LABSTAND CASES BOOK III
they continue to be paid during their lunch break
1. Sime Darby Pilipinas, Inc. petitioner,
vs NLRC and Sime Darby Salaried
Employees Assoc., respondents
Issue: Is the act of management in revising the
work schedule of its employees and discarding
their paid lunch break constitutive of unfair
labor practice?
Facts:
Sime Darby is engaged in the manufacture of
automotive tires, tubes and other rubber
products. Private respondent is an association of
the monthly salaried employees of the Sime
Darby factory workers in Marikina. Prior to the
controversy, all employees of Sime Darby
worked from 7:45am to 3:45pm with a 30-
minute paid "on call" lunch break.
On August 14, 1992, the company issued a
memorandum to all factory employees advising
all its monthly salaried employees in Marikina
Tire plant except those in the warehouse and
Quality Assurance Dept., of a change in work
schedules. (M-F, 7:45am-4:45pm and Sat
7:45am-11:45am) with cofee break of 10
minutes between 9:30am-10:30am and 2:30pm-
3:30pm and lunch break between 12nn-1pm(M-
F).
Because of this memorandum, the association
filed a complaint in behalf of its members a
complaint with labor Arbiter for unfair labor
practice, discrimination and evasion of liability.
However, the labor arbiter dismissed the
complaint on the grounds that the elimination of
the 30 minute paid lunch break constituted a
valid exercise of management prerogative and
that the new work schedule did not have the
effect of dimishing the benefits for the work did
not exceed 8 hours.
Labor arbiter added that it would be unjust if
even if they are no longer on call or required to
work during the break.
The association appealed to the NLRC but
NLRC has affirmed the labor arbiter's decision
and dismissed the appeal. However, in the
motion for reconsideration, NLRC having two
new commissioners has reversed the earlier
decision. Stating that,the public respondent
declared that the new work schedule deprived
the employees of the benefits of a time-honored
company practice of providing its employees a
30-minute paid lunch break resulting in an
unjust diminution of company privileges
prohibited by Art. 100 of the Labor Code, as
amended.
Ruling:
The Office of the Solicitor General filed in a
lieu of comment a manifestation and motion
recommending that the petitioner be granted,
alleging that the 14 August 1992 memorandum
which contained the new work schedule was not
discriminatory of the union members nor did it
constitute unfair labor practice on the part of
petitioner.
We agree, hence, we sustain petitioner. The right
to fix the work schedules of the employees rests
principally on their employer. In the instant case
petitioner, as the employer, cites as reason for
the adjustment the efficient conduct of its
business operations and its improved
production.
The case before us does not pertain to any
controversy involving discrimination of
employees but only the issue of whether the
change of work schedule, which management
deems necessary to increase production,
constitutes unfair labor practice. As shown by
the records, the change effected by management
with regard to working time is made to apply to
all factory employees engaged in the same line
of work whether or not they are members of
private respondent union. Hence, it cannot be
said that the new scheme adopted by
management prejudices the right of private
respondent to self-organization.
Management is free to regulate, according to its
own discretion and judgment, all aspects of
employment, including hiring, work
assignments, working methods, time, place and
manner of work, processes to be followed,
supervision of workers, working regulations,
transfer of employees, work supervision, lay off
of workers and discipline, dismissal and recall
of workers. Further, management retains the
prerogative, whenever exigencies of the service
so require, to change the working hours of its
employees. So long as such prerogative is
exercised in good faith for the advancement of
the employer's interest and not for the purpose
of defeating or circumventing the rights of the
employees under special laws or under valid
agreements, this Court will uphold such
exercise.
Petition granted.
2. Pan American Wolrd Airways System
(Phil.) vs. Pan American Employees
Association
Facts: Appeal by certiorari from the decision of
the Court ofIndustrial Relations in case No.
1055 V dated October 10, 1959, and its
resolution en banc denying the motion for
reconsideration by the petitioner herein.
The Court orders to compute the overtime
compensation due the
aforesaid fourteen (14) aircraft mechanic and
the 2 employees from the Communication
Department based on the time sheet of said
employees from February 23, 1952 July 15,
1958 and to submit his report within 30 days for
further disposition by the court.
