the project workers had expired, the

project itself was still ongoing and so continued to require the
workers services for its completion. There is no showing that
such services were unsatisfactory to justify their termination.
The real reason for the termination of their services was the
complaint the project workers had filed and their participation
in the strike against the private respondent.

Policy Instruction No. 20 of the Department of Labor, provides

that "project employees are not entitled to separation pay if

they are terminated as a result of the completion of the

project or any phase thereof in which they are employed,
regardless of the projects in which they had been employed
by a particular construction company." The rule would entitle
project employees to separation pay if the projects they are
working on have not yet been completed when their services
are terminated. This also holds true even if their contracts
have expired, on the theory that such contracts would have
been renewed anyway because their services were still
needed.
Applying this rule, we hold that the project workers in the case
at bar, who were separated even before the completion of the
project at the New Alabang Village are entitled to separation
pay. We make this disposition instead of ordering their
reinstatement as it may be assumed that the said project has
been completed by this time.

Employer Obligation
HANJIN v. IBANEZ, supra
A.M. ORETA AND CO. INC. v. NLRC
G.R. No. 74004 | August 10, 1989
Nature: A petition for certiorari seeking annulment of the resolution of
the NLRC
Quick Summary:
Employee was hired for 12 months, during 1 st month, he met an
accident which fractured him. He went back to work after a month but
was later terminated by employer because employee was
probationary and terminated due to poor performance due to his
physical condition.
Citing POLICY INSTRUCTION NO. 12 of Minister of Labor, What
determines regularity or casualness is not employment
contract, written or otherwise, but the nature of the job. If the
job is usually necessary or desirable to the main business of the
employer, the employment is regular. Otherwise, it is casual
employment.
In this case, employment contract reveals that it is renewable subject
to future agreements of the parties which evinces that the Grulla was
hired by the company as a regular employee and not just mere
probationary employee.

52

employment contract.
Facts:

June 11, 1980: Grulla was engaged by Engineering

Construction and Industrial Development Company (ENDECO)
through A.M. Oreta and Co., Inc., as a carpenter in its projects
in Jeddah, Saudi Arabia for a period of twelve (12) months. He
left the Philippines for Jeddah, Saudi Arabia on August 5, 1980.
After 10 days (ACCIDENT)

August 15, 1980: Grulla met an accident which fractured his

lumbar vertebra while working at the jobsite. He was rushed
to the New Jeddah Clinic and was confined there for twelve
(12) days.
After 12 days (DISCHARGED FROM HOSPITAL)

August 27, 1980: Grulla was discharged from the hospital and
was told that he could resume his normal duties after
undergoing physical therapy for two weeks.
After 22 days (REPORTED BACK TO WORK)

September 18, 1980: Grulla reported back to his Project

Manager and presented to the latter a medical certificate
declaring the former already fit for work.
TERMINATION

Since then, he started working again until he received a notice

of TERMINATION of his employment on October 9, 1980.
Court action

Respondent Grulla filed a complaint for illegal dismissal,

recovery of medical benefits, unpaid wages for the unexpired
ten (10) months of his contract.

Arguments of A.M. Oreta and Company, Inc and ENDECO:

Grulla was validly dismissed because the latter was still a
probationary employee; and that his dismissal was justified on
the basis of his unsatisfactory performance of his job during
the probationary period
POEA: Awarded to Grulla the salaries corresponding to the unexpired
portion of his employment contract.
NLRC: Affirmed
Hence this petition for review on Certiorari
Issue:
WON the employment of respondent Grulla was illegally terminated
and therefore entitles him to salaries corresponding to the unexpired
portion of his employment contract.
Held/ Ratio:
YES. Grulla is a regular employee and therefore awarded the
salaries corresponding to the unexpired portion of his

Article 280 of the Labor Code provides: 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
employer.
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 actually exists.
Policy Instructions No. 12 of Minister of Labor:
What determines regularity or casualness is not employment
contract, written or otherwise, but the nature of the job. If the job is
usually necessary or desireable to the main business of the employer,
the employment is regular.
In this case, the employment contract reveals that although the period
of employment of Grulla is twelve (12) months, the contract is
renewable subject to future agreements of the parties. It is clear from
the employment contract that Grulla was hired by the company as a
regular employee and not just mere probationary employee.
Grulla is a regular employee, not probationary.

