THIRD DIVISION
10% of premium paid with the second year;
G.R. No. 102199 January 28, 1997
AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO
BUSTAMANTE, respondents.
PANGANIBAN, J.:
The determination of the proper forum is crucial because the filing of the petition or complaint
in the wrong court or tribunal is fatal, even for a patently meritorious claim. More specifically,
labor arbiters and the National Labor Relations Commission have no jurisdiction to entertain
and rule on money claims where no employer-employee relations is involved. Thus, any such
award rendered without jurisdiction is a nullity.
This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution 1 of the
National Labor Relations Commission, promulgated September 27, 1991, in NLRC-NCR Case
No. 00-02-01196-90, entitled "Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.,"
affirming the decision of the labor arbiter which ordered payment of the amount of
P319,796.00 as insurance commissions to private respondent.
The Antecedent Facts
The facts are simple. 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: 2
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 authoriied, 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.
xxx xxx xxx
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.
xxx xxx xxx
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;
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.
On July 5, 1989, 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 dated July 5, 1989, approved by Retired Brig. Gen. Rosalino Alquiza,
president of petitioner-company. 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.
Sometime in October 1989, private respondent was informed that his check was ready for
release. In collecting his check, he discovered from a document (account summary) attached
to said check that his total commissions for the 24 months actually amounted to P354,796.09.
Said document stated: 4
6. The total receivable for Mr. Bustamante out of the renewals and old
business generated since 1983 grosses P438,835.00 less his outstanding
obligation in the amount of P78,039.89 as of June 30, 1989, total
expected commission would amount to P354,796.09. From that figure at a
15% compromise settlement this would mean P53,219.41 due him to
settle his claim.
Private respondent, however, was paid only the amount of P35,000.00.
On November 23, 1989, 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.
On February 26, 1990, private respondent filed his complaint with the Department of Labor
claiming: (1) commission for 2 years from termination of employment equivalent to 30% of
premiums remitted during employment; (2) P354,796.00 as commission earned from renewals
and old business generated since 1983; (3) P100,000.00 as moral damages; and (4)
P100,000.00 as exemplary damages.
After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision,
dated August 24, 1990, the dispositive portion of which reads: 5
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.
 All other claims of the complainant are dismissed for want of merit.
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.
On appeal, the Second Division 6 of the respondent Commission affirmed the decision of the
Labor Arbiter. In the assailed Resolution, respondent Commission found no reason to disturb
said ruling of the labor arbiter and
ruled: 7
WHEREFORE, in view of the foregoing considerations, the subject appeal
should be as it is hereby, denied and the decision appealed from affirmed
SO ORDERED.
Hence, this petition.
The Issue
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.
The Court's Ruling
The petition is meritorious.
First Issue: Not All That Glitters Is Control
Well-settled is the doctrine that the existence of an employer-employee relationship is
ultimately a question of fact and that the findings thereon by the labor arbiter and the National
Labor Relations Commission shall be accorded not only respect but even finality when
supported by substantial evidence. 8 The determinative factor in such finality is the presence
of substantial evidence to support said finding, otherwise, such factual findings cannot bind
this Court.
Respondent Commission concurred with the labor arbiter's findings that: 9
x x x The complainant's job as sales insurance agent is usually necessary
and desirable in the usual business of the respondent company. Under
the Sales Agents Agreement, the complainant was required to solicit
exclusively for the respondent company, and he was bound by the
company policies, memo circulars, rules and regulations which were
issued from time to time. By such requirement to follow strictly
management policies, orders, circulars, rules and regulations, it only
shows that the respondent had control or reserved the right to control the
complainant's work as solicitor. Complainant was not an independent
contractor as he did not carry on an independent business other than that
of the company's . . .
To this, respondent Commission added that the Sales Agent's Agreement specifically
provided that petitioner may assign private respondent a specific area of responsibility and a
production quota. From there, it concluded that apparently there is that exercise of control by
the employer which is the most important element in determining employer- employee
relationship. 10
We hold, however, that respondent Commission misappreciated the facts of the case. Time
and again, 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. 11
The difficulty lies in correctly assessing if certain factors or elements properly indicate the
presence of control. Anent the issue of exclusivity in the case at bar, the fact that private
respondent was required to solicit business exclusively for petitioner could hardly be
considered as control in labor jurisprudence. Under Memo Circulars No. 2-81 12 and 2-85,
dated December 17, 1981 and August 7, 1985, respectively, issued by the Insurance
Commissioner, insurance agents are barred from serving more than one insurance company,
in order to protect the public and to enable insurance companies to exercise exclusive
supervision over their agents in their solicitation work. Thus, the exclusivity restriction clearly
springs from a regulation issued by the Insurance Commission, and not from an intention by
petitioner to establish control over the method and manner by which private respondent shall
accomplish his work. This feature is not meant to change the nature of the relationship
between the parties, nor does it necessarily imbue such relationship with the quality of control
envisioned by the law.
So too, the fact that private respondent was bound by company policies, memo/circulars, rules
and regulations issued from time to time is also not indicative of control. In its Reply to
Complainant's Position Paper, 13 petitioner alleges that the policies, memo/circulars, and rules
and regulations referred to in provision B(1) of the Sales Agent's Agreement are only those
pertaining to payment of agents' accountabilities, availment by sales agents of cash advances
for sorties, circulars on incentives and awards to be given based on production, and other
matters concerning the selling of insurance, in accordance with the rules promulgated by the
Insurance Commission. According to the petitioner, insurance solicitors are never affected or
covered by the rules and regulations concerning employee conduct and penalties for
violations thereof, work standards, performance appraisals, merit increases, promotions,
absenteeism/attendance, leaves of absence, management-union matters, employee benefits
and the like. Since private respondent failed to rebut these allegations, the same are deemed
admitted, or at least proven, thereby leaving nothing to support the respondent Commission's
conclusion that the foregoing elements signified an employment relationship between the
parties.
In regard to the territorial assignments given to sales agents, this too cannot be held as
indicative of the exercise of control over an employee. First of all, the place of work in the
business of soliciting insurance does not figure prominently in the equation. And more
significantly, private respondent failed to rebut petitioner's allegation that it had never issued
him any territorial assignment at all. Obviously, this Court cannot draw the same inference
from this feature as did the respondent Commission.
To restate, the significant factor in determining the relationship of the parties is the presence
or absence of supervisory authority to control the method and the details of performance of
the service being rendered, and the degree to which the principal may intervene to exercise
such control. The presence of such power of control is indicative of an employment
relationship, while absence thereof is indicative of independent contractorship. In other words,
the test to determine the existence of independent contractorship is whether one claiming to
be an independent contractor has contracted to do the work according to his own methods
and without being subject to the control of the employer except only as to the result of the
work. 14 Such is exactly the nature of the relationship between petitioner and private
respondent.
Further, not every form of control that a party reserves to himself over the conduct of the other
party in relation to the services being rendered may be accorded the effect of establishing an
employer-employee relationship. The facts of this case fall squarely with the case of Insular
Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. The distinction
acquires particular relevance in the case of an enterprise affected with
public interest, as is the business of insurance, and is on that account
subject to regulation by the State with respect, not only to the relations
between insurer and insured but also to the internal affairs of the
insurance company. Rules and regulations governing the conduct of the
business are provided for in the Insurance Code and enforced by the
Insurance Commissioner. It is, therefore, usual and expected for an
insurande company to promulgate a set of rules to guide its commission
agents in selling its policies that they may not run afoul of the law and
what it requires or prohibits. . . . None of these really invades the agent's
contractual prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience, hence cannot justifiably be
said to establish an employer-employee relationship between him and the
company. 15
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. As
petitioner explains:
(Private respondent) was free to solicit life insurance anywhere he wanted
and he had free and unfettered time to pursue his business. He did not
have to punch in and punch out the bundy clock as he was not required to
report to the (petitioner's) office regularly. 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. 16
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.
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.
Second Issue: Jurisdiction of Respondent
Commission & Labor Arbiter
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. 17
The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the
Labor Code. 18 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." 19 Without this critical element of
employment relationship, the labor arbiter and respondent Commission can never acquire
jurisdiction over a dispute. As in the case at bar. It was serious error on the part of the labor
arbiter to have assumed jurisdiction and adjudicated the claim. Likewise, the respondent
Commission's affirmance thereof.
Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings,
even on appeal. The doctrine of estoppel cannot be properly invoked by respondent
Commission to cure this fatal defect as it cannot confer jurisdiction upon a tribunal that to
begin with, was bereft of jurisdiction over a cause of action. 20 Moreover, in the proceedings
below, petitioner consistently challenged the jurisdiction of the labor arbiter 21 and respondent
Commission. 22
It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a
court or tribunal without jurisdiction is a total nullity. 23 A void judgment for want of jurisdiction
is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All
acts performed pursuant to it and all claims emanating from it have no legal effect. Hence, it
can never become final. ". . . (I)t may be said to be a lawless thing which can be treated as an
outlaw and slain at sight, or ignored wherever and whenever it exhibits its head." 24
The way things stand, it becomes unnecessary to consider the merits of private respondent's
claim for unpaid commission. Be that as it may, this ruling is without prejudice to private
respondent's right to file a suit for collection of unpaid commissions against petitioner with the
proper forum and within the proper period.
WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET
ASIDE.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur
EN BANC
G.R. No. 112546 March 13, 1996
NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION
TRUST, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ANTONIO M.
VILLANUEVA and WILFREDO GUILLEMA, respondents.
PANGANIBAN, J.:p
Is a company which is forced by huge business losses to close its business, legally required to
pay separation benefits to its employees at the time of its closure in an amount equivalent to
the separation pay paid to those who were separated when the company was still a going
concern? This is the main question brought before this Court in this petition for certiorari under
Rule 65 of the Revised Rules of Court, which seeks to reverse and set aside the Resolutions
dated July 29, 19931 and September 27, 19932 of the National Labor Relations
Commission3 (NLRC) in NLRC CA No. M-00139593.
The Resolution dated July 29, 1993 affirmed in toto the decision of the Labor Arbiter in RAB-
11-08-00672-92 and RAB-11-08-00713-92 ordering petitioners to pay the complainants
therein certain monetary claims.
The Resolution dated September 27, 1993 denied the motion for reconsideration of the said
July 29, 1993 Resolution.
The Facts
Petitioner North Davao Mining Corporation (North Davao) was incorporated in 1974 as a
100% privately-owned company. Later, the Philippine National Bank (PNB) became part
owner thereof as a result of a conversion into equity of a portion of loans obtained by North
Davao from said bank. On June 30, 1986, PNB transferred all its loans to and equity in North
Davao in favor of the national government which, by virtue of Proclamation No. 50 dated
December 8, 1986, later turned them over to petitioner Asset Privatization Trust (APT). As of
December 31, 1990 the national government hold 81.8% of the common stock and 100% of
the preferred stock of said company.4
Respondent Wilfredo Guillema is one among several employees of North Davao who were
separated by reason of the company's closure on May 31, 1992, and who were the
complainants in the cases before the respondent labor arbiter.
On May 31, 1992, petitioner North Davao completely ceased operations due to serious
business reverses. From 1988 until its closure in 1992, North Davao suffered net losses
averaging three billion pesos (P3,000,000,000.00) per year, for each of the five years prior to
its closure. All told, as of December 31, 1991, or five months prior to its closure, its total
liabilities had exceeded its assets by 20,392 billion pesos, as shown by its financial
statements audited by the Commission on Audit. When it ceased operations, its remaining
employees were separated and given the equivalent of 12.5 days' pay for every year of
service, computed on their basic monthly pay, in addition to the commutation to cash of their
unused vacation and sick leaves. However, it appears that, during the life of the petitioner
corporation, from the beginning of its operations in 1981 until its closure in 1992, it had been
giving separation pay equivalent to thirty (30) days' pay for every year of service. Moreover,
inasmuch as the region where North Davao operated was plagued by insurgency and other
peace and order problems, the employees had to collect their salaries at a bank in Tagum,
Davao del Norte, some 58 kilometers from their workplace and about 2 1/2 hours' travel time
by public transportation; this arrangement lasted from 1981 up to 1990.
Subsequently, a complaint was filed with respondent Labor Arbiter by respondent Wilfredo
Guillema and 271 other separated employees for: (1) additional separation pay of 17.5 days
for every year of service; (2) back wages equivalent to two days a month; (3) transportation
allowance; (4) hazard pay; (5) housing allowance; (6) food allowance; (7) post-employment
medical clearance; and (8) future medical allowance, all of which amounted to
P58,022,878.31 as computed by private respondent.5
On May 6, 1993, respondent Labor Arbiter rendered a decision ordering petitioner North
Davao to pay the complainants the following:
(a) Additional separation pay of 17.5 days for every year of service;
(b) Backwages equivalent to two (2) days a month times the number of
years of service but not to exceed three (3) years;
(c) Transportation allowance at P80 a month times the number of years of
service but not to exceed three (3) years.
The benefits awarded by respondent Labor Arbiter amounted to P10,240,517.75. Attorney's
fees equivalent to ten percent (10%) thereof were also granted.6
On appeal, respondent NLRC affirmed the decision in toto. Petitioner North Davao's motion
for reconsideration was likewise denied. Hence, this petition.
The Parties' Submissions and the Issues
In affirming the Labor Arbiter's decision, respondent NLRC ruled that "since (North Davao)
has been paying its employees separation pay equivalent to thirty (30) days pay for every year
of service," knowing fully well that the law provides for a lesser separation pay, then such
company policy "has ripened into an obligation," and therefore, depriving now the herein
private respondent and others similarly situated of the same benefits would be
discriminatory.7 Quoting from Businessday Information Systems and Services, Inc. (BISSI)
vs. NLRC,8 it said that petitioners "may not pay separation benefits unequally for such
discrimination breeds resentment and ill-will among those who have been treated less
generously than others." It also cited Abella vs. NLRC,9 as authority for saying that Art. 283 of
the Labor Code protects workers in case of closure of the establishment.
To justify the award of two days a month in backwages and P80 per month of transportation
allowance, respondent Commission ruled:
As to the appellants' claim that complainants-appellees' time spent in
collecting their wages at Tagum, Davao is not compensable allegedly
because it was on official time can not be given credence. No iota of
evidence has been presented to back up said contention. The same is
true with appellants' assertion that the claim for transportation expenses is
without basis since they were incurred by the complainants. Appellants
should have submitted the payrolls to prove that complainants appellees
were not the ones who personally collected their wages and/or the
bus/jeep trip tickets or vouchers to show that the complainants-appellees
were provided with free transportation as claimed.
Petitioner, through the Government Corporate Counsel, raised the following grounds for the
allowance of the petition:
1. The NLRC acted with grave abuse of discretion in affirming without
legal basis the award of additional separation pay to private respondents
 who were separated due to serious business losses on the part of
petitioner.
2. The NLRC acted with grave abuse of discretion in affirming without
sufficient factual basis the award of backwages and transportation
expenses to private respondents.
3. There is no appeal, nor any plain, speedy and adequate remedy in the
ordinary course of the law.
and the following issues:
1. Whether or not an employer whose business operations ceased due to
serious business losses or financial reverses is obliged to pay separation
pay to its employees separated by reason of such closure.
2. Whether or not time spent in collecting wages in a place other than the
place of employment is compensable notwithstanding that the same is
done during official time.
3. Whether or not private respondents are entitled to transportation
expenses in the absence of evidence that these expenses were incurred.
The First Issue: Separation Pay
To resolve this issue, it is necessary to revisit the provision of law adverted to by the parties in
their submissions, namely, Art. 283 of the Labor Code, which reads as follows:
Art. 283. Closure of establishment and reduction of personnel. — The
employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be
equivalent to 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 one (1) whole year. (emphasis supplied)
The underscored portion of Art. 283 governs the grant of separation benefits "in case of
closures or cessation of operation" of business establishments "NOT due to serious business
losses or financial reverses . . . ". Where, however, the closure was due to business losses —
as in the instant case, in which the aggregate losses amounted to over P20 billion — the
Labor Code does not impose any obligation upon the employer to pay separation benefits, for
obvious reasons. There is no need to belabor this point. Even the public respondents, in their
Comment 10 filed by the Solicitor General, impliedly concede this point.
However, respondents tenaciously insist on the award of separation pay, anchoring their claim
solely on petitioner North Davao's long-standing policy of giving separation pay benefits
equivalent to 30-days' pay, which policy had been in force in the years prior to its closure.
Respondents contend that, by denying the same separation benefits to private respondent
and the others similarly situated, petitioners discriminated against them. They rely on this
Court's ruling in Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC,
(supra). In said case, petitioner BISSI, after experiencing financial reverses, decided "as a
retrenchment measure" to lay-off some employees on May 16, 1988 and gave them
separation pay equivalent to one-half (1/2) month pay for every year of service. BISSI retained
some employees in an attempt to rehabilitate its business as a trading company. However,
barely two and a half months later, these remaining employees were likewise discharged
because the company decided to cease business operations altogether. Unlike the earlier
terminated employees, the second batch received separation pay equivalent to a full month's
salary for every year of service, plus a mid-year bonus. This Court ruled that "there was
impermissible discrimination against the private respondents in the payment of their
separation benefits. The law requires an employer to extend equal treatment to its employees.
It may not, in the guise of exercising management prerogatives, grant greater benefits to
some and less to others. . . ."
In resolving the present case, it bears keeping in mind at the outset that the factual
circumstances of BISSI are quite different from the current case. The Court noted that BISSI
continued to suffer losses even after the retrenchment of the first batch of employees: clearly,
business did not improve despite such drastic measure. That notwithstanding, when BISSI
finally shut down, it could well afford to (and actually did) pay off its remaining employees with
MORE separation benefits as compared with those earlier laid off; obviously, then, there
was no reason for BISSI to skimp on separation pay for the first batch of discharged
employees. That it was able to pay one-month separation benefit for employees at the time of
closure of its business meant that it must have been also in a position to pay the same
amount to those who were separated prior to closure. That it did not do so was a wrongful
exercise of management prerogatives. That is why the Court correctly faulted it with
"impermissible discrimination." Clearly, it exercised its management prerogatives contrary to
"general principles of fair play and justice."
In the instant case however, the company's practice of giving one month's pay for every year
of service could no longer be continued precisely because the company could not afford it
anymore. It was forced to close down on account of accumulated losses of over P20 billion.
This could not be said of BISSI. In the case of North Davao, it gave 30-days' separation pay to
its employees when it was still a going concern even if it was already losing heavily. As a
going concern, its cash flow could still have sustained the payment of such separation
benefits. But when a business enterprise completely ceases operations, i.e., upon its death as
a going business concern, its vital lifeblood — its cashflow — literally dries up. Therefore, the
fact that less separation benefits ware granted when the company finally met its business
death cannot be characterized as discrimination. Such action was dictated not by a
discriminatory management option but by its complete inability to continue its business life due
to accumulated losses. Indeed, one cannot squeeze blood out of a dry stone. Nor water out of
parched land.
As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation
benefits when the closure is due to losses. In the case before us, the basis for the claim of the
additional separation benefit of 17.5 days is alleged discrimination, i.e., unequal treatment of
employees, which is proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under
the facts and circumstances of the present case, the grant of a lesser amount of separation
pay to private respondent was done, not by reason of discrimination, but rather, out of sheer
financial bankruptcy — a fact that is not controlled by management prerogatives. Stated
differently, the total cessation of operation due to mind-boggling losses was a supervening
fact that prevented the company from continuing to grant the more generous amount of
separation pay. The fact that North Davao at the point of its forced closure voluntarily paid any
separation benefits at all — although not required by law — and 12.5-days worth at that,
should have elicited admiration instead of condemnation. But to require it to continue being
generous when it is no longer in a position to do so would certainly be unduly oppressive,
unfair and most revolting to the conscience. As this Court held in Manila Trading & Supply
Co. vs. Zulueta, 11 and reiterated in San Miguel Corporation vs. NLRC 12 and later, in Allied
Banking Corporation vs. Castro, 13 "(t)he law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer."
At this juncture, we note that the Solicitor General in his Comment challenges the petitioners'
assertion that North Davao, having closed down, no longer has the means to pay for the
benefits. The Solicitor General stresses that North Davao was among the assets transferred
by PNB to the national government, and that by virtue of Proclamation No. 50 dated
December 8, 1986, the APT was constituted trustee of this government asset. He then
concludes that "(i)t would, therefore, be incongruous to declare that the National Government,
which should always be presumed to be solvent, could not pay now private respondents'
money claims." Such argumentation is completely misplaced. Even if the national government
owned or controlled 81.8% of the common stock and 100% of the preferred stock of North
Davao, it remains only a stockholder thereof, and under existing laws and prevailing
jurisprudence, a stockholder as a rule is not directly, individually and/or personally liable for
the indebtedness of the corporation. The obligation of North Davao cannot be considered the
obligation of the national government, hence, whether the latter be solvent or not is not
material to the instant case. The respondents have not shown that this case constitutes one of
the instances where the corporate veil may be pierced. 14 From another angle, the national
government is not the employer of private respondent and his co-complainants, so there is no
reason to expect any kind of bailout by the national government under existing law and
jurisprudence.
The Second and Third Issues:
Back Wages and Transportation Allowance
Anent the award of back wages and transportation allowance, the issues raised in connection
therewith are factual, the determination of which is best left to the respondent NLRC. It is well
settled that this Court is bound by the findings of fact of the NLRC, so long as said findings are
supported by substantial evidence 15.
As the Solicitor General pointed out in his comment:
It is undisputed that because of security reasons, from the time of its
operations, petitioner NDMC maintained its policy of paying its workers at
a bank in Tagum, Davao del Norte, which usually took the workers about
two and a half (2 1/2) hours of travel from the place of work and such
travel time is not official.
Records also show that on February 12, 1992, when an inspection was
conducted by the Department of Labor and Employment at the premises
of petitioner NDMC at Amacan, Maco, Davao del Norte, it was found out
that petitioners had violated labor standards law, one of which is the place
of payment of wages (p. 109, Vol. 1, Record)
Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code provides that:
Sec. 4. Place of payment. — (a) As a general rule, the place of payment
shall be at or near the place of undertaking. Payment in a place other than
the workplace shall be permissible only under the following
circumstances:
(1) When payment cannot be effected at or near the place of work by
reason of the deterioration of peace and order conditions, or by reason of
actual or impending emergencies caused by fire, flood, epidemic or other
calamity rendering payment thereat impossible;
(2) When the employer provides free transportation to the employees back
and forth; and
(3) Under any analogous circumstances; provided that the time spent by
the employees in collecting their wages shall be considered as
compensable hours worked.
(b) xxx xxx xxx
(Emphasis supplied)
Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), the
Regional Director, Regional Office No. XI, Department of Labor and
Employment, Davao City, ordered petitioner NDMC, among others, as
follows:
WHEREFORE, . . . . Respondent is further ordered to
pay its workers salaries at the plantsite at Amacan,
New Leyte, Maco, Davao del Norte or whenever not
possible, through the bank in Tagum, Davao del Norte
as already been practiced subject, however to the
provisions of Section 4 of Rule VIII, Book III of the
rules implementing the Labor Code as amended.
Thus, public respondent Labor Arbiter Antonio M. Villanueva correctly held
that:
From the evidence on record, we find that the hours
spent by complainants in collecting salaries at a bank
in Tagum, Davao del Norte shall be considered
compensable hours worked. Considering further the
distance between Amacan, Maco to Tagum which is 2
1/2 hours by travel and the risks in commuting all the
time in collecting complainants' salaries, would justify
the granting of backwages equivalent to two (2) days
in a month as prayed for.