Petitioner contends that the finding of that the 1
hour meal period should be considered work
(deducting 15 minutes as time allowed for
eating) is not supported by substantial evidence.
Issue: Whether or not the 1 hour meal period
should be considered as overtime work (after
deducting 15 minutes)
Held: Yes. The Court ruled that during the so
called meal period, the mechanics were required
to stand by for emergency work; that if they
happened not to be available when called, they
were reprimanded by the lead man; that as in
fact it happened on many occasions, the
mechanics had been called from their meals or
told to hurry Employees Association up eating
to perform work during this period. Judgment
appealed from is affirmed. Cost
againstappellant.
3. JOSE SONZA vs. ABS-CBN
BROADCASTING CORPORATION
G.R. No. 138051
June 10, 2004
Facts: In May 1994, ABS-CBN signed an
agreement with the Mel and Jay Management
and Development Corporation (MJMDC). ABS-
CBN was represented by its corporate officers
while MJMDC was represented by Sonza, as
President and general manager, and Tiangco as
its EVP and treasurer. Referred to in the
agreement as agent, MJMDC agreed to provide
Sonzas services exclusively to ABS-CBN as
talent for radio and television. ABS-CBN agreed
to pay Sonza a monthly talent fee of P310, 000
for the first year and P317, 000 for the second
and third year.

On April 1996, Sonza wrote a letter to ABS-
CBN where he irrevocably resigned in view of
the recent events concerning his program and
career. After the said letter, Sonza filed with the
Department of Labor and Employment a
complaint alleging that ABS-CBN did not pay
his salaries, separation pay, service incentive
pay,13th month pay, signing bonus, travel
allowance and amounts under the Employees
Stock Option Plan (ESOP). ABS-CBN
contended that no employee-employer
relationship existed between the parties.
However, ABS-CBN continued to remit Sonzas
monthly talent fees but opened another account
for the same purpose.
The Labor Arbiter dismissed the complaint and
found that there is no employee-employer
relationship. NLRC affirmed the decision of the
Labor Arbiter. CA also affirmed the decision of
NLRC.
Issue: Whether or not there was employer-
employee relationship between the parties.
Ruling: Case law has consistently held that the
elements of an employee-employer relationship
are selection and engagement of the employee,
the payment of wages, the power of dismissal
and the employers power to control the
employee on the means and methods by which
the work is accomplished. The last element, the
so-called "control test", is the most important
element.
Sonzas services to co-host its television and
radio programs are because of his peculiar
talents, skills and celebrity status. Independent
contractors often present themselves to possess
unique skills, expertise or talent to distinguish
them from ordinary employees. The specific
selection and hiring of SONZA, because of his
unique skills, talent and celebrity status not
possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of
an independent contractual relationship. All the
talent fees and benefits paid to SONZA were the
result of negotiations that led to the Agreement.
For violation of any provision of the Agreement,
either party may terminate their relationship.
Applying the control test to the present case, we
find that SONZA is not an employee but an
independent contractor.
The control test is the most important test our
courts apply in distinguishing an employee from
an independent contractor. This test is based on
the extent of control the hirer exercises over a
worker. The greater the supervision and control
the hirer exercises, the more likely the worker is
deemed an employee. The converse holds true
as well the less control the hirer exercises, the
more likely the worker is considered an
independent contractor. To perform his work,
SONZA only needed his skills and talent. How
SONZA delivered his lines, appeared on
television, and sounded on radio were outside
ABS-CBNs control. ABS-CBN did not instruct
SONZA how to perform his job. ABS-CBN
merely reserved the right to modify the program
format and airtime schedule "for more effective
programming." ABS-CBNs sole concern was
the quality of the shows and their standing in the
ratings.
Clearly, ABS-CBN did not exercise control over
the means and methods of performance of
Sonzas work. A radio broadcast specialist who
works under minimal supervision is an
independent contractor. Sonzas work as
television and radio program host required
special skills and talent, which SONZA
admittedly possesses.
ABS-CBN claims that there exists a prevailing
practice in the broadcast and entertainment
industries to treat talents like Sonza as
independent contractors. The right of labor to
security of tenure as guaranteed in the
Constitution arises only if there is an employer-
employee relationship under labor laws.