Article 281 of the Labor Code provides that the employer shall
make known to the employee at the time he is hired, the
standards by which he will qualify as a regular employee. In
the absence of these requisites, there is justification in
concluding that respondent Grulla was a regular employee
entitled to security of tenure during his period of employment.
Assuming that respondent is a probationary employee, still he
cannot be removed except for cause during the period of
probation.

Although a probationary or temporary employee has limited

tenure, he still enjoys security of tenure.The alleged ground of
unsatisfactory performance is not one of the just causes for
dismissal provided in the Labor Code. Neither is it included
among the grounds for termination of employment under their

53

contract. They failed to show proof of the particular acts or

omissions constituting the unsatisfactory performance of
Grulla of his duties, which was allegedly due to his poor
physical state after the accident.
Dispositive:
The instant petition is dismissed for lack of merit and the resolution of
the respondent Commission is hereby AFFIRMED.

Specific Period
GLORY PHILIPPINES INC., v. VERGARA, supra
PUREFOODS CORP. v. NLRC
LABAYOG v. M.Y. SAN BISCUITS, INC.
Continuous Rehiring
CHUA v. CA, supra
C.E. CONSTRUCTION CORP. v. CIOCO
Facts:
Cioco, et al were workers hired by C.E. Construction Corp as
carpenters and laborers in various construction projects from 19901999, the latest was GTI Tower in Makati. Before the start of every
project, Cioco et al signed invidual employment contracts.
In summer of 1999, Cioco et al (with 66 other workers) were
terminated by the company on the ground that the phases of the GTI
Tower project were already completed. Cioco et al filed a complaint for
illegal dismissal.

Were they illegally dismissed?

Held
Yes.
No.
Ratio
We again hold that the fact that the WORKERS have been employed
with the COMPANY for several years on various projects, the longest
being nine (9) years, did not automatically make them regular
employees considering that the definition of regular employment in
Article 28011 of the Labor Code, makes specific exception with respect
to project employment. The re-hiring of petitioners on a project-toproject basis did not confer upon them regular employment status.
The practice was dictated by the practical consideration that
experienced construction workers are more preferred. 12 It did not
change their status as project employees.
A review of the records shows that the COMPANY submitted the
needed evidence. In its motion for reconsideration of the CAs
decision, the COMPANY attached as Annexes "A"17 and "B,"18 Progress
Billing Reports clearly showing that the GTI Tower project was already
80.9203% and 81.3747% accomplished as of May 31, 1999 and June
30, 1999, respectively. Specifically, the particular form, concreting and
masonry works for which the WORKERS had been hired and assigned
were already completed or near completion, as shown by Annexes "A3," "A-4," and "A-6" of the May Progress Billing Report, and Annexes
"B-3," "B-4," "B-6" and "B-7" of the June Progress Billing Report. The
WORKERS did not question the veracity of the evidence presented and
just insisted that they are regular employees of the COMPANY, hence,
not liable for termination on mere ground of project completion.

Company: Cioco et al were project employees; due notices of

termination were given to them; termination reports were submitted
to DOLE, as required.

Workpool Employees

Cioco et al: We were regular workers of the company, hence, entitled

to reinstatement and backwages.

AGUILAR CORP. v. NLRC

Issue

MARAGUINOT v. NLRC, supra

ABESCO CONSTRUCTION
RAMIREZ, supra

AND

DEVELOPMENT

CORP.

v.

WON Cioco et al project employees of the company?

