1. FARLE P. ALMODIEL, petitioner vs. NLRC, RAYTHEON PHILS., Respondents are further ordered to pay complainant P200,000.
to pay complainant P200,000.00 as moral damages
INC., respondents, G.R. No. 100641 June 14, 1993
THE CASE: Subject of this petition for certiorari is the March 1991 decision of the
National Labor Relations Commission which reversed and set aside the Labor
Arbiter's decision and ordered instead the payment of separation pay and financial
assistance of P100,000.00. Petitioner imputes grave abuse of discretion on the part of
the Commission and prays for the reinstatement of the Labor Arbiter's decision which
declared his termination on the ground of redundancy illegal.
FACTS: Petitioner F. Almodiel, a CPA, was hired as Cost Accounting Manager of
Raytheon Philippines, Inc. He started as a probationary or temporary employee. His
major duties were: (1) plan, coordinate and carry out year - end and physical
inventory; (2) formulate and issue out hard copies of Standard Product costing and
other cost/pricing analysis if needed and required and (3) set up the written Cost
Accounting System for the whole company. After a few months, he was given a
regularization increase of P1,600.00 a month.
On August 17, 1988, he recommended and submitted a Cost Accounting/Finance
Reorganization, affecting the whole finance group but the same was disapproved by
the Controller. However, he was assured by the Controller that should his position or
department which was apparently a one-man department with no staff becomes
untenable or unable to deliver the needed service due to manpower constraint, he
would be given a three (3) year advance notice.
On January 27, 1989, petitioner was summoned by his immediate boss and in the
presence of IRD Manager, Mr. Rolando Estrada, he was told of the abolition of his
position on the ground of redundancy. He pleaded with management to defer its action
or transfer him to another department, but he was told that the decision of
management was final and that the same has been conveyed to the Department of
Labor and Employment. Thus, he was constrained to file the complaint for illegal
dismissal before the Arbitration Branch of the National Capital Region, NLRC,
Department of Labor and Employment.
Labor Arbiter’s Ruling: 1989 - Labor Arbiter declared that complainant's
termination on the ground of redundancy is highly irregular and without legal and
factual basis, thus ordering the respondents to reinstate complainant to his former
position with full backwages without lost of seniority rights and other benefits.
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and P20,000.00 as exemplary damages, plus ten percent (10%) of the total award as
attorney's fees.
Raytheon appealed on the grounds that the Labor Arbiter committed grave abuse of
discretion in denying its rights to dismiss petitioner on the ground of redundancy, in
relying on baseless surmises and self-serving assertions of the petitioner that its act
was tainted with malice and bad faith and in awarding moral and exemplary damages
and attorney's fees.
NLRC’s Ruling: 1991 - the NLRC reversed the decision and directed Raytheon to
pay petitioner the total sum of P100,000.00 as separation pay/financial assistance.
ISSUES: 1. Whether NLRC committed grave abuse of discretion amounting to (lack
of) or in excess of jurisdiction in declaring as valid and justified the termination of
petitioner on the ground of redundancy.
2. Whether bad faith, malice and irregularity crept in the abolition of petitioner's
position of Cost Accounting Manager on the ground of redundancy.
RULING:
1. No. There is no dispute that petitioner was duly advised, one (1) month before, of
the termination of his employment on the ground of redundancy in a written notice by
his immediate superior in January 27, 1989. He was issued a check representing
separation pay but in view of his refusal to acknowledge the notice and the check, they
were sent to him thru registered mail on January 30, 1989. The Department of Labor
and Employment was served a copy of the notice of termination of petitioner in
accordance with the pertinent provisions of the Labor Code and the implementing
rules.
2. No. Whether petitioner's functions as Cost Accounting Manager have been
dispensed with or merely absorbed by another is however immaterial. For even
conceding that the functions of petitioner's position were merely transferred, no malice
or bad faith can be imputed from said act. This Court said that redundancy, for
purposes of our Labor Code, exists where the services of an employee are in excess
of what is reasonably demanded by the actual requirements of the enterprise. The
characterization of an employee's services as no longer necessary or sustainable, and
therefore, properly terminable, was an exercise of business judgment on the part of
the employer. The wisdom or soundness of such characterization or decision was not
subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so
long, of course, as violation of law or merely arbitrary and malicious action is not
shown.
Indeed, an employer has no legal obligation to keep more employees than are
necessary for the operation of its business. Petitioner does not dispute the fact that a
cost accounting system was installed and used at Raytheon subsidiaries and plants
worldwide; and that the functions of his position involve the submission of periodic
reports utilizing computerized forms designed and prescribed by the head office with
the installation of said accounting system. Petitioner attempts to controvert these
realities by alleging that some of the functions of his position were still indispensable
and were actually dispersed to another department. What these indispensable
functions that were dispersed, he failed however, to specify and point out. Besides, the
fact that the functions of a position were simply added to the duties of another does not
affect the legitimacy of the employer's right to abolish a position when done in the
normal exercise of its prerogative to adopt sound business practices in the
management of its affairs.
Considering further that petitioner held a position which was definitely managerial in
character, Raytheon had a broad latitude of discretion in abolishing his position. An
employer has a much wider discretion in terminating employment relationship of
managerial personnel compared to rank and file employees. The reason is that
officers in such key positions perform not only functions which by nature require the
employer's full trust and confidence but also functions that spell the success or failure
of an enterprise.
 Petitioner claims that the functions of his position were absorbed by the
Payroll/Mis/Finance Department under Ang Tan Chai, a resident alien
without any working permit from the DOLE as required by law. Almodiel also
claims that he is better qualified than Ang Tan Chai, a B.S. Industrial
Engineer, hired merely as a Systems Analyst Programmer or its equivalent in
early 1987, promoted as MIS Manager only during the middle part of 1988
and a resident alien.
 On the other hand, Raytheon insists that petitioner's functions as Cost
Accounting Manager had not been absorbed by Ang Tan Chai, a permanent
resident born in this country. It claims to have established below that Ang Tan
Chai did not displace petitioner or absorb his functions and duties as they
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were occupying entirely different and distinct positions requiring different sets
of expertise or qualifications and discharging functions altogether different
and foreign from that of petitioner's abolished position.
Destitute of merit is petitioner's imputation of unlawful discrimination when Raytheon
caused corollary functions appertaining to cost accounting to be absorbed by Danny
Ang Tan Chai, a resident alien without a working permit. Article 40 of the Labor Code
which requires employment permit refers to non-resident aliens. The employment
permit is required for entry into the country for employment purposes and is issued
after determination of the non-availability of a person in the Philippines who is
competent, able and willing at the time of application to perform the services for which
the alien is desired. Since Ang Tan Chai is a resident alien, he does not fall within the
ambit of the provision.
Petitioner also assails that he is better qualified for the position. It should be noted,
however, that Ang Tan Chai was promoted to the position during the middle part of
1988 or before the abolition of petitioner's position in early 1989. Besides the fact that
Ang Tan Chai's promotion thereto is a settled matter, it has been consistently held that
an objection founded on the ground that one has better credentials over the appointee
is frowned upon so long as the latter possesses the minimum qualifications for the
position. In the case at bar, since petitioner does not allege that Ang Tan Chai does
not qualify for the position, the Court cannot substitute its discretion and judgment for
that which is clearly and exclusively management prerogative.
It is a well-settled rule that labor laws do not authorize interference with the employer's
judgment in the conduct of his business. The determination of the qualification and
fitness of workers for hiring and firing, promotion or reassignment are exclusive
prerogatives of management. The Labor Code and its implementing Rules do not vest
in the Labor Arbiters nor in the different Divisions of the NLRC (nor in the courts)
managerial authority. The employer is free to determine, using his own discretion and
business judgment, all elements of employment, "from hiring to firing" except in cases
of unlawful discrimination or those which may be provided by law.
NOTES: Termination of an employee's services because of redundancy is governed
by Article 283 of the Labor Code which provides as follows:
Art. 283. Closure of establishment and reduction of personnel. —
The employer may also terminate the employment of any employee
due to installation of labor-saving devices, redundancy,
 retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by
serving a written notice on the worker and the Department of Labor
and Employment at least one (1) month before the intended date
thereof. In case of termination due to installation of labor-saving
devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closure or cessation of operations
of establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to at
least one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered as one (1) whole year.
2. CENTURY CANNING CORPORATION V. COURT OF APPEALS; G.R. No.
152894; August 17, 2007
This is a petition for review of the Decision and the Resolution of the Court of Appeals.
Facts: On 15 July 1997, Century Canning Corporation (petitioner) hired Gloria C.
Palad (Palad) as “fish cleaner” at petitioner’s tuna and sardines factory. Palad signed
on 17 July 1997 an apprenticeship agreement with petitioner. Palad received an
apprentice allowance of P138.75 daily. On 25 July 1997, petitioner submitted its
apprenticeship program for approval to the Technical Education and Skills
Development Authority (TESDA) of the Department of Labor and Employment
(DOLE). On 26 September 1997, the TESDA approved petitioner’s apprenticeship
program.
According to petitioner, a performance evaluation was conducted on 15 November
1997, where petitioner gave Palad a rating of N.I. or “needs improvement” since she
scored only 27.75% based on a 100% performance indicator. Furthermore, according
to the performance evaluation, Palad incurred numerous tardiness and absences. As
a consequence, petitioner issued a termination notice5 dated 22 November 1997 to
Palad, informing her of her termination effective at the close of business hours of 28
November 1997.
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Palad then filed a complaint for illegal dismissal, underpayment of wages, and
non-payment of pro-rated 13th month pay for the year 1997.
The Labor Arbiter dismissed the complaint for lack of merit but ordered petitioner to
pay Palad her last salary and her pro-rated 13th month pay.
On appeal, the National Labor Relations Commission (NLRC) affirmed with
modification the Labor Arbiter’s decision, thus:
WHEREFORE, premises considered, the decision of the Arbiter dated 25 February
1999 is hereby MODIFIED in that, in addition, respondents are ordered to pay
complainant’s backwages for two (2) months in the amount of P7,176.00 (P138.75 x
26 x 2 mos.). All other dispositions of the Arbiter as appearing in the dispositive portion
of his decision are AFFIRMED.
Upon denial of Palad’s motion for reconsideration, Palad filed a special civil action for
certiorari with the Court of Appeals. On 12 November 2001, the Court of Appeals
rendered a decision, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, the questioned decision of the NLRC is
hereby SET ASIDE and a new one entered, to wit:
(a) finding the dismissal of petitioner to be illegal;
(b) ordering private respondent to pay petitioner her underpayment in wages;
(c) ordering private respondent to reinstate petitioner to her former position without
loss of seniority rights and to pay her full backwages computed from the time
compensation was withheld from her up to the time of her reinstatement;
(d) ordering private respondent to pay petitioner attorney’s fees equivalent to ten
(10%) per cent of the monetary award herein; and
(e) ordering private respondent to pay the costs of the suit.
The Ruling of the Court of Appeals
The Court of Appeals held that the apprenticeship agreement which Palad signed was
not valid and binding because it was executed more than two months before the
TESDA approved petitioner’s apprenticeship program.
The Court of Appeals also held that petitioner illegally dismissed Palad. The Court of
Appeals ruled that petitioner failed to show that Palad was properly apprised of the
required standard of performance. The Court of Appeals likewise held that Palad was should rightly be considered as a regular employee of petitioner as defined by Article
not afforded due process because petitioner did not comply with the twin requirements 280 of the Labor Code x x x.
of notice and hearing. Republic Act No. 779615 (RA 7796), which created the TESDA, has transferred the
authority over apprenticeship programs from the Bureau of Local Employment of the
The Issues DOLE to the TESDA. RA 7796 emphasizes TESDA’s approval of the apprenticeship
program as a pre-requisite for the hiring of apprentices.
Petitioner raises the following issues: Since Palad is not considered an apprentice because the apprenticeship agreement
was enforced before the TESDA’s approval of petitioner’s apprenticeship
program, Palad is deemed a regular employee performing the job of a “fish cleaner.”
1. WHETHER OR NOT THE PRIVATE RESPONDENT WAS AN APPRENTICE; Clearly, the job of a “fish cleaner” is necessary in petitioner’s business as a tuna and
and sardines factory. Under Article 28021 of the Labor Code, an employment is deemed
2. WHETHER THERE WAS A VALID CAUSE IN TERMINATING THE SERVICE regular where the employee has been engaged to perform activities which are usually
OF PRIVATE RESPONDENT. necessary or desirable in the usual business or trade of the employer.
The Ruling of the Court Illegal Termination of Palad

The petition is without merit. To constitute valid dismissal from employment, two requisites must concur: (1) the
Registration and Approval by the TESDA of Apprenticeship Program Required Before dismissal must be for a just or authorized cause; and (2) the employee must be
Hiring of Apprentices afforded an opportunity to be heard and to defend himself.
When the alleged valid cause for the termination of employment is not clearly proven,
as in this case, the law considers the matter a case of illegal dismissal.