Individuals with special skills, expertise or
talent enjoy the freedom to offer their services
as independent contractors. The right to life and
livelihood guarantees this freedom to contract as
independent contractors. The right of labor to
security of tenure cannot operate to deprive an
individual, possessed with special skills,
expertise and talent, of his right to contract as an
independent contractor.
4.FRANCISCO vs. NLRC
GR No. 170087 August 31, 2006
FACTS:
Angelina Francisco was hired by Kasei
Corporation during the incorporation stage. She
was designated as
accountant and corporate secretary and was
assigned to handle all the accounting needs of
the company. She was also designated as Liason
Officer to the City of Manila to secure permits
for the operation of the company.
In 1996, she was designated as Acting Manager.
She was assigned to handle recruitment of all
employees and
perform management administration functions.
In 2001, she was replaced by Liza Fuentes as
Manager. Kasei
Corporation reduced her salary to P2,500 per
month which was until September. She asked
for her salary but
was informed that she was no longer connected
to the company. She did not anymore report to
work since
she was not paid for her salary. She filed an
action for constructive dismissal with the Labor
Arbiter.
Kasei Corporation however averred in its
defense that:
- Petitioner had no daily time record and she
came to the office any time she wanted. The
company never
interfered with her work except that from time
to time, the management would ask her opinion
on matters
relating to her profession.
- petitioner was not among the employees
reported to the BIR, as well as a list of payees
subject to expanded
withholding tax which included petitioner. SSS
records were also submitted showing that
petitioner's latest
employer was Seiji Corporation
DECISION OF LOWER COURTS:
*Labor arbiter: Francisco was illegally
dismissed.
*NLRC: affirmed LA.
*CA: reversed NLRC.
*CA (motion for reconsideration): denied.
Hence, the present petition.
ISSUE/S:
(1) WON there was an employer-employee
relationship between petitioner and private
respondent Kasei Corporation; and if in the
affirmative,
(2) WON petitioner was illegally dismissed.
HELD:
(1) YES.
The court held that in this jurisdiction, there has
been no uniform test to determine the existence
of an employer-employee relation.
Generally, courts have relied on the so-called
RIGHT OF CONTROL TEST where the person
for whom the
services are performed reserves a right to
control not only the end to be achieved but also
the means to be
used in reaching such end. In addition to the
standard of right-of-control, the existing
ECONOMIC
CONDITIONS PREVAILING BETWEEN THE
PARTIES, like the inclusion of the employee in
the payrolls, can
help in determining the existence of an
employer-employee relationship.
The better approach would therefore be to adopt
a two-tiered test involving:
*CONTROL TEST - YES
*ECONOMIC CONDITIONS -YES
(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.
By applying the control test, there is no doubt
that petitioner is an employee of Kasei
Corporation because she
was under the direct control and supervision of
Seiji Kamura, the corporations Technical
Consultant. It is
therefore apparent that petitioner is
economically dependent on respondent
corporation for her continued
employment in the latters line of business.
Under the broader economic reality test, the
petitioner can likewise be said to be an
employee of respondent
corporation because 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 contributions from August 1,
1999 to December 18, 2000
In Sevilla v. Court of Appeals, the court
observed the need to consider the existing
economic conditions
prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of
the
employee in the payrolls, to give a clearer
picture in determining the existence of an
employer-employee
relationship based on an analysis of the totality
of economic circumstances of the worker.
Thus, the determination of the relationship
between employer and employee depends upon
the
circumstances of the whole economic activity,
such as:
(1) the extent to which the services performed
are an integral part of the employers business;
(2) the extent of the workers investment in
equipment and facilities;
(3) the nature and degree of control exercised by
the employer;
(4) the workers opportunity for profit and loss;
(5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed
independent
enterprise;
(6) the permanency and duration of the
relationship between the worker and the
employer; and
(7) the degree of dependency of the worker
upon the employer for his continued
employment in that line of
business.
The proper standard of economic dependence is
whether the worker is dependent on the alleged
employer
for his continued employment in that line of
business.