54

Length of Service
PALOMARES v. NLRC
Quick Facts:
Petitioners were hired as contractual employees for several specific
projects for private respondents 5-year expansion plan. They filed for
regularization but private respondent denied it. Thus they filed for
illegal dismissal. NLRC found they were project employees and not
entitled to regularization or reinstatement. Thus this petition on
certiorari.
Issue:
WON petitioners were contractual employees
Held:
Yes, they were contractual employees
Ratio (doctrine in blue highlights):
2.
ID.; ID.; ID.; PROJECT EMPLOYEES; TEST THEREOF. The
principal test for determining whether an employee is a project
employee and not a regular employee is whether he was assigned to
carry out a specific project or undertaking, the duration and scope of
which were specified at the time he was engaged for that project.
DTSaIc
3.
ID.; ID.; ID.; ID.; THE FACT THAT EMPLOYEES WORKED FOR THE
EMPLOYER UNDER DIFFERENT PROJECT EMPLOYMENT CONTRACTS
FOR YEARS CANNOT BE MADE A BASIS TO CONSIDER THEM AS
REGULAR EMPLOYEES; CASE AT BAR. It should be noted that there
were intervals in petitioners' respective employment contracts with
NSC, thus bolstering the latter's position that, indeed, petitioners are
project employees. Since its work depends on availability of such
contracts or projects, necessarily the employment of its work force is
not permanent but co-terminous with the projects to which they are
assigned and from whose payrolls they are paid. It would be extremely
burdensome for their employer to retain them as permanent
employees and pay them wages even if there are no projects to work
on. The fact that petitioners worked for NSC under diferent project
employment contracts for several years cannot be made a basis to
consider them as regular employees, for they remain project
employees regardless of the number of projects in which they have
worked.

4.
ID.; ID.; ID.; ID.; LENGTH OF SERVICE IS NOT THE
CONTROLLING DETERMINANT OF THE EMPLOYMENT TENURE OF A
PROJECT EMPLOYEE. Even if petitioners were repeatedly and
successively re-hired on the basis of a contract of employment for
more than one year, they cannot be considered regularized. Length of
service is not the controlling determinant of the employment tenure of
a project employee. As stated earlier, it is based on whether or not the
employment has been fixed for a specific project or undertaking, the
completion of which has been determined at the time of the
engagement of the employee. Furthermore, the second paragraph of
Article 280, providing that an employee who has rendered service for
at least one (1) year, shall be considered a regular employee, pertains
to casual employees and not to project employees such as petitioners.
5.
ID.; ID.; ID.; CRITERIA FOR FIXED CONTRACTS OF
EMPLOYMENT WHICH DO NOT CIRCUMVENT SECURITY OF TENURE.
In the case of Philippine National Oil Company Energy Development
Corporation v. NLRC, we set forth the criteria for fixed contracts of
employment which do not circumvent security of tenure, to wit: (1)
The fixed period of employment was knowingly and voluntarily agreed
upon by the parties, without any force, duress or improper pressure
being brought to bear upon the employee and absent any other
circumstances vitiating his consent; or (2) It satisfactorily appears that
the employer and employee dealt with each other on more or less
equal terms with no moral dominance whatever being exercised by
the former on the latter.
FILIPINAS PRE-FABRICATED BUILDING SYSTEMS v. PUENTE
PNOC ENERGY DEVELOPMENT CORP v. NLRC, supra
7.05 CASUAL EMPLOYEES
Art. 280. Regular and casual employment. 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.
Nature of Work
A.M. ORETA AND CO. INC. v. NLRC, supra

55

One Year Service

KIMBERLY v. DRILON
Facts:

KILUSAN-OLALIA terminated its strike and picketing activities

efective June 1, 1986 after a compliance agreement was
entered into by it with KIMBERLY.