In the case at bench, the apprenticeship agreement between petitioner and private
Furthermore, Palad was not accorded due process. Even if petitioner did conduct a
respondent was executed on May 28, 1990 allegedly employing the latter as an
performance evaluation on Palad, petitioner failed to warn Palad of her alleged poor
apprentice in the trade of “care maker/molder.” On the same date, an apprenticeship
performance. In fact, Palad denies any knowledge of the performance evaluation
program was prepared by petitioner and submitted to the Department of Labor and
conducted and of the result thereof. Petitioner likewise admits that Palad did not
Employment. However, the apprenticeship agreement was filed only on June 7, 1990.
receive the notice of termination because Palad allegedly stopped reporting for
Notwithstanding the absence of approval by the Department of Labor and
work. The records are bereft of evidence to show that petitioner ever gave Palad the
Employment, the apprenticeship agreement was enforced the day it was signed.
opportunity to explain and defend herself. Clearly, the two requisites for a valid
Prior approval by the Department of Labor and Employment of the proposed
dismissal are lacking in this case.
apprenticeship program is, therefore, a condition sine qua non before an
WHEREFORE, we AFFIRM the Decision and the Resolution of the Court of Appeals.
apprenticeship agreement can be validly entered into.
The act of filing the proposed apprenticeship program with the Department of Labor
and Employment is a preliminary step towards its final approval and does not 3. Bernardo vs NLRC GR 122917 07/03/99
instantaneously give rise to an employer-apprentice relationship.
Hence, since the apprenticeship agreement between petitioner and private Facts: Petitioners numbering 43 are deaf–mutes who were hired on various periods
respondent has no force and effect in the absence of a valid apprenticeship program from 1988 to 1993 by respondent Far East Bank and Trust Co. as Money Sorters and
duly approved by the DOLE, private respondent’s assertion that he was hired not as
an apprentice but as a delivery boy (“kargador” or “pahinante”) deserves credence. He
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Counters through a uniformly worded agreement called ‘Employment Contract for
Handicapped Workers. Subsequently, they are dismissed.
Petitioners maintain that they should be considered regular employees, because their
task as money sorters and counters was necessary and desirable to the business of
respondent bank. They further allege that their contracts served merely to preclude
the application of Article 280 and to bar them from becoming regular employees.
Private respondent, on the other hand, submits that petitioners were hired only as
“special workers and should not in any way be considered as part of the regular
complement of the Bank.” Rather, they were “special” workers under Article 80 of the
Labor Code.
Issue: WON petitioners have become regular employees.
Held:
The uniform employment contracts of the petitioners stipulated that they shall be
trained for a period of one month, after which the employer shall determine whether or
not they should be allowed to finish the 6-month term of the contract. Furthermore,
the employer may terminate the contract at any time for a just and reasonable
cause. Unless renewed in writing by the employer, the contract shall automatically
expire at the end of the term.
Respondent bank entered into the aforesaid contract with a total of 56 handicapped
workers and renewed the contracts of 37 of them. In fact, two of them worked from
1988 to 1993. Verily, the renewal of the contracts of the handicapped workers and the
hiring of others lead to the conclusion that their tasks were beneficial and necessary to
the bank. More important, these facts show that they were qualified to perform the
responsibilities of their positions. In other words, their disability did not render them
unqualified or unfit for the tasks assigned to them.
In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled
employee should be given the same terms and conditions of employment as
a qualified able-bodied person. Section 5 of the Magna Carta provides:
“Section 5. Equal Opportunity for Employment.—No disabled person shall be denied
access to opportunities for suitable employment. A qualified disabled employee shall
be subject to the same terms and conditions of employment and the same
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compensation, privileges, benefits, fringe benefits, incentives or allowances as a
qualified able bodied person.”
The fact that the employees were qualified disabled persons necessarily removes the
employment contracts from the ambit of Article 80. Since the Magna Carta accords
them the rights of qualified able-bodied persons, they are thus covered by Article 280
of the Labor Code, which provides:
“ART. 280. Regular and Casual Employment. — The provisions of written agreement
to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or
trade of the employer, x x x”
“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 the 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 one 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.”
Respondent bank entered into the aforesaid contract with a total of 56 handicapped
workers and renewed the contracts of 37 of them. In fact, two of them worked from
1988 to 1993. Verily, the renewal of the contracts of the handicapped workers and the
hiring of others lead to the conclusion that their tasks were beneficial and necessary to
the bank. More important, these facts show that they were qualified to perform the
responsibilities of their positions. In other words, their disability did not render them
unqualified or unfit for the tasks assigned to them.
Without a doubt, the task of counting and sorting bills is necessary and desirable to the
business of respondent bank. With the exception of sixteen of them, petitioners
performed these tasks for more than six months.
Petition granted.
4. SSS vs. CA
FACTS: Margarita Tana, widow of the late Ignacio Tana, Sr., alleged that her husband
was, before his demise, an employee of Conchita Ayalde as a farmhand in the two (2)
sugarcane plantations she owned (known as Hda. No. Audit B-70 located in
Pontevedra, La Carlota City) and leased from the University of the Philippines (known
as Hda. Audit B-15-M situated in La Granja, La Carlota City). She further alleged that
Tana worked continuously six (6) days a week, four (4) weeks a month, and for twelve
(12) months every year between January 1961 to April 1979. For his labor, Tana
allegedly received a regular salary according to the minimum wage prevailing at the
time. She further alleged that throughout the given period, social security
contributions, as well as medicare and employees compensation premiums were
deducted from Tanas wages. It was only after his death that Margarita discovered that
Tana was never reported for coverage, nor were his contributions/premiums remitted
to the Social Security System (SSS). Consequently, she was deprived of the burial
grant and pension benefits accruing to the heirs of Tana had he been reported for
coverage.
Margarita alleged that Ayalde and Maghari shall pay the premium contributions of the
deceased Ignacio Tana, Sr. and report his name for SSS Coverage. On the other
side, respondent Ayalde belied the allegation that Ignacio Tana, Sr. was her
employee, admitting only that he was hired intermittently as an independent contractor
to plow, harrow, or burrow Hda. No. Audit B-15-M. Tana used his own carabao and
other implements, and he followed his own schedule of work hours. Ayalde further
alleged that she never exercised control over the manner by which Tana performed
his work as an independent contractor.
ISSUE: WON an agricultural laborer who was hired on pakyaw basis can be
considered an employee entitled to compulsory coverage and corresponding benefits
under the Social Security Law.
SSS argues that the deceased Tana Sr. who was hired by Ayalde on “pakyaw” basis
to perform specific task in her sugarcane plantations, should be considered an
employee; and such, his heirs are entitled to pension and burial benefits.
RULING: The mandatory coverage under the SSS Law (Republic Act No. 1161, as
amended by PD 1202 and PD 1636) is premised on the existence of an
employer-employee relationship, and Section 8(d) defines an employee as any person
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who performs services for an employer in which either or both mental and physical
efforts are used and who receives compensation for such services where there is an
employer-employee relationship. The essential elements of an employer-employee
relationship are: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the 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.
No particular form of evidence is required to prove the existence of an
employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted. For, if only documentary evidence would be required to
show that relationship, no scheming employer would ever be brought before the bar of
justice, as no employer would wish to come out with any trace of the illegality he has
authored considering that it should take much weightier proof to invalidate a written
instrument. Thus, as in this case where the employer-employee relationship between
petitioners and Esita was sufficiently proved by testimonial evidence, the absence of
time sheet, time record or payroll has become inconsequential.
In this case, the testimonies of Margarita Tana and other testimonies that Tana Sr.
was an employee of Ayalde and there is an existence of employer-employee
relationship between them. FIRST, it is indubitable, therefore, that Tana worked
continuously for Ayalde, not only as arador on pakyaw basis, but as a regular
farmhand, doing backbreaking jobs for Ayaldes business.There is no shred of
evidence to show that Tana was only a seasonal worker, much less a migrant
worker. All witnesses, including Ayalde herself, testified that Tana and his family
resided in the plantation. If he was a mere pakyaw worker or independent contractor,
then there would be no reason for Ayalde to allow them to live inside her property for
free. The only logical explanation is that he was working for most part of the year
exclusively for Ayalde, in return for which the latter gratuitously allowed Tana and his
family to reside in her property. SECOND, A closer scrutiny of the records, however,
reveals that while Ayalde herself may not have directly imposed on Tana the manner
and methods to follow in performing his tasks, she did exercise control through her
overseer.
Be that as it may, the power of control refers merely to the existence of the power. It is
not essential for the employer to actually supervise the performance of duties of the
employee; it is sufficient that the former has a right to wield the power. Certainly,
Ayalde, on her own or through her overseer, wielded the power to hire or dismiss, to
check on the work, be it in progress or quality, of the laborers. As the owner/lessee of
the plantations, she possessed the power to control everyone working therein and
everything taking place therein.
Jurisprudence provides other equally important considerations which support the
conclusion that Tana was not an independent contractor. First, Tana cannot be said to
be engaged in a distinct occupation or business. His carabao and plow may be useful
in his livelihood, but he is not independently engaged in the business of farming or
plowing. Second, he had been working exclusively for Ayalde for eighteen (18) years
prior to his demise. Third, there is no dispute that Ayalde was in the business of
growing sugarcane in the two plantations for commercial purposes. There is also no
question that plowing or preparing the soil for planting is a major part of the regular
business of Ayalde.
5. OPULENCIA ICE PLANT VS. NLRC
Facts: MANUEL P. ESITA was for twenty (20) years a compressor operator of
Tiongson Ice Plant in San Pablo City. In 1980 he was hired as compressor
operator-mechanic for the ice plants of petitioner Dr. Melchor Opulencia located in
Tanauan, Batangas, and Calamba, Laguna. Initially assigned at the ice plant in
Tanauan, Esita would work from seven o'clock in the morning to five o'clock in the
afternoon receiving a daily wage of P35.00.
In 1986, Esita was transferred to the ice plant in Calamba, which was then undergoing
overhauling, taking the place of compressor operator Lorenzo Eseta, who was
relieved because he was already old and weak. For less than a month, Esita helped in
the construction-remodeling of Dr. Opulencia's house.
In February 1989, for demanding the correct amount of wages due him, Esita was
dismissed from service. Consequently, he filed with Sub-Regional Arbitration in San
Pablo City, a complaint for illegal dismissal, underpayment, non-payment for overtime,
legal holiday, premium for holiday and rest day, 13th month, separation/retirement pay
and allowances against petitioners.
Petitioners deny that Esita is an employee. They claim that Esita could not have been
employed in 1980 because the Tanauan ice plant was not in operation due to low
voltage of electricity and that Esita was merely a helper/peon of one of the contractors
they had engaged to do major repairs and renovation of the Tanauan ice plant in 1986.
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Petitioners further allege that when they had the Calamba ice plant repaired and
expanded, Esita likewise rendered services in a similar capacity, and thus admitting
that he worked as a helper/peon in the repair or remodeling of Dr. Opulencia's
residence in Tanauan.
In December 1989, Labor Arbiter Villena rendered a decision 1 finding the existence of
an employer-employee relationship between petitioners and Esita and accordingly
directed them to pay him separation pay, underpayment of wages, allowances, 13th
month, holiday, premium for holiday, and rest day pays. Almost a year after, NLRC
affirmed the decision of Labor Arbiter Villena but reduced the monetary award as it
was not proven that Esita worked every day including rest days and on the days before
the legal holidays. In March 1991, petitioners' motion for reconsideration was denied.
Issue: WON there was an employee-employer relationship between Opulencia and
Esita.
Ruling: Yes. No particular form of evidence is required to prove the existence of an
employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted. For, if only documentary evidence would be required to
show that relationship, no scheming employer would ever be brought before the bar of
justice, as no employer would wish to come out with any trace of the illegality he has
authored considering that it should take much weightier proof to invalidate a written
instrument.
On the claim that Esita's construction work could not ripen into a regular employment
in the ice plant because the construction work was only temporary and unrelated to the
ice-making business, needless to say, the one month spent by Esita in construction is
insignificant compared to his nine-year service as compressor operator in determining
the status of his employment as such, and considering further that it was Dr.
Opulencia who requested Esita to work in the construction of his house.
In allowing Esita to stay in the premises of the ice plant and permitting him to cultivate
crops to augment his income, there is no doubt that petitioners should be commended;
however, in view of the existence of an employer-employee relationship as found by
public respondents, we cannot treat humanitarian reasons as justification for
emasculating or taking away the rights and privileges of employees granted by law.
Benevolence, it is said, does not operate as a license to circumvent labor laws. If
petitioners were genuinely altruistic in extending to their employees privileges that are
not even required by law, then there is no reason why they should not be required to
give their employees what they are entitled to receive.
Moreover, as found by public respondents, Esita was enjoying the same privileges
granted to the other employees of petitioners, so that in thus treating Esita, he cannot
be considered any less than a legitimate employee of petitioners.
6. FRANCISCO VS. NLRC
Facts: Petitoner 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, Petitioner 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.
The Labor Arbiter found that the petitioner was illegally dismissed. NLRC affirmed the
decision while CA reversed it.
Issue: Whether or not there was an employer-employee relationship.
Ruling: 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: (1) the
putative employer’s power to control the employee with respect to the means and
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methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.
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 employer’s business; (2) the
extent of the worker’s investment in equipment and facilities; (3) the nature and degree
of control exercised by the employer; (4) the worker’s opportunity for profit and loss;
(5) the amount of initiative, skill, judgment or foresight required for the success of the
claimed independent enterprise; (6) the permanency and duration of the relationship
between the worker and the employer; and (7) the degree of dependency of the
worker upon the employer for his continued employment in that line of business. The
proper standard of economic dependence is whether the worker is dependent on the
alleged employer for his continued employment in that line of business.
By applying the control test, 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 corporation’s Technical Consultant. It is therefore apparent that petitioner
is economically dependent on respondent corporation for her continued employment
in the latter’s line of business.
There can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is
economically dependent upon respondent for her continued employment in that line of
business. Her main job function involved accounting and tax services rendered to
Respondent Corporation on a regular basis over an indefinite period of engagement.