(2) YES, she was illegally dismissed. A
diminution of pay is prejudicial to the employee
and amounts to
constructive dismissal. Constructive dismissal is
an involuntary resignation resulting in cessation
of work
resorted to when continued employment
becomes impossible, unreasonable or unlikely;
when there is a
demotion in rank or a diminution in pay; or
when a clear discrimination, insensibility or
disdain by an
employer becomes unbearable to an employee
RATIO:
In affording full protection to labor, this Court
must ensure equal work opportunities regardless
of sex, race
or creed. Even as we, in every case, attempt to
carefully balance the fragile relationship
between employees
and employers, we are mindful of the fact that
the policy of the law is to apply the Labor Code
to a greater
number of employees. This would enable
employees to avail of the benefits accorded to
them by law, in line
with the constitutional mandate giving
maximum aid and protection to labor, promoting
their welfare and
reaffirming it as a primary social economic
force in furtherance of social justice and
national development.
5. National Federation of Labor v. NLRC
GR No. 103586
Facts:
1. Wage orders 3, 4, 5 & 6 were implemented
for a year which effectively icnreased the
statutory minimum wages of workers. In the
private respondent's company (Franklin Baker
Corp.) the wage rates of the regular employees
and casuals were such that there wasa positive
differential between 2 in the amount of P4.56.
After Wage Order No. 5, this differential is not
zero. As a result, grievance meetings were held
between the parties. It resulted to the following
action on the part of the employer: a)
regularization of casual employees, b) increase
in the wages of the regular employees, and the
c) grant of across the board increase of P2 to all
the regular employees.
2. The company experienced output slowdown
resulting to the dismissal of 205 employees. The
petitioner union went on strike and demand the
rectification of the wage distortion. The NLRC
in its decision found the existence of a wage
distortion and ordered the respondent company
to increase wage by P1.00. However, the NLRC
Fifth division held (after an MR) that the wage
distortion only existed for 15 days and has
ceased.
Issue: W/N it is within management
prerogative or discretion to implement a new
classification of its employees
RULING:
Yes. It is a decision that lies outside the concept
of 'wage distortion.' It is a decision that the
company must make either in conjuction with
employee negotiation. It is not therefore within
the power of the NLRC to impose unilaterally a
new scheme for the classification of employees
under the guise of rectifying a wage distortion
when none has been established either by CBA
or by management decision.
The court held that wage increases given by
employers either unilaterally or as a result of
collective bargaining negotiations should be
validated as an action on the part of the
employer to correct the wage distortion caused
by the implementation of the wage orders.
Moreover, the regularization of the casual
employees with the increases in the wages of the
regulars made the issue on wage distortion
academic
6. Cagayan sugar milling v secretary of labor
1998
7. Traders Royal Bank Employees Union v
NLRC
FACTS:
Petitioner and private respondent Atty.
Emmanuel Noel A. Cruz entered into a retainer
agreement whereby the former obligated itself
to pay the latter a monthly retainer fee of
P3,000.00 in consideration of the undertaking to
render the services enumerated in their contract.
During the existence of that agreement,
petitioner union referred to private respondent
the claims of its members for holiday, mid-year
and year-end bonuses against their employer,
Traders Royal Bank (TRB). A complaint was
filed by petitioner. NLRC favored the
employees, awarding them holiday pay
differential, mid-year bonus differential, and
year-end bonus differential. TRB challenged the
decision of the NLRC before the SC. The SC
deleted the award of mid-year and year-end
bonus differentials while affirming the award of
holiday pay differential.
After private respondent received the decision
of the SC he notified the petitioner union, the
TRB and the NLRC of his right to exercise and
enforce his attorneys lien over the award of
holiday pay differential, he filed a motion before
LA for the determination of his attorneys fees,
praying that 10% of the total award for holiday
pay differential computed by TRB at
P175,794.32, or the amount of P17,579.43, be
declared as his attorneys fees, and that
petitioner union be ordered to pay and remit said
amount to him.
Petitioner opposed said motion. LA favored
private respondent. Petitioner appealed to
NLRC but NLRC affirmed LAs decision.
Hence the petition at bar.
ISSUE:
Is the private respondent entitled to Atty.s fees
aside from his retainer fee?
RULING:
Yes. There are 2 commonly accepted concepts
of attorneys fees, the so-called ordinary and
extraordinary. In its ordinary concept, an
attorneys fee is the reasonable compensation
paid to a lawyer by his client for the legal
services he has rendered to the latter. The basis
of this compensation is the fact of his
employment by and his agreement with the
client.