On June 2, 1986, Med-Arbiter Bonifacio 1. Marasigan, who was

handling the certification election case issued an order
declaring the following as eligible to vote in the certification
election, thus:
1. The regular rank-and-file laborers/employees of the respondent
company consisting of 537 as of May 14, 1986 should be considered
qualified to vote;
2. Those casuals who have worked at least six (6) months as
appearing in the payroll months prior to the filing of the instant
petition on April 21, 1986; and
3. Those contractual employees who are allegedly in the employ of an
independent contractor and who have also worked for at least six (6)
months as appearing in the payroll month prior to the filing of the
instant petition on April 21, 1986.
During the pre-election conference, 64 casual workers were
challenged by KIMBERLY and (UKCEU-PTGWO) on the ground
that they are not employees of KIMBERLY but of RANK. It was
agreed by all the parties that the 64 voters shall be allowed to
cast their votes but that their ballots shall be segregated and
subject to challenge proceedings. The certification election
was conducted on July I., 1986, with the following results:
1. KILUSAN-OLALIA = 246 votes
2. (UKCEU-PTGWO) = 266 votes
3. NO UNION = 1 vote
4. SPOILED BALLOTS = 4 votes
5. CHALLENGED BALLOTS = 64 votes
TOTAL 581 votes
On November 13, 1986, then Minister Sanchez rendered a
decision the disposition wherein is summarized as follows:
1. The service contract for janitorial and yard maintenance service
between KIMBERLY and RANK was declared legal;
2. The other casual employees not performing janitorial and yard
maintenance services were deemed labor-only contractual and since
labor-only contracting is prohibited, such employees were held to
have attained the status of regular employees, the regularization
being effective as of the date of the decision;
3. UKCEU-PTGWO having garnered more votes than KILUSAN-OLALIA
was certified as the exclusive bargaining representative of KIMBERLY's
employees;
4. The reinstatement of 28 dismissed KILUSAN-OLALIA members was
ordered;

The CBA between Kimberly-Clark Philippines, Inc. and United

Kimberly-Clark Employees Union-Philippine Transport and
General Workers' Organization (UKCEU-PTGWO) expired June
30, 1986.

Within the 60-day freedom period prior to the expiration of

and during the negotiations for the renewal of the
aforementioned CBA, some members of the bargaining unit
formed another union called "Kimberly Independent Labor
Union for Solidarity, Activism and Nationalism-Organized
Labor Association in Line Industries and Agriculture (KILUSANOLALIA).

On April 21, 1986, KILUSAN-OLALIA filed a petition for

certification election in Regional Office No. IV, Ministry of
Labor and Employment (MOLE). Kimberly and (UKCEU-PTGWO)
did not object to the holding of a certification election but
objected to the inclusion of the so-called contractual workers
whose employment with Kimberly was coursed through an
independent contractor, Rank Manpower Company (RANK for
short), as among the qualified voters.

Pending resolution of the petition for certification election by

the med-arbiter, KILUSAN-OLALIA filed a notice of strike on
May 7, 1986 with the Bureau of Labor Relations, charging
KIMBERLY with unfair labor practices based on the following
alleged acts: (1) dismissal of union members (KILUSANOLALIA); (2) non-regularization of casuals/contractuals with
over six months service; (3) non-implementation of
appreciation bonus for 1982 and 1983; (4) non-payment of
minimum wages; (5) coercion of employees; and (6) engaging
in CBA negotiations despite the pendency of a petition for
certification election. This was later amended to withdraw the
charge of coercion but to add, as new charges, the dismissal
of Roque Jimenez and the non-payment of backwages of the
reinstated Emerito Fuentes.

Kimberly petitioned MOLE to assume jurisdiction of the

dispute which it did so and ordered the workers top stop their
strike.