Respondent Corporation hired and engaged petitioner for compensation, with the
power to dismiss her for cause. More importantly, Respondent Corporation had the
power to control petitioner with the means and methods by which the work is to be
accomplished.
6. ANGELINA FRANCISCO, Petitioner, G.R. No. 170087 August 31,
2006 v. NATIONAL LABOR RELATIONS, COMMISSION, et al Respondents
FACTS:
Petitioner was hired by Kasei Corporation during its incorporation stage. She was
designated as Accountant and Corporate Secretary and was assigned to handle all
the accounting needs of the company. She was also designated as Liaison Officer to
the City of Makati to secure permits and other licenses for the initial operation of the
company. Although she was designated as Corporate Secretary, she was not
entrusted with the corporate documents; neither did she attend any board meeting nor
required to do so. She never prepared any legal document and never represented the
company as its Corporate Secretary. However, on some occasions, she was prevailed
upon to sign documentation for the company.
Petitioner was designated Acting Manager. The corporation also hired Gerry
Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was assigned to
handle recruitment of all employees and perform management administration
functions; represent the company in all dealings with government agencies, and to
administer all other matters pertaining to the operation of Kasei Restaurant which is
owned and operated by Kasei Corporation.
For five years, petitioner performed the duties of Acting Manager. However,
petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she
was required to sign a prepared resolution for her replacement but she was assured
that she would still be connected with Kasei Corporation. Timoteo Acedo, the
designated Treasurer, convened a meeting of all employees of Kasei Corporation and
announced that nothing had changed and that petitioner was still connected with
Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR
matters.
Thereafter, Kasei Corporation reduced her salary and was not paid her
mid-year bonus allegedly because the company was not earning well. On October
2001, petitioner did not receive her salary from the company. She made repeated
follow-ups with the company cashier but she was advised that the company was not
earning well. Petitioner asked for her salary from Acedo and the rest of the officers but
she was informed that she is no longer connected with the company.
Since she was no longer paid her salary, petitioner did not report for work and
filed an action for constructive dismissal before the labor arbiter.
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Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired as one of its technical consultants
on accounting matters and act concurrently as Corporate Secretary. As technical
consultant, petitioner performed her work at her own discretion without control and
supervision of Kasei Corporation.
The Labor Arbiter found that petitioner was illegally dismissed
NLRC affirmed with modification the Decision of the Labor Arbiter
Court of Appeals reversed the NLRC decision
ISSUES:
(1) whether there was an employer-employee relationship between petitioner and
private respondent Kasei Corporation; and if in the affirmative,
(2) Whether petitioner was illegally dismissed.
RULING:
The Court ruled that there was an employer-employee relationship between petitioner
and private respondent Kasei Corporation and the dismissal of petitioner is illegal.
The Court Sevilla v. Court of Appeals 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.
However, in certain cases the control test is not sufficient to give a complete picture of
the relationship between the parties, owing to the complexity of such a relationship
where several positions have been held by the worker.
The Court adopt a two-tiered test to determine if there was an
employer-employee relationship (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.
 This two-tiered test would provide a framework of analysis, which would take
into consideration the totality of circumstances surrounding the true nature of the
relationship between the parties. This is especially appropriate in this case where
there is no written agreement or terms of reference to base the relationship on; and
due to the complexity of the relationship based on the various positions and
responsibilities given to the worker over the period of the latter’s employment.
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. 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. When petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioner’s 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. It is therefore apparent
that petitioner is economically dependent on Respondent Corporation for her
continued employment in the latter’s line of business.
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. She reported for work regularly and
served in various capacities as Accountant, Liaison Officer, Technical Consultant,
Acting Manager and Corporate Secretary, with substantially the same job functions,
that is, rendering accounting and tax services to the company and performing
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functions necessary and desirable for the proper operation of the corporation such as
securing business permits and other licenses over an indefinite period of engagement.
Based on the foregoing, there can be no other conclusion that petitioner is an
employee of respondent Kasei Corporation. She was selected and engaged by the
company for compensation, and is economically dependent upon respondent for her
continued employment in that line of business. Her main job function involved
accounting and tax services rendered to Respondent Corporation on a regular basis
over an indefinite period of engagement. Respondent Corporation hired and engaged
petitioner for compensation, with the power to dismiss her for cause. More importantly,
Respondent Corporation had the power to control petitioner with the means and
methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her
salary by P2, 500 a month from January to September 2001. This amounts to an illegal
termination of employment, where the petitioner is entitled to full back wages. Since
the position of petitioner as accountant is one of trust and confidence, and under the
principle of strained relations, petitioner is further entitled to separation pay, in lieu of
reinstatement. 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.
7. LOLITA LOPEZ, petitioner G.R. No. 155731 Vs. BODEGA CITY,
respondent September 3, 2007
FACTS: Respondent Bodega City (Bodega City) is a corporation duly registered and
existing under and by virtue of the laws of the Republic of the Philippines, while
respondent Andres C. Torres-Yap (Yap) is its owner/ manager. Petitioner was the lady
keeper of Bodega City tasked with manning its ladies comfort room.
Petitioner was made to explain why the concessionaire agreement between her and
respondents should not be terminated or suspended in view of an incident that
happened, wherein petitioner was seen to have acted in a hostile manner against a
lady customer of Bodega City who informed the management that she saw petitioner
sleeping while on duty. Yap informed petitioner that because of the incident that
happened, respondents had decided to terminate the concessionaire agreement
between them
Petitioner filed with the Arbitration Branch of the NLRC, a complaint for illegal
dismissal against respondents contending that she was dismissed from her
employment without cause and due process.
In their answer, respondents contended that no employer-employee relationship
ever existed between them and petitioner; that the latter’s services rendered within the
premises of Bodega City was by virtue of a concessionaire agreement she entered
into with respondents.
The complaint was dismissed by the Labor Arbiter for lack of merit.
However, on appeal, the NLRC set aside the order of dismissal and remanded
the case for further proceedings. Upon remand, the case was assigned to a different
Labor Arbiter. Thereafter, hearings were conducted and the parties were required to
submit memoranda and other supporting documents.
Labor Arbiter rendered judgment finding that petitioner was an employee of
respondents and that the latter illegally dismissed her.
Petitioner filed a motion for reconsideration of the above-quoted NLRC
Resolution, but the NLRC denied the same.
Aggrieved, petitioner filed a Petition for Certiorari with the CA. CA promulgated
the presently assailed Decision dismissing her special civil action for certiorari.
Petitioner moved for reconsideration but her motion was denied.
Hence, herein petition
Petitioner claims that the concessionaire agreement was only offered to
her during her tenth year of service and after she organized a union and filed a
complaint against respondents. Prior to these, entire petitioner asserts that her job
as a lady keeper was a task assigned to her as an employee of respondents.
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Petitioner further argues that her receipt of a special allowance from respondents
is a clear evidence that she was an employee of the latter, as the amount she
received was equivalent to the minimum wage at that time. Petitioner also
contends that her identification card clearly shows that she was not a
concessionaire but an employee of respondents. Moreover, petitioner submits that
the fact that she was required to follow rules and regulations prescribing
appropriate conduct while she was in the premises of Bodega City is clear
evidence of the existence of an employer-employee relationship between her and
petitioners.
On the other hand, respondents contend that the present petition was filed for
the sole purpose of delaying the proceedings of the case; petitioners compliance
with the terms and conditions of the proposed concessionaire contract for a period
of three years is evidence of her implied acceptance of such proposal; petitioner
failed to present evidence to prove her allegation that the subject concessionaire
agreement was only proposed to her in her 10 th year of employment with
respondent company and after she organized a union and filed a labor complaint
against respondents; petitioner failed to present competent documentary and
testimonial evidence to prove her contention that she was an employee of
respondents since 1985.
ISSUE:
Whether or not an employer-employee relationship exists
RULING:
The Court ruled that there has been no employer-employee relationship between
respondents and petitioner.
To ascertain the existence of an employer-employee relationship,
jurisprudence has invariably applied the four-fold test, namely: (1) the manner of
selection and engagement; (2) the payment of wages; (3) the presence or absence of
the power of dismissal; and (4) the presence or absence of the power of control. Of
these four, the last one is the most important. The so-called control test is commonly
regarded as the most crucial and determinative indicator of the presence or absence
of an employer-employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services are performed reserves
the right to control not only the end achieved, but also the manner and means to be
used in reaching that end.
It is undisputed that non-employees, such as Felimon Habitan, an admitted
concessionaire, musicians, singers and the like at Bodega City are also issued
identification cards. Given this premise, it appears clear to that petitioner's I.D. Card is
incompetent proof of an alleged employer-employee relationship between the herein
parties. Viewed in the context of this case, the card is at best a passport from
management assuring the holder thereof of his unmolested access to the premises of
Bodega City.
With respect to the petty cash voucher, petitioner failed to refute respondents
claim that it was not given to her for services rendered or on a regular basis, but simply
granted as financial assistance to help her temporarily meet her familys needs.
Hence, going back to the element of control, the concessionaire agreement
merely stated that petitioner shall maintain the cleanliness of the ladies comfort room
and observe courtesy guidelines that would help her obtain the results they wanted to
achieve. There is nothing in the agreement which specifies the methods by which
petitioner should achieve these results. Respondents did not indicate the manner in
which she should go about in maintaining the cleanliness of the ladies comfort room.
Neither did respondents determine the means and methods by which petitioner could
ensure the satisfaction of respondent company’s customers. In other words, petitioner
was given a free hand as to how she would perform her job as a lady keeper. In fact,
the last paragraph of the concessionaire agreement even allowed petitioner to engage
persons to work with or assist her in the discharge of her functions.
Moreover, petitioner was not subjected to definite hours or conditions of work.
The fact that she was expected to maintain the cleanliness of respondent company’s
ladies comfort room during Bodega Citys operating hours does not indicate that her
performance of her job was subject to the control of respondents as to make her an
employee of the latter. Instead, the requirement that she had to render her services
while Bodega City was open for business was dictated simply by the very nature of her
undertaking, which was to give assistance to the users of the ladies comfort room.
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Lastly, the Court finds that the elements of selection and engagement as well as the
power of dismissal are not present in the instant case.
It has been established that there has been no employer-employee relationship
between respondents and petitioner. Their contractual relationship was governed by
the concessionaire agreement embodied in the 1992 letter. Thus, petitioner was not
dismissed by respondents. Instead, as shown by the letter of Yap to her their
contractual relationship was terminated by reason of respondents' termination of the
subject concessionaire agreement, which was in accordance with the provisions of the
agreement in case of violation of its terms and conditions.
8. G.R. No. 102199 January 28, 1997
AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO
BUSTAMANTE, respondents.
FACTS:
Private respondent Eutiquio Bustamante had been an insurance underwriter of
petitioner AFP Mutual Benefit Association, Inc. since 1975. The Sales Agent's
Agreement between them provided:
B. Duties and Obligations:
1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall
solicit exclusively for AFPMBAI (petitioner), and shall be bound by the latter's
policies, memo circulars, rules and regulations which it may from time to time,
revise, modify or cancel to serve its business interests.
2. The SALES AGENT shall confine his business activities for AFPMBAI while inside
any military camp, installation or residence of military personnel. He is free to solicit in
the area for which he/she is licensed and as authorized, provided however, that
AFPMBAI may from time to time, assign him a specific area of responsibility and a
production quota on a case to case basis.
C. Commission
1. The SALES AGENT shall be entitled to the commission due for all premiums
actually due and received by AFPMBAI out of life insurance policies solicited and
obtained by the SALES AGENT at the rates set forth in the applicant's commission
schedules hereto attached.
D. General Provisions
1. There shall be no employer-employee relationship between the parties, the SALES
AGENT being hereby deemed an independent contractor.
As compensation, he received commissions based on the following percentages of
the premiums paid: 3
"30% of premium paid within the first year;
10% of premium paid with the second year;
5% of the premium paid during the third year;
3% of the premium paid during the fourth year; and
1% of the premium paid during the fifth year up to
the tenth year.
Petitioner dismissed private respondent for misrepresentation and for
simultaneously selling insurance for another life insurance company in violation of said
agreement. At the time of his dismissal, private respondent was entitled to accrued
commissions equivalent to twenty four (24) months per the Sales Agent Agreement
and as stated in the account summary, said summary showed that private respondent
had a total commission receivable of P438,835.00, of which only P78,039.89 had
been paid to him. Private respondent wrote petitioner seeking the release of his
commissions for said 24 months. Petitioner, through Marketing Manager Juan
Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00. Hence,
believing Concepcion's computations, private respondent signed a quitclaim in favor
of petitioner.
Private respondent was informed that his check was ready for release. In
collecting his check, he discovered from a document (account summary) attached to
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said check that his total commissions for the 24 months actually amounted to
P354,796.09. Private respondent, however, was paid only the amount of P35,000.00.
Private respondent filed a complaint with the Office of the Insurance
Commissioner praying for the payment of the correct amount of his commission. Atty.
German C. Alejandria, Chief of the Public Assistance and Information Division, Office
of the Insurance Commissioner, advised private respondent that it was the
Department of Labor and Employment that had jurisdiction over his complaint.
Private respondent filed his complaint with the Department of Labor claiming
commission for 2 years from termination of employment. After submission of position
papers, Labor Arbiter Jose G. de Vera rendered his decision, the dispositive portion of
which reads:
WHEREFORE, all the foregoing premises being considered, judgment is hereby
rendered declaring the dismissal of the complainant as just and valid, and
consequently, his claim for separation pay is denied. On his money claim, the
respondent company is hereby ordered to pay complainant the sum of P319,796.00
plus attorney's fees in the amount of P31,976.60.