In its extraordinary concept, an attorneys fee is
an indemnity for damages ordered by the court
to be paid by the losing party in a litigation. The
basis of this is any of the cases provided by law
where such award can be made, such as those
authorized in Article 2208, Civil Code, and is
payable not to the lawyer but to the client,
unless they have agreed that the award shall
pertain to the lawyer as additional compensation
or as part thereof.
It is the first type of attorneys fees which
private respondent demanded before the labor
arbiter. A claim for attorneys fees may be
asserted either in the very action in which the
services of a lawyer had been rendered or in a
separate action. While a claim for attorneys
fees may be filed before the judgment is
rendered, the determination as to the propriety
of the fees or as to the amount thereof will have
to be held in abeyance until the main case from
which the lawyers claim for attorneys fees may
arise has become final. Otherwise, the
determination to be made by the courts will be
premature. Of course, a petition for attorneys
fees may be filed before the judgment in favor
of the client is satisfied or the proceeds thereof
delivered to the client.
Private respondent was well within his rights
when he made his claim and waited for the
finality of the judgment for holiday pay
differential, instead of filing it ahead of the
awards complete resolution.
The P3,000.00 which petitioner pays monthly to
private respondent does not cover the services
the latter actually rendered before the LA and
the NLRC in behalf of the former. As stipulated
in their retainers agreement, the monthly fee is
intended merely as a consideration for the law
firms commitment to render the services.
There are two kinds of retainer fees a client may
pay his lawyer. These are a general retainer, or a
retaining fee, and a special retainer.
A general retainer, or retaining fee, is the fee
paid to a lawyer to secure his future services as
general counsel for any ordinary legal problem
that may arise in the routinary business of the
client and referred to him for legal action. The
future services of the lawyer are secured and
committed to the retaining client. For this, the
client pays the lawyer a fixed retainer fee. The
fees are paid whether or not there are cases
referred to the lawyer. The reason for the
remuneration is that the lawyer is deprived of
the opportunity of rendering services for a fee to
the opposing party or other parties. In fine, it is
a compensation for lost opportunities.
A special retainer is a fee for a specific case
handled or special service rendered by the
lawyer for a client. A client may have several
cases demanding special or individual attention.
If for every case there is a separate and
independent contract for attorneys fees, each
fee is considered a special retainer.
The P3,000.00 monthly fee provided in the
retainer agreement between the union and the
law firm refers to a general retainer, or a
retaining fee, as said monthly fee covers only
the law firms commitment to render the legal
services enumerated in said agreement..
Whether there is an agreement or not, the courts
can fix a reasonable compensation which
lawyers should receive for their professional
services. However, the value of private
respondents legal services should not be
established on the basis of Article 111 of the
Labor Code alone. Said article provides:
(a) In cases of unlawful withholding of wages
the culpable party may be assessed attorneys
fees equivalent to ten percent of the amount of
the wages recovered.
The implementing provision 38 of the foregoing
article further states:
Sec. 11. Attorneys fees. Attorneys fees in
any judicial or administrative proceedings for
the recovery of wages shall not exceed 10% of
the amount awarded. The fees may be deducted
from the total amount due the winning party.
The fees mentioned here are the extraordinary
attorneys fees recoverable as indemnity for
damages sustained by and payable to the
prevailing part. The 10% attorneys fees fixes
only the limit on the amount of attorneys fees
the victorious party may recover in any judicial
or administrative proceedings and it does not
revent the NLRC from fixing an amount lower
than 10% ceiling prescribed by the article when
circumstances warrant it.
The measure of compensation for private
respondents services as against his client should
properly be addressed by the rule of quantum
meruit which means as much as he deserves,
which is used in the absence of a contract, but
recoverable by him from his client. Where a
lawyer is employed without a price for his
services being agreed upon, the courts shall fix
the amount on quantum meruit basis.
But instead of adopting the above guidelines,
the labor arbiter erroneously set the amount of
attorneys fees on the basis of Article 111 of the
Labor Code. He completely relied on the
operation of Article 111 when he fixed the
amount of attorneys fees.