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5. Roque Jimenez was ordered reinstated without backwages, the

period when he was out of work being considered as penalty for his
misdemeanor;
6. The decision of the voluntary arbitrator ordering the reinstatement
of Ermilo Fuentes with backwages was declared as already final and
unappealable;
7. KIMBERLY was ordered to pay appreciation bonus for 1982 and
1983.
Issue: WoN workers, not performing janitorial or yard
maintenance service, became regular employees of KIMBERLY
and are thus eligible to vote.

differential, cost of living allowance, 13th month pay, and

such other benefits extended to regular employees under the
CBA, from the day immediately following their first year of
service in the company. These regular employees are likewise
entitled to vote in the certification election held in July 1,
1986. Consequently, the votes cast by those employees not
performing janitorial and yard maintenance service, which
form part of the 64 challenged votes, should be opened,
counted and considered for the purpose of determining the
certified bargaining representative.
SAN MIGUEL CORP. v. ABELLA, supra

Held: Yes.

INTEGRATED CONTRACTOR AND PLUMBING WORKS, INC. v. CA

Ratio:
The law thus provides for two. kinds of regular employees, namely: (1)
those who are engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer;
and (2) those who have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which they are
employed. The individual petitioners herein who have been adjudged
to be regular employees fall under the second category. These are the
mechanics, electricians, machinists machine shop helpers, warehouse
helpers, painters, carpenters, pipefitters and masons. It is not
disputed that these workers have been in the employ of KIMBERLY for
more than one year at the time of the filing of the Petition for
certification election by KILUSAN-OLALIA.
Owing to their length of service with the company, these
workers became regular employees, by operation of law, one
year after they were employed by KIMBERLY through RANK.
While the actual regularization of these employees entails the
mechanical act of issuing regular appointment papers and compliance
with such other operating procedures as may be adopted by the
employer, it is more in keeping with the intent and spirit of the
law to rule that the status of regular employment attaches to
the casual worker on the day immediately after the end of his
first year of service. To rule otherwise, and to instead make their
regularization dependent on the happening of some contingency or
the fulfillment of certain requirements, is to impose a burden on the
employee which is not sanctioned by law.
On the basis of the foregoing circumstances, and as a
consequence of their status as regular employees, those
workers not perforce janitorial and yard maintenance service
were performance entitled to the payment of salary

7.06 CONTRACT FIXED PERIOD

Test Validity
BRENT SCHOOL V. ZAMORA
LABAYOG v. M.Y. BISCUITS, INC., supra
CIELO v. NLRC
Facts: Cielo is a truck driver who claims he was illegally dismissed by
the Henry Lei Trucking Company. The agreement between the parties
contained the following stipulations:
1.

That the term of said agreement is for a period of 6 months,

unless otherwise earlier terminated at the option of either
party;

2.

That the net income shall be divided between the trucking

company and the driver on 90/10% basis in favor of the
former;

3.

That there is no employer/employee relationship between the

parties since the agreement was contractual in nature.

A week before the agreement was about to expire, however, Cielo was
formally notified by the trucking company of the termination of his
services on the ground of expiration of their contract. Cielo came to
Court claiming that he had worked for the trucking company for more
than 6 months and had thus acquired the status of a regular
employee. As such, he could no longer be dismissed except for lawful
cause. He also contended that he had been removed before of his
refusal to sign, as required by the trucking company, an affidavit

57

stating that he has received his salary and allowances from said
company and had no more claim against them.
Issue: W/N the six-month period fixed by the contract between the
parties is valid
Held/Ratio: It is void ab initio since, from the circumstances, it is
apparent that the six-month period has been imposed to preclude
acquisition of security of tenure by the employee.

the agreement was a contract of employment into which were read

the provisions of the Labor Code and the social justice policy
mandated by the Constitution. It was a deceitful agreement cloaked
in the habiliments of legality to conceal the selfish desire of the
employer to reap undeserved profits at the expense of its employees.
As such, the agreement should be struck down or disregarded as
contrary to public policy, morals, etc.
CAPAROSO v. CA