The labor arbiter relied on the Sales Agent's Agreement proviso that
petitioner could assign private respondent a specific area of responsibility and a
production quota, and read it as signalling the existence of employer- employee
relationship between petitioner and private respondent. Second Division of the
respondent Commission affirmed the decision of the Labor Arbiter.
Petitioner contends that respondent Commission committed grave abuse of
discretion in ruling that the labor arbiter had jurisdiction over this case. At the heart of
the controversy is the issue of whether there existed an employer-employee
relationship between petitioner and private respondent. Petitioner argues that, despite
provisions B(1) and (2) of the Sales Agent's Agreement, there is no
employer-employee relationship between private respondent and itself. Hence,
respondent commission gravely abused its discretion when it held that the labor
arbiter had jurisdiction over the case.
ISSUES:
1.) whether or not an employer-employee relationship exists
2.) Whether or not the labor arbiter had jurisdiction over the case
RULING:
The Court has applied the "four-fold" test in determining the existence of
employer-employee relationship. This test considers the following elements: (1) the
power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to
control, the last being the most important element
Private respondent's contention that he was petitioner's employee is belied
by the fact that he was free to sell insurance at any time as he was not subject to
definite hours or conditions of work and in turn was compensated according to the
result of his efforts. By the nature of the business of soliciting insurance, agents are
normally left free to devise ways and means of persuading people to take out
insurance. There is no prohibition, as contended by petitioner, for private respondent
to work for as long as he does not violate the Insurance Code. Private respondent was
free to solicit life insurance anywhere he wanted and he had free and unfettered time
to pursue his business. He was not covered by any employee policies or regulations
and not subject to the disciplinary action of management on the basis of the Employee
Code of Conduct. He could go out and sell insurance at his own chosen time. He was
entirely left to his own choices of areas or territories, with no definite, much less
supervised, time schedule.
Private respondent had complete control over his occupation and (petitioner)
did not exercise any right of Control and Supervision over his performance except as
to the payment of commission the amount of which entirely depends on the sole efforts
of (private respondent). He was free to engage in other occupation or practice other
profession for as long as he did not commit any violation of the ethical standards
prescribed in the Sales Agent's Agreement. Although petitioner could have,
theoretically, disapproved any of private respondent's transactions, what could be
disapproved was only the result of the work, and not the means by which it was
accomplished.
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The "control" which the above factors indicate did not sum up to the power to
control private respondent's conduct in and mode of soliciting insurance. On the
contrary, they clearly indicate that the juridical element of control had been absent in
this situation. Thus, the Court is constrained to rule that no employment relationship
had ever existed between the parties. Under the contract invoked, private respondent
had never been petitioner's employee, but only its commission agent. As an
independent contractor, his claim for unpaid commission should have been litigated in
an ordinary civil action.
The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217
of the Labor Code. The unifying element running through paragraphs (1) — (6) of said
provision is the consistent reference to cases or disputes arising out of or in
connection with an employer-employee relationship. Prior to its amendment by Batas
Pambansa Blg. 227 on June 1, 1982, this point was clear as the article included "all
other cases arising from employer-employee relation unless expressly excluded by
this Code." Without this critical element of employment relationship, the labor arbiter
and respondent Commission can never acquire jurisdiction over a dispute.
9. INSULAR LIFE ASSURANCE CO. LTD. v NLRC
G.R. No. 119930, March 12, 1998
FACTS:
- Petitioner entered into an agency contract with respondent Pantaleon delos Reyes
authorizing the latter to solicit within the Philippines for life insurance and annuities for
which he would be paid compensation in the forms of commission.
- The contract was prepared by the petitioner in its entirety and delos Reyes merely
signed his conformity thereto.
- It contained the stipulation that no Employer-Employee relationship shall be created
between the parties and that the agent is free to exercise his own judgment as to time,
place and means of soliciting insurance.
- However, delos Reyes was prohibited by petitioner from working for any other life
insurance company and violation of such stipulation was sufficient ground for
termination of contract.
- Aside from that, private respondent was required to submit to the former all
completed applications for insurance within 90 consecutive days, deliver policies,
receive and collect premiums and balance of first year premiums, renewal and the like.
He was bound to turn over to the company all sums of money collected by him.
- Petitioner and private respondent entered into another contract where the latter was
appointed as Acting Unit Manager under its office- Cebu DSO V. As such, his duties
involve recruitment, training, organization and development within his territory to a
sufficient number of qualified underwriters.
- It was similarly provided in the management contract that the relation of the acting
unit manager and/or the agents of his unit to the company shall be that of independent
contractor. The acting unit manager was given production bonus, development
allowance and a unit development financing scheme termed financial assistance.
- Aside from soliciting insurance, he was also expressly obliged to participate in the
company’s conservation program. Private respondent concurrently worked as an
agent and Acting Manager until he was notified by the petitioner that his services were
terminated. So, he filed a complaint before the Labor Arbiter on the ground of illegal
dismissal and for not paying him salaries and separation pay.
- Petitioner filed a motion to dismiss the complaint for lack of jurisdiction for it was
alleged that there was no employer-employee relationship. It reasoned out that the
basis for such or the 4- fold test i.e (1) selection and engagement of employee, (b)
payment of wages, (c) power of dismissal and (d) power of control. Delos Reyes was
not an employee, but an independent contractor.
LABOR ARBITER: The complaint was dismissed on the ground that the element of
control was not sufficiently established since based on the contract, the agreement
was just set out to achieve the desired result without dictating the means or methods
of attaining it.
NLRC: Regarded the agency and management contracts as contracts of agency. The
circumstances being:
(a) Delos Reyes was to serve exclusively the company, therefore, was not an
independent contractor;
(b) He was required to meet certain manpower and production quota and;
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(c) Petitioner controlled the assignment to and removal of soliciting agents from his
unit.
ISSUE: Whether or not there exists an employer-employee relationship between
Insular Life and Delos Reyes.
HELD: YES. Both petitioner and respondent NLRC treated the agency contract and
the management contract entered into between petitioner and de los Reyes as
contracts of agency. While the first has the earmarks of an agency contract, the
second is far removed from the concept of agency in that provided therein was
conditionality that indicates an employer-employee relationship.
- Private respondent was appointed as Acting Unit Manager only upon
recommendation of the District Manager. This indicates that private respondent was
hired by petitioner because of the favorable endorsement of its duly authorized officer.
- Then, the very designation of the appointment of private respondent as “acting” unit
manager obviously implies a temporary employment status which may be made
permanent only upon compliance with company standards.
- On the matter of payment of wages, petitioner pointed out that respondent was
compensated strictly on commission basis, the amount of which was totally dependent
on his total output. But, the manager’s contract, speaks differently. Under the contract,
de los Reyes must meet with the manpower and production requirements as Acting
Unit Manager.
- As to the matter involving the power of dismissal and control by the employer,
respondent’s duty to collect the company’s premiums using company receipts is
further evidence of petitioner’s control over respondent. Thus, exclusivity of service,
control of assignments and removal of agents under private respondent’s unit,
collection of premiums, furnishing of company facilities and materials as well as capital
described are but hallmarks of the management system in which herein private
respondent worked.
- As found by the NLRC, he exercised administrative functions which are necessary
and beneficial to the business of Insular Life. Private respondent de los Reyes was
therefore an employee of herein petitioner.
10. Tongko v. Manufacturer Life Insurance Co. (MANULIFE) Inc., et al.
G.R. No 167622, January 25, 2011
FACTS: The contractual relationship between Tongko and Manulife had two basic
phases.
- The initial phase began on July 1, 1977 under a Career Agent’s Agreement which
regarded him as an independent contractor, not an employee. As an agent, his tasks
were to canvass for applications for insurance products and collect money due to the
Company.
- The company may terminate this Agreement for any breach or violation of any of the
provisions hereof by the Agent by giving written notice to the Agent within 15 days
from the time of the discovery of breach.
- Tongko initially agreed to comply with all regulations and requirements of Manulife
and to maintain a standard of knowledge and competency in the sale of Manulife’s
products.
- The second phase started in 1983 when Tongko was named Unit Manager. In 1990,
he became a Branch Manager. In 1996, Tongko became a Regional Sales Manager,
where he earned commissions, persistency income and management overrides.
Since the beginning, Tongko consistently declared himself self-employed in his
income tax returns.
- In 2001, Manulife instituted manpower development programs. Respondent Vergel
de Dios wrote Tongko a letter as regards the concerns being brought up during the
Metro North Sales Managers Meeting, which directed the managers to increase the
number of agents to at least 1,000 strong for a start. It was found that Tongko’s region
was the lowest performer in terms of recruiting in 2000.
- Subsequently, Tongko received another letter, dated December 18, 2001,
terminating his services for despite the series of meetings, those have failed to align
Tongko’s directions with Management’s avowed agency growth policy.
- Tongko then filed an illegal dismissal complaint with the NLRC Arbitration Branch. He
alleged the existence of an employment relationship. In support of this he asserted
that as Unit Manager, he was paid an annual over-rider, a travel and entertainment
allowance in addition to his overriding commissions. He was tasked with numerous
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administrative functions and supervisory authority over Manulife’s employees. He was
required to follow at least three codes of conduct.
- On the other hand, Manulife contended that what existed between them was a mere
agency relationship. It contended that there was no fixed wage or salary given to
Tongko, and that under the agreement, he was paid commissions, computed based
on the premium paid in full and actually received by Manulife. Tongko even declared
himself as self-employed and consistently paid taxes as such.
LABOR ARBITER: No employer-employee relationship existed between the parties.
NLRC: It found the existence of an employer-employee relationship thus there was
illegal dismissal.
CA: It reverted to the labor arbiter’s decision that no employer-employee relationship
existed between them.
SC (Nov.2008 Decision): In reversing the CA ruling, it declared that an
employment relationship existed between them. First, there exists the possibility of an
insurance agent becoming an employee of an insurance company if evidence shows
that the company promulgated rules or regulations that effectively controlled or
restricted an insurance agent’s choice of methods or the methods themselves in
selling insurance.
Second, Manulife had the power of control over Tongko, sufficient to characterize him
as an employee, as shown by the fact that he complied with 3 different codes of
conduct and that he performed administrative duties. Also, Tongko was tasked to
recruit some agents in addition to his other administrative functions.
Manulife disagreed with the decision hence a Motion for Reconsideration was filed
and granted.
ISSUE: Whether or not there exists an employer-employee relationship between
Tongko and Manulife.
HELD: NO, Tongko was just an agent. Rules regarding the desired results (e.g., the
required volume to continue to qualify as a company agent & legal/ ethical rules to be
followed) are built-in elements of control specific to an insurance agency and should
not and cannot be read as elements of control that attend an employment relationship
governed by the Labor Code.
- Based on decided cases, a determination of the presence of the Labor Code element
of control was made on the basis of the stipulations of the subsequent contracts. In
this case, while Tongko was later on designated unit manager in 1983, Branch
Manager in 1990, and Regional Sales Manager in 1996, no formal contract regarding
these undertakings appears in the records of the case. Any such contract or
agreement, had there been any, could have at the very least provided the bases for
properly ascertaining the juridical relationship established between the parties.
- For this reason, we can take judicial notice that as a matter of Insurance Code-based
business practice, an agency relationship prevails in the insurance industry for the
purpose of selling insurance. Significantly, evidence shows that Tongko’s role as an
insurance agent never changed during his relationship with Manulife. Tongko
essentially remained an agent, but moved up in this role through Manulife’s
recognition that he could use other agents approved by Manulife but operating under
his guidance. For want of a better term, Tongko perhaps could be labeled as a "lead
agent" who guided under his wing other Manulife agents.
- Evidence indicates that Tongko consistently clung to the view that he was an
independent agent since he invariably declared himself a business or self-employed
person in his income tax returns. The concept of estoppel – a legal and equitable
concept – necessarily must come into play. Tongko’s previous admissions in several
years of tax returns as an independent agent, as against his belated claim that he was
all along an employee, are too diametrically opposed to be simply dismissed or
ignored.
- There was, indeed, lack of evidence on record showing that Manulife ever exercised
means-and-manner control, even to a limited extent, over Tongko during his ascent in
Manulife’s sales ladder. The reality is, prior to the directives sent by De Dios, Manulife
had practically left Tongko alone not only in doing the business of selling insurance,
but also in guiding the agents under his wing. In addition, the mere presentation of
codes or of rules and regulations is not per se indicative of labor law control. The
codes of conduct do not intrude into the insurance agents’ means and manner of
conducting their sales and only control them as to the desired results.
- Guidelines indicative of labor law "control," based on the case of Insular Life, should
not merely relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means or methods to be
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employed in attaining the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means.
- Hence, the failure of Tongko to comply with the guidelines & directives of Manulife is
recruiting more agents, as a ground for termination of Tongko’s agency, is a matter
that the labor tribunals cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the courts applying the laws of
insurance, agency and contracts.
NOTE: Tongko is just an AGENT. In effect, the SC is telling us that, first, there must be
an evidence of a contract that shows that the relationship has been converted from
contract of agency to that of employment, which is absent in the case at bar. Secondly,
adherence to a code of conduct is not, per se, indicative of control when it merely
controls the desired results and not the means and the manner by which agents are to
conduct their sales. The directive of De Dios to Tongko (in increasing the number of
agents) was merely suggestive. Hence, not indicative of control.
11. Sonza vs. ABS-CBN
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 Sonza’s 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 filed a Motion to Dismiss, contending that no employee-employer
relationship existed between the parties. Sonza filed an Opposition.