Article 111 of the Labor Code may not be used
as the lone standard in fixing the exact amount
payable to the lawyer by his client for the legal
services he rendered. While it limits the
maximum allowable amount of attorneys fees,
it does not direct the instantaneous and
automatic award of attorneys fees in such
maximum limit. The criteria found in the Code
of Professional Responsibility are to be
considered, in assessing the proper amount.
These are: (a) the time spent and the extent of
services rendered or required; (b) the novelty
and difficulty of the questions involved; (c) the
importance of the subject matter; (d) the skill
demanded; (e) the probability of losing other
employment as a result of acceptance of the
proffered case; (f) the customary charges for
similar services and the schedule of fees of the
IBP chapter to which the lawyer belongs; (g) the
amount involved in the controversy and the
benefits resulting to the client from the services;
(h) the contingency or certainty of
compensation; (i) the character of the
employment, whether occasional or established;
and (j) the professional standing of the lawyer.
WHEREFORE, the Resolution of respondent is
MODIFIED, and petitioner is hereby
ORDERED to pay the amount of P10,000.00 as
attorneys fees to private

Attorney's fees; ordinary vs. extraordinary -
G.R. No. 174179
G.R. No. 174179
"x xx.
On the Award of Attorneys Fees
Article 111 of the Labor Code, as amended,
governs the grant of attorneys fees in labor
cases:
Art. 111. Attorneys fees.- (a) In cases of
unlawful withholding of wages, the culpable
party may be assessed attorneys fees equivalent
to ten percent of the amount of wages
recovered.
(b) It shall be unlawful for any person to
demand or accept, in any judicial or
administrative proceedings for the recovery of
wages, attorneys fees which exceed ten percent
of the amount of wages recovered.
Section 8, Rule VIII, Book III of its
Implementing Rules also provides, viz.:
Section 8. Attorneys fees. Attorneys fees in
any judicial or administrative proceedings for
the recovery of wages shall not exceed 10% of
the amount awarded. The fees may be deducted
from the total amount due the winning party.
We explained in PCL Shipping Philippines, Inc.
v. National Labor Relations Commission[34]that
there are two commonly accepted concepts of
attorneys fees the ordinary and
extraordinary. In its ordinary concept, an
attorneys fee is the reasonable compensation
paid to a lawyer by his client for the legal
services the former renders; compensation is
paid for the cost and/or results of legal services
per agreement or as may be assessed. In
its extraordinary concept, attorneys fees are
deemed indemnity for damages ordered by
the court to be paid by the losing party to the
winning party. The instances when these may
be awarded are enumerated in Article 2208 of
the Civil Code, specifically in its paragraph 7 on
actions for recovery of wages, and is payable
not to the lawyer but to the client, unless the
client and his lawyer have agreed that the
award shall accrue to the lawyer as
additional or part of compensation.[35]
We also held in PCL Shipping that Article 111
of the Labor Code, as amended, contemplates
theextraordinary concept of attorneys fees
and that Article 111 is an exception to the
declared policy of strict construction in the
award of attorneys fees. Although an express
finding of facts and law is still necessary to
prove the merit of the award, there need not
be any showing that the employer acted
maliciously or in bad faith when it withheld
the wages. In carrying out and interpreting the
Labor Code's provisions and implementing
regulations, the employee's welfare should be
the primary and paramount consideration. This
kind of interpretation gives meaning and
substance to the liberal and compassionate spirit
of the law as embodied in Article 4 of the Labor
Code (which provides that "[a]ll doubts in the
implementation and interpretation of the
provisions of [the Labor Code], including its
implementing rules and regulations, shall be
resolved in favor of labor") and Article 1702 of
the Civil Code (which provides that "[i]n case of
doubt, all labor legislation and all labor
contracts shall be construed in favor of the
safety and decent living for the laborer).[36]
We similarly so ruled in RTG Construction, Inc.
v. Facto[37]and in Ortiz v. San Miguel
Corporation.[38] In RTG Construction, we
specifically stated:
Settled is the rule that in actions for recovery of
wages, or where an employee was forced to
litigate and, thus, incur expenses to protect his
rights and interests, a monetary award by way of
attorneys fees is justifiable under Article 111 of
the Labor Code; Section 8, Rule VIII, Book III
of its Implementing Rules; and paragraph 7,
Article 2208 of the Civil Code. The award of
attorneys fees is proper, and there need not
be any showing that the employer acted
maliciously or in bad faith when it withheld
the wages. There need only be a showing that
the lawful wages were not paid accordingly.