While insisting that it is the agreement that regulates its relations with
Cielo, the trucking company is ensnared by its own words. The
agreement specifically declared that there was no employer-employee
relationship between the parties.
Yet the affidavit the trucking
company prepared required Cielo to acknowledge that he has received
his salary and allowances from them, suggesting an employment
relationship. According to its position paper, Cielos refusal to sign the
affidavit constituted disrespect or insubordination which had some
bearing on the renewal of his contract of employment with the
trucking company. The records show that all the drivers of the
trucking company have been hired on a fixed contract basis, as
evidenced by the mimeographed form of the agreement and of the
affidavit. The trucking company merely filled in the blanks with the
corresponding data, such as the drivers name and address, the
amount received by him, and the date of the document. Each driver
was paid through individual vouchers rather than a common payroll.

FABELA v. SAN MIGUEL CORP.

It is obvious that the purpose behind these individual contracts was to

evade the application of the labor laws by making it appear that the
drivers of the trucking company were not its regular employees.
Under these arrangements, the trucking company hoped to be able to
terminate the services of the drivers without the inhibitions of the
Labor Code. All it had to do was refuse to renew the agreements,
which were uniformly limited to a six-month period. No cause had to
be established because such renewal was subject to the discretion of
the parties. In fact, the trucking company did not even have to wait
for the expiration of the contract as it was there provided that it could
be earlier terminated at the option of either party.

HACIENDA BINO v. CUENCA

April 15, 2005
Callejo, Sr., J.:

By this clever scheme, the trucking company could also prevent the
drivers from becoming regular employees and thus be entitled to
security of tenure and other benefits, such as a minimum wage, costof-living allowances, vacation and sick leaves, holiday pay, and other
statutory requirements. It was a clear attempt to exploit the unwitting
employee and deprive him of the protection of the Labor Code by
making it appear that the stipulations of the parties were governed by
the Civil Code as in ordinary private transactions. In reality, however,

PNOC ENERGY DEVELOPMENT CORP. v. NLRC

Seasonal Employees
MAGALOS v. NLRC
PHIL. TOBACCO v. NLRC
SAN MIGUEL CORP. v. NLRC, supra
MANILA HOTEL v. CIR
INDUSTRIAL ETC. v. CIR

Facts: Hacienda Bino is a 236-hectare sugar plantation owned by

Hortencia L. Starke located at Barangay Orong, Kabankalan City,
Negros Occidental. The 76 individual respondents were part of the
workforce of Hacienda Bino consisting of 220 workers, performing
various works, such as cultivation, planting of cane points,
fertilization, watering, weeding, harvesting, and loading of harvested
sugarcanes to cargo trucks. On July 18, 1996, during the of-milling
season, Starke issued an Order or Notice which stated To all Hacienda
Employees: Please bear in mind that all those who signed in favor of
CARP are expressing their desire to get out of employment on their
own volition.
The Labor Arbiter, NLRC and CA ruled in favor of the laborers and
declared that Hacienda Bino is liable to the laborers for illegal
dismissal.

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Issue: WON they are seasonal or regular employees.

Held: Regular
Ratio: The primary standard for 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
employee. There is no doubt that the respondents were performing
work necessary and desirable in the usual trade or business of an
employer. Hence, they can properly be classified as regular
employees.
For respondents to be excluded from those classified as
regular employees, it is not enough that they perform work or services
that are seasonal in nature. They must have been employed only for
the duration of one season. While the records sufficiently show that
the respondents work in the hacienda was seasonal in nature, there
was, however, no proof that they were hired for the duration of one
season only. In fact, the payrolls, submitted in evidence by the
petitioners, show that they availed the services of the respondents
since 1991. Absent any proof to the contrary, the general rule of
regular employment should, therefore, stand. It bears stressing that
the employer has the burden of proving the lawfulness of his
employees dismissal.

POSEIDON FISHING v. NLRC

59