- Meanwhile, ABS-CBN continued to remit Sonza’s monthly talent fees but opened
another account for the same purpose.
LABOR ARBITER: Denied the motion and directed the parties to file their respective
position papers. It ruled that there is no employee-employer relationship.
NLRC: Affirmed the decision of the Labor Arbiter.
CA: Also affirmed the decision of NLRC stating that MJMDC entered into a contract
merely as an agent of Sonza.
ISSUE: Whether or not there exists an employer-employee relationship between
Sonza & the ABS-CBN.
HELD: NO. 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 employer’s 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. Sonza’s
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
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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-CBN’s 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-CBN’s 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 Sonza’s work. A radio broadcast specialist who works
under minimal supervision is an independent contractor.
- Sonza’s 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.
- Clearly, the present case does not call for an application of the Labor Code
provisions, but an interpretation and application of their agreement. In effect, the
cause of action of Sonza is for breach of contract which is intrinsically a civl dispute
cognizable by the regular courts.
12. OROZCO vs COURT OF APPEALS
FACTS: PDI engaged the services of Orozco to write a weekly column for its Lifestyle
section. She religiously submitted her articles except for a 6-month stint when she
went to NY City. Nevertheless, she continued to send her articles through mail. She
also received compensation for every column that was published. When Orozco’s
column appeared in the newspaper for the last time, her editor, Logarta, told her that
the PDI’s editor-in-chief, Magsanoc, wanted to stop publishing her columns for no
reason at all and advised her to talk to the editor-in-chief. When Orozco talked to
Magsanoc, the latter told her that it was the PDI chairperson who wanted to stop the
publication of her column.
However, when Orozco talked to Apostol, the latter told her that Magsanoc informed
her that the Lifestyle section had already many columnists. PDI claims that Magsanoc
met with the editor of the Lifestyle section to discuss how to improve said section.
They agreed to cut down the number of columnists by keeping only those whose
columns were well-written, with regular feedback and following. In their judgment,
petitioner’s column failed to improve, continued to be superficially and poorly written,
and failed to meet the high standards of the newspaper. Hence, they decided to
terminate petitioner’s column.
Orozco filed a complaint for illegal dismissal.
LA—decided in favor of petitioner.
NLRC—dismissed the appeal and affirmed the LA’s decision.
CA—set aside the NLRC’s decision and dismissed Orozco’s complaint.
Hence, this petition.
ISSUE/s: Whether petitioner is an employee of PDI.
Whether petitioner was illegally dismissed.
HELD: Petition dismissed. Judgment and Resolution affirmed.
Applying the four-fold test, the Court held that PDI lacked control over the petitioner.
Though PDI issued guidelines for the petitioner to follow in the course of writing her
columns, careful examination reveals that the factors enumerated by the petitioner are
inherent conditions in running a newspaper. In other words, the so-called control as to
time, space, and discipline are dictated by the very nature of the newspaper business
itself. Aside from the constraints presented by the space allocation of her column,
there were no restraints on her creativity; petitioner was free to write her column in the
manner and style she was accustomed to and to use whatever research method she
deemed suitable for her purpose. The apparent limitation that she had to write only on
subjects that befitted the Lifestyle section did not translate to control, but was simply a
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logical consequence of the fact that her column appeared in that section and therefore
had to cater to the preference of the readers of that section.
Orozco in this case is considered as an independent contractor. As stated in the case
of Sonza vs. ABS-CBN, independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from ordinary employees. Like the
petitioner in the cited case, Petitioner was engaged as a columnist for her talent, skill,
experience, and her unique viewpoint as a feminist advocate. How she utilized all
these in writing her column was not subject to dictation by respondent. As in Sonza,
respondent PDI was not involved in the actual performance that produced the finished
product. It only reserved the right to shorten petitioner’s articles based on the
newspaper’s capacity to accommodate the same. This fact was not unique to
petitioner’s column. It is a reality in the newspaper business that space constraints
often dictate the length of articles and columns, even those that regularly appear
therein.
Furthermore, respondent PDI did not supply petitioner with the tools and
instrumentalities she needed to perform her work. Petitioner only needed her talent
and skill to come up with a column every week. As such, she had all the tools she
needed to perform her work. Hence, since Orozco is not an employee of PDI, the latter
cannot be held guilty of illegally dismissing the petitioner.
13. FULACHE vs ABS CBN
FACTS: The petitioners in this case are questioning the CBA executed between
ABS-CBN and the ABS-CBN Rank-and-File Employees Union (Union) because under
such agreement, they are only considered as temporary and not regular employees.
The petitioners claimed that they should be recognized as regular employees of
ABS-CBN because they had already rendered more than a year of service in the
company and, therefore, entitled to the benefits of a regular employee. Instead of
salaries, ABS-CBN pointed out that talents are paid a pre-arranged consideration
called “talent fee” taken from the budget of a particular program and subject to a ten
percent (10%) withholding tax. Talents do not undergo probation. Their services are
engaged for a specific program or production, or a segment thereof. Their contracts
are terminated once the program, production or segment is completed. ABS-CBN
alleged that the petitioners’ services were contracted on various dates by its Cebu
station as independent contractors/off camera talents, and they were not entitled to
regularization in these capacities.
Labor Arbiter—rendered decision holding that the petitioners were regular
employees of ABS CBN, not independent contractors, and are entitled to the benefits
and privileges of regular employees.
NLRC--National Labor Relations Commission (NLRC) Fourth Division, mainly
contending that the petitioners were independent contractors, not regular employees.
While the appeal of the regularization case was pending, ABS-CBN dismissed
Fulache, Jabonero, Castillo, Lagunzad and Atinen (all drivers) for their refusal to sign
up contracts of employment with service contractor Able Services. The four drivers
and Atinen responded by filing a complaint for illegal dismissal.
LA—upheld the validity of ABS-CBN's contracting out of certain work or services in its
operations. The labor arbiter found that petitioners Fulache, Jabonero, Castillo,
Lagunzad and Atinen had been dismissed due to redundancy, an authorized cause
under the law.
NLRC—reversed the labor arbiter’s ruling in the illegal dismissal case; it found that
petitioners Fulache, Jabonero, Castillo, Lagunzad and Atinen had been illegally
dismissed and awarded them back wages and separation pay in lieu of reinstatement.
Under both cases, the petitioners were awarded CBA benefits and privileges from the
time they became regular employees up to the time of their dismissal.
NLRC resolved the motions for reconsideration on by both parties, thus, on
the regularization issue, the NLRC stood by the ruling that the petitioners
were regular employees entitled to the benefits and privileges of regular
employees. On the illegal dismissal case, the petitioners, while recognized
as regular employees, were declared dismissed due to redundancy. The
NLRC denied the petitioners’ second motion for reconsideration in its order of
May 31, 2006 for being a prohibited pleading.
ISSUE: WON the petitioners are correct that they should be considered already as
regular employees
HELD:
As regular employees, the petitioners fall within the coverage of the bargaining unit
and are therefore entitled to CBA benefits as a matter of law and contract.
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Section 1. APPROPRIATE BARGAINING UNIT. – The parties agree that the
appropriate bargaining unit shall be regular rank-and-file employees of
ABS-CBN BROADCASTING CORPORATION but shall not include: a)
Personnel classified as Supervisor and Confidential employees; b)
Personnel who are on “casual” or “probationary” status as defined in Section
2 hereof; c) Personnel who are on “contract” status or who are paid for
specified units of work such as writer-producers, talent-artists, and singers.
The inclusion or exclusion of new job classifications into the bargaining unit
shall be subject of discussion between the COMPANY and the UNION.
Under these terms, the petitioners are members of the appropriate
bargaining unit because they are regular rank-and-file employees and do not
belong to any of the excluded categories. Specifically, nothing in the records
shows that they are supervisory or confidential employees; neither are they
casual nor probationary employees. Most importantly, the labor arbiter’s
decision of January 17, 2002 – affirmed all the way up to the CA level – ruled
against ABS-CBN’s submission that they are independent contractors. Thus,
as regular rank-and-file employees, they fall within CBA coverage under the
CBA’s express terms and are entitled to its benefits.
14. TAN vs LAGRAMA
FACTS: Petitioner Rolando Tan is the president of Supreme Theater Corporation and
the general manager of Crown and Empire Theaters in Butuan City. Private
respondent Leovigildo Lagrama is a painter, making ad billboards and murals for the
motion pictures shown at the Empress, Supreme, and Crown Theaters for more than
10 years, from September 1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and
upbraided: Nangihi na naman ka sulod sa imong drawinganan. (You again urinated
inside your work area.) When Lagrama asked what Tan was saying, Tan told
him, Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala
nay drawing. Gawas. (Dont say anything further. I dont want you to draw
anymore. From now on, no more drawing. Get out.)
Lagrama denied the charge against him. He claimed that he was not the only one who
entered the drawing area and that, even if the charge was true, it was a minor
infraction to warrant his dismissal. However, everytime he spoke, Tan
shouted Gawas (Get out), leaving him with no other choice but to leave the premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission (NLRC) in Butuan City. He alleged that he had
been illegally dismissed and sought reinvestigation and payment of 13th month pay,
service incentive leave pay, salary differential, and damages.
Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was
an independent contractor who did his work according to his methods, while he
(petitioner) was only interested in the result thereof. He cited the admission of
Lagrama during the conferences before the Labor Arbiter that he was paid on a fixed
piece-work basis, i.e., that he was paid for every painting turned out as ad billboard or
mural for the pictures shown in the three theaters, on the basis of a no mural/billboard
drawn, no pay policy. He submitted the affidavits of other cinema owners, an
amusement park owner, and those supervising the construction of a church to prove
that the services of Lagrama were contracted by them. He denied having dismissed
Lagrama and alleged that it was the latter who refused to paint for him after he was
scolded for his habits.
LA—in favor of Respondent.
NLRC—finding Lagrama to be an independent contractor, and for this reason
reversing the decision of the Labor Arbiter.
ISSUE: Whether or not Lagrama is an independent contractor or an employee of Tan?
HELD: Lagrama is an employee not an independent contractor
Applying Four Fold Test
A. Power of Control - Evidence shows that the Lagrama performed his work
as painter and under the supervision and control of Tan.
Lagrama worked in a designated work area inside the theater of Tan for the
use of which petitioner prescribed rules, which rules included the observance
of cleanliness and hygeine and prohibition against urinating in the work area
and any other place other than rest rooms and
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Tan's control over Lagrama's work extended not only the use of work area
but also the result of Lagrama;s work and the manner and means by which
the work was to be accomplished Lagrama is not an independent contractor
because he did not enjoy independence and freedom from the control and
supervision of Tan and he was subjected to Tan's control over the means and
methods by which his work is to be performed and accomplished
B. Payment of Wages
Lagrama worked for Tan on a fixed piece work basis is of no moment.
Payment by result is a method of compensation and does not define the
essence of the relation.
That Lagrama was not reported as an employee to the SSS is not conclusive,
on the question whether he was an employee, otherwise Tan would be
rewarded for his failure or even neglect to perform his obligation.
C. Power of Dismissal – by Tan stating that he had the right to fire Lagrama,
Tan in effect acknowledged Lagrama to be his employee
D. Power of Selection and Engagement of Employees – Tan engaged the
services of Lagrama without the intervention of third party
15. NATIONAL SUGAR REFINERIES CORP. v. NLRC
F: Petitioner is a corporation which is fully owned and controlled by the Government,
operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. The
Batangas refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50.
On the other hand, Private Respondent (NBSR SUPERVISORY UNION), represents
the former supervisors of the NASUREFCO Batangas Sugar Refinery.
Petitioner implemented a Job Evaluation (JE) Program affecting all employees,
from rank-and-file to department heads. The program was designed to rationalize the
duties and functions of all positions, re-establish levels of responsibility, and recognize
both wage and operational structures. Jobs were ranked according to effort,
responsibility, training and working conditions and relative worth of the job. As a result,
all positions were re-evaluated, and all employees including the members of
respondent union were granted salary adjustments and increases in benefits
commensurate to their actual duties and functions.
10 years prior to the implementation of the program, the members of respondent
union were treated in the same manner as rank-and file employees. As such, they
used to be paid overtime, rest day and holiday pay pursuant to the provisions of
Articles 87, 93 and 94 of the Labor Code as amended. With the implementation of the
JE Program, the following adjustments were made: (1) the members of respondent
union were re-classified under levels S-5 to S-8 which are considered managerial staff
for purposes of compensation and benefits; (2) there was an increase in basic pay of
the average of 50% of their basic pay prior to the JE Program, with the union members
now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the highest
paid rank-and-file employee; (3) longevity pay was increased on top of alignment
adjustments; (4) they were entitled to increased company COLA of P225.00 per
month; (5) there was a grant of P100.00 allowance for rest day/holiday work.
2 years after the implementation of the JE Program, specifically on June 20,
1990, the members of private respondent union filed a complainant with the executive
labor arbiter for non-payment of overtime, rest day and holiday pay allegedly in
violation of Article 100 of the Labor Code.
 Labor Arbiter – ruled in favour of Private Respondent union; 1. Pay the
individual members of complainant union the usual overtime pay, rest day
pay and holiday pay enjoyed by them instead of the P100.00 special
allowance which was implemented on June 11, 1988; and 2. Pay the
individual members of complainant union the difference in money value
between the P100.00 special allowance and the overtime pay, rest day pay
and holiday pay that they ought to have received from June 1, 1988.