[39]
(emphasis ours)
In PCL Shipping, we found the award of
attorneys fees due and appropriate since the
respondent therein incurred legal expenses after
he was forced to file an action for recovery of
his lawful wages and other benefits to protect
his rights.[40] From this perspective and the
above precedents, we conclude that the CA
erred in ruling that a finding of the employers
malice or bad faith in withholding wages must
precede an award of attorneys fees under
Article 111 of the Labor Code. To reiterate, a
plain showing that the lawful wages were not
paid without justification is sufficient.
In the present case, we find it undisputed that
the union members are entitled to their AA
benefits and that these benefits were not paid by
the Company. That the Company had no funds
is not a defense as this was not an insuperable
cause that was cited and properly invoked. As a
consequence, the union members represented by
the Union were compelled to litigate and incur
legal expenses. On these bases, we find no
difficulty in upholding the NLRCs award of ten
percent (10%) attorneys fees.
The more significant issue in this case is the
effect of the MOA provision that attorneys fees
shall be deducted from the AA and CBA
receivables. In this regard, the CA held that
theadditional grant of 10% attorneys fees by the
NLRC violates Article 111 of the Labor Code,
considering that the MOA between the parties
already ensured the payment of 10% attorneys
fees deductible from the AA and CBA
receivables of theUnions members. In addition,
the Company also argues that the Unions
demand, together with the NLRC award, is
unconscionable as it represents 20% of the
amount due or aboutP21.4 million.
In Traders Royal Bank Employees Union-
Independent v. NLRC,[41] we expounded on the
concept of attorneys fees in the context of
Article 111 of the Labor Code, as follows:
In the first place, the fees mentioned here are the
extraordinary attorneys fees recoverable
as indemnity for damages sustained by and
payable to the prevailing part[y]. In the
second place, the ten percent (10%) attorneys
fees provided for in Article 111 of the Labor
Code and Section 11, Rule VIII, Book III of the
Implementing Rules is the maximum of the
award that may thus be granted. Article 111
thus fixes only the limit on the amount of
attorneys fees the victorious party may
recover in any judicial or administrative
proceedings and it does not even prevent the
NLRC from fixing an amount lower than the ten
percent (10%) ceiling prescribed by the article
when circumstances warrant it.[42] (emphases
ours; citation omitted)
In the present case, the ten percent (10%)
attorneys fees awarded by the NLRC on the
basis of Article 111 of the Labor Code accrue to
the Unions members as indemnity for damages
and not to the Unions counsel as compensation
for his legal services, unless, they agreed that
the award shall be given to their counsel as
additional or part of his compensation; in
this case the Union bound itself to pay 10%
attorneys fees to its counsel under the
MOA and also gave up the attorneys fees
awarded to the Unions members in favor of
their counsel. This is supported by Borelas
affidavit which stated that [t]he 10% attorneys
fees paid by the members/employees is separate
and distinct from the obligation of the company
to pay the 10% awarded attorneys fees which
we also gave to our counsel as part of our
contingent fee agreement.[43] The limit to this
agreement is that the indemnity for damages
imposed by the NLRC on the losing party
(i.e., the Company) cannot exceed ten percent
(10%).
Properly viewed from this perspective, the
award cannot be taken to mean an additional
grant of attorneys fees, in violation of the ten
percent (10%) limit under Article 111 of the
Labor Code since it rests on an entirely different
legal obligation than the one contracted under
the MOA. Simply stated, the attorneys fees
contracted under the MOA do not refer to the
amount of attorneys fees awarded by the
NLRC; the MOA provision on attorneys fees
does not have any bearing at all to the
attorneys fees awarded by the NLRC under
Article 111 of the Labor Code. Based on these
considerations, it is clear that the CA erred in
ruling that the LAs award of attorneys fees
violated the maximum limit of ten percent
(10%) fixed by Article 111 of the Labor Code.