Corollary to the above findings, and for equitable
reasons, we likewise hold respondents liable for the
transportation expenses incurred by complainants at
P40.00 round trip fare during pay days.
(p. 10, Decision; p. 207, Vol. 1, Record)
On the contrary, it will be petitioners' burden or duty to
present evidence of compliance of the law on labor
standards, rather than for private respondents to
prove that they were not paid/provided by petitioners
of their backwages and transportation expenses.
Other than the bare denials of petitioners, the above findings stand uncontradicted. Indeed we
are not at liberty to set aside findings of facts of the NLRC, absent any capriciousness,
arbitrariness, or abuse or complete lack of basis. In Maya Farms Employees Organizations
vs. NLRC, 16 , we held:
This Court has consistently ruled that findings of fact of administrative
agencies ad quasi-judicial bodies which have acquired expertise because
their jurisdiction is confined to specific matters are generally accorded not
only respect but even finality and are binding upon this Court unless there
is a showing of grave abuse of discretion, or where it is clearly shown that
they were arrived at arbitrarily or in disregard of the evidence on record.
WHEREFORE, judgment is hereby rendered MODIFYING the assailed Resolution by
SETTING ASIDE and deleting the award for "additional separation pay of 17.5 days for every
year of service", and AFFIRMING it in all other aspects. No costs.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan,
Mendoza, Francisco and Hermosisima, Jr., JJ., concur.
SECOND DIVISION
G.R. No. L-80680 January 26, 1989
DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R. ERISPE,
JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA, FERDINAND CRUZ, FEDERICO
A. BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO UDOG, PETER
TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY ESTEBAN and LYDIA
ORTEGA, petitioners,
vs.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON,
NATIONAL LABOR RELATIONS COMMISSION, and HON. EMERSON C.
TUMANON, respondents.
V.E. Del Rosario & Associates for respondent CMC.
The Solicitor General for public respondent.
Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for petitioners.
Mildred A. Ramos for respondent Lily Victoria A. Azarcon.
SARMIENTO, J.:
On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the National
Labor Relations Commission for reinstatement and payment of various benefits, including
minimum wage, overtime pay, holiday pay, thirteen-month pay, and emergency cost of living
allowance pay, against the respondent, the California Manufacturing Company. 1
On October 7, 1986, after the cases had been consolidated, the California Manufacturing
Company (California) filed a motion to dismiss as well as a position paper denying the
existence of an employer-employee relation between the petitioners and the company and,
consequently, any liability for payment of money claims. 2 On motion of the petitioners, Livi
Manpower Services, Inc. was impleaded as a party-respondent.
It appears that the petitioners were, prior to their stint with California, employees of Livi
Manpower Services, Inc. (Livi), which subsequently assigned them to work as "promotional
merchandisers" 3 for the former firm pursuant to a manpower supply agreement. Among other
things, the agreement provided that California "has no control or supervisions whatsoever
over [Livi's] workers with respect to how they accomplish their work or perform [Californias]
obligation"; 4 the Livi "is an independent contractor and nothing herein contained shall be
construed as creating between [California] and [Livi] . . . the relationship of principal[-]agent or
employer[-]employee'; 5 that "it is hereby agreed that it is the sole responsibility of [Livi] to
comply with all existing as well as future laws, rules and regulations pertinent to employment
of labor" 6 and that "[California] is free and harmless from any liability arising from such laws or
from any accident that may befall workers and employees of [Livi] while in the performance of
their duties for [California].7
It was further expressly stipulated that the assignment of workers to California shall be on a
"seasonal and contractual basis"; that "[c]ost of living allowance and the 10 legal holidays will
be charged directly to [California] at cost "; and that "[p]ayroll for the preceeding [sic] week
[shall] be delivered by [Livi] at [California's] premises." 8
The petitioners were then made to sign employment contracts with durations of six months,
upon the expiration of which they signed new agreements with the same period, and so on.
Unlike regular California employees, who received not less than P2,823.00 a month in
addition to a host of fringe benefits and bonuses, they received P38.56 plus P15.00 in
allowance daily.
The petitioners now allege that they had become regular California employees and demand,
as a consequence whereof, similar benefits. They likewise claim that pending further
proceedings below, they were notified by California that they would not be rehired. As a result,
they filed an amended complaint charging California with illegal dismissal.
California admits having refused to accept the petitioners back to work but deny liability
therefor for the reason that it is not, to begin with, the petitioners' employer and that the
"retrenchment" had been forced by business losses as well as expiration of contracts. 9 It
appears that thereafter, Livi re-absorbed them into its labor pool on a "wait-in or standby"
status. 10
Amid these factual antecedents, the Court finds the single most important issue to be:
Whether the petitioners are California's or Livi's employees.
The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the existence of
any employer-employee relation between the petitioners and California ostensibly in the light
of the manpower supply contract, supra, and consequently, against the latter's liability as and
for the money claims demanded. In the same breath, however, the labor arbiter absolved Livi
from any obligation because the "retrenchment" in question was allegedly "beyond its control
." 13 He assessed against the firm, nevertheless, separation pay and attorney's fees.
We reverse.
The existence of an employer-employees relation is a question of law and being such, it
cannot be made the subject of agreement. Hence, the fact that the manpower supply
agreement between Livi and California had specifically designated the former as the
petitioners' employer and had absolved the latter from any liability as an employer, will not
erase either party's obligations as an employer, if an employer-employee relation otherwise
exists between the workers and either firm. At any rate, since the agreement was between Livi
and California, they alone are bound by it, and the petitioners cannot be made to suffer from
its adverse consequences.
This Court has consistently ruled that the determination of whether or not there is an
employer-employee relation depends upon four standards: (1) the manner of selection and
engagement of the putative employee; (2) the mode of payment of wages; (3) the presence or
absence of a power of dismissal; and (4) the presence or absence of a power to control the
putative employee's conduct. 14 Of the four, the right-of-control test has been held to be the
decisive factor. 15
On the other hand, we have likewise held, based on Article 106 of the Labor Code,
hereinbelow reproduced:
ART. 106. Contractor or sub-contractor. — Whenever an employee enters
into a contract with another person for the performance of the former's
work, the employees of the contractor and of the latter's sub-contractor, if
any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or sub-contractor fails to pay wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or sub-contractor to such employees to
the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit
the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
 differentiations within these types of contracting and determine who
among the parties involved shall be considered the employer for purposes
of this Code, to prevent any violation or circumvention of any provisions of
this Code.
There is 'labor-only' contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities
which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
that notwithstanding the absence of a direct employer-employee relationship between the
employer in whose favor work had been contracted out by a "labor-only" contractor, and the
employees, the former has the responsibility, together with the "labor-only" contractor, for any
valid labor claims, 16 by operation of law. The reason, so we held, is that the "labor-only"
contractor is considered "merely an agent of the employer,"17 and liability must be shouldered
by either one or shared by both. 18
There is no doubt that in the case at bar, Livi performs "manpower services", 19 meaning to
say, it contracts out labor in favor of clients. We hold that it is one notwithstanding its
vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an
independent contractor." 20 The nature of one's business is not determined by self-serving
appellations one attaches thereto but by the tests provided by statute and prevailing case
law. 21 The bare fact that Livi maintains a separate line of business does not extinguish the
equal fact that it has provided California with workers to pursue the latter's own business. In
this connection, we do not agree that the petitioners had been made to perform activities
'which are not directly related to the general business of manufacturing," 22California's
purported "principal operation activity. " 23 The petitioner's had been charged with
"merchandizing [sic] promotion or sale of the products of [California] in the different sales
outlets in Metro Manila including task and occational [sic] price tagging," 24 an activity that is
doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served
as its (California's) promotions or sales arm or agent, or otherwise, rendered a piece of work it
(California) could not have itself done; Livi, as a placement agency, had simply supplied it with
the manpower necessary to carry out its (California's) merchandising activities, using its
(California's) premises and equipment. 25
Neither Livi nor California can therefore escape liability, that is, assuming one exists.
The fact that the petitioners have allegedly admitted being Livi's "direct employees" 26 in their
complaints is nothing conclusive. For one thing, the fact that the petitioners were (are), will not
absolve California since liability has been imposed by legal operation. For another, and as we
indicated, the relations of parties must be judged from case to case and the decree of law,
and not by declarations of parties.
The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no
argument either. As we held in Philippine Bank of Communications v. NLRC, 27 a temporary or
casual employee, under Article 218 of the Labor Code, becomes regular after service of one
year, unless he has been contracted for a specific project. And we cannot say that
merchandising is a specific project for the obvious reason that it is an activity related to the
day-to-day operations of California.
It would have been different, we believe, had Livi been discretely a promotions firm, and that
California had hired it to perform the latter's merchandising activities. For then, Livi would
have been truly the employer of its employees, and California, its client. The client, in that
case, would have been a mere patron, and not an employer. The employees would not in that
event be unlike waiters, who, although at the service of customers, are not the latter's
employees, but of the restaurant. As we pointed out in the Philippine Bank of
Communications case:
xxx xxx xxx
... The undertaking given by CESI in favor of the bank was not the
performance of a specific job for instance, the carriage and delivery of
documents and parcels to the addresses thereof. There appear to be
many companies today which perform this discrete service, companies
with their own personnel who pick up documents and packages from the
offices of a client or customer, and who deliver such materials utilizing
their own delivery vans or motorcycles to the addressees. In the present
case, the undertaking of CESI was to provide its client the bank with a
certain number of persons able to carry out the work of messengers. Such
undertaking of CESI was complied with when the requisite number of
persons were assigned or seconded to the petitioner bank. Orpiada
utilized the premises and office equipment of the bank and not those of
CESI. Messengerial work the delivery of documents to designated
persons whether within or without the bank premises-is of course directly
related to the day-to-day operations of the bank. Section 9(2) quoted
above does not require for its applicability that the petitioner must be
engaged in the delivery of items as a distinct and separate line of
business.
Succinctly put, CESI is not a parcel delivery company: as its name
indicates, it is a recruitment and placement corporation placing bodies, as
it were, in different client companies for longer or shorter periods of time,
... 28
In the case at bar, Livi is admittedly an "independent contractor providing temporary services
of manpower to its client. " 29 When it thus provided California with manpower, it supplied
California with personnel, as if such personnel had been directly hired by California. Hence,
Article 106 of the Code applies.
The Court need not therefore consider whether it is Livi or California which exercises control
over the petitioner vis-a-vis the four barometers referred to earlier, since by fiction of law,
either or both shoulder responsibility.
It is not that by dismissing the terms and conditions of the manpower supply agreement, we
have, hence, considered it illegal. Under the Labor Code, genuine job contracts are
permissible, provided they are genuine job contracts. But, as we held in Philippine Bank of
Communications, supra, when such arrangements are resorted to "in anticipation of, and for
the very purpose of making possible, the secondment" 30 of the employees from the true
employer, the Court will be justified in expressing its concern. For then that would compromise
the rights of the workers, especially their right to security of tenure.
This brings us to the question: What is the liability of either Livi or California?
The records show that the petitioners bad been given an initial six-month contract, renewed
for another six months. Accordingly, under Article 281 of the Code, they had become regular
employees-of-California-and had acquired a secure tenure. Hence, they cannot be separated
without due process of law.
California resists reinstatement on the ground, first, and as we Id, that the petitioners are not
its employees, and second, by reason of financial distress brought about by "unfavorable
political and economic atmosphere" 31"coupled by the February Revolution." 32 As to the first
objection, we reiterate that the petitioners are its employees and who, by virtue of the required
one-year length-of-service, have acquired a regular status. As to the second, we are not
convinced that California has shown enough evidence, other than its bare say so, that it had in
fact suffered serious business reverses as a result alone of the prevailing political and
economic climate. We further find the attribution to the February Revolution as a cause for its
alleged losses to be gratuitous and without basis in fact.
California should be warned that retrenchment of workers, unless clearly warranted, has
serious consequences not only on the State's initiatives to maintain a stable employment
record for the country, but more so, on the workingman himself, amid an environment that is
desperately scarce in jobs. And, the National Labor Relations Commission should have known
better than to fall for such unwarranted excuses and nebulous claims.
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1): SETTING
ASIDE the decision, dated March 20, 1987, and the resolution, dated August 19, 1987; (2)
ORDERING the respondent, the California Manufacturing Company, to REINSTATE the
petitioners with full status and rights of regular employees; and (3) ORDERING the
respondent, the California Manufacturing Company, and the respondents, Livi Manpower
Service, Inc. and/or Lily-Victoria Azarcon, to PAY, jointly and severally, unto the petitioners:
(a) backwages and differential pays effective as and from the time they had acquired a regular
status under the second paragraph, of Section 281, of the Labor Code, but not to exceed
three (3) years, and (b) all such other and further benefits as may be provided by existing
collective bargaining agreement(s) or other relations, or by law, beginning such time; and (4)
ORDERING the private respondents to PAY unto the petitioners attorney's fees equivalent to
ten (10%) percent of all money claims hereby awarded, in addition to those money claims.
The private respondents are likewise ORDERED to PAY the costs of this suit.
IT IS SO ORDERED.
Melencio-Herrera, (Chairperson), Paras, Padilla and Regalado, JJ., concur.
EN BANC Insofar as the Christmas bonus, the accumulated sick leave privileges and the transportation
G.R. No. L-21120 February 28, 1967 allowance during the lay-off period, the PAL's contention is clearly devoid of merit. The
PHILIPPINE AIR LINES, INC., petitioner, aforementioned clause must be considered in the light of the entire context of the resolution of
vs. July 13, 1954 and of its dispositive part. In ordering therein the "reinstatement" of said
PHILIPPINE AIR LINES EMPLOYEES ASSOCIATION and COURT OF INDUSTRIAL employees with "back wages from the date of their dismissal to the date of their reinstatement,
RELATIONS, respondents.Paredes, Poblador, Cruz & Nazareno for petitioner. Tañada, Lerum & Cinco and Beltran & Lacson for respondents. Mariano B. and without prejudice to their seniority or other rights and privileges," it is obvious that the
Tuason for respondent Court of Industrial Relations.
resolution intended to restore the employees to their status immediately prior to their
CONCEPCION, C.J.:
dismissal.
Appeal by certiorari , taken by the Philippine Air Lines, Inc. — hereinafter referred to as the
Hence, it directed , not only their reinstatement, but, also, the payment of their back wages
PAL from an order of the Court of Industrial Relations — hereinafter referred to as the CIR —
during the period of their lay-off — thus referring necessarily to a period of time preceding
the dispositive part of reads:
their reinstatement — and the retention of "their seniority or other rights and privileges". Rights
WHEREFORE , THE Philippine Air Lines is hereby ordered to pay the four
reinstatement, but at the time? Certainly, not after their reinstatement, but at the time of their
claimants, Messrs. Fortuno Biangco, Hernando Guevarra, Bernardino Abarrientos
aforementioned dismissal. In other words, the reinstatement was with back wages for the lay-
and 140 days each, sick leave which the two may use or enjoy according to existing
off period, coupled with "seniority or other rights and privileges", attached to the status of the
company rules, and regulations regarding this privilege, and to allow the four
employees when they were dismissed. To put it differently, the CIR treated said employees as
claimants the enjoyment of their earned and accumulated free trip passes both here
if they had not been absent form work and had been uninterruptedly working during the lay-off
and aboard subject to the above-mentioned plan the company may adopt. In order
period.1äwphï1.ñët
to effect early payment of the Christmas bonus, the Chief Examiner of the Court or
Thus, in Republic Steel Corporation vs. NLRB (114 F. 2d. 820), it was held that, under a
his duly authorized representatives is hereby directed to examine; pertinent records
decree of the Circuit Court of Appeals and Order of the National Labor Relations Board
of the company, to compute and determine the Christmas bonus due each of the
directing the employer to reinstate the striking employees without prejudice to their seniority or
four claimant and to submit a report therefore immediately upon completion of the
other rights or privileges, it was the intention of the Board and Court to provide that, upon
same.
reinstatement the employees were to be treated in matters involving seniority and continuity of
It appears that on May 4, 1950, PAL dismissed its above named four (4) employees,
employment as though they had not been absent from work, and hence the reinstated
who are member of the Philippine Air Lines Employees Association — hereinafter
employees were entitled to the benefits of the employer's vacation plan for the year in which
referred to as PALEA — and that on July 13, 1954, the CIR en banc passed
they were reinstated and subsequent years upon the basis of continuity of service
resolution, in Case No. 465-V thereof, directing the reinstatement of said employess
computed as though they had been actually at during the entire period from the date of strike
"to their former or equivalent position in the company, with back wages from the
to the date of reinstatement.
date of their reinstatement, and without prejudice to their seniority or other rights
As a consequence, the employees involved in the case at bar are entitled to the Christmas
and privileges. This resolution was affirmed by the Supreme Court, in G.R. No. L-
bonus that PAL had given to all of its employees during said period, for said bonus, having
8197, on October 31, 1958.
been paid regularly, has become part of the compensation of the employees. 1 Said
On January 14, 1959, said employees were reinstated and subsequently their backwages,
employees are, likewise, entitled to transportation allowance and the corresponding sick leave
computed at the rate of their compensation at the time of the aforementioned dismissal, less
privileges. These sick leave privileges are subject, however, to the following qualifications,
the wages and salaries earned by them elsewhere during the lay-off period, were paid to
namely: (1) that the accumulated sick leave cannot exceed 140 days, pursuant to the
them. The employees objected to this deduction and the CIR sustained them, in a Resolution
collective bargaining agreement between the PAL and the PALEA, effective in 1959; and (2)
dated May 22, 1960, which was reversed by the Supreme Court, on July 26, 1960, in G.R. No.
that, pursuant to the same agreement, which denies sick leave privileges to retired
L-15544. Soon later, or on November 10, 1960, the PALEA moved for the execution of the
employees, Onofre Griño and Bernardino Abarrientos, who have retired, are not entitled to
CIR resolution of July 13, 1954, as regards the "other rights and privileges" therein mentioned,
said privileges.
referring, more specifically to: (1) Christmas bonus from 1950 to 1958; (2) accumulated sick
The PAL's appeal as regards the free trip passes is, however, well taken, for the employees
leave; (3) transportation allowance during lay-off period; and (4) accumulated free trip passes,
had no absolute right thereto, even if they had actually rendered services during the lay-off
both domestic and international. By an order dated October 8, 1962, the CIR granted this
period. The free trip passes were given, neither automatically, nor indiscriminately. The
motion, except as regards the sick leave of Onofre Griño and Bernardino Abarrientos, and the
employees had to apply therefore and their applications were subject PAL's approval.
transportation allowance, which were denied. Hence this appeal.
Wherefore, except as to the free trip passes for the lay-off period, which should not be
PAL maintains that the CIR has erred in acting as it did, because : (1) the aforementioned
deemed included in the "rights and privileges" awarded in the resolution of July 13, 1954, and
privileges were not specifically mentioned in the CIR resolution of July 13, 1954; (2) the order
subject to the qualification that the accumulated sick leave privileges cannot exceed 140 days,
of the CIR dated October 8, 1962, had, allegedly, the effect of amending said resolution; and
the appealed resolution of October 8, 1962, is hereby affirmed in all other respects, without
(3) the clause therein "without prejudice to their seniority or other rights and privileges" should
pronouncement as to costs. It is so ordered.
be construed prospectively, not retroactively.
Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, Sanchez and Castro, JJ., concur.
FIRST DIVISION
G.R. No. 114733 January 2, 1997
AURORA LAND PROJECTS CORP. Doing business under the name "AURORA PLAZA"
and TERESITA T. QUAZON, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and HONORIO DAGUI, respondents.
HERMOSISIMA, JR., J.:
The question as to whether an employer-employee relationship exists in a certain situation
continues to bedevil the courts. Some businessmen try to avoid the bringing about of an
employer-employee relationship in their enterprises because that judicial relation spawns
obligations connected with workmen's compensation, social security, medicare, minimum
wage, termination pay, and unionism.1 In light of this observation, it behooves this Court to be
ever vigilant in Checking the unscrupulous efforts of some of our entrepreneurs, primarily
aimed at maximizing their return on investments at the expense of the lowly workingman.
This petition for certiorari seeks the reversal of the Resolution2 of public respondent National
Labor Relations Commission dated March 16, 1994 affirming with modification the decision of
the Labor Arbiter, dated May 25, 1992, finding petitioners liable to pay private respondent the
total amount of P195,624.00 as separation pay and attorney's fees.
The relevant antecedents:
Private respondent Honorio Dagui was hired by Doña Aurora Suntay Tanjangco in 1953 to
take charge of the maintenance and repair of the Tanjangco apartments and residential
buildings. He was to perform carpentry, plumbing, electrical and masonry work. Upon the
death of Doña Aurora Tanjangco in 1982, her daughter, petitioner Teresita Tanjangco
Quazon, took over the administration of all the Tanjangco properties. On June 8, 1991, private
respondent Dagui received the shock of his life when Mrs. Quazon suddenly told him: "Wala
ka nang trabaho mula ngayon,"3 on the alleged ground that his work was unsatisfactory. On
August 29, 1991, private respondent, who was then already sixty-two (62) years old, filed a
complaint for illegal dismissal with the Labor Arbiter.
On May 25, 1992, Labor Arbiter Ricardo C. Nora rendered judgment, the decretal portion of
which reads:
IN VIEW OF ALL THE FOREGOING, respondents Aurora Plaza and/or Teresita
Tanjangco Quazon are hereby ordered to pay the complainant the total amount of
ONE HUNDRED NINETY FIVE THOUSAND SIX HUNDRED TWENTY FOUR
PESOS (P195,624.00) representing complainant's separation pay and the ten
(10%) percent attorney's fees within ten (10) days from receipt of this Decision.
All other issues are dismissed for lack of merit.4
Aggrieved, petitioners Aurora Land Projects Corporation and Teresita T. Quazon appealed to
the National Labor Relations Commission. The Commission affirmed, with modification, the
Labor Arbiter's decision in a Resolution promulgated on March 16, 1994, in the following
manner:
WHEREFORE, in view of the above considerations, let the appealed decision be as
it is hereby AFFIRMED with (the) MODIFICATION that complainant must be paid
separation pay in the amount of P88,920.00 instead of P177,840.00. The award of
attorney's fees is hereby deleted.5
As a last recourse, petitioners filed the instant petition based on grounds not otherwise
succinctly and distinctly ascribed, viz:
I
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AFFIRMING THE
LABOR ARBITER'S DECISION SOLELY ON THE BASIS OF ITS STATEMENT
THAT "WE FAIL TO FIND ANY REASON OR JUSTIFICATION TO DISAGREE
WITH THE LABOR ARBITER IN HIS FINDING THAT HONORIO DAGUI WAS
DISMISSED BY THE RESPONDENT" (p. 7, RESOLUTION), DESPITE — AND
WITHOUT EVEN BOTHERING TO CONSIDER — THE GROUNDS STATED IN
PETITIONERS' APPEAL MEMORANDUM WHICH ARE PLAINLY MERITORIOUS.
II
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN FINDING THAT
COMPLAINANT WAS EMPLOYED BY THE RESPONDENTS MORE SO "FROM
1953 TO 1991" (p. 3, RESOLUTION).
III
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AWARDING
SEPARATION PAY IN FAVOR OF PRIVATE RESPONDENT MORE SO FOR THE
EQUIVALENT OF 38 YEARS OF ALLEGED SERVICE.