Reason: The along span of time during which the benefits were being paid to
the supervisors has accused the payment thereof to ripen into contractual
obligation; at the complainants cannot be estopped from questioning the
validity of the new compensation package despite the fact that they have
been receiving the benefits therefrom, considering that respondent union
was formed only a year after the implementation of the Job Evaluation
Program, hence there was no way for the individual supervisors to express
their collective response thereto prior to the formation of the union; and the
comparative computations presented by the private respondent union
showed that the P100.00 special allowance given NASUREFCO fell short of
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what the supervisors ought to receive had the overtime pay rest day pay and
holiday pay not been discontinued, which arrangement, therefore, amounted
to a diminution of benefits.
 NLRC – affirmed LA;
Reason: The members of respondent union are not managerial employees,
as defined under Article 212 (m) of the Labor Code and, therefore, they are
entitled to overtime, rest day and holiday pay. Further, it declared that these
supervisory employees are merely exercising recommendatory powers
subject to the evaluation, review and final action by their department heads;
their responsibilities do not require the exercise of discretion and
independent judgment; they do not participate in the formulation of
management policies nor in the hiring or firing of employees; and their main
function is to carry out the ready policies and plans of the corporation. 3
Reconsideration of said decision was denied in a resolution of public
respondent dated August 30, 1991.
Petitioner contends that the members of respondent union are members of the
managerial staff who are not entitled to overtime, rest day and holiday pay; and in
making petitioner assume the "double burden" of giving the benefits due to
rank-and-file employees together with those due to supervisors under the JE Program.
Further, Petitioner, avers that for purposes of determining whether or not the members
of respondent union are entitled to overtime, rest day and holiday pay, said employees
should be considered as "officers or members of the managerial staff" as defined
under Article 82, Book III of the Labor Code on "Working Conditions and Rest Periods"
and amplified in Section 2, Rule I, Book III of the Rules to Implement the Labor Code.
ISSUE: WON the members of respondent union are entitled to overtime, rest day and
holiday pay?
RULING: No, they are not entitled to overtime, rest day and holiday pay. A
cursory perusal of the Job Value Contribution Statements 7 of the union members will
readily show that these supervisory employees are under the direct supervision of
their respective department superintendents and that generally they assist the latter in
planning, organizing, staffing, directing, controlling communicating and in making
decisions in attaining the company's set goals and objectives. These supervisory
employees are likewise responsible for the effective and efficient operation of their
respective departments. More specifically, their duties and functions include, among
others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes
employee shifting scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends
disciplinary action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become
more productive;
4) conducts semi-annual performance evaluation of his subordinates and
recommends necessary action for their development/advancement;
5) represents the superintendent or the department when appointed and authorized by
the former;
6) coordinates and communicates with other inter and intra department supervisors
when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality
of service and working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and
followed by all NASUREFCO employees, recommends revisions or modifications to
said rules when deemed necessary, and initiates and prepares reports for any
observed abnormality within the refinery;
10) supervises the activities of all personnel under him and goes to it that instructions
to subordinates are properly implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
Therefore, it is apparent that the members of respondent union discharge
duties and responsibilities which ineluctably qualify them as officers or members of the
managerial staff, as defined in Section 2, Rule I Book III of the Rules to Implement the
Labor Code, viz.: (1) their primary duty consists of the performance of work directly
related to management policies of their employer; (2) they customarily and regularly
exercise discretion and independent judgment; (3) they regularly and directly assist
the managerial employee whose primary duty consist of the management of a
department of the establishment in which they are employed (4) they execute, under
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general supervision, work along specialized or technical lines requiring special
training, experience, or knowledge; (5) they execute, under general supervision,
special assignments and tasks; and (6) they do not devote more than 20% of their
hours worked in a work-week to activities which are not directly and clearly related to
the performance of their work hereinbefore described.
Therefore, the union members should be considered as officers and
members of the managerial staff and are, therefore, exempt from the coverage of
Article 82. Perforce, they are not entitled to overtime, rest day and holiday.
16. PENARANDA v. BAGANGA PLYWOOD
FACTS: Petitioner (Charlito Pearanda) was hired as an employee of Respondent to
take charge of the operations and maintenance of its steam plant boiler. In May 2001,
Petitioner filed a Complaint for illegal dismissal with money claims against BPC and its
general manager, Hudson Chua, before the NLRC.
Petitioner alleges that he was employed by respondent on March 15, 1999 with a
monthly salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer until he was
illegally terminated on December 19, 2000. Further, he alleges that his services were
terminated without the benefit of due process and valid grounds in accordance with
law. Furthermore, he was not paid his overtime pay, premium pay for working during
holidays/rest days, night shift differentials and finally claims for payment of damages
and attorney’s fees having been forced to litigate the present complaint.
On the other hand, respondent is a domestic corporation laws and is represented
herein by its General Manager (Hudson Chua), the individual
respondent. Respondents thru counsel allege that Petitioner separation from service
was done pursuant to Art. 283 of the Labor Code. The respondent was on temporary
closure due to repair and general maintenance and it applied for clearance with the
Department of Labor and Employment, Regional Office No. XI to shut down and to
dismiss employees and due to the insistence of Petitioner he was paid his separation
benefits. Consequently, when Respondent partially reopened in January 2001,
Petitioner failed to reapply. Hence, he was not terminated from employment much less
illegally. He opted to severe employment when he insisted payment of his separation
benefits. Furthermore, being a managerial employee he is not entitled to overtime pay
and if ever he rendered services beyond the normal hours of work, [there] was no
office order/or authorization for him to do so. Finally, respondents allege that the claim
for damages has no legal and factual basis and that the instant complaint must
necessarily fail for lack of merit.
 Labor Arbiter – no illegal dismissal and that petitioners Complaint was
premature because he was still employed by Respondent; According to the
LA, Petitioner’s money claims for illegal dismissal was also weakened by his
quitclaim and admission during the clarificatory conference that he accepted
separation benefits, sick and vacation leave conversions and thirteenth
month pay. Nevertheless, the LA found petitioner entitled to overtime pay,
premium pay for working on rest days, and attorney’s fees in the total amount
of P21,257.98.
 NLRC – deleted the award of overtime pay and premium pay for working on
rest days. According to the Commission, petitioner was not entitled to these
awards because he was a managerial employee.
 CA – dismissed Petitioner’s petition; hHe failed to: 1) attach copies of the
pleadings submitted before the labor arbiter and NLRC; and 2) explain why
the filing and service of the Petition was not done by personal service.
Petitioner claims that he was not a managerial employee, and therefore, entitled
to the award granted by the labor arbiter.
ISSUE: WON Petitioner as member of the managerial employees and officers is not
entitled to overtime pay and premium pay for working on rest days?
RULING: Petitioner was a member of the managerial staff, which also takes him
out of the coverage of labor standards. Like managerial employees, officers and
members of the managerial staff are not entitled to the provisions of law on labor
standards. The Implementing Rules of the Labor Code define members of a
managerial staff as those with the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to
management policies of the employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work along
specialized or technical lines requiring special training, experience, or knowledge; or
(iii) execute under general supervision special assignments and tasks; and
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(4) Who do not devote more than 20 percent of their hours worked in a workweek to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2), and (3) above.
Here, Petitioner as shift engineer, Petitioner’s duties and responsibilities were as
follows:
1. To supply the required and continuous steam to all consuming units at minimum
cost.
2. To supervise, check and monitor manpower workmanship as well as operation of
boiler and accessories.
3. To evaluate performance of machinery and manpower.
4. To follow-up supply of waste and other materials for fuel.
5. To train new employees for effective and safety while working.
6. Recommend parts and supplies purchases.
7. To recommend personnel actions such as: promotion, or disciplinary action.
8. To check water from the boiler, feedwater and softener, regenerate softener if
beyond hardness limit.
9. Implement Chemical Dosing.
10. Perform other task as required by the superior from time to time.
The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that
petitioner was a member of the managerial staff. His duties and responsibilities
conform to the definition of a member of a managerial staff under the Implementing
Rules.
Petitioner supervised the engineering section of the steam plant boiler. His
work involved overseeing the operation of the machines and the performance of the
workers in the engineering section. This work necessarily required the use of
discretion and independent judgment to ensure the proper functioning of the steam
plant boiler. As supervisor, petitioner is deemed a member of the managerial staff.
Noteworthy, even petitioner admitted that he was a supervisor. In his
Position Paper, he stated that he was the foreman responsible for the operation of the
boiler. The term foreman implies that he was the representative of management over
the workers and the operation of the department. Petitioner’s evidence also showed
that he was the supervisor of the steam plant. His classification as supervisor is further
evident from the manner his salary was paid. He belonged to the 10% of respondents
354 employees who were paid on a monthly basis; the others were paid only on a daily
basis.
17. GRAND ASIAN SHIPPING LINES v. GALVEZ et. al.
FACTS: Petitioner is a domestic corporation engaged in transporting liquified
petroleum gas (LPG) from Petron Corporation’s refinery in Limay, Bataan to Petron’s
Plant in Ugong, Pasig and Petron’s Depot in Rosario, Cavite. Petitioners William How
and Eduardo Francisco are its President and General Manager, respectively.
Respondents, on the other hand, are crewmembers of one of GASLI’s vessels. M/T
Dorothy Uno, with the following designations: Wilfredo Galvez as Captain; Joel Sales
as Chief Mate; Cristito Gruta as Chief Engineer; Danilo Arguelles as Radio Operator;
Renato Batayola, Patricio Fresmillo and Jovy Noble as Able Seamen; Emilio Dominico
and Benny Nilmao as Oilers; and Jose Austral as 2nd Engineer.
Sometime in January 2000, one of the vessel’s Oilers, Richard Abis, reported
to GASLI’s Office and Crewing Manager, Elsa Montegrico, an alleged illegal activity
being committed by respondents aboard the vessel. Abis revealed that after about 4 to
5 voyages a week, a substantial volume of fuel oil is unconsumed and stored in the
vessel’s fuel tanks. However, Gruta would misdeclare it as consumed fuel in the
Engineer’s Voyage Reports. Then, the saved fuel oil is siphoned and sold to other
vessels out at sea usually at night time. Respondents would then divide among
themselves the proceeds of the sale. Abis added that he was hesitant at first to report
respondents’ illegal activities for fear for his life.
An investigation on the alleged pilferage was conducted. Petitioner’s Internal
Auditor, Roger de la Rama (De la Rama), issued a Certification of Overstatement of
Fuel Oil Consumption for M/T Dorothy Uno stating that for the period June 30, 1999 to
February 15, 2000 fuel oil consumption was overstated by 6,954.3 liters amounting to
₱74,737.86.
On February 11, 2000, a formal complaint for qualified theft was filed with the
Criminal Investigation and Detection Group (CIDG) at Camp Crame against
respondents, with Montegrico’s Complaint-Affidavit attached.
In their Joint Counter-Affidavit and Joint Rejoinder-Affidavit, Respondents denied
the charge. They alleged that the complaint was based on conflicting and erroneous
computation/estimates of fuel consumption; that the complaint was fabricated as
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borne out by its failure to specify the exact time the alleged pilferage took place; that
the allegations that the pilferage has been going on since August 1999 and that
Austral and Sales acted as lookouts are not true because both embarked on the
vessel only on December 28, 1999 and January of 2000, respectively; that four other
officers who were on board the vessel much longer than Austral and Sales were not
included in the charge; and, that the complaint was intended as a mere leverage.
A complaint for qualified theft was filed in RTC Manila.
Meanwhile, Petitioner placed Respondents under preventive suspension. After
conducting administrative hearings, petitioners decided to terminate respondents from
employment. Respondents (except Sales) were thus served with notices informing
them of their termination for serious misconduct, wilful breach of trust, and
commission of a crime or offense against their employer.
It appears that several other employees and crewmembers of GASLI’s two other
vessels were likewise suspended and terminated from employment. Nine seafarers of
M/T Deborah Uno were charged and terminated for insubordination, defying orders
and refusal to take responsibility of cargo products/fuel. For vessel M/T Coral Song,
two crewmembers were dismissed for serious act of sabotage and grave
insubordination. Proceedings before the Labor Arbiter Respondents and the other
dismissed crewmembers of M/T Deborah Uno and M/T Coral Song (complainants)
filed with the NLRC separate complaints for illegal suspension and dismissal,
underpayment/non-payment of salaries/wages, overtime pay, premium pay for holiday
and rest day, holiday pay, service incentive leave pay, hazard pay, tax refunds and
indemnities for damages and attorney’s fees against Petitioners.
 LABOR ARBITER - dismissal of all 21 complainants illegal. As regards the
dismissal of herein respondents, the Labor Arbiter ruled that the filing of a
criminal case for qualified theft against them did not justify their termination
from employment. The Labor Arbiter found it abstruse that the specific date
and time the alleged pilferage took place were not specified and that some
crewmembers who boarded the vessel during the same period the alleged
pilferage transpired were not included in the charge. With regard to the other
complainants, petitioners likewise failed to prove the legality of their
dismissal; ordered petitioners to reinstate complainants with full backwages
and to pay their money claims for unpaid salary, overtime pay, premium pay
for holidays and rest days, holiday and service incentive leave pay, as
 indicated in the Computation of Money Claims. Complainants were likewise
awarded damages due to the attending bad faith in effecting their
termination, double indemnity prescribed by RA No. 8188 in view of violation
of the Minimum Wage Law, as well as 10% attorney’s fee. With respect to the
claim for tax refund, the same was referred to the Bureau of Internal
Revenue, while the claim for hazard pay was dismissed for lack of basis.