Under this interpretation, the
Companys argument that the attorneys fees are
unconscionable as they represent 20% of the
amount due or about P21.4 million is more
apparent than real. Since the attorneys fees
awarded by the LA pertained to the Unions
members as indemnity for damages, it was
totally within their right to waive the amount
and give it to their counsel as part of their
contingent fee agreement. Beyond the limit
fixed by Article 111 of the Labor Code, such as
between the lawyer and the client, the attorneys
fees may exceed ten percent (10%) on the basis
of quantum meruit, as in the present case.[44]
x xx."
8. Escario, et. al. vs. NLRC, [G.R. No. 124055
June 8, 2000]
Post under case digests, labor law at Friday,
March 02, 2012 Posted by Schizophrenic Mind
Facts: Petitioners are merchandisers of
respondent company. They withdraw stocks
from the warehouse , fix the prices, price-
tagging, displaying the products and inventory.
They were paid by the company through an
agent to avoid liability. They claim that they
were under the control and supervision of the
company. They asked for regularization of their
status. They were then given notice of their
termination. The company denied any
employer-employee relationship. They claim
that they used an agent or independent
contractors to sell the merchandise. The Labor
Arbiter ruled that there was an employer-
employee relationship. The NLRC set aside the
decision and said that there was no such
relationship. The agent was a legitimate
independent contractor.
Issue: Whether or not the petitioners are
employees of the company.
Held: The Court ruled that there is no employer-
employee relationship and that petitioners are
employees of the agent. The agent is a
legitimate independent contractor. Labor-only
contractor occurs only when the contractor
merely recruits, supplies or places workers to
perform a job for a principal. The labor-only
contractor doesnt have substantial capital or
investment and the workers recruited perform
activities directly related to the principal
business of the employer. There is permissible
contracting only when the contractor carries an
independent business and undertakes the
contract in his own manner and method, free
from the control of the principal and the
contractor has substantial capital or investment.
The agent, and not the company, also exercises
control over the petitioners. No documents were
submitted to prove that the company exercised
control over them. The agent hired the
petitioners. The agent also pays the petitioners,
no evidence was submitted showing that it was
the company paying them and not the agent. It
was also the agent who terminated their
services. By petitioning for regularization, the
petitioners concede that they are not regular
employees.

As for janitorial and messengerial services, that
they are considered directly related to the
principal business of the employer has been
jurisprudentially recognized. Furthermore,
Sunower did not carry on an independent
business or undertake the performance of its
service contract according to its own manner
and method, free from the control and
supervision of its principal, SMC, its
apparent role having been merely to recruit
persons to work for SMC."!Therefore since
Sunower is labor only contracting, there is
the existence of an employer- employee
relationship!between SMC and private
respondents
9. San Miguel vs Aballa (2005) G.R. 149011
"Facts:"!Petitioner San Miguel Corporation
entered into a one-year contract with the
Sunower Multi-Purpose Cooperative."!
Sunower undertook and agreed to perform and
provide the company on a non exclusive basis
for a period of one year the following:
Messengerial, Janitorial, Shrimp harvesting and
Sanitation. "!Pursuant to the contract,
Sunower engaged private respondents to
render services at SMCs Bacolod Shrimp
Processing Plant. The contract was renewed and
private respondentd continued to perform their
tasks. Later, private respondents led a
complaint praying to be declared as regular
employees of SMC, with claims of recovery of
all benets and privileges."!Issue:"!Whether or
not Sunower is engaged in labor only
contracting."!"Held:"!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 the 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, i.e., to ensure that the
employees are paid their wages. The principal
employer becomes jointly and severally liable
with the job contractor, only for the payment of
the employees wages whenever the contractor
fails to pay the same. "!Other than that, the
principal employer is not responsible for any
claim made by the employees."!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 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."!The following would show that
sunower is engaged in labor only contracting:
What appears is that Sunower 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. It is gathered that
the lot, building, machineries and all other
working tools utilized by private respondents
in carrying out their tasks were owned and
provided by SMC."!Sunower, during the
existence of its service contract with respondent
SMC, did not own a single machinery,
equipment, or working tool used in the
processing plant. Everything was owned and
provided by respondent SMC. The lot, the
building, and working facilities are owned by respondents in shrimp harvesting, receiving
respondent SMC."!And from the job description and packing formed an integral part of the
provided by SMC itself, the work assigned to shrimp processing operations of SMC. "
private respondents was directly related to the
aquaculture operations of SMC. Undoubtedly,
the nature of the work performed by private