IV
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING BOTH
PETITIONERS LIABLE FOR SEPARATION PAY.6
It is our impression that the crux of this petition rests on two elemental issues: (1) Whether or
not private respondent Honorio Dagui was an employee of petitioners; and (2) If he were,
whether or not he was illegally dismissed.
Petitioners insist that private respondent had never been their employee. Since the
establishment of Aurora Plaza, Dagui served therein only as a job contractor. Dagui had
control and supervision of whoever he would take to perform a contracted job. On occasion,
Dagui was hired only as a "tubero" or plumber as the need arises in order to unclog sewerage
pipes. Every time his services were needed, he was paid accordingly. It was understood that
his job was limited to the specific undertaking of unclogging the pipes. In effect, petitioners
would like us to believe that private respondent Dagui was an independent contractor,
particularly a job contractor, and not an employee of Aurora Plaza.
We are not persuaded.
Section 8, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code
provides in part:
There is job contracting permissible under the Code if the following conditions are
met:
xxx xxx xxx
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of his business.
Honorio Dagui earns a measly sum of P180.00 a day (latest salary).7 Ostensibly, and by no
stretch of the imagination can Dagui qualify as a job contractor. No proof was adduced by the
petitioners to show that Dagui was merely a job contractor, and it is absurd to expect that
private respondent, with such humble resources, would have substantial capital or investment
in the form of tools, equipment, and machineries, with which to conduct the business of
supplying Aurora Plaza with manpower and services for the exclusive purpose of maintaining
the apartment houses owned by the petitioners herein.
The bare allegation of petitioners, without more, that private respondent Dagui is a job
contractor has been disbelieved by the Labor Arbiter and the public respondent NLRC. Dagui,
by the findings of both tribunals, was an employee of the petitioners. We are not inclined to set
aside these findings. The issue whether or not an employer-employee relationship exists in a
given case is essentially a question of fact.8 As a rule, repetitious though it has become to
state, this Court does not review supposed errors in the decision of the NLRC which raise
factual issues, because factual findings of agencies exercising quasi-judicial functions [like
public respondent NLRC] are accorded not only respect but even finality, aside from the
consideration that this Court is essentially not a trier of facts.9
However, we deem it wise to discuss this issue full-length if only to bolster the conclusions
reached by the labor tribunals, to which we fully concur.
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in
dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's
power to control the employee's conduct.10 It is the so-called "control test," and that is,
whether the employer controls or has reserved the right to control the employee not only as to
the result of the work to be done but also as to the means and methods by which the same is
to be accomplished,11 which constitute the most important index of the existence of the
employer-employee relationship. Stated otherwise, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to control not only
the end to be achieved but also the means to be used in reaching such end.12
All these elements are present in the case at bar. Private respondent was hired in 1953 by
Doña Aurora Suntay Tanjangco (mother of Teresita Tanjangco-Quazon), who was then the
one in charge of the administration of the Tanjangco's various apartments and other
properties. He was employed as a stay-in worker performing carpentry, plumbing, electrical
and necessary work (sic) needed in the repairs of Tanjangco's properties.13 Upon the demise
of Doña Aurora in 1982, petitioner Teresita Tanjangco-Quazon took over the administration of
these properties and continued to employ the private respondent, until his unceremonious
dismissal on June 8, 1991.14
Dagui was not compensated in terms of profits for his labor or services like an independent
contractor. Rather, he was paid on a daily wage basis at the rate of P180.00. 15 Employees are
those who are compensated for their labor or services by wages rather than by
profits.16 Clearly, Dagui fits under this classification.
Doña Aurora and later her daughter petitioner Teresita Quazon evidently had the power of
dismissal for cause over the private respondent.17
Finally, the records unmistakably show that the most important requisite of control is likewise
extant in this case. It should be borne in mind that the power of control refers merely to the
existence of the power and not to the actual exercise thereof. It is not essential for the
employer to actually supervise the performance of duties of the employee; it is enough that
the former has a right to wield the power.18 The establishment of petitioners is engaged in the
leasing of residential and apartment buildings. Naturally, private respondent's work therein as
a maintenance man had to be performed within the premises of herein petitioners. In fact,
petitioners do not dispute the fact that Dagui reports for work from 7:00 o'clock in the morning
until 4:00 o'clock in the afternoon. It is not far-fetched to expect, therefore, that Dagui had to
observe the instructions and specifications given by then Doña Aurora and later by Mrs.
Teresita Quazon as to how his work had to be performed. Parenthetically, since the job of a
maintenance crew is necessarily done within company premises, it can be inferred that both
Doña Aurora and Mrs. Quazon could easily exercise control on private respondent whenever
they please.
The employment relationship established, the next question would have to be: What kind of an
employee is the private respondent — regular, casual or probationary?
We find private respondent to be a regular employee, for Article 280 of the Labor Code
provides:
Regular and Casual employment. — The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business
or trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the
season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such actually exists.
As can be gleaned from this provision, there are two kinds of regular employees, namely: (1)
those who are engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer; and (2) those who have rendered at least one year of
service, whether continuous or broken, with respect to the activity in which they are
employed.19
Whichever standard is applied, private respondent qualifies as a regular employee. As aptly
ruled by the Labor Arbiter:
. . . As owner of many residential and apartment buildings in Metro Manila, the
necessity of maintaining and employing a permanent stay-in worker to perform
carpentry, plumbing, electrical and necessary work needed in the repairs of
Tanjangco's properties is readily apparent and is in fact needed. So much so that
upon the demise of Doña Aurora Tanjangco, respondent's daughter Teresita
Tanjangco-Quazon apparently took over the administration of the properties and
continued to employ complainant until his outright dismissal on June 8, 1991. . . . 20
The jobs assigned to private respondent as maintenance man, carpenter, plumber, electrician
and mason were directly related to the business of petitioners as lessors of residential and
apartment buildings. Moreover, such a continuing need for his services by herein petitioners is
sufficient evidence of the necessity and indispensability of his services to petitioners' business
or trade.
Private respondent Dagui should likewise be considered a regular employee by the mere fact
that he rendered service for the Tanjangcos for more than one year, that is, beginning 1953
until 1982, under Doña Aurora; and then from 1982 up to June 8, 1991 under the petitioners,
for a total of twenty-nine (29) and nine (9) years respectively. Owing to private respondent's
length of service, he became a regular employee, by operation of law, one year after he was
employed in 1953 and subsequently in 1982. In Baguio Country Club Corp., v. NLRC,21 we
decided that it is more in consonance with the intent and spirit of the law to rule that the status
of regular employment attaches to the casual employee on the day immediately after the end
of his first year of service. To rule otherwise is to impose a burden on the employee which is
not sanctioned by law. Thus, the law does not provide the qualification that the employee must
first be issued a regular appointment or must first be formally declared as such before he can
acquire a regular status.
Petitioners argue, however, that even assuming arguendo that private respondent can be
considered an employee, he cannot be classified as a regular employee. He was merely a
project employee whose services were hired only with respect to a specific job and only while
the same exists,22 thus falling under the exception of Article 280, paragraph 1 of the Labor
Code. Hence, it is claimed that he is not entitled to the benefits prayed for and subsequently
awarded by the Labor Arbiter as modified by public respondent NLRC.
The circumstances of this case in light of settled case law do not, at all, support this averment.
Consonant with a string of cases beginning with Ochoco v. NLRC,23 followed by Philippine
National Construction Corporation v. NLRC,24 Magante v. NLRC,25 and Capitol Industrial
Construction Corporation v. NLRC,26 if truly, private respondent was employed as a "project
employee," petitioners should have submitted a report of termination to the nearest public
employment office everytime his employment is terminated due to completion of each project,
as required by Policy Instruction No. 20, which provides:
Project employees are not entitled to termination pay if they are terminated as a
result of the completion of the project or any phase thereof in which they are
employed, regardless of the number of project in which they have been employed
by a particular construction company. Moreover, the company is not required to
obtain a clearance from the Secretary of Labor in connection with such
termination. What is required of the company is a report to the nearest Public
Employment Office for statistical purposes.
Throughout the duration of private respondent's employment as maintenance man, there
should have been filed as many reports of termination as there were projects actually finished,
if it were true that private respondent was only a project worker. Failure of the petitioners to
comply with this simple, but nonetheless compulsory, requirement is proof that Dagui is not a
project employee.27
Coming now to the second issue as to whether or not private respondent Dagui was illegally
dismissed, we rule in the affirmative.
Jurisprudence abound as to the rule that the twin requirements of due process, substantive
and procedural, must be complied with, before a valid dismissal exists.28 Without which the
dismissal becomes void.29
The twin requirements of notice and hearing constitute the essential elements of due process.
This simply means that the employer shall afford the worker ample opportunity to be beard
and to defend himself with the assistance of his representative, if he so desires.30 As held in
the case of Pepsi Cola Bottling Co. v. NLRC:31
The law requires that the employer must furnish the worker sought to be dismissed
with two written noticesbefore termination of employee can be legally effected: (1)
notice which apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) the subsequent notice which informs the employee of
the employer's decision to dismiss him (Section 13, BP 130; Sections, 2-6, Rule
XIV, Book V Rules and Regulations Implementing the Labor Code as amended),
Failure to comply with the requirements taints the dismissal with illegality. This
procedure is mandatory; in the absence of which, any judgment reached by
management is void and inexistent. (Tingson, Jr. v. NLRC, 185 SCRA 498 [1990];
National Service Corporation v. NLRC, 168 SCRA 122 [1988]; Ruffy v. NLRC, 182
SCRA 365 [1990].
These mandatory requirements were undeniably absent in the case at bar. Petitioner Quazon
dismissed private respondent on June 8, 1991, without giving him any written notice informing
the worker herein of the cause for his termination. Neither was there any hearing conducted in
order to give Dagui the opportunity to be heard and defend himself. He was simply told: "Wala
ka nang trabaho mula ngayon," allegedly because of poor workmanship on a previous
job.32 The undignified manner by which private respondent's services were terminated smacks
of absolute denial of the employee's right to due process and betrays petitioner Quazon's utter
lack of respect for labor. Such an attitude indeed deserves condemnation.
The Court, however, is bewildered why only an award for separation pay in lieu of
reinstatement was made by both the Labor Arbiter and the NLRC. No backwages were
awarded. It must be remembered that backwages and reinstatement are two reliefs that
should be given to an illegally dismissed employee. They are separate and distinct from each
other. In the event that reinstatement is no longer possible, as in this case, 33 separation pay is
awarded to the employee. The award of separation pay is in lieu of reinstatement and not of
backwages. In other words, an illegally dismissed employee is entitled to (1) either
reinstatement, if viable, or separation pay if reinstatement is no longer viable, and (2)
backwages.34 Payment of backwages is specifically designed to restore an employee's
income that was lost because of his unjust dismissal.35 On the other hand, payment of
separation pay is intended to provide the employee money during the period in which he will
be looking for another employment.36
Considering, however, that the termination of private respondent Dagui was made on June 8,
1991 or after the effectivity of the amendatory provision of Republic Act No. 6715 on March
21, 1989, private respondent's backwages should be computed on the basis of said law.
It is true that private respondent did not appeal the award of the Labor Arbiter awarding
separation pay sans backwages. While as a general rule, a party who has not appealed is not
entitled to affirmative relief other than the ones granted in the decision of the court
below,37 law and jurisprudence authorize a tribunal to consider errors, although unassigned, if
they involve (1) errors affecting the lower court's jurisdiction over the subject matter, (2) plain
errors not specified, and (3) clerical errors.38 In this case, the failure of the Labor Arbiter and
the public respondent NLRC to award backwages to the private respondent, who is legally
entitled thereto having been illegally dismissed, amounts to a "plain error" which we may
rectify in this petition, although private respondent Dagui did not bring any appeal regarding
the matter, in the interest of substantial justice. The Supreme Court is clothed with ample
authority to review matters, even if they are not assigned as errors on appeal, if it finds that
their consideration is necessary in arriving at a just decision of the case.39 Rules of procedure
are mere tools designed to facilitate the attainment of justice. Their strict and rigid application,
which would result in technicalities that tend to frustrate rather than promote substantial
justice, must always be avoided.40 Thus, substantive rights like the award of backwages
resulting from illegal dismissal must not be prejudiced by a rigid and technical application of
the rules.41
Petitioner Quazon argues that, granting the petitioner corporation should be held liable for the was dismissed on June 8, 1991 up to the finality of this decision, without deducting therefrom
claims of private respondent, she cannot be made jointly and severally liable with the the earnings derived by private respondent elsewhere during the period of his illegal
corporation, notwithstanding the fact that she is the highest ranking officer of the company, dismissal, pursuant to our ruling in Osmalik Bustamante, et al. v. National Labor Relations
since Aurora Plaza has a separate juridical personality. Commission.47
We disagree. No costs.
In the cases of Maglutac v. National Labor Relations Commission,42 Chua v. National Labor SO ORDERED.
Relations Commission,43 and A.C. Ransom Labor Union-CCLU v. National Labor Relations Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.
Commission 44 we were consistent in holding that the highest and most ranking officer of the
corporation, which in this case is petitioner Teresita Quazon as manager of Aurora Land
Projects Corporation, can be held jointly and severally liable with the corporation for the
payment of the unpaid money claims of its employees who were illegally dismissed. In this
case, not only was Teresita Quazon the most ranking officer of Aurora Plaza at the time of the
termination of the private respondent, but worse, she had a direct hand in the private
respondent's illegal dismissal. A corporate officer is not personally liable for the money claims
of discharged corporate employees unless he acted with evident malice and bad faith in
terminating their employment.45 Here, the failure of petitioner Quazon to observe the
mandatory requirements of due process in terminating the services of Dagui evinced malice
and bad faith on her part, thus making her liable.
Finally, we must address one last point. Petitioners aver that, assuming that private
respondent can be considered an employee of Aurora Plaza, petitioners cannot be held liable
for separation pay for the duration of his employment with Doña Aurora Tanjangco from 1953
up to 1982. If petitioners should be held liable as employers, their liability for separation pay
should only be counted from the time Dagui was rehired by the petitioners in 1982 as a
maintenance man.
We agree.
Petitioners' liability for separation pay ought to be reckoned from 1982 when petitioner
Teresita Quazon, as manager of Aurora Plaza, continued to employ private respondent. From
1953 up to the death of Doña Aurora sometime in 1982, private respondent's claim for
separation pay should have been filed in the testate or intestate proceedings of Doña Aurora.
This is because the demand for separation pay covered by the years 1953-1982 is actually a
money claim against the estate of Doña Aurora, which claim did not survive the death of the
old woman. Thus, it must be filed against her estate in accordance with Section 5, Rule 86 of
the Revised Rules of Court, to wit:
Sec. 5. Claims which must be filed under tire notice. If not filed, barred; exceptions.
— All claims for money against the decedent, arising from contract, express or
implied, whether the same be due, not due, or contingent, all claims for funeral
expenses for the last sickness of the decedent, and judgment for money against the
decedent, must be filed within the time limited in the notice; otherwise they are
barred forever, except that they may be set forth as counterclaims in any action that
the executor or administrator may bring against the claimants. . . .
WHEREFORE, the instant petition is partly GRANTED and the Resolution of the public
respondent National Labor Relations Commission dated March 16, 1994 is hereby MODIFIED
in that the award of separation pay against the petitioners shall be reckoned from the date
private respondent was re-employed by the petitioners in 1982, until June 8, 1991. In addition
to separation pay, full backwages are likewise awarded to private respondent, inclusive of
allowances, and other benefits or their monetary equivalent pursuant to Article 279 46 of the
Labor Code, as amended by Section 34 of Republic Act No. 6715, computed from the time he
SECOND DIVISION
G.R. No. 95845 February 21, 1996
WILLIAM L. TIU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and HERMES DELA CRUZ, respondents.
DECISION
MENDOZA, J.:
On February 18, 1986, private respondent filed a complaint, for illegal dismissal, violation of
the Minimum Wage Law and non-payment of the cost of living allowances, legal holiday pay,
service incentive pay and separation pay, against petitioner. Petitioner denied that private
respondent was his employee. But after consideration of the parties' evidence, the Labor
Arbiter found that private respondent was an employee of petitioner and that he had been
illegally dismissed. The Labor Arbiter ordered petitioner to pay private respondent the sum of
P25,076.96, corresponding to the latter's differentials, 13th month pay and separation pay. On
appeal, the Labor Arbiter's decision was affirmed in toto by the NLRC. Hence this petition
for certiorari. Petitioner alleges that the NLRC's decision was made in "reckless disregard" of
the applicable facts and law and that it amounts to a grave abuse of discretion of the NLRC.1
Petitioner, as operator of the D'Rough Riders Transportation, is engaged in the transportation
of passengers from Cebu City to the northern towns of Cebu. Private respondent worked in
petitioner's bus terminals as a "dispatcher," assisting and guiding passengers and carrying
their bags. The Labor Arbiter and the NLRC found, and petitioner had admitted in his position
paper below, that private respondent was paid a regular daily wage of P20.00.
Petitioner denies that private respondent was his employee. He alleges that he did not have
the power of selection and dismissal nor the power of control over private respondent.
According to petitioner, private respondent, together with so-called "standbys," hung around
his bus terminals, assisting passengers with their baggages as "dispatchers." Petitioner claims
that, in league with "bad elements" in the locality who threatened to cause damage to his
passenger buses and scare passengers away if petitioner and other bus operators did not let
them, private respondent and other "standbys" forced passengers to hire them as baggage
boys. Petitioner alleges that he had no choice but to allow private respondent and other
"standbys" to carry on their activities within the premises of his bus terminals.2 He also claims
he allowed them to do so even if their services as so-called "dispatchers" were not needed in
his business. Petitioner insists that as "dispatcher," private respondent worked in his own way,
without supervision by him.
The Labor Arbiter and the NLRC found private respondent to be an employee of petitioner,
applying the Four-fold test, namely (a) who has the power of selection and engagement of the
employees; (b) who pays the wages; (c) who has the power of dismissal, and (d) and who has
the power to control the employees' conduct. The Labor Arbiter stated in his decision:
Respondents would want this office to believe that the sum of P20.00 that they pay
complainant is ex gratia; hence, not compensation for services rendered. This is
however belied by respondents' own allegation in their position paper that, "for
purposes of preservation of his transportation business, agreed to give each
'standby' a fixed daily rate; and in exchange, they would canvass, assist and help
passengers of respondents' passenger trucks. This privilege or arrangement was
made possible due to the efforts and representation of complainant's father, Mr.
Regino dela Cruz, who is close and known to the standbys and/or dispatchers." The
impression that this office gets from said allegation is that the P20.00 received by
complainant represents the value that respondents attach to complainant's services;
hence, it is remuneration for services rendered. Respondent's admission of regular
payment of such an amount, already establishes the existence of one of the factors
that indicate employment relationship.
The right to hire and fire, on the other hand, has been indubitably established by
complainant's Exhibit A (rebuttal) which remains untraversed and unrefuted, a
translation of its contents of which are hereunder quoted for quick and easy
reference:
Since there was an agreement for your return that when you are caught
that you are inside the terminal you are to be dismissed outright and you
agreed to this condition so that last Tuesday you were caught taking a
bath inside the terminal so that from now on you are no longer with the
company "you are dismissed" because you broke the agreement.
Evident therefrom is management's unequivocal language as regards its exercise of
the prerogative to dismiss.
Complainant's Exhibit "D" rebuttal, respondent's official document, reflecting the
designation of respondent's witness, (Regino) dela Cruz as Chief Dispatcher,
likewise buttresses complainant's claim of employment, for the reason that the office
of Chief (Dispatcher) presupposes the existence of subordinates over whom said
chief exercises supervisory control. If a chief dispatcher works with the company,
uses and signs official documents as is reflected in Exhibit "D," it follows that his
employment as such was in consideration of a chief dispatcher's exercise of his
duties to supervise and control subordinate dispatchers. Along this line, Regino dela
Cruz's testimony that D'Rough Riders does not exercise control over the
complainant cannot preponderate over Exhibit "D."
In fine, this Office finds that complainant was an employee of respondent.
Affirming the Labor Arbiter decision, the NLRC held:
We perused at length the record of the instant case, analyzing in the process, the
grounds and supporting arguments advanced in the appeal and the reply thereto
and we found no merit in the appeal.
. . . A reading of the affidavit of Regino dela Cruz, a witness for the respondent who
is the Chief Dispatcher and father of the complainant would reveal that it was he
who included the complainant as one of the dispatchers of the respondents.
Considering that Regino dela Cruz is the Chief Dispatcher, the selection and
engagement of the complainant as a dispatcher of the respondents was made thru
him and with the acquiescence of the management.
Also, it is admitted by the respondents, as borne out by the records, including the
affidavit of Regino dela Cruz, that complainant was receiving a fixed daily rate from
the respondent. The Labor Arbiter is therefore correct when she ruled that what
complainant received from the respondents is a remuneration for services rendered.
The power of dismissal which respondents exercised over the person of the
complainant is clearly established by complainants' Exhibit "A" (rebuttal). This
exhibit refers to a disciplinary memorandum to the - complainant written in Visayan
dialect. This exhibit was not refuted by the respondents.
Also, we agree with the observation of the Labor Arbiter that respondent's Chief
Dispatcher is exercising his supervision and control over the complainant who is a
dispatcher as clearly manifested in Exhibit "D" (rebuttal) for the complainant.
 A close scrutiny of the same exhibit would reveal that complainant was indeed work except as to the results thereof; and (2) the contractor has substantial capital or
signing a daily time record of their hours of work. investment in the form of tools, equipment, machineries, work premises, and other materials
The evidences [sic] submitted by the complainant have proven that complainant is which are necessary in the conduct of his business.8 In the absence of these requisites, what
really an employee of the respondents. exists is a "labor-only" contract under which the person acting as contractor is considered
The question whether an employer-employee relationship exists is a question of fact. As long merely an agent or intermediary of the employer who is responsible to the workers in the
as the findings of the labor agencies on this question are supported by substantial evidence, same manner and to the same extent as if they had been directly employed by him. 9 As held
the findings will not be disturbed on review in this Court. Review in this Court concerning in Broadway Motors, Inc. v. NLRC,10citing Philippine Bank of Communications v. NLRC, 11 the
factual findings in labor cases is confined to determining allegations of lack of jurisdiction or "labor-only" contractor is a mere agent of the employer who is responsible to the employees of
grave abuse of discretion.3 the "labor-only" contractor as if such employees had been employed by him directly. In such a
We agree with the finding that an employer-employee relationship existed between petitioner case the statute establishes an employer-employee relationship between the employer and
and private respondent, such finding being supported by substantial evidence. Petitioner has the employees of the "labor-only" contractor to prevent any violation or circumvention of the
failed to refute the evidence presented by private respondent. He points to his Chief provisions of the Labor Code, by holding both the employer and the "labor-only" contractor
Dispatcher, Regino de la Cruz, as the one who exercised the powers of an employer over the responsible to the employees.
"dispatchers." Petitioner argues that under an agreement with Regino de la Cruz, it is the For this reason, we hold that Regino de la Cruz can, at most, be considered a "labor-only"
latter who selects and engages the "dispatchers," dictates their time, supervises the contractor and, therefore, a mere agent of petitioner. As he is acting in behalf of petitioner,
performance of their work, and pays their wages. He further argues that the "disciplinary private respondent Hermes de la Cruz is actually the employee of petitioner.
memorandum" issued by him was not addressed to private respondent but to Regino de la WHEREFORE, the petition is DENIED for lack of merit.