Petitioners filed a Notice of Appeal With A Very Urgent Motion to Reduce Bond
before the NLRC and posted a cash bond in the amount of ₱500,000.00.
 NLRC – denying Petitioners’ motion to reduce bond and directing them to
post an additional bond in the amount of ₱4,084,736.70 in cash or surety
within an unextendible period of 10 days; otherwise, their appeal would be
dismissed. Petitioners failed to comply with the Order. Thus, on February 3,
2003, complainants moved for the dismissal of the appeal since petitioners
had thus far posted only ₱1.5 million supersedeas bond and ₱500,000.00
cash bond, short of the amount required by the NLRC; it also found the
appeal meritorious and ruled that petitioners presented sufficient evidence to ISSUE: WON employer has broader discretion in dismissing managerial employees
show just causes for terminating complainants’ employment and compliance
with due process. Accordingly, complainants’ dismissal was valid, with the
exception of Sales. The NLRC adjudged petitioners to have illegally
dismissed Sales as there was absence of any record that the latter received
any notice of suspension, administrative hearing, or termination.
The NLRC struck down the monetary awards given by the Labor
Arbiter, which, it ruled, were based merely on the computations unilaterally
prepared by the complainants. It also ruled that Galvez, a ship captain, is
considered a managerial employee not entitled to premium pay for holiday
and rest day, holiday pay and service incentive leave pay. As for the other
complainants, the award for premium pay, holiday pay, rest day pay and
overtime pay had no factual basis because no proof was adduced to show
that work was performed on a given holiday or rest day or beyond the eight
hours normal work time. Even then, the NLRC opined that these claims had
already been given since complainants’ salaries were paid on a 365-day
basis. Likewise, service incentive leave pay, awards for damages and double
indemnity were deleted. Further, the NLRC sustained respondents’
contention that it is the Secretary of Labor or the Regional Director who has
jurisdiction to impose the penalty of double indemnity for violations of the
Minimum Wage Laws and not the Labor Arbiter.
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 CA – set aside the NLRC’s Decision and Resolution. It held that the NLRC’s
act of entertaining the appeal is a jurisdictional error since petitioners’ failure
to post additional bond rendered the Labor Arbiter’s Decision final, executory
and immutable. The CA, nonetheless, proceeded to discuss the merits of the
case insofar as the illegal dismissal charge is concerned. The CA conformed
with the Labor Arbiter’s ruling that petitioners’ evidence was inadequate to
support the charge of pilferage and justify respondents’ termination. The CA
ruled that Sales was also illegally dismissed, stating that Sales’ active
participation in the labor case against petitioners belies the theory that he
was not terminated from employment.
Petitioners filed a Motion for Reconsideration, questioning the CA in finding that
respondents were illegally dismissed, in reinstating the monetary awards granted by
the Labor Arbiter without passing upon the merits of these money claims and in
ascribing grave abuse of discretion on the part of the NLRC in taking cognizance of the
appeal before it.
on the ground of loss of trust and confidence than those occupying ordinary ranks.
While plain accusations are not sufficient to justify the dismissal of rank and file
employees, the mere existence of a basis for believing that managerial employees
have breached the trust reposed on them by their employer would suffice to justify
their dismissal?
RULING:
1. Galvez and Gruta were validly dismissed on the ground of loss of trust and
confidence; there were no valid grounds for the dismissal of Arguelles,
Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral. As specified in the
termination notice, respondents were dismissed on the grounds of (i) serious
misconduct, particularly in engaging in pilferage while navigating at sea, (ii)
willful breach of the trust reposed by the company, and (iii) commission of a
crime or offense against their employer. Petitioners claim that based on the
sworn statement of Abis, joint affidavit of Bernabe and De la Rama, letter of
petitioner Francisco requesting assistance from the CIDG, formal complaint
sheet, complaint and supplementary complaint affidavit of Montegrico,
CIDG’s letter referring respondents’ case to the Office of the City Prosecutor
of Manila, resolution of the City Prosecutor finding a prima facie case of
 qualified theft, and the Information for qualified theft, there is a reasonable
ground to believe that respondents were responsible for the pilferage of
diesel fuel oil at M/T Dorothy Uno, which renders them unworthy of the trust
and confidence reposed on them. After examination of the evidence
presented, however, we find that petitioners failed to substantiate adequately
the charges of pilferage against respondents.
Here, the mere filing of a formal charge, to our mind, does not
automatically make the dismissal valid. Evidence submitted to support the
charge should be evaluated to see if the degree of proof is met to justify
respondents’ termination. The affidavit executed by Montegrico simply
contained the accusations of Abis that respondents committed pilferage,
which allegations remain uncorroborated. "Unsubstantiated suspicions,
accusations, and conclusions of employers do not provide for legal
justification for dismissing employees." 54 The other bits of evidence were
also inadequate to support the charge of pilferage. The findings made by
GASLI’s port captain and internal auditor and the resulting certification
executed by De la Rama merely showed an overstatement of fuel
consumption as revealed in the Engineer’s Voyage Reports. The report of
Jade Sea Land Inspection Services only declares the actual usage and
amount of fuel consumed for a particular voyage. There are no other
sufficient evidence to show that respondents participated in the commission
of a serious misconduct or an offense against their employer.
As for the second ground for respondents’ termination, which is loss
of trust and confidence, distinction should be made between managerial and
rank and file employees. "[W]ith respect to rank-and-file personnel, loss of
trust and confidence, as ground for valid dismissal, requires proof of
involvement in the alleged events x x x [while for] managerial employees, the
mere existence of a basis for believing that such employee has breached the
trust of his employer would suffice for his dismissal."
Here, Galvez, as the ship captain, is considered a managerial
employee since his duties involve the governance, care and management of
the vessel.Gruta, as chief engineer, is also a managerial employee for he is
tasked to take complete charge of the technical operations of the vessel. As
captain and as chief engineer, Galvez and Gruta perform functions vested
27 | P a g e AGUINALDO, DIÑO, LAPEZ, MANGUERA, MORALES C., MORALES I. and UMANGAY – LABOR CASE DIGESTS
with authority to execute management policies and thereby hold positions of
responsibility over the activities in the vessel. Indeed, their position requires
the full trust and confidence of their employer for they are entrusted with the
custody, handling and care of company property and exercise authority over
it.
Thus, we find that there is some basis for the loss of confidence
reposed on Galvez and Gruta. The certification issued by De la Rama stated
that there is an overstatement of fuel consumption. Notably, while
respondents made self-serving allegations that the computation made
therein is erroneous, they never questioned the competence of De la Rama
to make such certification. Neither did they question the authenticity and
validity of the certification. Thus, the fact that there was an overstatement of
fuel consumption and that there was loss of a considerable amount of diesel
fuel oil remained unrefuted. Their failure to account for this loss of company
property betrays the trust reposed and expected of them. They had violated
petitioners’ trust and for which their dismissal is justified on the ground of
breach of confidence.
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and
Austral, proof of involvement in the loss of the vessel’s fuel as well as their
participation in the alleged theft is required for they are ordinary rank and file
employees. And as discussed above, no substantial evidence exists in the
records that would establish their participation in the offense charged. This
renders their dismissal illegal, thus, entitling them to reinstatement plus full
backwages, inclusive of allowances and other benefits, computed from the
time of their dismissal up to the time of actual reinstatement.
2. Respondents are not entitled to their money claims except 13th month pay
for the period of their illegal dismissal, unpaid salaries, salary differentials,
double indemnity for violation of the Minimum Wage Law and attorney’s fees.
Galvez and Gruta, as managerial employees, are not entitled to
their claims for holiday pay, service incentive leave pay and premium pay for
holiday and restday. Article 82 of the Labor Code specifically excludes
managerial employees from the coverage of the law regarding conditions of
 employment which include hours of work, weekly rest periods, holidays,
service incentive leaves and service charges.
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and
Austral, we cannot sustain the argument that they are classified as field
personnel under Article 82 of the Labor Code who are likewise excluded.
Article 82 defines field personnel as referring to "non-agricultural employees
who regularly perform their duties away from the principal place of business
or branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty." They are those who
perform functions which "cannot be effectively monitored by the employer or
his representative." Here, respondents, during the entire course of their
voyage, remain on board the vessel. They are not field personnel inasmuch
as they were constantly supervised and under the effective control of the
petitioners through the vessel’s ship captain.
Nevertheless, we cannot grant them their claims for holiday pay,
premium pay for holiday and restday, overtime pay and service incentive
leave pay. Respondents do not dispute petitioners’ assertion that in
computing respondents’ salaries, petitioners use 365 days as divisor. In fact,
this was the same divisor respondents used in computing their money claims
against petitioners. Hence, they are paid all the days of the month, which
already include the benefits they claim. As for overtime pay and premium pay
for holidays and restdays, no evidence was presented to prove that they
rendered work in excess of the regular eight working hours a day or worked
during holidays and restdays. In the absence of such proof, there could be no
basis to award these benefits.
For the claim of service incentive leave pay, respondents did not
specify what year they were not paid such benefit. In addition, records show
that they were paid their vacation leave benefits. Thus, in accordance with
Article 95 of the Labor Code, respondents can no longer claim service
incentive leave pay.
On the other hand, for failure to effectively refute the awards for
13th month pay for the period that respondents were illegally dismissed,
unpaid salaries and salary differentials, we affirm the grant thereof as
28 | P a g e AGUINALDO, DIÑO, LAPEZ, MANGUERA, MORALES C., MORALES I. and UMANGAY – LABOR CASE DIGESTS
computed by the Labor Arbiter. Petitioners’ evidence which consist of a mere
tabulation of the amount of actual benefits paid and given to respondents is
self-serving as it does not bear the signatures of the employees to prove that
they had actually received the amounts stated therein.
3. No evidence of Sales’ dismissal from employment. The rule that the
employer bears the burden of proof in illegal dismissal cases finds no
application when the employer denies having dismissed the employee. The
employee must first establish by substantial evidence the fact of
dismissal before shifting to the employer the burden of proving the validity of
such dismissal. We give credence to petitioners’ claim that Sales was not
dismissed from employment. Unlike the other respondents, we find no
evidence in the records to show that Sales was preventively suspended, that
he was summoned and subjected to any administrative hearing and that he
was given termination notice. From the records, it appears Sales was not
among those preventively suspended on February 26, 2000. To bolster this
fact, Petitioners presented the Payroll Journal Register for the period March
1-15, 2000 showing that Sales was still included in the payroll and was not
among those who were charged with an offense to warrant suspension. In
fact, Sales’ signature in the Semi-Monthly Attendance Report for February
26, 2000 to March 10, 2000 proves that he continued to work as Chief Mate
for the vessel M/T Dorothy Uno along with a new set of crewmembers. It is
likewise worth noting that in the Supplemental Complaint Affidavit of
Montegrico, Sales was not included in the list of those employees who were
accused of having knowledge of the alleged pilferage. This only shows that
he was never subjected to any accusation or investigation as a prelude to
termination. Hence, it would be pointless to determine the legality or illegality
of his dismissal because, in the first place, he was not dismissed from
employment.
18. Villar vs. National Labor Relations Commission
FACTS: HI-TECH MANUFACTURING CORPORATION (HITECH) hired petitioners to
perform various jobs for the company such as slitter machine operator, inkman, silk
screen printer, truck helper, rubber dye setter, forklift operator and stitching machine
operator.
Petitioner-members of the Federation of Free Workers Union filed before the
Department of Labor a petition for certification election among the rank-and-file
employees of HI-TECH. It was granted and a certification election was conducted
inside the company premises on 31 July 1994. However, petitioners lost in the election
as the HI-TECH employees voted for “No Union.”
Thereafter, petitioners were alleged to have been barred from entering the premises
of HI-TECH hence, couldn’t report to work. They filed before the Labor Arbiter
separate complaints for illegal dismissal and labor standards claims against HI-TECH,
Herman T. Go, owner, and Carmen Belano, general manager.
Petitioners’ contention: They were summarily dismissed from employment by the
management in retaliation for organizing a labor union in the work premises as well as
in filing the petition for certification election before the Department of Labor. That they
were paid daily wages ranging from P81.00 to P145.00 (below the minimum).
That they were required to work six (6) days a week from 8 o’clock in the morning to 7
o’clock in the evening without being paid for the overtime. Neither were they paid their
service incentive leave pay and 13th month pay.
HI-TECH’s contention: HI-TECH denied having dismissed petitioners. It contended
that petitioners were probably stung by their defeat in the certification election such
that they refused to work thereafter.
LABOR ARBITER: In favor of petitioners ordering HI-TECH to reinstate petitioners to
their former positions without loss of seniority rights and with full back wages, and to
pay their mandated monetary benefits.
NLRC: Set aside the LA’s Decision and ordered petitioners to report back to work, or if
no longer feasible, directed HITECH to pay petitioners their separation benefits.
ISSUE:
1. Whether petitioners deliberately and unjustifiably abandoned their
employment, or were illegally dismissed by the management of HI-TECH
ILLEGALY DISMISSED. It is clear from the records that sometime in August 1994,
immediately after petitioners supposedly “refused to work” having lost earlier in the
certification election, several complaints for illegal dismissal against HITECH were
29 | P a g e AGUINALDO, DIÑO, LAPEZ, MANGUERA, MORALES C., MORALES I. and UMANGAY – LABOR CASE DIGESTS
filed by petitioners. These are sufficient proofs that they were never guilty of leaving
their jobs. The concept of abandonment of work is inconsistent with the immediate
filing of complaints for illegal dismissal. An employee who took steps to protest his
layoff could not by any logic be said to have abandoned his work.
Abandonment is a matter of intention and cannot lightly be presumed from certain
equivocal acts. To constitute abandonment, there must be clear proof of deliberate
and unjustified intent to sever the employeremployee relationship. Mere absence of
the employee is not sufficient. The burden of proof to show a deliberate and unjustified
refusal of an employee to resume his employment without any intention of returning
rests on the employer. HI-TECH failed to discharge its burden.
2. NLRC held that petitioners’ claims for underpayment of wages, 13th month
pay and service incentive leave pay are without basis.
NO. First, petitioners executed a JOINT AFFIDAVIT specifying their daily wages,
positions and periods of employment, which was made the basis of the Labor Arbiter’s
computation of the monetary awards. Second, all that the NLRC needed to do was to
refer to the prevailing minimum wage to ascertain the correctness of petitioners’
claims. Third, and most importantly, the burden of proving payment of monetary
claims rests on the employer.
19. Auto Bus Transport Systems, Inc. vs. Bautista
FACTS: Respondent Antonio Bautista has been employed by petitioner Auto Bus
Transport Systems, Inc. (Autobus), as driver-conductor Respondent was paid on
commission basis, seven percent (7%) of the total gross income per travel, on a twice
a month basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe,
Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of
Autobus No. 124, as the latter vehicle suddenly stopped at a sharp curve without
giving any warning.
He averred that the accident happened because he was compelled by the
management to go back to Roxas, Isabela, although he had not slept for almost
twenty-four (24) hours, as he had just arrived in Manila from Roxas, Isabela.
Respondent further alleged that he was not allowed to work until he fully paid the
amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the
damaged buses and that despite respondent’s pleas for reconsideration, the same
was ignored by management. After a month, management sent him a letter of
termination.
Respondent instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay against Autobus.
Petitioner, on the other hand, maintained that respondent’s employment was replete
with offenses involving reckless imprudence, gross negligence, and dishonesty.
LA: Dismissed but ordered petitioner to pay his 13 th month pay and service incentive
leave.
NLRC: 13th month pay was removed.
CA: Dismissed the appeal of Petitioner.
ISSUE:
1. Whether or not respondent is entitled to service incentive leave
RULING:
YES. According to the Implementing Rules, Service Incentive Leave shall not apply to
employees classified as “field personnel.” The phrase “other employees whose
performance is unsupervised by the employer” must be understood as an
amplification of the interpretation of the definition of field personnel under the Labor
Code as those “whose actual hours of work in the field cannot be determined with
reasonable certainty.”
The same is true with respect to the phrase “those who are engaged on task or
contract basis, purely commission basis.” Said phrase should be related with “field
personnel,” Hence, employees engaged on task or contract basis or paid on purely
commission basis are not automatically exempted from the grant of service incentive
leave, unless, they fall under the classification of field personnel.
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According to Article 82 of the Labor Code, “field personnel” shall refer to
non-agricultural employees who regularly perform their duties away from the principal
place of business or branch office of the employer and whose actual hours of work in
the field cannot be determined with reasonable certainty.
Respondent is not a field personnel but a regular employee who performs tasks
usually necessary and desirable to the usual trade of petitioner’s business.
Accordingly, respondent is entitled to the grant of service incentive leave.
2. Whether the 3-year prescriptive period has lapsed
YES. Applying Article 291 of the Labor Code in light of this peculiarity of the service
incentive leave, we can conclude that the three (3)-year prescriptive period
commences, not at the end of the year when the employee becomes entitled to the
commutation of his service incentive leave, but from the time when the employer
refuses to pay its monetary
equivalent after demand of commutation or upon termination of the employee’s
services, as the case may be.
Therefore, the prescriptive period with respect to his claim for service incentive leave
pay only commenced from the time the employer failed to compensate his
accumulated service incentive leave pay at the time of his dismissal. Since respondent
had filed his money claim after only one month from the time of his dismissal,
necessarily, his money claim was filed within the prescriptive period provided for by
Article 291 of the Labor Code.
20. Boie-Takeda Chemicals, Inc. vs. De la Serna
FACTS: esident Corazon C. Aquino promulgated
Memorandum Order No. 28 which modified Section 1 of Presidential Decree No. 851
to the extent that all employers are hereby required to pay all their rank-and-file
employees a 13th month pay not later than December 24 of every year.
Revised Guidelines on the implementation of the 13th Month Pay Law were
promulgated by then Labor Secretary Franklin Drilon which, among other things,
defined with particularity what remunerative items were and were not embraced in the
concept of 13th month pay, and specifically dealt with employees who are paid a fixed
or guaranteed wage plus commission.
A routine inspection was conducted on May 2, 1989 in the premises of petitioner
Boie-Takeda Chemicals, Inc. by Labor and Development Officer Reynaldo B. Ramos.
It was discovered that Boie-Takeda had not been including then commissions earned
by its medical representatives in the computation of their 13th month pay.
Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results,
and expressing the view “that the commission paid to our medical representatives are
not to be included in the computation of the 13th month pay ** (since the) law and its
implementing rules speak of REGULAR or BASIC salary and therefore exclude all
other
remunerations which are not part of the REGULAR salary.”
Regional Director Luna C. Piezas ordered the petitioners to pay P565,746.47
representing
underpayment of thirteenth (13th) month pay for the years 1986, 1987, 1988.
Acting Labor Secretary: Sales commissions earned by Boie-Takeda’s medical
representatives before August 13, 1989, the effectivity date of Memorandum Order
No. 28 and
its Implementing Guidelines, shall be excluded in the computation of their 13th month
pay.
A similar Routine Inspection was conducted in the premises of Philippine Fuji Xerox
Corp. Regional Director Luna C. Piezas ordered to restitute to its salesmen the portion
of the 13th
month pay which arose out of the non-implementation of the said revised guidelines.
In their almost identically-worded petitions, petitioners, through common counsel,
attribute grave abuse of discretion to respondent labor officials Hon. Dionisio dela
Serna and Undersecretary Cresenciano B. Trajano in issuing the questioned Orders.
They maintain that under P.D. 851, the 13th month pay is based solely on basic salary.
ISSUE: Whether or not the Revised Guidelines were issued in excess of the
statutory authority conferred by PD 851
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RULING:
Yes. Memorandum Order No. 28 did not repeal, supersede or abrogate P.D. 851. As
may be gleaned from the language of Memorandum Order No. 28, it merely “modified”
Section 1 of the decree by removing the P1,000.00 salary ceiling. The concept of 13th
Month Pay as envisioned, defined and implemented under P.D. 851 remained
unaltered, and while entitlement to said benefit was no longer limited to employees
receiving a monthly basic salary of not more than P1,000.00, said benefit was, and still
is, to be computed on the basic salary of the employee-recipient as provided under
P.D. 851. Thus, the interpretation given to the term “basic salary” as defined in P.D.
851 applies equally to “basic salary” under Memorandum Order No. 28.
21. Philippine Duplicators vs. NLRC GR 110068 February 15, 1995
Facts: Private respondent union, for and on behalf of its member-salesmen, asked
petitioner corporation for payment of 13th month pay computed on the basis of the
salesmen’s fixed or guaranteed wages plus commissions.
Petitioner corporation refused the union’s request, but stated it would respect an
opinion from the MOLE. On 17 November 1987, acting upon a request for opinion
submitted by respondent union, Director Augusto G. Sanchez of the Bureau of
Working Conditions, MOLE, rendered an opinion to respondent union declaring
applicable the provisions of Explanatory Bulletin No. 86-12, Item No. 5 (a):
. . . . Since the salesmen of Philippine Duplicators are receiving a fixed basic wage
plus commission on sales and not purely on commission basis, they are entitled to
receive 13th month pay provided they worked at least one (1) month during the
calendar year. May we add at this point that in computing such 13th month pay, the
total commissions of said salesmen for the calendar year shall be divided by twelve
(12). (Emphasis supplied)
Notwithstanding Director Sanchez’ opinion or ruling, petitioner refused to pay the
claims of its salesmen for 13th month pay computed on the basis of both fixed wage
plus sales commissions.
Issue: WON sales commission is included in the coverage of basic salary for purposes
of computing 13th month pay.
Held:
 1. Decision (1993)
In the first place, Article 97 (f) of the Labor Code defines the term “wage” (which is
equivalent to “salary,” as used in P.D. No. 851 and Memorandum Order No. 28) in the
following terms:
(f) “Wage“ paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of calculating
the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services
rendered or to be rendered, and includes the fair and reasonable value, as determined
by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by
the employer to the employee. “Fair and reasonable value” shall not include any profit
to the employer or to any person affiliated with the employer. (Emphasis supplied)
In the instant case, there is no question that the sales commissions earned by
salesmen who make or close a sale of duplicating machines distributed by petitioner
corporation constitute part of the compensation or remuneration paid to salesmen for
serving as salesmen, and hence as part of the “wage” or “salary” of petitioner’s
salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or
guaranteed wage; the greater part of the salesmen’s wages or salaries being
composed of the sales or incentive commissions earned on actual sales closed by
them. No doubt this particular salary structure was intended for the benefit of petitioner
corporation, on the apparent assumption that thereby its salesmen would be moved to
greater enterprise and diligence and close more sales in the expectation of increasing
their sales commissions. This, however, does not detract from the character of such
commissions as part of the salary or wage paid to each of its salesmen for rendering
services to petitioner corporation.
Petition and MR dismissed
2. Resolution (1995)
In Boie-Takeda the so-called commissions “paid to or received by medical
representatives of Boie-Takeda Chemicals or by the rank and file employees of
Philippine Fuji Xerox Co.,” were excluded from the term “basic salary” because these
were paid to the medical representatives and rank-and-file employees as “productivity
bonuses.” The Second Division characterized these payments as additional
monetary benefits not properly included in the term “basic salary” in computing their
13th month pay. As a rule a bonus is an amount granted and paid to an employee for
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his industry loyalty which contributed to the success of the employer’s business and
made possible the realization of profits. It is an act of generosityof the employer for
which the employee ought to be thankful and grateful. It is also granted by an
enlightened employer to spur the employee to greater efforts for the success of the
business and realization of bigger profits. From the legal point of view a bonus is not
and mandable and enforceable obligation. It is so when It is made part of the wage or
salary or compensation.
2nd MR dismissed.
22. LOON VS. POWER MASTER INC.
FACTS: Respondents Power Master, Inc. and Tri-C General Services employed and
assigned the petitioners as janitors and leadsmen in various Philippine Long Distance
Telephone Company (PLDT) offices in Metro Manila area. Subsequently, the
petitioners filed a complaint for money claims against Power Master, Inc., Tri-C
General Services and their officers, the spouses Homer and Carina Alumisin
(collectively, the respondents). The petitioners alleged in their complaint that they
were not paid minimum wages, overtime, holiday, premium, service incentive leave,
and thirteenth month pays. They further averred that the respondents made them sign
blank payroll sheets. On June 11, 2001, the petitioners amended their complaint and
included illegal dismissal as their cause of action. They claimed that the respondents
relieved them from service in retaliation for the filing of their original complaint.
Notably, the respondents did not participate in the proceedings before the Labor
Arbiter except on April 19, 2001 and May 21, 2001 when Mr. Romulo Pacia, Jr.
appeared on the respondents’ behalf. The respondents’ counsel also appeared in a
preliminary mandatory conference on July 5, 2001. However, the respondents neither
filed any position paper nor proffered pieces of evidence in their defense despite their
knowledge of the pendency of the case.
LA: L.A. Salinas partially ruled in favor of the petitioners. The LA awarded the
petitioners salary differential, service incentive leave, and thirteenth month pays. In
awarding these claims, the LA stated that the burden of proving the payment of these
money claims rests with the employer. The LA also awarded attorney’s fees in favor of
the petitioners, pursuant to Article 111 of the Labor Code.
NLRC: partially ruled in favor of the respondents.16 The NLRC affirmed the LA’s
awards of holiday pay and attorney’s fees. The NLRC also vacated the LA’s awards
of salary differential, thirteenth month and service incentive leave pays.

CA: Affirmed NLRC Ruling

ISSUE: 1.) Whether the petitioners are entitled to salary differential, overtime, holiday,
premium, service incentive leave, and thirteenth month pays; and

2.) Whether the petitioners are entitled to attorney’s fees.

RULING: As to back wages, petitioners are entitled. Based on the above

considerations, the court reversed the NLRC and the CA’s finding that the petitioners
were terminated for just cause and were afforded procedural due process. In
termination cases, the burden of proving just and valid cause for dismissing an
employee from his employment rests upon the employer. The employer’s failure to
discharge this burden results in the finding that the dismissal is unjustified. This is
exactly what happened in the present case.

Petitioners are also entitled to salary differential, service incentive, holiday and
thirteenth month pays. As in illegal dismissal cases, the general rule is that the burden
rests on the defendant to prove payment rather than on the plaintiff to prove
non-payment of these money claims. The rationale for this rule is that the pertinent
personnel files, payrolls, records, remittances and other similar documents – which
will show that differentials, service incentive leave and other claims of workers have
been paid – are not in the possession of the worker but are in the custody and control
of the employer.

However, the court ruled that they are not entitled to overtime and premium pays. In
the present case, the petitioners failed to adduce any evidence that would show that
they actually rendered service in excess of the regular eight working hours a day, and
that they in fact worked on holidays and rest days.

The award of attorney’s fees is also warranted under the circumstances of this
case.1âwphi1 An employee is entitled to an award of attorney’s fees equivalent to ten
percent (10%) of the amount of the wages in actions for unlawful withholding of wages

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