Cruz, as employer of private respondent, to remind him regarding the discipline of the SO ORDERED.
"dispatchers." Regalado, Romero and Puno, JJ., concur.
Petitioner's contention is without merit. In determining whether there is an employer-employee
relationship between the parties the following questions must be considered: (a) who has the
power of selection and engagement of the employee? (b) who pays the wages of employee?
(c) who has the power of dismissal? and; (d) who has the power to control the employee's
conduct?4 Of these powers the power of control over the employees' conduct is generally
regarded as determinative of the existence of the relationship. 5 The "control test," under which
the person for whom the services are rendered reserves the right to direct not only the end to
be achieved but also the means for reaching such end, is generally relied on by the courts.6
Petitioner would have us believe that Chief Dispatcher Regino de la Cruz exercised these
powers on his own and independently of petitioner. This is untenable. Petitioner admits that
Regino de la Cruz was merely assigned to do dispatch work. While Regino dela Cruz took
charge of the hiring of men and paid their wages, he did so as he was told by petitioner. The
payment of salaries and wages came from petitioner. Regino de la Cruz filled up and signed
daily time records for dispatchers and took disciplinary action against erring employees in
accordance with instructions given to him by petitioner. In sum, it cannot be said that Regino
de la Cruz was the employer of the "dispatchers" or that he was an independent contractor.
He was himself only an employee of petitioner.
Indeed the "control test" only requires the existence of the right to control the manner of doing
the work in a person, not necessarily the actual exercise of the power by him, which he can
delegate.7 Consequently, in the case at bar, the power is exercised by Regino de la Cruz but it
is power which is only delegated to him so that in truth the power inherently and primarily is
possessed by petitioner. De la Cruz is a mere supervisor, while petitioner is the real employer.
Petitioner does not claim that Regino de la Cruz and his dispatchers were independent
contractors. Even if this be his contention, however, the argument would still be without merit.
Job contracting is permissible only if the following conditions are met: (1) the contractor
carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of the
FIRST DIVISION
G.R. No. 111870 June 30, 1994
AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION,
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.
Jerry D. Banares for petitioner.
Perdrelito Q. Aquino for private respondent.
CRUZ, J.:
Private respondent Luis S. Salas was appointed "notarial and legal counsel"
for petitioner Air Material Wings Savings and Loan Association (AMWSLAI)
in 1980. The appointment was renewed for three years in an implementing
order dated January 23, 1987, reading as follows:
SUBJECT: Implementing Order on the Reappointment of the
Legal Officer
TO: ATTY. LUIS S. SALAS
Per approval of the Board en banc in a regular meeting held
on January 21, 1987, you are hereby reappointed as Notarial
and Legal Counsel of this association for a term of three (3)
years effective March 1, 1987, unless sooner terminated
from office for cause or as may be deemed necessary by the
Board for the interest and protection of the association.
Aside from notarization of loan & other legal documents,
your duties and responsibilities are hereby enumerated in
the attached sheet, per Articles IX, Section 1-d of the by-
laws and those approved by the Board en banc.
Your monthly compensation/retainer's fee remains the same.
This shall form part of your 201 file.
BY AUTHORITY OF THE BOARD:LUVIN S. MANAY
President & Chief of the Board
On January 9, 1990, the petitioner issued another order reminding Salas of
the approaching termination of his legal services under their contract. This
prompted Salas to lodge a complaint against AMWSLAI for separation pay,
vacation and sick leave benefits, cost of living allowances, refund of SSS
premiums, moral and exemplary damages, payment of notarial services
rendered from February 1, 1980 to March 2, 1990, and attorney's fees.
Instead of filing an answer, AMWSLAI moved to dismiss for lack of
jurisdiction. It averred that there was no employer-employee relationship
between it and Salas and that his monetary claims properly fell within the
jurisdiction of the regular courts. Salas opposed the motion and presented
documentary evidence to show that he was indeed an employee of
AMWSLAI.
The motion was denied and both parties were required to submit their
position papers. AMWSLAI filed a motion for reconsideration ad cautelam,
which was also denied. The parties were again ordered to submit their
position papers but AMWSLAI did not comply. Nevertheless, most of Salas'
claims were dismissed by the labor arbiter in his decision dated November
21, 1991. 1
It was there held that Salas was not illegally dismissed and so not entitled to
collect separation benefits. His claims for vacation leave, sick leave, medical
and dental allowances and refund of SSS premiums were rejected on the
ground that he was a managerial employee. He was also denied moral and
exemplary damages for lack of evidence of bad faith on the part of
AMWSLAI. Neither was he allowed to collect his notarial fees from 1980 up
to 1986 because the claim therefor had already prescribed. However, the
petitioner was ordered to pay Salas his notarial fees from 1987 up to March
2, 1990, and attorney's fee equivalent to 10% of the judgment award.
On appeal, the decision was affirmed in toto by the respondent Commission,
prompting the petitioner to seek relief in this Court. 2
The threshold issue in this case is whether or not Salas can be considered
an employee of the petitioner company.
We have held in a long line of decisions that the elements of an employer-
employee relationship are: (1) selection and engagement of the employee;
(2) payment of wages; (3) power of dismissal; and (4) employer's own power
to control employee's conduct.3
The existence of such a relationship is essentially a factual question. The
findings of the NLRC on this matter are accorded great respect and even
finality when the same are supported by substantial evidence. 4
The terms and conditions set out in the letter-contract entered into by the
parties on January 23, 1987, clearly show that Salas was an employee of the
petitioner. His selection as the company counsel was done by the board of
directors in one of its regular meetings. The petitioner paid him a monthly
compensation/retainer's fee for his services. Though his appointment was for
a fixed term of three years, the petitioner reserved its power of dismissal for
cause or as it might deem necessary for its interest and protection. No less
importantly, AMWSLAI also exercised its power of control over Salas by
defining his duties and functions as its legal counsel, to wit:
1. To act on all legal matters pertinent to his Office.
2. To seek remedies to effect collection of overdue accounts
of members without prejudice to initiating court action to
protect the interest of the association.
3. To defend by all means all suit against the interest of the
Association. 5
In the earlier case of Hydro Resources Contractors Corp. v.
Pagalilauan, 6 this Court observed that:
A lawyer, like any other professional, may very well be an
employee of a private corporation or even of the
government. It is not unusual for a big corporation to hire a
staff of lawyers as its in-house counsel, pay them regular
salaries, rank them in its table of organization, and otherwise
 treat them like its other officers and employees. At the same
time, it may also contract with a law firm to act as outside
counsel on a retainer basis. The two classes of lawyers often
work closely together but one group is made up of
employees while the other is not. A similar arrangement may
exist as to doctors, nurses, dentists, public relations
practitioners and other professionals.
We hold, therefore, that the public respondent committed no grave abuse of
discretion in ruling that an employer-employee relationship existed between
the petitioner and the private respondent.
We must disagree with the NLRC, however, on Salas' claims for notarial
fees.
The petitioner contends that the public respondents are not empowered to
adjudicate claims for notarial fees. On the other hand, the Solicitor General
believes that the NLRC acted correctly when it took cognizance of the claim
because it arose out of Salas' employment contract with the petitioner which
assigned him the duty to notarize loan agreements and other legal
documents. Moreover, Section 9 of Rule 141 of the Rules of Court does not
restrict or prevent the labor arbiter and the NLRC from determining claims for
notarial fees.
Labor arbiters have the original and exclusive jurisdiction over money claims
of workers when such claims have some reasonable connection with the
employer-employee relationship. The money claims of workers referred to in
paragraph 3 of Article 217 of the Labor Code are those arising out of or in
connection with the employer-employee relationship or some aspect or
incident of such relationship.
Salas' claim for notarial fees is based on his employment as a notarial officer
of the petitioner and thus comes under the jurisdiction of the labor arbiter.
The public respondents agreed that Salas was entitled to collect notarial fees
from 1987 to 1990 by virtue of his having been assigned as notarial officer.
We feel, however, that there is no substantial evidence to support this
finding.
The letter-contract of January 23, 1987, does not contain any stipulation for
the separate payment of notarial fees to Salas in addition to his basic salary.
On the contrary, it would appear that his notarial services were part of his
regular functions and were thus already covered by his monthly
compensation. It is true that the notarial fees were paid by members-
borrowers of the petitioner for its own account and not of Salas. However,
this is not a sufficient basis for his claim to such fees in the absence of any
agreement to that effect.
ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with
the modification that the award of notarial fees and attorney's fees is
disallowed. It is so ordered.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.
SECOND DIVISION
G.R. No. L-75038 August 23, 1993
ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD, BENJAMIN
BRIZUELA, NORLITO LADIA, MARCELO AGUILAN, DAVID ORO, NELIA BRIZUELA,
FLORA ESCOBIDO, JUSTILITA CABANIG, and DOMINGO SAGUIT, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and BROAD STREET
TAILORING and/or RODOLFO ZAPANTA, respondents.
Balguma, Macasaet & Associates for petitioners.
Teresita Gandionco Oledan for private respondents.
NOCON, J.:
A basic factor underlying the exercise of rights and the filing of claims for benefits under the
Labor Code and other presidential issuances or labor legislations is the status and nature of
one's employment. Whether an employer-employee relationship exist and whether such
employment is managerial in character or that of a rank and file employee are primordial
considerations before extending labor benefits. Thus, petitioners in this case seek a definitive
ruling on the status and nature of their employment with Broad Street Tailoring and pray for
the nullification of the resolution dated May 12, 1986 of the National Labor Relations
Commissions in NLRC Case No. RB-IV- 21558-78-T affirming the decision of Labor Arbiter
Ernilo V. Peñalosa dated May 28, 1979, which held eleven of them as independent
contractors and the remaining one as employee but of managerial rank.
The facts of the case shows that petitioner Elias Villuga was employed as cutter in the
tailoring shop owned by private respondent Rodolfo Zapanta and known as Broad Street
Tailoring located at Shaw Boulevard, Mandaluyong, Metro Manila. As cutter, he was paid a
fixed monthly salary of P840.00 and a monthly transportation allowance of P40.00. In addition
to his work as cutter, Villuga was assigned the chore of distributing work to the shop's tailors
or sewers when both the shop's manager and assistant manager would be absent. He saw to
it that their work conformed with the pattern he had prepared and if not, he had them redone,
repaired or resewn.
The other petitioners were either ironers, repairmen and sewers. They were paid a fixed
amount for every item ironed, repaired or sewn, regardless of the time consumed in
accomplishing the task. Petitioners did not fill up any time record since they did not observe
regular or fixed hours of work. They were allowed to perform their work at home especially
when the volume of work, which depended on the number of job orders, could no longer be
coped up with.
From February 17 to 22, 1978, petitioner Villuga failed to report for work allegedly due to
illness. For not properly notifying his employer, he was considered to have abandoned his
work.
In a complaint dated March 27, 1978, filed with the Regional Office of the Department of
Labor, Villuga claimed that he was refused admittance when he reported for work after his
absence, allegedly due to his active participation in the union organized by private
respondent's tailors. He further claimed that he was not paid overtime pay, holiday pay,
premium pay for work done on rest days and holidays, service incentive leave pay and 13th
month pay.
Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro also claimed that
they were dismissed from their employment because they joined the Philippine Social Security
Labor Union (PSSLU). Petitioners Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia
Brizuela, Flora Escobido, Justilita Cabaneg and Domingo Saguit claimed that they stopped
working because private respondents gave them few pieces of work to do after learning of
their membership with PSSLU. All the petitioners laid claims under the different labor standard
laws which private respondent allegedly violated.
On May 28, 1979, Labor Arbiter Ernilo V. Peñalosa rendered a decision ordering the dismissal
of the complaint for unfair labor practices, illegal dismissal and other money claims except
petitioner Villuga's claim for 13th month pay for the years 1976, 1977 and 1980. The
dispositive portion of the decision states as follows:
WHEREFORE, premises considered, the respondent Broad Street
Tailoring and/or Rodolfo Zapanta are hereby ordered to pay complainant
Elias Villuga the sum of ONE THOUSAND TWO HUNDRED FORTY-
EIGHT PESOS AND SIXTY-SIX CENTAVOS (P1,248.66) representing
his 13th month pay for the years 1976, 1977 and 1978. His other claims in
this case are hereby denied for lack of merit.
The complaint insofar as the other eleven (11) complainants are
concerned should be, as it is hereby dismissed for want of jurisdiction.1
On appeal, the National Labor Relations Commission affirmed the questioned decision in a
resolution dated May 12, 1986, the dispositive portion of which states as follows:
WHEREFORE, premises considered, the decision appealed from is, as it
is hereby AFFIRMED, and the appeal dismissed. 2
Presiding Commissioner Guillermo C. Medina merely concurred in the result while
Commissioner Gabriel M. Gatchalian rendered a dissenting opinion which states as follows:
I am for upholding employer-employee relationship as argued by the
complainants before the Labor Arbiter and on appeal. The further fact that
the proposed decision recognizes complainant's status as piece-rate
worker all the more crystallizes employer-employee relationship the
benefits prayed for must be granted. 3
Hence, petitioners filed this instant certiorari case on the following grounds:
1. That the respondent National Labor Relations Commission abused its
discretion when it ruled that petitioner/complainant, Elias Villuga falls
within the category of a managerial employee;
2. . . . when it ruled that the herein petitioners were not dismissed by
reason of their union activities;
3. . . . when it ruled that petitioners Andres Abad, Benjamin Brizuela,
Norlito Ladia, Marcelo Aguilan, David Oro, Nelia Brizuela, Flora Escobido,
Justilita Cabaneg and Domingo Saguit were not employees of private
respondents but were contractors.
4. . . . when it ruled that petitioner Elias Villuga is not entitled to overtime
pay and services for Sundays and Legal Holidays; and
5. . . . when it failed to grant petitioners their respective claims under the
provisions of P.D. Nos. 925, 1123 and 851.4
Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor Code, to be a
member of a managerial staff, the following elements must concur or co-exist, to wit: (1) that
his primary duty consists of the performance of work directly related to management policies;
(2) that he customarily and regularly exercises discretion and independent judgment in the
performance of his functions; (3) that he regularly and directly assists in the management of
the establishment; and (4) that he does not devote his twenty per cent of his time to work
other than those described above.
Applying the above criteria to petitioner Elias Villuga's case, it is undisputed that his primary
work or duty is to cut or prepare patterns for items to be sewn, not to lay down or implement
any of the management policies, as there is a manager and an assistant manager who
perform said functions. It is true that in the absence of the manager the assistant manager, he
distributes and assigns work to employees but such duty, though involving discretion, is
occasional and not regular or customary. He had also the authority to order the repair or
resewing of defective item but such authority is part and parcel of his function as cutter to see
to it that the items cut are sewn correctly lest the defective nature of the workmanship be
attributed to his "poor cutting." Elias Villuga does not participate in policy-making. Rather, the
functions of his position involve execution of approved and established policies. In Franklin
Baker Company of the Philippines v. Trajano, 5 it was held that employees who do not
participate in policy-making but are given ready policies to execute and standard practices to
observe are not managerial employees. The test of "supervisory or managerial status"
depends on whether a person possesses authority that is not merely routinary or clerical in
nature but one that requires use of independent judgment. In other words, the functions of the
position are not managerial in nature if they only execute approved and established policies
leaving little or no discretion at all whether to implement said policies or not. 6
Consequently, the exclusion of Villuga from the benefits claimed under Article 87 (overtime
pay and premium pay for holiday and rest day work), Article 94, (holiday pay), and Article 95
(service incentive leave pay) of the Labor Code, on the ground that he is a managerial
employee is unwarranted. He is definitely a rank and file employee hired to perform the work
of the cutter and not hired to perform supervisory or managerial functions. The fact that he is
uniformly paid by the month does not exclude him from the benefits of holiday pay as held in
the case of Insular Bank of America Employees Union v. Inciong.7 He should therefore be
paid in addition to the 13th month pay, his overtime pay, holiday pay, premium pay for holiday
and rest day, and service incentive leave pay.
As to the dismissal of the charge for unfair labor practices of private respondent consisting of
termination of employment of petitioners and acts of discrimination against members of the
labor union, the respondent Commission correctly held the absence of evidence that Mr.
Zapanta was aware of petitioners' alleged union membership on February 22, 1978 as the
notice of union existence in the establishment with proposal for recognition and collective
bargaining negotiation was received by management only an March 3, 1978. Indeed, self-
serving allegations without concrete proof that the private respondent knew of their
membership in the union and accordingly reacted against their membership do not suffice.
Nor is private respondent's claim that petitioner Villuga abandoned his work acceptable. For
abandonment to constitute a valid cause for dismissal, there must be a deliberate and
unjustified refusal of the employee to resume his employment. Mere absence is not sufficient,
it must be accompanied by overt acts unerringly pointing to the fact that the employee simply
does not want to work anymore.8 At any rate, dismissal of an employee due to his prolonged
absence without leave by reason of illness duly established by the presentation of a medical
certificate is not justified.9 In the case at bar, however, considering that petitioner Villuga
absented himself for four (4) days without leave and without submitting a medical certificate to
support his claim of illness, the imposition of a sanction is justified, but surely, not dismissal, in
the light of the fact that this is petitioner's first offense. In lieu of reinstatement, petitioner
Villuga should be paid separation pay where reinstatement can no longer be effected in view
of the long passage of time or because of the realities of the situation. 10 But petitioner should
not be granted backwages in addition to reinstatement as the same is not just and equitable
under the circumstances considering that he was not entirely free from blame. 11
As to the other eleven petitioners, there is no clear showing that they were dismissed because
the circumstances surrounding their dismissal were not even alleged. However, we disagree
with the finding of respondent Commission that the eleven petitioners are independent
contractors.
For an employer-employee relationship to exist, the following elements are generally
considered: "(1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal and (4) the power to control the
employee's conduct." 12
Noting that the herein petitioners were oftentimes allowed to perform their work at home and
were paid wages on a piece-rate basis, the respondent Commission apparently found the
second and fourth elements lacking and ruled that "there is no employer-employee
relationship, for it is clear that respondents are interested only in the result and not in the
means and manner and how the result is obtained."
Respondent Commission is in error. The mere fact that petitioners were paid on a piece-rate
basis is no argument that herein petitioners were not employees. The term "wage" has been
broadly defined in Article 97 of the Labor Code as remuneration or earnings, capable of being
expressed in terms of money whether fixed or ascertained on a time, task, piece or
commission
basis. . . ." The facts of this case indicate that payment by the piece is just a method of
compensation and does not define the essence of the
relation. 13 The petitioners were allowed to perform their work at home does not likewise imply
absence of control and supervision. The control test calls merely for the existence of a right to
control the manner of doing the work, not the actual exercise of the right. 14
In determining whether the relationship is that of employer and employee or one of an
independent contractor, "each case must be determined on its own facts and all the features
of the relationship are to be considered." 15Considering that petitioners who are either sewers,
repairmen or ironer, have been in the employ of private respondent as early as 1972 or at the
latest in 1976, faithfully rendering services which are desirable or necessary for the business
of private respondent, and observing management's approved standards set for their
respective lines of work as well as the customers' specifications, petitioners should be
considered employees, not independent contractors.
Independent contractors are those who exercise independent employment, contracting to do a
piece of work according to their own methods and without being subjected to control of their
employer except as to the result of their work. By the nature of the different phases of work in
a tailoring shop where the customers' specifications must be followed to the letter, it is
inconceivable that the workers therein would not be subjected to control.
In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and similar workers hired in the
tailoring department, although paid weekly wages on piece work basis, are employees not
independent contractors. Accordingly, as regular employees, paid on a piece-rate basis,
petitioners are not entitled to overtime pay, holiday pay, premium pay for holiday/rest day and
service incentive leave pay. Their claim for separation pay should also be defined for lack of
evidence that they were in fact dismissed by private respondent. They should be paid,
however, their 13th month pay under P.D. 851, since they are employees not independent
contractors.
WHEREFORE, in view of the foregoing reasons, the assailed decision of respondent National
Labor Relations Commission is hereby MODIFIED by awarding —
(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for holiday and rest
day, service incentive leave pay and separation pay, in addition to his 13th month pay; and
(b) in favor of the rest of the petitioners, their respective 13th month pay.
The case is hereby REMANDED to the National Labor Relations Commission for the
computation of the claims herein-above mentioned.
SO ORDERED.
Narvasa C.J., Padilla, Regalado and Puno, JJ., concur.
SECOND DIVISION
G.R. No. 73887 December 21, 1989
GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,
vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION, respondents.
G.A. Fortun and Associates for petitioner.
Corsino B. Soco for private respondent.
PARAS J.:
Before us is a Petition for certiorari to review the decision of the National Labor Relations
Commission (NLRC, for brevity) dated September 9, 1985 reversing the decision of Labor
Arbiter Vito J. Minoria, dated June 9, 1983, by 1) ordering petitioner insurance company,
Great Pacific Life Assurance Corporation (Grepalife, for brevity) to recognize private
respondent Honorato Judico, as its regular employee as defined under Art. 281 of the Labor
Code and 2) remanding the case to its origin for the determination of private respondent
Judico's money claims.
The records of the case show that Honorato Judico filed a complaint for illegal dismissal
against Grepalife, a duly organized insurance firm, before the NLRC Regional Arbitration
Branch No. VII, Cebu City on August 27, 1982. Said complaint prayed for award of money
claims consisting of separation pay, unpaid salary and 13th month pay, refund of cash bond,
moral and exemplary damages and attorney's fees.
Both parties appealed to the NLRC when a decision was rendered by the Labor Arbiter
dismissing the complaint on the ground that the employer-employee relations did not exist
between the parties but ordered Grepalife to pay complainant the sum of Pl,000.00 by reason
of Christian Charity.
On appeal, said decision was reversed by the NLRC ruling that complainant is a regular
employee as defined under Art. 281 of the Labor Code and declaring the appeal of Grepalife
questioning the legality of the payment of Pl,000.00 to complainant moot and academic.
Nevertheless, for the purpose of revoking the supersedeas bond of said company it ruled that
the Labor Arbiter erred in awarding Pl,000.00 to complainant in the absence of any legal or
factual basis to support its payment.
Petitioner company moved to reconsider, which was denied, hence this petition for review
raising four legal issues to wit:
I. Whether the relationship between insurance agents and their principal,
the insurance company, is that of agent and principal to be governed by
the Insurance Code and the Civil Code provisions on agency, or one of
employer-employee, to be governed by the Labor Code.
II. Whether insurance agents are entitled to the employee benefits
prescribed by the Labor Code.
III. Whether the public respondent NLRC has jurisdiction to take
cognizance of a controversy between insurance agent and the insurance
company, arising from their agency relations.
IV. Whether the public respondent acted correctly in setting aside the
decision of Labor Arbiter Vito J. Minoria and in ordering the case
remanded to said Labor Arbiter for further proceedings.(p. 159, Rollo)
The crux of these issues boil down to the question of whether or not employer-employee
relationship existed between petitioner and private respondent.
Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement
of agency with petitioner Grepalife to become a debit agent attached to the industrial life
agency in Cebu City. Petitioner defines a debit agent as "an insurance agent selling/servicing
industrial life plans and policy holders. Industrial life plans are those whose premiums are
payable either daily, weekly or monthly and which are collectible by the debit agents at the
home or any place designated by the policy holder" (p. 156, Rollo). Such admission is in line
with the findings of public respondent that as such debit agent, private respondent Judico had
definite work assignments including but not limited to collection of premiums from policy
holders and selling insurance to prospective clients. Public respondent NLRC also found out
that complainant was initially paid P 200. 00 as allowance for thirteen (13) weeks regardless
of production and later a certain percentage denominated as sales reserve of his total
collections but not lesser than P 200.00. Sometime in September 1981, complainant was
promoted to the position of Zone Supervisor and was given additional (supervisor's) allowance
fixed at P110.00 per week. During the third week of November 1981, he was reverted to his
former position as debit agent but, for unknown reasons, not paid so-called weekly sales
reserve of at least P 200.00. Finally on June 28, 1982, complainant was dismissed by way of
termination of his agency contract.
Petitioner assails the findings of the NLRC that private respondent is an employee of the
former. Petitioner argues that Judico's compensation was not based on any fixed number of
hours he was required to devote to the service of petitioner company but rather it was the
production or result of his efforts or his work that was being compensated and that the so-
called allowance for the first thirteen weeks that Judico worked as debit agent, cannot be
construed as salary but as a subsidy or a way of assistance for transportation and meal
expenses of a new debit agent during the initial period of his training which was fixed for
thirteen (13) weeks. Stated otherwise, petitioner contends that Judico's compensation, in the
form of commissions and bonuses, was based on actual production, (insurance plans sold
and premium collections).
Said contentions of petitioner are strongly rejected by private respondent. He maintains that
he received a definite amount as his Wage known as "sales reserve" the failure to maintain
the same would bring him back to a beginner's employment with a fixed weekly wage of P
200.00 regardless of production. He was assigned a definite place in the office to work on
when he is not in the field; and in addition to canvassing and making regular reports, he was
burdened with the job of collection and to make regular weekly report thereto for which an
anemic performance would mean dismissal. He earned out of his faithful and productive
service, a promotion to Zone Supervisor with additional supervisor's allowance, (a definite or
fixed amount of P110.00) that he was dismissed primarily because of anemic performance
and not because of the termination of the contract of agency substantiate the fact that he was
indeed an employee of the petitioner and not an insurance agent in the ordinary meaning of
the term.
That private respondent Judico was an agent of the petitioner is unquestionable. But, as We
have held in Investment Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may
have two classes of agents who sell its insurance policies: (1) salaried employees who keep
definite hours and work under the control and supervision of the company; and (2) registered
representatives who work on commission basis. The agents who belong to the second
category are not required to report for work at anytime, they do not have to devote their time
exclusively to or work solely for the company since the time and the effort they spend in their
work depend entirely upon their own will and initiative; they are not required to account for
their time nor submit a report of their activities; they shoulder their own selling expenses as
well as transportation; and they are paid their commission based on a certain percentage of
their sales. One salient point in the determination of employer-employee relationship which
cannot be easily ignored is the fact that the compensation that these agents on commission
received is not paid by the insurance company but by the investor (or the person insured).
After determining the commission earned by an agent on his sales the agent directly deducts
it from the amount he received from the investor or the person insured and turns over to the
insurance company the amount invested after such deduction is made. The test therefore is
whether the "employer" controls or has reserved the right to control the "employee" not only
as to the result of the work to be done but also as to the means and methods by which the
same is to be accomplished.
Applying the aforementioned test to the case at bar, We can readily see that the element of
control by the petitioner on Judico was very much present. The record shows that petitioner
Judico received a definite minimum amount per week as his wage known as "sales reserve"
wherein the failure to maintain the same would bring him back to a beginner's employment
with a fixed weekly wage of P 200.00 for thirteen weeks regardless of production. He was
assigned a definite place in the office to work on when he is not in the field; and in addition to
his canvassing work he was burdened with the job of collection. In both cases he was required
to make regular report to the company regarding these duties, and for which an anemic
performance would mean a dismissal. Conversely faithful and productive service earned him a
promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of
P110.00 aside from the regular P 200.00 weekly "allowance". Furthermore, his contract of
services with petitioner is not for a piece of work nor for a definite period.
On the other hand, an ordinary commission insurance agent works at his own volition or at his
own leisure without fear of dismissal from the company and short of committing acts
detrimental to the business interest of the company or against the latter, whether he produces
or not is of no moment as his salary is based on his production, his anemic performance or
even dead result does not become a ground for dismissal. Whereas, in private respondent's
case, the undisputed facts show that he was controlled by petitioner insurance company not
only as to the kind of work; the amount of results, the kind of performance but also the power
of dismissal. Undoubtedly, private respondent, by nature of his position and work, had been a
regular employee of petitioner and is therefore entitled to the protection of the law and could
not just be terminated without valid and justifiable cause.
Premises considered, the appealed decision is hereby AFFIRMED in toto.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ ., concur.
FIRST DIVISION
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and
Melecio T. Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines applications for
insurance policies and annuities in accordance with the existing rules and
regulations" of the Company;
2. he would receive "compensation, in the form of commissions ... as
provided in the Schedule of Commissions" of the contract to "constitute a
part of the consideration of ... (said) agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as
well as all its circulars ... and those which may from time to time be
promulgated by it, ..." were made part of said contract.
The contract also contained, among others, provisions governing the relations of the parties,
the duties of the Agent, the acts prohibited to him, and the modes of termination of the
agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise
his own judgment as to time, place and means of soliciting insurance.
Nothing herein contained shall therefore be construed to create the
relationship of employee and employer between the Agent and the
Company. However, the Agent shall observe and conform to all rules and
regulations which the Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from
giving, directly or indirectly, rebates in any form, or from making any
misrepresentation or over-selling, and, in general, from doing or
committing acts prohibited in the Agent's Manual and in circulars of the
Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will, without
any previous notice to the Agent, for or on account of ... (explicitly
specified causes). ...
Either party may terminate this contract by giving to the other notice in
writing to that effect. It shall become ipso facto cancelled if the Insurance
Commissioner should revoke a Certificate of Authority previously issued
or should the Agent fail to renew his existing Certificate of Authority upon
its expiration. The Agent shall not have any right to any commission on
renewal of premiums that may be paid after the termination of this
agreement for any cause whatsoever, except when the termination is due
to disability or death in line of service. As to commission corresponding to
any balance of the first year's premiums remaining unpaid at the
termination of this agreement, the Agent shall be entitled to it if the
balance of the first year premium is paid, less actual cost of collection,
unless the termination is due to a violation of this contract, involving
criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of
commissions or other compensations shall be valid without the prior
consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract — an Agency
Manager's Contract — and to implement his end of it Basiao organized an agency or office to
which he gave the name M. Basiao and Associates, while concurrently fulfilling his
commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a
reconsideration, Basiao sued the Company in a civil action and this, he was later to claim,
prompted the latter to terminate also his engagement under the first contract and to stop
payment of his commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and
its president. Without contesting the termination of the first contract, the complaint sought to
recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents
disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the
Company's employee, but an independent contractor and that the Company had no obligation
to him for unpaid commissions under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the
underwriting agreement had established an employer-employee relationship between him and
the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim.
Said official's decision directed payment of his unpaid commissions "... equivalent to the
balance of the first year's premium remaining unpaid, at the time of his termination, of all the
insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10%
attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations
Commission. 7 Hence, the present petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the
Company's employee by virtue of the contract invoked by him, thereby placing his claim for
unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under
the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company would have
it, that under said contract Basiao's status was that of an independent contractor whose claim
was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an
ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally
accepted sense existed between it and Basiao, is drawn from the terms of the contract they
had entered into, which, either expressly or by necessary implication, made Basiao the master
of his own time and selling methods, left to his judgment the time, place and means of
soliciting insurance, set no accomplishment quotas and compensated him on the basis of
results obtained. He was not bound to observe any schedule of working hours or report to any
regular station; he could seek and work on his prospects anywhere and at anytime he chose
to, and was free to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of Basiao's
contract with the Company, the respondents contend that they do not constitute the decisive
determinant of the nature of his engagement, invoking precedents to the effect that the critical
feature distinguishing the status of an employee from that of an independent contractor
is control, that is, whether or not the party who engages the services of another has the power
to control the latter's conduct in rendering such services. Pursuing the argument, the
respondents draw attention to the provisions of Basiao's contract obliging him to "... observe
and conform to all rules and regulations which the Company may from time to time prescribe
...," as well as to the fact that the Company prescribed the qualifications of applicants for
insurance, processed their applications and determined the amounts of insurance cover to be
issued as indicative of the control, which made Basiao, in legal contemplation, an employee of
the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court in the
1956 case of Viana vs. Alejo Al-Lagadan10
... In determining the existence of employer-employee relationship, the
following elements are generally considered, namely: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees' conduct —
although the latter is the most important element (35 Am. Jur. 445). ...
has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without
question a valid test of the character of a contract or agreement to render service. It should,
however, be obvious that not every form of control that the hiring party reserves to himself
over the conduct of the party hired in relation to the services rendered may be accorded the
effect of establishing an employer-employee relationship between them in the legal or
technical sense of the term. A line must be drawn somewhere, if the recognized distinction
between an employee and an individual contractor is not to vanish altogether. Realistically, it
would be a rare contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the
means used to achieve it. The distinction acquires particular relevance in the case of an
enterprise affected with public interest, as is the business of insurance, and is on that account
subject to regulation by the State with respect, not only to the relations between insurer and
insured but also to the internal affairs of the insurance company. 12 Rules and regulations
governing the conduct of the business are provided for in the Insurance Code and enforced by
the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to
promulgate a set of rules to guide its commission agents in selling its policies that they may
not run afoul of the law and what it requires or prohibits. Of such a character are the rules
which prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to the Company
the determination of the premiums to be paid and the schedules of payment. None of these
really invades the agent's contractual prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience, hence cannot justifiably be said to establish an
employer-employee relationship between him and the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao to be
independent contractors, instead of employees of the parties for whom they worked.
In Mafinco Trading Corporation vs. Ople, 13the Court ruled that a person engaged to sell soft
drinks for another, using a truck supplied by the latter, but with the right to employ his own
workers, sell according to his own methods subject only to prearranged routes, observing no
working hours fixed by the other party and obliged to secure his own licenses and defray his
own selling expenses, all in consideration of a peddler's discount given by the other party for
at least 250 cases of soft drinks sold daily, was not an employee but an independent
contractor.
In Investment Planning Corporation of the Philippines us. Social Security System 14 a case
almost on all fours with the present one, this Court held that there was no employer-employee
relationship between a commission agent and an investment company, but that the former
was an independent contractor where said agent and others similarly placed were: (a) paid
compensation in the form of commissions based on percentages of their sales, any balance of
commissions earned being payable to their legal representatives in the event of death or
registration; (b) required to put up performance bonds; (c) subject to a set of rules and
regulations governing the performance of their duties under the agreement with the company
and termination of their services for certain causes; (d) not required to report for work at any
time, nor to devote their time exclusively to working for the company nor to submit a record of
their activities, and who, finally, shouldered their own selling and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice
miller to buy and sell rice and palay without compensation except a certain percentage of what
he was able to buy or sell, did work at his own pleasure without any supervision or control on
the part of his principal and relied on his own resources in the performance of his work, was a
plain commission agent, an independent contractor and not an employee.
The respondents limit themselves to pointing out that Basiao's contract with the Company
bound him to observe and conform to such rules and regulations as the latter might from time
to time prescribe. No showing has been made that any such rules or regulations were in fact
promulgated, much less that any rules existed or were issued which effectively controlled or
restricted his choice of methods — or the methods themselves — of selling insurance. Absent
such showing, the Court will not speculate that any exceptions or qualifications were imposed
on the express provision of the contract leaving Basiao "... free to exercise his own judgment
as to the time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with
the Company for twenty-five years. Whatever this is meant to imply, the obvious reply would
be that what is germane here is Basiao's status under the contract of July 2, 1968, not the
length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an
employee of the petitioner, but a commission agent, an independent contractor whose claim
for unpaid commissions should have been litigated in an ordinary civil action. The Labor
Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to
do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders
it unnecessary and premature to consider Basiao's claim for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set
aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-
83 is dismissed. No pronouncement as to costs.
SO ORDERED.
Cruz, Gancayco, Griño-Aquino, and Medialdea, JJ., concur.
THIRD DIVISION
G.R. Nos. 83380-81 November 15, 1989
MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G.
INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter,
Department of Labor and Employment, National Capital Region), SANDIGAN NG
MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its members, JACINTO
GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER NARVAEZ,
EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO,
CASIMIRO ZAPATA, GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS,
MERILYN A. VIRAY, LILY OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and
MARIA ANGELES, respondents.
Ledesma, Saludo & Associates for petitioners.
Pablo S. Bernardo for private respondents.
FERNAN, C.J.:
This petition for certiorari involving two separate cases filed by private respondents against
herein petitioners assails the decision of respondent National Labor Relations Commission in
NLRC CASE No. 7-2603-84 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-
TUCP etc., et al. v. Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No.
2-428-85 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v.
Toppers Makati, et al.", affirming the decision of the Labor Arbiter who jointly heard and
decided aforesaid cases, finding: (a) petitioners guilty of illegal dismissal and ordering them to
reinstate the dismissed workers and (b) the existence of employer-employee relationship and
granting respondent workers by reason thereof their various monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working for petitioner Makati
Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and "plantsadoras".
They are paid on a piece-rate basis except Maria Angeles and Leonila Serafina who are paid
on a monthly basis. In addition to their piece-rate, they are given a daily allowance of three (P
3.00) pesos provided they report for work before 9:30 a.m. everyday.
Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from
Monday to Saturday and during peak periods even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the
respondent workers, filed a complaint docketed as NLRC NCR Case No. 7-2603-84 for (a)
underpayment of the basic wage; (b) underpayment of living allowance; (c) non-payment of
overtime work; (d) non-payment of holiday pay; (e) non-payment of service incentive pay; (f)
13th month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2, 3, 4 and 5.1
During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro
Pelobello left with Salvador Rivera, a salesman of petitioner Haberdashery, an open package
which was discovered to contain a "jusi" barong tagalog. When confronted, Pelobello replied
that the same was ordered by respondent Casimiro Zapata for his customer. Zapata allegedly
admitted that he copied the design of petitioner Haberdashery. But in the afternoon, when
again questioned about said barong, Pelobello and Zapata denied ownership of the same.
Consequently a memorandum was issued to each of them to explain on or before February 4,
1985 why no action should be taken against them for accepting a job order which is prejudicial
and in direct competition with the business of the company. 2 Both respondents allegedly did
not submit their explanation and did not report for work. 3 Hence, they were dismissed by
petitioners on February 4, 1985. They countered by filing a complaint for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-
428-85 finding respondents guilty of illegal dismissal and ordering them to
reinstate Dioscoro Pelobello and Casimiro Zapata to their respective or
similar positions without loss of seniority rights, with full backwages from
July 4, 1985 up to actual reinstatement. The charge of unfair labor
practice is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants' claims for
underpayment re violation of the minimum wage law is hereby ordered
dismissed for lack of merit.
Respondents are hereby found to have violated the decrees on the cost of
living allowance, service incentive leave pay and the 13th Month Pay. In
view thereof, the economic analyst of the Commission is directed to
compute the monetary awards due each complainant based on the
available records of the respondents retroactive as of three years prior to
the filing of the instant case.
SO ORDERED. 5
From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988
affirmed said decision but limited the backwages awarded the Dioscoro Pelobello and
Casimiro Zapata to only one (1) year. 6
After their motion for reconsideration was denied, petitioners filed the instant petition raising
the following issues:
I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-
EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER HABERDASHERY AND
RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS
WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE THE FINDING THAT THEY
ARE NOT ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS
PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7
The first issue which is the pivotal issue in this case is resolved in favor of private
respondents. We have repeatedly held in countless decisions that the test of employer-
employee relationship is four-fold: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employee's
conduct. It is the so called "control test" that is the most important element. 8 This simply
means the determination of whether the employer controls or has reserved the right to control
the employee not only as to the result of the work but also as to the means and method by
which the same is to be accomplished. 9
The facts at bar indubitably reveal that the most important requisite of control is present. As
gleaned from the operations of petitioner, when a customer enters into a contract with the
haberdashery or its proprietor, the latter directs an employee who may be a tailor, pattern
maker, sewer or "plantsadora" to take the customer's measurements, and to sew the pants,
coat or shirt as specified by the customer. Supervision is actively manifested in all these
aspects — the manner and quality of cutting, sewing and ironing.
Furthermore, the presence of control is immediately evident in this memorandum issued by
Assistant Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Topper's Makati
Tailors which reads in part:
4. Effective immediately, new procedures shall be followed:
A. To follow instruction and orders from the undersigned Roger
Valderama, Ruben Delos Reyes and Ofel Bautista. Other than this person
(sic) must ask permission to the above mentioned before giving orders or
instructions to the tailors.
B. Before accepting the job orders tailors must check the materials, job
orders, due dates and other things to maximize the efficiency of our
production. The materials should be checked (sic) if it is matched (sic)
with the sample, together with the number of the job order.
C. Effective immediately all job orders must be finished one day before the
due date. This can be done by proper scheduling of job order and if you
will cooperate with your supervisors. If you have many due dates for
certain day, advise Ruben or Ofel at once so that they can make
necessary adjustment on due dates.
D. Alteration-Before accepting alteration person attending on customs
(sic) must ask first or must advise the tailors regarding the due dates so
that we can eliminate what we call 'Bitin'.
E. If there is any problem regarding supervisors or co-tailor inside our
shop, consult with me at once settle the problem. Fighting inside the shop
is strictly prohibited. Any tailor violating this memorandum will be subject
to disciplinary action.
For strict compliance. 10
From this memorandum alone, it is evident that petitioner has reserved the right to control its
employees not only as to the result but also the means and methods by which the same are to
be accomplished. That private respondents are regular employees is further proven by the
fact that they have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid
an additional allowance of P 3.00 daily if they report for work before 9:30 a.m. and which is
forfeited when they arrive at or after 9:30 a.m. 11
Since private respondents are regular employees, necessarily the argument that they are
independent contractors must fail. As established in the preceding paragraphs, private
respondents did not exercise independence in their own methods, but on the contrary were
subject to the control of petitioners from the beginning of their tasks to their completion. Unlike
independent contractors who generally rely on their own resources, the equipment, tools,
accessories, and paraphernalia used by private respondents are supplied and owned by
petitioners. Private respondents are totally dependent on petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private respondents are entitled to
the Minimum Wage as mandated by Section 2(g) of Letter of Instruction No. 829, Rules
Implementing Presidential Decree No. 1614 and reiterated in Section 3(f), Rules Implementing
Presidential Decree 1713 which explicitly states that, "All employees paid by the result shall
receive not less than the applicable new minimum wage rates for eight (8) hours work a day,
except where a payment by result rate has been established by the Secretary of Labor.
..." 12 No such rate has been established in this case.
But all these notwithstanding, the question as to whether or not there is in fact an
underpayment of minimum wages to private respondents has already been resolved in the
decision of the Labor Arbiter where he stated: "Hence, for lack of sufficient evidence to
support the claims of the complainants for alleged violation of the minimum wage, their claims
for underpayment re violation of the Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4,
and 5 must perforce fall." 13
The records show that private respondents did not appeal the above ruling of the Labor
Arbiter to the NLRC; neither did they file any petition raising that issue in the Supreme Court.
Accordingly, insofar as this case is concerned, that issue has been laid to rest. As to private
respondents, the judgment may be said to have attained finality. For it is a well-settled rule in
this jurisdiction that "an appellee who has not himself appealed cannot obtain from the
appellate court-, any affirmative relief other than the ones granted in the decision of the court
below. " 14
As a consequence of their status as regular employees of the petitioners, they can claim cost
of living allowance. This is apparent from the provision defining the employees entitled to said
allowance, thus: "... All workers in the private sector, regardless of their position, designation
or status, and irrespective of the method by which their wages are paid. " 15
Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the
Rules and Regulations Implementing P.D. No. 851 which provides:
Section 3. Employers covered. — The Decree shall apply to all employers
except to:
xxx xxx xxx
(e) Employers of those who are paid on purely commission, boundary, or
task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which
case the employer shall be covered by this issuance insofar as such
workers are concerned. (Emphasis supplied.)
On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th
Month Pay, they are not entitled to service incentive leave pay because as piece-rate workers
being paid at a fixed amount for performing work irrespective of time consumed in the
performance thereof, they fall under one of the exceptions stated in Section 1(d), Rule V,
Implementing Regulations, Book III, Labor Code. For the same reason private respondents
cannot also claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III,
Labor Code).
With respect to the last issue, it is apparent that public respondents have misread the
evidence, for it does show that a violation of the employer's rules has been committed and the
evidence of such transgression, the copied barong tagalog, was in the possession of
Pelobello who pointed to Zapata as the owner. When required by their employer to explain in
a memorandum issued to each of them, they not only failed to do so but instead went on
AWOL (absence without official leave), waited for the period to explain to expire and for
petitioner to dismiss them. They thereafter filed an action for illegal dismissal on the far-
fetched ground that they were dismissed because of union activities. Assuming that such acts
do not constitute abandonment of their jobs as insisted by private respondents, their blatant
disregard of their employer's memorandum is undoubtedly an open defiance to the lawful
orders of the latter, a justifiable ground for termination of employment by the employer
expressly provided for in Article 283(a) of the Labor Code as well as a clear indication of guilt
for the commission of acts inimical to the interests of the employer, another justifiable ground
for dismissal under the same Article of the Labor Code, paragraph (c). Well established in our
jurisprudence is the right of an employer to dismiss an employee whose continuance in the
service is inimical to the employer's interest. 16
In fact the Labor Arbiter himself to whom the explanation of private respondents was
submitted gave no credence to their version and found their excuses that said barong tagalog
was the one they got from the embroiderer for the Assistant Manager who was investigating
them, unbelievable.
Under the circumstances, it is evident that there is no illegal dismissal of said employees.
Thus, We have ruled that:
No employer may rationally be expected to continue in employment a
person whose lack of morals, respect and loyalty to his employer, regard
for his employer's rules, and appreciation of the dignity and responsibility
of his office, has so plainly and completely been bared.
That there should be concern, sympathy, and solicitude for the rights and
welfare of the working class, is meet and proper. That in controversies
between a laborer and his master, doubts reasonably arising from the
evidence, or in the interpretation of agreements and writings should be
resolved in the former's favor, is not an unreasonable or unfair rule. But
that disregard of the employer's own rights and interests can be justified
by that concern and solicitude is unjust and unacceptable. (Stanford
Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).
The law is protecting the rights of the laborer authorizes neither oppression nor self-
destruction of the employer. 17More importantly, while the Constitution is committed to the
policy of social justice and the protection of the working class, it should not be supposed that
every labor dispute will automatically be decided in favor of labor. 18
Finally, it has been established that the right to dismiss or otherwise impose discriplinary
sanctions upon an employee for just and valid cause, pertains in the first place to the
employer, as well as the authority to determine the existence of said cause in accordance with
the norms of due process. 19
There is no evidence that the employer violated said norms. On the contrary, private
respondents who vigorously insist on the existence of employer-employee relationship,
because of the supervision and control of their employer over them, were the very ones who
exhibited their lack of respect and regard for their employer's rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to
terminate the services of private respondents.
WHEREFORE, the decision of the National Labor Relations Commission dated March 30,
1988 and that of the Labor Arbiter dated June 10, 1986 are hereby modified. The complaint
filed by Pelobello and Zapata for illegal dismissal docketed as NLRC NCR Case No. 2-428-85
is dismissed for lack of factual and legal bases. Award of service incentive leave pay to private
respondents is deleted.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.
THIRD DIVISION
G.R. No. 86693 July 2, 1990
COSMOPOLITAN FUNERAL HOMES, INC., petitioner,
vs.
NOLI MAALAT and NATIONAL LABOR RELATIONS COMMISSION, respondents.
Castro, Enriquez, Carpio, Guillen & Associates for petitioner.
Castro B. Dorado for private respondent.
GUTIERREZ, JR., J.:
The nature of the work of a "funeraria" supervisor, whether employee or commission agent, is
the issue raised in this petition.
Sometime in 1962, petitioner Cosmopolitan Funeral Homes, Inc. engaged the services of
private respondent Noli Maalat as a "supervisor" to handle the solicitation of mortuary
arrangements, sales and collections. The funeral services which he sold refer to the taking of
the corpse, embalming, casketing, viewing and delivery. The private respondent was paid on
a commission basis of 3.5% of the amounts actually collected and remitted.
On January 15, 1987, respondent Maalat was dismissed by the petitioner for commission of
the following violations despite previous warnings:
(a) Understatement of the reported contract price against the actual
contract price charged to and paid by the customers;
(b) Misappropriation of funds or collections by non-remittance of
collections and non-issuance of Official Receipt;
(c) Charging customers additional amount and pocketing the same for the
cost of medicines, linen, and security services without issuing Official
Receipt;
(d) Non-reporting of some embalming and re-embalming charges and
pocketing the same and non-issuance of Official Receipt;
(e) Engaging in tomb making and inclusion of the price of the tomb in the
package price without prior knowledge of the customers and the company.
(At p. 16, Records)
Maalat filed a complaint for illegal dismissal and non-payment of commissions.
On the basis of the parties' position papers, Labor Arbiter Newton R. Sancho rendered a
decision declaring Maalat's dismissal illegal and ordering the petitioner to pay separation pay,
commission, interests and attorney's fee in the total amount of P205,571.52.
In an appeal from the decision, the National Labor Relations Commission (NLRC), on May 31,
1988, reversed the Arbiter's action and rendered a new decision, the dispositive portion of
which reads:
WHEREFORE, premises considered, the decision dated November 27,
1987, is hereby SET ASIDE and VACATED and a New One ENTERED,
ordering as follows:
1. Judgment is hereby rendered declaring the dismissal of complainant
Noli Maalat by respondent-appellant as justified and with lawful cause. By
way of equitable relief and in the interest of social and compassionate
justice, We hereby order and direct respondent Cosmopolitan Funeral
Homes, Inc. to pay complainant Maalat his separation pay equivalent to
one-half (1/2%) month average income for every year of service to
appellant, computed on his last year of service immediately preceding his
separation from respondent, subject to allowable set-offs and deductions
of the counter-claims of respondent company, after due notice and
hearing.
2. The claims for accrued commissions by complainant may be admitted,
subject to proofs thereof, and allowable set-offs and deductions credited
to the account of respondent-appellant by way of counterclaims, after due
notice and hearing.
3. All the evidence adduced by the parties are hereby admitted, subject to
rebuttal and/or controvertion by either party during the hearing and the
hearings hereafter.
4. The Attorney's fee in favor of complainant's counsel is hereby fixed at
two (2%) percent, assessable over whatever final money award
complainant may be entitled on the aggregate sums thereof, after proper
hearing on the same.
All other claims and counter-claims are hereby dismissed for lack of merit,
except those specified above.
Finally, this case is remanded to the Regional Arbitration Branch of origin
for further proceedings in accordance with the above judgment. No
findings as to costs. (At pp. 66-67, Rollo)
The petitioner's motion for reconsideration was denied, hence, this petition for review before
this Court.
The issues raised in this petition are:
I. Whether or not the NLRC erred in ruling that an employment relationship existed between
the parties; and
II. Whether or not there was equitable basis for the award of 1/2 month separation pay for
every year of service.
I
In determining whether a person who performs work for another is the latter's employee or an
independent contractor, the prevailing test is the "right of control" test. Under this test, an
employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the manner and means
to be used in reaching that end.
The petitioner argues that Maalat was never its employee for he was only a commission agent
whose work was not subject to its control. Citing Investment Planning Corporation of the
Philippines v. Social Security System (21 SCRA 924 [1967]), the petitioner states that the
work of its agents approximates that of an independent contractor since the agent is not under
control by the latter with respect to the means and methods employed in the performance of
the work, but only as to the results.
The NLRC, after its perusal of the facts and evidence on record, stated that there exists an
employment relationship between the parties. The petitioner has failed to overcome this
factual finding.
The fact that the petitioner imposed and applied its rule prohibiting superiors from engaging in
other funeral business which it considered inimical to company interests proves that it had the
right of control and actually exercised its control over the private respondent. In other words,
Maalat worked exclusively for the petitioner.
Moreover, the private respondent was prohibited from engaging in part-time embalming
business outside of the company and a violation thereof was cause for dismissal. Incurring
absences without leave was likewise subject to disciplinary action: a reprimand for the first
offense, one week suspension for the second offense, and dismissal for the third offense.
The petitioner admits that these prohibitive rules bound the private respondent but states that
these rules have no bearing on the means and methods ordinarily required of a supervisor.
The overall picture is one of employment. The petitioner failed to prove that the contract with
private respondent was but a mere agency, which indicates that a "supervisor" is free to
accomplish his work on his own terms and may engage in other means of livelihood.
In Investment Planning Corporation, supra, cited by the petitioner, the majority of the
"commission agents" are regularly employed elsewhere. Such a circumstance is absent in
Maalat's case. Moreover, the private respondent's job description states that ". . . he attends
to the needs of the clientele and arranges the kind of casket and funeral services the
customers would like to avail themselves of" and indicates that he must always be on the job
or at least most of time.
Likewise, the private respondent was not allowed to issue his own receipts, nor was he
allowed to directly deduct his commission as truly independent salesmen practice.
Worthy of note too are two other company rules which provide that "negotiation and making of
contract with customers shall be done inside the office" and "signing of contract should be
made immediately before the cadaver or deceased is place in the casket." (Annex 10-B,
Petitioner's Position Paper, Records) Said rules belie the petitioner's stand that it does not
have control over the means and methods by which the work is accomplished. The control
test has been satisfied. (Social Security System v. Court of Appeals, 156 SCRA 383 [1987])
The finding by the public respondent that the petitioner has reported private respondent to the
Social Security System as a covered employee adds strength to the conclusion that Maalat is
an employee.
There is no reversible error in the findings of facts by the NLRC which are supported by
substantial evidence and which we, therefore, do not disturb on appeal.
The payment of compensation by way of commission does not militate against the conclusion
that private respondent was an employee. Under Article 97 of the Labor Code, "wage" shall
mean "the renumeration of earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task, pace or commission basis . . .".
The non-observance of regular office hours does not sufficiently show that Maalat is a
"supervisor on commission basis" nor does the same indicate that he is an independent
salesman. As a supervisor, although compensated on commission basis, he is exempt from
the observance of normal hours of work for his compensation is measured by the number of
sales he makes. He may not have had the usual fixed time for starting and ending his work as
in other types of employment but he had to spend most of his working hours at his job. People
die at all times of the day or night.
All considered, we rule that private respondent is an employee of petitioner corporation.
II
The petitioner impugns the award of separation pay equivalent to one-half (1/2) month
average income for every year of service to private respondent. The NLRC ruled that:
However, mindful of the fact the complainant Noli Maalat has served
respondent company for the last twenty four (24) years, more or less, it is
but proper to afford him some equitable relief, consistent with the recent
rulings of the Supreme Court, due to his past services with no known
previous record, and the ends of social and compassionate justice will
thus be served if he is paid a portion of his separation pay, equivalent to
one-half (1/2) month every year of his service to said company. (See Soco
v. Mercantile Corporation, G.R. No. 53364-65, March 16, 1987; and
Firestone, et al, v. Lariosa et al., G.R. No. 70479, February 27, 1987). We
are not inclined to grant complainant his full month termination pay for
every year of his service because, unlike in the former Soco case, the
misconduct of the employee merely involves infraction of company rules
while in the latter Firestone case it involves misconduct of a rank-and-file
employee, although similarly involving acts of dishonesty. (At pp. 65-
66, Rollo)
This Court will not disturb the finding by the NLRC that private respondent Maalat was
dishonest in the discharge of his functions. The finding is sufficiently supported by the
evidence on record.
Additionally, the private respondent did not appeal from the NLRC decision, thereby impliedly
accepting the validity of his dismissal.
We take exception, therefore, to the grant of separation pay to private respondent.
In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164 SCRA 671 [1988]),
this Court re-examined, the doctrine in the aforecited Firestone and Soco cases and other
previous cases that employees dismissed for cause are nevertheless entitled to separation
pay on the ground of social and compassionate justice. In abandoning this doctrine, the Court
held, and we quote:
. . . We hold that henceforth separation pay shall be allowed as a measure
of social justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those reflecting on
his moral character. Where the reason for the valid dismissal is, for
example, habitual intoxication or an offense involving moral turpitude, like
theft or illicit sexual relations with a fellow worker, the employer may not
be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social
justice.
A contrary rule would, as the petitioner correctly argues, have the effect of
rewarding rather than punishing the erring employee for his offense. . . .
The policy of social justice is not intended to countenance wrongdoing
simply because it is committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved privilege. . .
.
Subsequent decisions have abided by this pronouncement. (See Philippine National
Construction Corporation v. National Labor Relations Commission, 170 SCRA 207 [1989];
Eastern Paper Mills, Inc. v. National Labor Relations Commission, 170 SCRA 597 [1989];
Osias Academy v. National Labor Relations Commission, G.R. No. 83234, April 18, 1989; and
Nasipit Lumber Co., Inc. v. National Labor Relations Commission, G.R. No. 54424, August 31,
1989.)
Conformably with the above cited PLDT ruling, this Court pronounces that the grant of
separation pay to private respondent Maalat, who was validly terminated for dishonesty, is not
justified.
Parenthetically, it may be mentioned that the Labor Arbiter, apparently unaware of the petition
for review pending before this Court, conducted further proceedings to compute private
respondent's separation pay, unclaimed commission and 2% attorney's fees, in compliance
with the NLRC decision of May 31, 1988. After hearing, the Labor Arbiter rendered a decision
on May 10, 1989, the pertinent portion of which reads:
In sum, the sustainable claims of complainant are as follows:
(1) Separation Pay : P 76,064.40
(2) Unpaid Commissions : 39,344.80
——————
Sub-total : P 115,409.20
(3) 2% Attorney's Fees : 2,308.18
——————
P 117, 717.38
WHEREFORE, judgment is hereby rendered ordering respondent
Cosmopolitan Funeral Homes, Inc., to pay complainant Noli Maalat his
claims above set forth in the total amount of P117,717.38 only.
Neither party appealed from said decision.
For being in conflict with our holding that the private respondent is not entitled to separation
pay, this Court sets aside the Labor Arbiter's computation of separation pay. However, we
uphold his computation of unclaimed commissions amounting to P39,344.80. The amount of
attorney's fee should consequently be recomputed at 2% of P39,344.80 or P786.89.
WHEREFORE, the judgment of the National Labor Relations Commission is AFFIRMED
except for the grant of separation pay which is hereby disallowed. Private respondent Maalat
is entitled to unclaimed commissions of P39,344.80 and 2% attorney's fees of P786.89, said
amounts being considered final.
SO ORDERED.
Feliciano, Bidin and Cortes, JJ., concur.
Fernan, C.J., is on leave.
THIRD DIVISION
G.R. No. 73199 October 26, 1988
DR. RENATO SARA and/or ROMEO ARANA petitioners,
vs.
CERILA AGARRADO and the NATIONAL LABOR RELATIONS
COMMISSION, respondents.
Amparo & Barcelona Law Offices for petitioners.
The Solicitor General for public respondent. Nicanor A. Magno for private respondent.
FERNAN, C.J.:
Challenged in this petition for certiorari is the jurisdiction of the Labor Tribunal over Case No.
LRD-ROXII-006-82, a claim for unpaid commissions and reimbursement of certain sums of
money filed by herein private respondent Cerila Agarrado against herein petitioners Dr.
Renato Sara and Romeo Arabia.
Private respondent Cerila Agarrado was an attendant in the clinic of petitioner Dr. Renato
Sara She quit her job in 1973. Four years later, petitioners Dr. Sara and Romeo Arabia, being
owners of a rice mill and having begun to engage in the buy and sell of palay and rice, entered
into a verbal agreement with private respondent Agarrado whereby it was agreed that the
latter would be paid P2.00 commission per sack of milled rice sold as well as a commission of
10% per kilo of palay purchased. It was further agreed that private respondent would spend
her own money for the undertaking, but to enable her to carry out the agreement more
effectively, she was authorized to borrow money from other persons, as in fact she did,
subject to reimbursement by petitioners. 1
In 1982, private respondent filed with the National Labor Relations Commission (NLRC)
Regional Arbitration Branch No. XI, Cotabato City, a complaint against petitioners for unpaid
commission of P4,598.00 on milled rice sold, P2,982.80 on palay sold, reimbursement of
P17,500.00 which she had borrowed from various persons and Pl,749.00 of her own money
which petitioners allegedly had not reimbursed (LRD-ROXII-006- 82).
By way of defense, petitioners raised the issue of lack of jurisdiction on the part of the Labor
Arbiter to take cognizance of the case, there being no employer-employee relationship
between the parties. They averred that the claim for alleged unpaid commission and certain
sums of money is governed by the law on agency under the Civil Code and hence a purely
civil obligation cognizable by the regular courts.
On January 17, 1973, Labor Arbiter Magno C. Cruz rendered a decision in favor of private
respondent ordering petitioners to pay all the claims amounting to P26,397.80. 2
Petitioner appealed the decision to the NLRC, which in a resolution dated June 25, 1986
affirmed the Labor Arbiter's decision and dismissed the appeal. 3
Their motion for reconsideration having been denied, petitioners took the present recourse,
maintaining lack of jurisdiction on the part of the Labor Tribunal as well as grave abuse of
discretion on its part in finding them liable to private respondent.
In his comment, the Solicitor General agreed with petitioners that there was no employer-
employee relationship between the parties and that by reason thereof the Labor Arbiter had
no jurisdiction over the case. The Solicitor General's comment was accompanied by a
manifestation and motion stating that he was filing the comment on his own behalf and that
the public respondent NLRC had been informed about his contrary stand. 4
The primordial issue in this case is whether an employer-employee relationship exists
between petitioners and private respondent as to warrant cognizance by the Labor Arbiter of
LRD-ROXII-006-82.
To determine the existence of an employer-employee relationship, this Court in a long line of
decisions 5 has invariably applied the following four-fold test: [1] the selection and
engagement of the employee; [2] the payment of wages; [3] the power of dismissal; and [4]
the power to control the employee's conduct.
In the case at bar, we find that although there was a selection and engagement of private
respondent in 1977, the verbal agreement between the parties negated the existence of the
other requisites.
As to the payment of wages, the verbal agreement entered into by the parties stipulated that
private respondent would be paid a commission of P2.00 per sack of milled rice sold as well
as a 10% commission on palay purchase. The arrangement thus was explicitly on a
commission basis dependent on the volume of sale or purchase. Private respondent was not
guaranteed any minimum compensation nor was she allowed any drawing account or
advance of any kind against unearned commissions. Her right to compensation depended
upon and was measured by the tangible results she produced the quantity of rice sold and the
quantity of palay purchased.
The power to terminate the relationship was mutually vested upon the parties. Either may
terminate the business arrangement at will, with or without cause.
Finally, noticeably absent from the agreement between the parties is the element of control.
Among the four (4) requisites, control is deemed the most important that the other requisites
may even be disregarded. 6 Under the control test, an employer-employee relationship exists
if the "employer" has reserved the right to control the "employee" not only as to the result of
the work done but also as to the means and methods by which the same is to be
accomplished. 7 Otherwise, no such relationship exists.
We observe that the means and methods of purchasing and selling rice or palay by private
respondent were totally independent of petitioners' control. As established by the NLRC:
... Sometime in June 1977, respondent re-engaged the services of herein
complainant to sell milled rice to the customers of the former, as well as to
buy palay for and in behalf of Dr. Renato Sara, with the verbal agreement
that to carry out effectively the said task, complainant was duly authorized
by respondent, Dr. Sara to spend her own money, if necessary but subject
to reimbursment and if that would not be sufficient, to borrow money from
other sources with further understanding that Dr. Sala will repay the ill thru
the complainant; ... ([Emphasis supplied], p. 21, Rollo)
Note that private respondent was never given capital by his supposed employer but relied on
her own resources and if insufficient, she borrowed money from others. Petitioners did not
supply private respondent with tools and appliances needed to enable her to carry her
undertaking, except to authorize her to borrow money from others, subject to reimbursement.
The absence of control is made more evident by the fact that private respondent was not even
obliged to sell the palay she purchased to petitioners. She was at liberty to sell the palay to
any trader offering higher buying rates. She was thus free to sell it to anybody whom she
pleased.
Moreover, private respondent worked for petitioners at her own pleasure and was not subject
to definite hours or conditions of work. She could even delegate the task of buying and selling
to others, if she so desired, or simultaneously engaged in other means of livelihood while
selling and purchasing rice or palay.
Under the conditions set forth in their agreement, private respondent was an independent
contractor, who exercising independent employment, contracted to do a piece of work
according to her own method and without being subject to the control of her employer except
as to the result of her work. She was paid for the result of her labor, unlike an employee who
is paid for the labor he performs. 8
The verbal agreement devoid as it was of any stipulations indicative of control leaves no doubt
that private respondent was not an employee of petitioners but was rather an independent
contractor.
The Labor Tribunal's jurisdiction being primarily predicated upon the existence of an
employer-employee relationship between the parties, the absence of such element, as in the
case at bar, removes the controversy from the scope of its limited jurisdiction.
WHEREFORE, the instant petition for certiorari is granted. Case No. LRD-ROXII-006-82 of
the National Labor Relations Commission is hereby ordered DISMISSED for lack of
jurisdiction.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.
EN BANC
G.R. No. L-19124 November 18, 1967
INVESTMENT PLANNING CORPORATION OF THE PHILIPPINES, petitioner-appellant,
vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.
MAKALINTAL, J.:
Petitioner is a domestic corporation engaged in business management and the sale of
securities. It has two classes of agents who sell its investment plans: (1) salaried employees
who keep definite hours and work under the control and supervision of the company; and (2)
registered representatives who work on commission basis.
On August 27, 1960 petitioner, through counsel, applied to respondent Social Security
Commission for exemption of its so-called registered representatives from the compulsory
coverage of the Social Security Act. The application was denied in a letter signed by the
Secretary to the Commission on January 16, 1961. A motion to reconsider was filed and also
denied, after hearing, by the Commission itself in its resolution dated September 8, 1961. The
matter was thereafter elevated to this Court for review.
The issue submitted for decision here is whether petitioner's registered representatives are
employees within the meaning of the Social Security Act (R.A. No. 1161 as amended).
Section 8 (d) thereof defines the term "employee" — for purposes of the Act — as "any person
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, employer-employee
relationship." (As amended by Sec.4, R.A. No. 2658). These representatives are in reality
commission agents. The uncontradicted testimony of petitioner's lone witness, who was its
assistant sales director, is that these agents are recruited and trained by him particularly for
the job of selling "'Filipinos Mutual Fund" shares, made to undergo a test after such training
and, if successful, are given license to practice by the Securities and Exchange Commission.
They then execute an agreement with petitioner with respect to the sale of FMF shares to the
general public. Among the features of said agreement which respondent Commission
considered pertinent to the issue are: (a) an agent is paid compensation for services in the
form of commission; (b) in the event of death or resignation he or his legal representative shall
be paid the balance of the commission corresponding to him; (c) he is subject to a set of rules
and regulations governing the performance of his duties under the agreement; (d) he is
required to put up a performance bond; and (e) his services may be terminated for certain
causes. At the same time the Commission found from the evidence and so stated in its
resolution that the agents "are not required to report (for work) at any time; they do not have to
devote their time exclusively to or work solely for petitioner; the time and the effort they spend
in their work depend entirely upon their own will and initiative; they are not required to account
for their time nor submit a record of their activities; they shoulder their own selling expenses
as well as transportation; and they are paid their commission based on a certain percentage
of their sales." The record also reveals that the commission earned by an agent on his sales is
directly deducted by him from the amount he receives from the investor and turns over to the
company the amount invested after such deduction is made. The majority of the agents are
regularly employed elsewhere — either in the government or in private enterprises.
Of the three requirements under Section 8 (d) of the Social Security Act it is admitted that the
first is present in respect of the agents whose status is in question. They exert both mental
and physical efforts in the performance of their services. The compensation they receive,
however, is not necessarily for those efforts but rather for the results thereof, that is, for actual
sales that they make. This point is relevant in the determination of whether or not the third
requisite is also present, namely, the existence of employer-employee relationship. Petitioner
points out that in effect such compensation is paid not by it but by the investor, as shown by
the basis on which the amount of the commission is fixed and the manner in which it is
collected.
Petitioner submits that its commission agents, engaged under the terms and conditions
already enumerated, are not employees but independent contractors, as defined in Article
1713 of the Civil Code, which provides:
Art. 1713. By the contract for a piece of work the contractor binds himself to execute
a piece of work for the employer, in consideration of a certain price or
compensation. The contractor may either employ only his labor or skill, or also
furnish the material.
We are convinced from the facts that the work of petitioner's agents or registered
representatives more nearly approximates that of an independent contractor than that of an
employee. The latter is paid for the labor he performs, that is, for the acts of which such labor
consists; the former is paid for the result thereof. This Court has recognized the distinction
in Chartered Bank, et al. vs. Constantino, 56 Phil. 717, where it said:
On this point, the distinguished commentator Manresa in referring to Article 1588 of
the (Spanish) Civil Code has the following to say. . . .
The code does not begin by giving a general idea of the subject matter, but by fixing
its two distinguishing characteristics.
But such an idea was not absolutely necessary because the difference between the
lease of work by contract or for a fixed price and the lease of services of hired
servants or laborers is sufficiently clear. In the latter, the direct object of the contract
is the lessor's labor; the acts in which such labor consists, performed for the benefit
of the lessee, are taken into account immediately. In work done by contract or for a
fixed price, the lessor's labor is indeed an important, a most important factor; but it is
not the direct object of the contract, nor is it immediately taken into account. The
object which the parties consider, which they bear in mind in order to determine the
cause of the contract, and upon which they really give their consent, is not the labor
but its result, the complete and finished work, the aggregate of the lessor's acts
embodied in something material, which is the useful object of the contract. . . .
(Manresa Commentarios al Codigo Civil, Vol. X, ed., pp. 774-775.)
Even if an agent of petitioner should devote all of his time and effort trying to sell its
investment plans would not necessarily be entitled to compensation therefor. His right to
compensation depends upon and is measured by the tangible results he produces.
The specific question of when there is "employer-employee relationship" for purposes of the
Social Security Act has not yet been settled in this jurisdiction by any decision of this Court.
But in other connections wherein the term is used the test that has been generally applied is
the so-called control test, that is, whether the "employer" controls or has reserved the right to
control the "employee" not only as to the result of the work to be done but also as to the
means and methods by which the same is to be accomplished.
Thus in Philippine Manufacturing Company vs. Geronimo, et al., L-6968, November 29, 1954,
involving the Workmen's Compensation Act, we read:
. . . Garcia, a painting contractor, had a contract undertaken to paint a water tank
belonging to the Company "in accordance with specifications and price stipulated,"
and with "the actual supervision of the work (being) taken care of by" himself.
 Clearly, this made Garcia an independent contractor, for while the company
prescribed what should be done, the doing of it and the supervision thereof was left
entirely to him, all of which meant that he was free to do the job according to his
own method without being subject to the control of the company except as to the
result.
Cruz, et al. vs. The Manila Hotel Company, L-9110, April 30, 1957, presented the issue of who
were to be considered employees of the defendant firm for purposes of separation
gratuity. LVN Pictures, Inc. vs. Phil. Musicians Guild, et al., L-12582, January 28, 1961,
involved the status of certain musicians for purposes of determining the appropriate
bargaining representative of the employees. In both instances the "control" test was followed.
(See also Mansal vs. P.P. Gocheco Lumber Co., L-8017, April 30, 1955; and Viana vs.
Allagadan, et al., L-8967, May 31, 1956.)
In the United States, the Federal Social Security Act of 1935 set forth no definition of the term
'employee' other than that it 'includes an officer of a corporation.' Under that Act the U.S.
Supreme Court adopted for a time and in several cases the so-called 'economic-reality' test
instead of the 'control' test. (U.S. vs. Silk and Harrison, 91 Law Ed. 1757; Bartels vs.
Birmingham, Ibid, 1947, both decided in June 1947). In the Bartels case the Court said:
In United States v. Silk, No. 312, 331 US 704, ante, 1957, 67 SCt 1463, supra, we
held that the relationship of employer-employee, which determines the liability for
employment taxes under the Social Security Act was not to be determined solely by
the idea of control which an alleged employer may or could exercise over the details
of the service rendered to his business by the worker or workers. Obviously control
is characteristically associated with the employer-employee relationship, but in the
application of social legislation employees are those who as a matter of economic
reality are dependent upon the business to which they render service. In Silk, we
pointed out that permanency of the relation, the skill required, the investment in the
facilities for work and opportunities for profit or less from the activities were also
factors that should enter into judicial determination as to the coverage of the Social
Security Act. It is the total situation that controls. The standards are as important in
the entertainment field as we have just said, in Silk, that they were in that of
distribution and transportation. (91 Law, Ed. 1947, 1953;)
However, the 'economic-reality' test was subsequently abandoned as not reflective of the
intention of Congress in the enactment of the original Security Act of 1935. The change was
accomplished by means of an amendatory Act passed in 1948, which was construed and
applied in later cases. In Benson vs. Social Security Board, 172 F. 2d. 682, the U.S. Supreme
Court said:
After the decision by the Supreme Court in the Silk case, the Treasury Department
revamped its Regulation, 12 Fed. Reg. 7966, using the test set out in the Silk case
for determining the existence of an employer-employee relationship. Apparently this
was not the concept of such a relationship that Congress had in mind in the
passage of such remedial acts as the one involved here because thereafter on June
14, 1948, Congress enacted Public Law 642, 42 U.S C.A. Sec. 1301 (a) (6). Section
1101(a) (6) of the Social Security Act was amended to read as follows:
The term "employee" includes an officer of a corporation, but such term
does not include (1) any individual who, under the usual common-law
rules applicable in determining the employer-employee relationship, has
the status of an independent contractor or (2) any individual (except an
officer of a corporation) who is not an employee under such common law
rules.
While it is not necessary to explore the full effect of this enactment in the
determination of the existence of employer-employee relationships arising in the
future, we think it can fairly be said that the intent of Congress was to say that in
determining in a given case whether under the Social Security Act such a
relationship exists, the common-law elements of such a relationship, as recognized
and applied by the courts generally at the time of the passage of the Act, were the
standard to be used . . . .
The common-law principles expressly adopted by the United States Congress are
summarized in Corpus Juris Secundum as follows:
Under the common-law principles as to tests of the independent contractor
relationship, discussed in Master and Servant, and applicable in determining
coverage under the Social Security Act and related taxing provisions, the significant
factor in determining the relationship of the parties is the presence or absence of a
supervisory power to control the method and detail of performance of the service,
and the degree to which the principal may intervene to exercise such control, the
presence of such power of control being indicative of an employment relationship
and the absence of such power being indicative of the relationship of independent
contractor. In other words, the test of existence of the relationship of independent
contractor, which relationship is not taxable under the Social Security Act and
related provisions, is whether the one who is claimed to be an independent
contractor has contracted to do the work according to his own methods and without
being subject to the control of the employer except as to the result of the work. (81
C.J.S. Sec. 5, pp. 24-25); See also Millard's Inc. vs. United States, 46 F. Supp. 385;
Schmidt vs. Ewing, 108 F. Supp. 505; Ramblin vs. Ewing, 106 F. Supp. 268.
In the case last cited (Rambin v. Ewing) the question presented was whether the plaintiff
there, who was a sales representative of a cosmetics firm working on a commission basis,
was to be considered an employee. Said the Court:
Plaintiff's only remuneration was her commission of 40%, plus $5 extra for every
$250 of sales. Plaintiff was not guaranteed any minimum compensation and she
was not allowed a drawing account or advance of any kind against unearned
commissions. Plaintiff paid all of her traveling expenses and she even had to pay
the postage for sending orders to Avon.
The only office which Avon maintained in Shreveport was an office for the city
manager. Plaintiff worked from her own home and she was never furnished any
leads. The relationship between plaintiff and Avon was terminable at will . . .
xxx xxx xxx
. . . A long line of decisions holds that commission sales representatives are not
employees within the coverage of the Social Security Act. The underlying
circumstances of the relationship between the sales representatives and company
often vary widely from case to case, but commission sales representatives have
uniformly been held to be outside the Social Security Act.
Considering the similarity between the definition of "employee" in the Federal Social Security
Act (U.S.) as amended and its definitions in our own Social Security Act, and considering
further that the local statute is admittedly patterned after that of the United States, the
decisions of American courts on the matter before us may well be accorded persuasive force.
The logic of the situation indeed dictates that where the element of control is absent; where a
person who works for another does so more or less at his own pleasure and is not subject to
definite hours or conditions of work, and in turn is compensated according to the result of his
efforts and not the amount thereof, we should not find that the relationship of employer and
employee exists.
We have examined the contract form between petitioner and its registered representatives
and found nothing therein which would indicate that the latter are under the control of the
former in respect of the means and methods they employ in the performance of their work.
The fact that for certain specified causes the relationship may be terminated (e.g., failure to
meet the annual quota of sales, inability to make any sales production during a six-month
period, conduct detrimental to petitioner, etc.) does not mean that such control exists, for the
causes of termination thus specified have no relation to the means and methods of work that
are ordinarily required of or imposed upon employees.
In view of the foregoing considerations, the resolution of respondent Social Security
Commission subject of this appeal is reversed and set aside, without pronouncement as to
costs.
Reyes, J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando,
JJ., concur.
Concepcion, C.J., took no part part.
EN BANC
G.R. No. L-12582 January 28, 1961
LVN PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees.
x---------------------------------------------------------x
G.R. No. L-12598 January 28, 1961
SAMPAGUITA PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees.
Nicanor S. Sison for petitioner-appellant.
Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.
CONCEPCION, J.:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review
by certiorari of an order of the Court of Industrial Relations in Case No. 306-MC thereof,
certifying the Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as
the sole and exclusive bargaining agency of all musicians working with said companies, as
well as with the Premiere Productions, Inc., which has not appealed. The appeal of LVN
Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the
appeal of Sampaguita Pictures, Inc. Involving as they do the same order, the two cases have
been jointly heard in this Court, and will similarly be disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as
the Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures,
Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly
organized under the Philippine laws, engaged in the making of motion pictures and in the
processing and distribution thereof; that said companies employ musicians for the purpose of
making music recordings for title music, background music, musical numbers, finale music
and other incidental music, without which a motion picture is incomplete; that ninety-five (95%)
percent of all the musicians playing for the musical recordings of said companies are
members of the Guild; and that the same has no knowledge of the existence of any other
legitimate labor organization representing musicians in said companies. Premised upon these
allegations, the Guild prayed that it be certified as the sole and exclusive bargaining agency
for all musicians working in the aforementioned companies. In their respective answers, the
latter denied that they have any musicians as employees, and alleged that the musical
numbers in the filing of the companies are furnished by independent contractors. The lower
court, however, rejected this pretense and sustained the theory of the Guild, with the result
already adverted to. A reconsideration of the order complained of having been denied by the
Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for
review for certiorari.
Apart from impugning the conclusion of the lower court on the status of the Guild members as
alleged employees of the film companies, the LVN Pictures, Inc., maintains that a petition for
certification cannot be entertained when the existence of employer-employee relationship
between the parties is contested. However, this claim is neither borne out by any legal
provision nor supported by any authority. So long as, after due hearing, the parties are found
to bear said relationship, as in the case at bar, it is proper to pass upon the merits of the
petition for certification.
It is next urged that a certification is improper in the present case, because, "(a) the petition
does not allege and no evidence was presented that the alleged musicians-employees of the
respondents constitute a proper bargaining unit, and (b) said alleged musicians-employees
represent a majority of the other numerous employees of the film companies constituting a
proper bargaining unit under section 12 (a) of Republic Act No. 875."
The absence of an express allegation that the members of the Guild constitute a proper
bargaining unit is fatal proceeding, for the same is not a "litigation" in the sense in which this
term is commonly understood, but a mere investigation of a non-adversary, fact finding
character, in which the investigating agency plays the part of a disinterested investigator
seeking merely to ascertain the desires of employees as to the matter of their representation.
In connection therewith, the court enjoys a wide discretion in determining the procedure
necessary to insure the fair and free choice of bargaining representatives by
employees.1 Moreover, it is alleged in the petition that the Guild it a duly registered legitimate
labor organization and that ninety-five (95%) percent of the musicians playing for all the
musical recordings of the film companies involved in these cases are members of the Guild.
Although, in its answer, the LVN Pictures, Inc. denied both allegations, it appears that, at the
hearing in the lower court it was merely the status of the musicians as its employees that the
film companies really contested. Besides, the substantial difference between the work
performed by said musicians and that of other persons who participate in the production of a
film, and the peculiar circumstances under which the services of that former are engaged and
rendered, suffice to show that they constitute a proper bargaining unit. At this juncture, it
should be noted that the action of the lower court in deciding upon an appropriate unit for
collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct.
468. 90 L. ed. 145) and that its judgment in this respect is entitled to almost complete finality,
unless its action is arbitrary or capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135
F. 2d. 891), which is far from being so in the cases at bar.
Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency
for the musicians working in the aforesaid film companies. It does not intend to represent the
other employees therein. Hence, it was not necessary for the Guild to allege that its members
constitute a majority of all the employees of said film companies, including those who are not
musicians. The real issue in these cases, is whether or not the musicians in question are
employees of the film companies. In this connection the lower court had the following to say:
As a normal and usual course of procedure employed by the companies when a
picture is to be made, the producer invariably chooses, from the musical directors,
one who will furnish the musical background for a film. A price is agreed upon
verbally between the producer and musical director for the cost of furnishing such
musical background. Thus, the musical director may compose his own music
specially written for or adapted to the picture. He engages his own men and pays
the corresponding compensation of the musicians under him.
When the music is ready for recording, the musicians are summoned through 'call
slips' in the name of the film company (Exh 'D'), which show the name of the
musician, his musical instrument, and the date, time and place where he will be
picked up by the truck of the film company. The film company provides the studio for
the use of the musicians for that particular recording. The musicians are also
provided transportation to and from the studio by the company. Similarly, the
company furnishes them meals at dinner time.
During the recording sessions, the motion picture director, who is an employee of
the company, supervises the recording of the musicians and tells what to do in
every detail. He solely directs the performance of the musicians before the camera
as director, he supervises the performance of all the action, including the musicians
who appear in the scenes so that in the actual performance to be shown on the
screen, the musical director's intervention has stopped.
And even in the recording sessions and during the actual shooting of a scene, the
technicians, soundmen and other employees of the company assist in the operation.
Hence, the work of the musicians is an integral part of the entire motion picture
since they not only furnish the music but are also called upon to appear in the
finished picture.
The question to be determined next is what legal relationship exits between the
musicians and the company in the light of the foregoing facts.
We are thus called upon to apply R.A. Act 875. which is substantially the same as
and patterned after the Wagner Act substantially the same as a Act and the Taft-
Hartley Law of the United States. Hence, reference to decisions of American Courts
on these laws on the point-at-issue is called for.
Statutes are to be construed in the light of purposes achieved and the evils sought
to be remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed.
1345.) .
In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111,
the United States Supreme Court said the Wagner Act was designed to avert the
'substantial obstruction to the free flow of commerce which results from strikes and
other forms of industrial unrest by eliminating the causes of the unrest. Strikes and
industrial unrest result from the refusal of employers' to bargain collectively and the
inability of workers to bargain successfully for improvement in their working
conditions. Hence, the purposes of the Act are to encourage collective bargaining
and to remedy the workers' inability to bargaining power, by protecting the exercise
of full freedom of association and designation of representatives of their own
choosing, for the purpose of negotiating the terms and conditions of their
employment.'
The mischief at which the Act is aimed and the remedies it offers are not confined
exclusively to 'employees' within the traditional legal distinctions, separating them
from 'independent contractor'. Myriad forms of service relationship, with infinite and
subtle variations in the term of employment, blanket the nation's economy. Some
are within this Act, others beyond its coverage. Large numbers will fall clearly on
one side or on the other, by whatever test may be applied. Inequality of bargaining
power in controversies of their wages, hours and working conditions may
characterize the status of one group as of the other. The former, when acting alone
may be as helpless in dealing with the employer as dependent on his daily wage
and as unable to resist arbitrary and unfair treatment as the latter.'
To eliminate the causes of labor dispute and industrial strike, Congress thought it
necessary to create a balance of forces in certain types of economic relationship.
Congress recognized those economic relationships cannot be fitted neatly into the
containers designated as 'employee' and 'employer'. Employers and employees not
in proximate relationship may be drawn into common controversies by economic
forces and that the very dispute sought to be avoided might involve 'employees' who
are at times brought into an economic relationship with 'employers', who are not
their 'employers'. In this light, the language of the Act's definition of 'employee' or
'employer' should be determined broadly in doubtful situations, by underlying
economic facts rather than technically and exclusively established legal
classifications. (NLRB vs. Blount, 131 F [2d] 585.)
In other words, the scope of the term 'employee' must be understood with reference
to the purposes of the Act and the facts involved in the economic relationship.
Where all the conditions of relation require protection, protection ought to be given .
By declaring a worker an employee of the person for whom he works and by
recognizing and protecting his rights as such, we eliminate the cause of industrial
unrest and consequently we promote industrial peace, because we enable him to
negotiate an agreement which will settle disputes regarding conditions of
employment, through the process of collective bargaining.
The statutory definition of the word 'employee' is of wide scope. As used in the Act,
the term embraces 'any employee' that is all employees in the conventional as well
in the legal sense expect those excluded by express provision. (Connor Lumber
Co., 11 NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of
industrial unrest by protecting the exercise of their right to self-organization for the
purpose of collective bargaining. (b) To promote sound stable industrial peace and
the advancement of the general welfare, and the best interests of employers and
employees by the settlement of issues respecting terms and conditions of
employment through the process of collective bargaining between employers and
representatives of their employees.
The primary consideration is whether the declared policy and purpose of the Act can
be effectuated by securing for the individual worker the rights and protection
guaranteed by the Act. The matter is not conclusively determined by a contract
which purports to establish the status of the worker, not as an employee.
The work of the musical director and musicians is a functional and integral part of
the enterprise performed at the same studio substantially under the direction and
control of the company.
In other words, to determine whether a person who performs work for another is the
latter's employee or an independent contractor, the National Labor Relations relies
on 'the right to control' test. Under this test an employer-employee relationship exist
where the person for whom the services are performed reserves the right to control
not only the end to be achieved, but also the manner and means to be used in
reaching the end. (United Insurance Company, 108, NLRB No. 115.).
Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.
'We find that the independent contractors and persons working under
them are employees' within the meaning of Section 2 (3) of its Act.
However, we are of the opinion that the independent contractors have
sufficient authority over the persons working under their immediate
supervision to warrant their exclusion from the unit. We shall include in the
unit the employees working under the supervision of the independent
contractors, but exclude the contractors.'
 'Notwithstanding that the employees are called independent contractors', the Board
will hold them to be employees under the Act where the extent of the employer's
control over them indicates that the relationship is in reality one of employment.
(John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective
Bargaining, Vol.).
The right of control of the film company over the musicians is shown (1) by calling
the musicians through 'call slips' in 'the name of the company; (2) by arranging
schedules in its studio for recording sessions; (3) by furnishing transportation and
meals to musicians; and (4) by supervising and directing in detail, through the
motion picture director, the performance of the musicians before the camera, in
order to suit the music they are playing to the picture which is being flashed on the
screen.
Thus, in the application of Philippine statutes and pertinent decisions of the United
States Courts on the matter to the facts established in this case, we cannot but
conclude that to effectuate the policies of the Act and by virtue of the 'right of control'
test, the members of the Philippine Musicians Guild are employees of the three film
companies and, therefore, entitled to right of collective bargaining under Republic
Act No. 875.
In view of the fact that the three (3) film companies did not question the union's
majority, the Philippine Musicians Guild is hereby declared as the sole collective
bargaining representative for all the musicians employed by the film companies."
We are fully in agreement with the foregoing conclusion and the reasons given in support
thereof. Both are substantially in line with the spirit of our decision in Maligaya Ship Watchmen
Agency vs. Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact,
the contention of the employers in the Maligaya cases, to the effect that they had dealt with
independent contractors, was stronger than that of the film companies in these cases. The
third parties with whom the management and the workers contracted in the Maligaya cases
were agencies registered with the Bureau of Commerce and duly licensed by the City of
Manila to engage in the business of supplying watchmen to steamship companies, with
permits to engage in said business issued by the City Mayor and the Collector of Customs. In
the cases at bar, the musical directors with whom the film companies claim to have dealt with
had nothing comparable to the business standing of said watchmen agencies. In this respect,
the status of said musical directors is analogous to that of the alleged independent contractor
in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the particularity that the Caro case
involved the enforcement of the liability of an employer under the Workmen's Compensation
Act, whereas the cases before us are merely concerned with the right of the Guild
to represent the musicians as a collective bargaining unit. Hence, there is less reason to be
legalistic and technical in these cases, than in the Caro case.
Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut
Product Co., Inc vs. CIR(46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos
Vda. de Geronimo, L-6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31,
1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of
favoring the theory of said petitioners-appellants, the case of the Sunripe Coconut Product
Co., Inc. is authority for herein respondents-appellees. It was held that, although engaged as
piece-workers, under the "pakiao" system, the "parers" and "shellers" in the case were, not
independent contractor, but employees of said company, because "the requirement imposed
on the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat
wasted,' in effect limits or controls the means or details by which said workers are to
accomplish their services" — as in the cases before us.
The nature of the relation between the parties was not settled in the Viana case, the same
having been remanded to the Workmen's Compensation Commission for further evidence.
The case of the Philippine Manufacturing Co. involved a contract between said company and
Eliano Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the
services of Arcadio Geronimo, a laborer, who fell while painting the tank and died in
consequence of the injuries thus sustained by him. Inasmuch as the company was engaged in
the manufacture of soap, vegetable lard, cooking oil and margarine, it was held that the
connection between its business and the painting aforementioned was purely casual; that
Eliano Garcia was an independent contractor; that Geronimo was not an employee of the
company; and that the latter was not bound, therefore, to pay the compensation provided in
the Workmen's Compensation Act. Unlike the Philippine Manufacturing case, the relation
between the business of herein petitioners-appellants and the work of the musicians is not
casual. As held in the order appealed from which, in this respect, is not contested by herein
petitioners-appellants — "the work of the musicians is an integral part of the entire motion
picture." Indeed, one can hardly find modern films without music therein. Hence, in
the Caro case (supra), the owner and operator of buildings for rent was held bound to pay the
indemnity prescribed in the Workmen's Compensation Act for the injury suffered by a
carpenter while working as such in one of said buildings even though his services had been
allegedly engaged by a third party who had directly contracted with said owner. In other
words, the repair work had not merely a casual connection with the business of said owner. It
was a necessary incident thereof, just as music is in the production of motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs
materially from the present cases. It involved the interpretation of Republic Act No. 660, which
amends the law creating and establishing the Government Service Insurance System. No
labor law was sought to be construed in that case. In act, the same was originally heard in the
Court of First Instance of Manila, the decision of which was, on appeal, affirmed by the
Supreme Court. The meaning or scope if the term "employee," as used in the Industrial Peace
Act (Republic Act No. 875), was not touched therein. Moreover, the subject matter of said
case was a contract between the management of the Manila Hotel, on the one hand, and
Tirso Cruz, on the other, whereby the latter greed to furnish the former the services of his
orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time
daily." In the language of this court in that case, "what pieces the orchestra shall play, and
how the music shall be arranged or directed, the intervals and other details — such are left to
the leader's discretion."
This is not situation obtaining in the case at bar. The musical directors above referred to
have no such control over the musicians involved in the present case. Said musical directors
control neither the music to be played, nor the musicians playing it. The film companies
summon the musicians to work, through the musical directors. The film companies, through
the musical directors, fix the date, the time and the place of work. The film companies, not the
musical directors, provide the transportation to and from the studio. The film companies
furnish meal at dinner time.
What is more — in the language of the order appealed from — "during the recording sessions,
the motion picture director who is an employee of the company" — not the musical director —
"supervises the recording of the musicians and tells them what to do in every detail". The
motion picture director — not the musical director — "solely directs and performance of the
musicians before the camera". The motion picture director "supervises the performance of all
the actors, including the musicians who appear in the scenes, so that in the actual
performance to be shown in the screen, the musical director's intervention has stopped." Or,
as testified to in the lower court, "the movie director tells the musical director what to do; tells
the music to be cut or tells additional music in this part or he eliminates the entire music he
does not (want) or he may want more drums or move violin or piano, as the case may be".
The movie director "directly controls the activities of the musicians." He "says he wants more
drums and the drummer plays more" or "if he wants more violin or he does not like that.".
It is well settled that "an employer-employee relationship exists . . .where the person for whom
the services are performed reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end . . . ." (Alabama Highway Express Co., Express
Co., v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the "means to be
used", is illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No.
210, pp. 1197, 1199-1201), in which, by reason of said control, the employer-employee
relationship was held to exist between the management and the workers, notwithstanding the
intervention of an alleged independent contractor, who had, and exercise, the power to hire
and fire said workers. The aforementioned control over the means to be used" in reading the
desired end is possessed and exercised by the film companies over the musicians in the
cases before us.
WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners
herein. It is so ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes
and Dizon, JJ., concur.
Gutierrez David, J., took no part.
THIRD DIVISION
G.R. No. 114787 June 2, 1995
MAM REALTY DEVELOPMENT CORPORATION and MANUEL CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and CELSO B. BALBASTRO respondents.
VITUG, J.:
A prime focus in the instant petition is the question of when to hold a director or officer of a
corporation solidarily obligated with the latter for a corporate liability.
The case originated from a complaint filed with the Labor Arbiter by private respondent Celso
B. Balbastro against herein petitioners, MAM Realty Development Corporation ("MAM") and
its Vice President Manuel P. Centeno, for wage differentials, "ECOLA," overtime pay,
incentive leave pay, 13th month pay (for the years 1988 and 1989), holiday pay and rest day
pay. Balbastro alleged that he was employed by MAM as a pump operator in 1982 and had
since performed such work at its Rancho Estate, Marikina, Metro Manila. He earned a basic
monthly salary of P1,590.00 for seven days of work a week that started from 6:00 a.m. to up
until 6:00 p.m. daily.
MAM countered that Balbastro had previously been employed by Francisco Cacho and Co.,
Inc., the developer of Rancho Estates. Sometime in May 1982, his services were contracted
by MAM for the operation of the Rancho Estates' water pump. He was engaged, however, not
as an employee, but as a service contractor, at an agreed fee of P1,590.00 a month. Similar
arrangements were likewise entered into by MAM with one Rodolfo Mercado and with a
security guard of Rancho Estates III Homeowners' Association. Under the agreement,
Balbastro was merely made to open and close on a daily basis the water supply system of the
different phases of the subdivision in accordance with its water rationing scheme. He worked
for only a maximum period of three hours a day, and he made use of his free time by offering
plumbing services to the residents of the subdivision. He was not at all subject to the control
or supervision of MAM for, in fact, his work could so also be done either by Mercado or by the
security guard. On 23 May 1990, prior to the filing of the complaint, MAM executed a Deed of
Transfer,1 effective 01 July 1990, in favor of the Rancho Estates Phase III Homeowners
Association, Inc., conveying to the latter all its rights and interests over the water system in the
subdivision.
In a decision, dated 23 December 1991, the Labor Arbiter dismissed the complaint for lack of
merit.
On appeal to it, respondent National Labor Relations Commission ("NLRC") rendered
judgment (a) setting aside the questioned decision of the Labor Arbiter and (b) referring the
case, pursuant to Article 218(c) of the Labor Code, to Arbiter Cristeta D. Tamayo for further
hearing and submission of a report within 20 days from receipt of the Order.2On 21 March
1994, respondent Commissioner, after considering the report of Labor Arbiter Tamayo,
ordered:
WHEREFORE, the respondents are hereby directed to pay jointly and
severally complainant the sum of P86,641.05 as above-computed. 3
The instant petition asseverates that respondent NLRC gravely abused its
discretion, amounting to lack or excess of jurisdiction, (1) in finding that an
employer-employee relationship existed between petitioners and private respondent
and (2) in holding petitioners jointly and severally liable for the money claims
awarded to private respondent.
Once again, the matter of ascertaining the existence of an employer-employee relationship is
raised. Repeatedly, we have said that this factual issue is determined by:
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employer's power to control the employee with respect to the result
of the work to be done and to the means and methods by which the work
is to be accomplished.
We see no grave abuse of discretion on the part of NLRC in finding a full
satisfaction, in the case at bench, of the criteria to establish that employer-employee
relationship. The power of control, the most important feature of that relationship
and, here, a point of controversy, refers merely to the existence of the power and
not to the actual exercise thereof. It is not essential for the employer
to actually supervise the performance of duties of the employee; it is enough that
the former has a right to wield the power.4 It is hard to accede to the contention of
petitioners that private respondent should be considered totally free from such
control merely because the work could equally and easily be done either by
Mercado or by the subdivision's security guard. Not without any significance is that
private respondent's employment with MAM has been registered by petitioners with
the Social Security System.5
It would seem that the money claims awarded to private respondent were computed from 06
March 1988 to 06 March 1991,6 the latter being the date of the filing of the complaint. The
NLRC might have missed the transfer by MAM of the water system to the Homeowners
Association on 01 July 1990, a matter that would appear not to be in dispute. Accordingly, the
period for the computation of the money claims should only be for the period from 06 March
1988 to 01 July 1990 (when petitioner corporation could be deemed to have ceased from the
activity for which private respondent was employed), and petitioner corporation should,
instead, be made liable for the employee's separation pay equivalent to one-half (1/2) month
pay for every year of
service. 7 While the transfer was allegedly due to MAM's financial constraints, unfortunately for
petitioner corporation, however, it failed to sufficiently establish that its business losses or
financial reverses were serious enough that possibly can warrant an exemption under the
law.8
We agree with petitioners, however, that the NLRC erred in holding Centeno jointly and
severally liable with MAM. A corporation, being a juridical entity, may act only through its
directors, officers and employees. Obligations incurred by them, acting as such corporate
agents, are not theirs but the direct accountabilities of the corporation they represent. True,
solidary liabilities may at times be incurred but only when exceptional circumstances warrant
such as, generally, in the following cases:9
1. When directors and trustees or, in appropriate cases, the officers of a
corporation —
(a) vote for or assent to patently unlawful acts of the
corporation;
(b) act in bad faith or with gross negligence in
directing the corporate affairs;
 (c) are guilty of conflict of interest to the prejudice of
the corporation, its stockholders or members, and
other persons. 10
2. When a director or officer has consented to the issuance of watered
stocks or who, having knowledge thereof, did not forthwith file with the
corporate secretary his written objection thereto. 11
3. When a director, trustee or officer has contractually agreed or stipulated
to hold himself personally and solidarily liable with the Corporation. 12
4 When a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action.13
In labor cases, for instance, the Court has held corporate directors and officers
solidarily liable with the corporation for the termination of employment of employees
done with malice or in bad faith.14
In the case at Bench, there is nothing substantial on record that can justify, prescinding from
the foregoing, petitioner Centeno's solidary liability with the corporation.
An extra note. Private respondent avers that the questioned decision, having already become
final and executory, could no longer be reviewed by this Court. The petition before us has
been filed under Rule 65 of the Rules of Court, there being no appeal, or any other plain,
speedy and adequate remedy in the ordinary course of law from decisions of the National
Labor Relations Commission; it is a relief that is open so long as it is availed of within a
reasonable time.
WHEREFORE, the order of 21 March 1994 is MODIFIED. The case is REMANDED to the
NLRC for a re-computation of private respondent's monetary awards, which, conformably with
this opinion, shall be paid solely by petitioner MAM Realty Development Corporation. No
special pronouncement on costs.
SO ORDERED.
Feliciano, Romero, Melo and Francisco, JJ., concur.
THIRD DIVISION respondents are hereby directed to pay all complainants their respective
separation pay based on their one-half month's earnings per year of
G.R. No. 100665 February 13, 1995 service, a fraction of at least six months to be considered one whole year,
ZANOTTE SHOES/LEONARDO LORENZO, petitioners, or the following amounts:
vs. 1 Joseph Lluz P 7,488.00 (3 yrs. & 7 mos.)
NATIONAL LABOR RELATIONS COMMISSION, HON. BENIGNO C. VILLARENTE, JR.,
2 Noel Adarayan 12,636.00 (8 yrs. & 8 mos.)
JOSEPH LLUZ, LOLITO LLUZ, NOEL ADARAYAN, ROGELIO SIRA, VIRGINIA
HERESANO, GENELITO HERESANO and CARMELITA DE DIOS, respondents. 3 Rogelio Sira 8,828.00 (6 yrs. & 9 mos.)
4 Lolito Lluz 8,828.00 (6 yrs. & 7 mos.)
VITUG, J.: 5 Genelito Heresano 1,404.00 (1 year)
This petition for certiorari assails the 24th April 1991 resolution of respondent National Labor
Relations Commission ("NLRC"), as well as its resolution of 30 May 1991 denying a motion for 6 Virginia Heresano 665.00 (1 yr. & 5 mos.)
reconsideration, which has dismissed herein petitioners' appeal of the 16th October 1989 7 Carmelita de Dios 19,656.00 (13 yrs. & 9 mos.)
decision of Labor Arbiter Benigno C. Villarente, Jr. Total P 59,515.002
Private respondents filed a complaint for illegal dismissal and for various monetary claims,
including the recovery of damages and attorney's fees, against petitioners. In their
Respondents are also hereby directed to pay complainants' counsel the
supplemental position paper, the complainants subsequently confined themselves to the
amount of P5,950.00 which is equivalent to 10% of the above total awards
illegal dismissal charge and abandoned the monetary claims. One of the original eight
as attorney's fees.
complainants, Virgilio Alcunaba, decided to resume his work with petitioners, thus leaving the
SO ORDERED. 3
rest to pursue the case. Private respondents averred that they started to work for petitioners
An appeal was interposed by petitioners. The NLRC, on 24 April 1991, sustained the findings
on, respectively, the following dates:
of the Labor Arbiter and dismissed the appeal. On 30 May 1991, the NLRC denied petitioners'
NAME DATE motion for reconsideration.
1 Joseph Lluz March, 1985 Hence, the instant petition.
2 Noel Adarayan Feb. 17, 1980 In his comment, dated 14 October 1991, the Solicitor General moved for the modification of
NLRC's resolution of 24 April 1991. While conceding that an employer-employee relationship
3 Rogelio Sira January, 1982 existed between petitioners and private respondents, the Solicitor General, nevertheless,
4 Lolito Lluz March, 1982 expressed strong reservations on the award of separation pay in view of the findings by both
5 Virginia Heresano May, 1987 the Labor Arbiter and the NLRC that there was neither dismissal nor abandonment in the case
at bench. The NLRC submitted its own comment on 11 February 1992.
6 Genelito Heresano 20-Oct-87
Well-settled is the rule that factual findings of the NLRC, particularly when they coincide with
7 Carmelita de Dios January, 1975 1 that of the Labor Arbiter, are accorded respect, if not finality, and will not be disturbed absent
that they worked for a minimum of twelve hours daily, including Sundays and holidays when any showing that substantial evidence which might otherwise affect the result of the case has
needed; that they were paid on piece-work basis; that it "angered" petitioner Lorenzo when been discarded. We see no reason, in this case at bench, for disturbing the findings of the
they requested to be made members of the Social Security System ("SSS"); and that, when Labor Arbiter and the NLRC on the existence of an employer-employee relationship between
they demanded an increase in their pay rates, they were prevented (starting 24 October 1988) herein private parties. The work of private respondents is clearly related to, and in the pursuit
from entering the work premises. of, the principal business activity of petitioners. The indicia used for determining the existence
Petitioners, in turn, claimed that their business operations were only seasonal, normally twice of an employer-employee relationship, all extant in the case at bench, include (a) the selection
a year, one in June (coinciding with the opening of school classes) and another in December and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and
(during the Christmas holidays), when heavy job orders would come in. Private respondents, (d) the employer's power to control the employee with respect to the result of the work to be
according to petitioners, were engaged on purely contractual basis and paid the rates done and to the means and methods by which the work to be done and to the means and
conformably with their respective agreements. methods by which the work is to be accomplished. The requirement, so herein posed as an
On 16 October 1989, Labor Arbiter Benigno C. Villarente, Jr., rendered judgment in favor of issue, refers to the existence of the right to control and not necessarily to the actual exercise
the complainants, thus: of the right. In Dy Keh Beng v.International Labor and Marine Union of the Philippines, et
WHEREFORE, judgment is hereby rendered declaring that there was an al.,4 the Court has held:
employer-employee relationship between complainants and respondents While this Court up holds the control test under which an employer-
and that the former were regular employees of the latter. Accordingly, employee relationship exists "where the person for whom the services are
 performed reserves a right to control not only the end to be achieved but
also the means to be used in reaching such end," it finds no merit with
petitioner's arguments as stated above. It should be borne in mind that the
control test calls merely for the existence of the right to control the manner
of doing the work, not the actual exercise of the right. Considering the
finding by the Hearing Examiner that the establishment of Dy Keh Beng is
"engaged in the manufacture of basket known as kaing," it is natural to
expect that those working under Dy would have to observe, among others,
Dy's requirements of size and quality of the kaing. Some control would
necessarily be exercised by Dy's specifications. Parenthetically, since the
work on the baskets is done at Dy's establishments, it can be inferred that
the proprietor Dy could easily exercise control on the men he employed.
We share the opinion of the Solicitor General that the award of separation pay to private
respondents appears, nonetheless, to be unwarranted.
The Labor Arbiter, sustained by the NLRC, concluded that there was neither dismissal nor
abandonment. The Labor Arbiter said —
. . . At any rate, records show that even during the conciliation stage,
respondents had repeatedly indicated that they were willing to accept
back all complainants aside from denying complainants allegation. Hence,
it is clear that there was no dismissal to talk about in the first place which
would have to be determined whether legal or not. We also take particular
note of complainants' desire to be given separation pay instead of being
ordered back to work. Considering all these factors we hereby rule that
there was neither dismissal nor abandonment but complainants are simply
out of job for reasons not attributable to either party. (Rollo, pp. 30-31.)
The NLRC, in nonetheless agreeing with the Labor Arbiter on the latter's award of separation
pay, ventured to say:
. . . It is not difficult to see the rationale behind the Labor Arbiter's
disposition — he saw in respondents' offer of reinstatement the
commanding advantage it had to later force (by whatever unlawful means
they may resort to) the complainants out of job, just as the Labor Arbiter
saw that fear on the part of complainants to enter into a trap being laid
before them for indeed, it is peculiar for an employer who wants to get rid
of its employees, to insist on reinstatement rather than a separation pay
scheme which the law allows them so they may be able to better manage
their business. (Rollo, p. 39.)
We find the above disquisition of the NLRC too peculative and conjectural to be sustained.
The fact of the matter is that petitioners have repeatedly indicated their willingness to accept
private respondents but the latter have steadfastly refused the offer. For being without any
clear legal basis, the award of separation pay must thus be set aside. 5 There is nothing,
however, that prevents petitioners from voluntarily giving private respondents some amounts
on ex gratia basis.
WHEREFORE, the questioned findings and resolutions of respondents Labor Arbiter and
NLRC are MODIFIED by deleting the award of separation pay and the corresponding
attorney's fees. No costs.
SO ORDERED.
Feliciano, Romero, Melo and Francisco, JJ., concur.
SECOND DIVISION
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and
SEGUNDINA NOGUERA, respondents-appellees.
SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal by
certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the
appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc.,
represented by Mr. Eliseo Canilao as party of the second part, and
hereinafter referred to as appellants, the Tourist World Service, Inc.
leased the premises belonging to the party of the first part at Mabini St.,
Manila for the former-s use as a branch office. In the said contract the
party of the third part held herself solidarily liable with the party of the part
for the prompt payment of the monthly rental agreed on. When the branch
office was opened, the same was run by the herein appellant Una 0.
Sevilla payable to Tourist World Service Inc. by any airline for any fare
brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla
and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service,
Inc. appears to have been informed that Lina Sevilla was connected with a
rival firm, the Philippine Travel Bureau, and, since the branch office was
anyhow losing, the Tourist World Service considered closing down its
office. This was firmed up by two resolutions of the board of directors of
Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the
first abolishing the office of the manager and vice-president of the Tourist
World Service, Inc., Ermita Branch, and the second,authorizing the
corporate secretary to receive the properties of the Tourist World Service
then located at the said branch office. It further appears that on Jan. 3,
1962, the contract with the appellees for the use of the Branch Office
premises was terminated and while the effectivity thereof was Jan. 31,
1962, the appellees no longer used it. As a matter of fact appellants used
it since Nov. 1961. Because of this, and to comply with the mandate of the
Tourist World Service, the corporate secretary Gabino Canilao went over
to the branch office, and, finding the premises locked, and, being unable
to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to
protect the interests of the Tourist World Service. When neither the
appellant Lina Sevilla nor any of her employees could enter the locked
premises, a complaint wall filed by the herein appellants against the
appellees with a prayer for the issuance of mandatory preliminary
injunction. Both appellees answered with counterclaims. For apparent lack
of interest of the parties therein, the trial court ordered the dismissal of the
case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order
dismissing her counterclaim which the court a quo, in an order dated June
8, 1963, granted permitting her to present evidence in support of her
counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated
counterclaim of Segundina Noguera and the new complaint of appellant
Lina Sevilla were jointly heard following which the court a quo ordered
both cases dismiss for lack of merit, on the basis of which was elevated
the instant appeal on the following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE
NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S
COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS.
LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST
WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-
EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID
ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-
APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING
THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE
TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES
HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM
THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN
HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL
APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O.
SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI
PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT
APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS
GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the
telephone line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service
was actionable or not; and
3. Whether or not the lessee to the office premises belonging to the
appellee Noguera was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture
was entered into by and between her and appellee TWS with offices at the
Ermita branch office and that she was not an employee of the TWS to the
end that her relationship with TWS was one of a joint business venture
appellant made declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure
and wife of an eminent eye, ear and nose specialist as
well as a imediately columnist had been in the travel
business prior to the establishment of the joint
business venture with appellee Tourist World Service,
Inc. and appellee Eliseo Canilao, her compadre, she
being the godmother of one of his children, with her
own clientele, coming mostly from her own social
circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease
agreement dated 19 October 1960 (Exh. 'A') covering
the premises at A. Mabini St., she expressly
warranting and holding [sic] herself 'solidarily' liable
with appellee Tourist World Service, Inc. for the
prompt payment of the monthly rentals thereof to other
appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary
from appellee Tourist World Service, Inc., which had
its own, separate office located at the Trade &
Commerce Building; nor was she an employee
thereof, having no participation in nor connection with
said business at the Trade & Commerce Building (pp.
16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her
own passengers, her own bookings her own business
(and not for any of the business of appellee Tourist
World Service, Inc.) obtained from the airline
companies. She shared the 7% commissions given by
the airline companies giving appellee Tourist World
Service, Lic. 3% thereof aid retaining 4% for herself
(pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the
expenses of maintaining the A. Mabini St. office,
paying for the salary of an office secretary, Miss
Obieta, and other sundry expenses, aside from
desicion the office furniture and supplying some of fice
furnishings (pp. 15,18 tsn. April 6,1965), appellee
Tourist World Service, Inc. shouldering the rental and
other expenses in consideration for the 3% split in the
co procured by appellant Mrs. Sevilla (p. 35 tsn Feb.
16,1965).
6. It was the understanding between them that
appellant Mrs. Sevilla would be given the title of
branch manager for appearance's sake only (p. 31
tsn. Id.), appellee Eliseo Canilao admit that it was just
a title for dignity (p. 36 tsn. June 18, 1965- testimony
of appellee Eliseo Canilao pp. 38-39 tsn April 61965-
testimony of corporate secretary Gabino Canilao (pp-
2-5, Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the appellant was an
employee of the appellee Tourist World Service, Inc. and as such was
designated manager.1
xxx xxx xxx
The trial court2 held for the private respondent on the premise that the private respondent,
Tourist World Service, Inc., being the true lessee, it was within its prerogative to terminate the
lease and padlock the premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere
employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her
employer. 4 The respondent Court of Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court, erred.
Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY
TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE
APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF
HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT
(SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN
CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE
(ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP
AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND
THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF
DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE
PROCESS WHICH ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD
"OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND
COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P.
8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT
SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL
CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT
RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD
SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD
NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE
INC.6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between
Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule on the
question, the crucial issue, in its opinion being "whether or not the padlocking of the premises
by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina
Sevilla entitled the latter to the relief of damages prayed for and whether or not the evidence
for the said appellant supports the contention that the appellee Tourist World Service, Inc.
unilaterally and without the consent of the appellant disconnected the telephone lines of the
Ermita branch office of the appellee Tourist World Service, Inc.7 Tourist World Service, Inc.,
insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager"
of its Ermita "branch" office and that inferentially, she had no say on the lease executed with
the private respondent, Segundina Noguera. The petitioners contend, however, that relation
between the between parties was one of joint venture, but concede that "whatever might have
been the true relationship between Sevilla and Tourist World Service," the Rule of Law
enjoined Tourist World Service and Canilao from taking the law into their own hands, 8 in
reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private respondent, Tourist
World Service, Inc., maintains, that the relation between the parties was in the character of
employer and employee, the courts would have been without jurisdiction to try the case, labor
disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of
Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an employer-
employee relation. In general, we have relied on the 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." 10Subsequently, however, we
have considered, in addition to the standard of right-of control, the existing economic
conditions prevailing between the parties, like the inclusion of the employee in the payrolls, in
determining the existence of an employer-employee relationship.11
The records will show that the petitioner, Lina Sevilla, was not subject to control by the private
respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the
means used in connection therewith. In the first place, under the contract of lease covering the
Tourist Worlds Ermita office, she had bound herself in solidum as and for rental payments, an
arrangement that would be like claims of a master-servant relationship. True the respondent
Court would later minimize her participation in the lease as one of mere guaranty, 12 that does
not make her an employee of Tourist World, since in any case, a true employee cannot be
made to part with his own money in pursuance of his employer's business, or otherwise,
assume any liability thereof. In that event, the parties must be bound by some other relation,
but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was
opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist World
Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under
these circumstances, it cannot be said that Sevilla was under the control of Tourist World
Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her
own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained
4% in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary usually, she earned compensation in fluctuating
amounts depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist
World's employee. As we said, employment is determined by the right-of-control test and
certain economic parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence,
accepting Lina Sevilla's own, that is, that the parties had embarked on a joint venture or
otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of
such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist
World Service, Inc.'s] right to stop the operation of your branch office 14 in effect, accepting
Tourist World Service, Inc.'s control over the manner in which the business was run. A joint
venture, including a partnership, presupposes generally a of standing between the joint co-
venturers or partners, in which each party has an equal proprietary interest in the capital or
property contributed 15 and where each party exercises equal rights in the conduct of the
business.16 furthermore, the parties did not hold themselves out as partners, and the building
itself was embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a distinct
partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man
the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so
pursuant to a contract of agency. It is the essence of this contract that the agent renders
services "in representation or on behalf of another.18 In the case at bar, Sevilla solicited airline
fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As
compensation, she received 4% of the proceeds in the concept of commissions. And as we
said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's
authority as owner of the business undertaking. We are convinced, considering the
circumstances and from the respondent Court's recital of facts, that the ties had contemplated
a principal agent relationship, rather than a joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one
coupled with an interest, the agency having been created for mutual interest, of the agent and
the principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such,
she had acquired an interest in the business entrusted to her. Moreover, she had assumed a
personal obligation for the operation thereof, holding herself solidarily liable for the payment of
rentals. She continued the business, using her own name, after Tourist World had stopped
further operations. Her interest, obviously, is not to the commissions she earned as a result of
her business transactions, but one that extends to the very subject matter of the power of
management delegated to her. It is an agency that, as we said, cannot be revoked at the
pleasure of the principal. Accordingly, the revocation complained of should entitle the
petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself to the telephone
disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the
Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc.
disconnected the telephone lines at the branch office. 20 Yet, what cannot be denied is the fact
that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming,
therefore, that it had no hand in the disconnection now complained of, it had clearly condoned
it, and as owner of the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the padlocking
incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease con-
tract did not accord it any authority to terminate that contract without notice to its actual
occupant, and to padlock the premises in such fashion. As this Court has ruled, the petitioner,
Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the
equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having
been explicitly named therein as a third party in charge of rental payments (solidarily with The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as
Tourist World, Inc.). She could not be ousted from possession as summarily as one would exemplary damages, 25and P5,000.00 as nominal 26 and/or temperate27 damages, to be just,
eject an interloper. fair, and reasonable under the circumstances.
The Court is satisfied that from the chronicle of events, there was indeed some malevolent WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution
design to put the petitioner, Lina Sevilla, in a bad light following disclosures that she had issued on July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET
worked for a rival firm. To be sure, the respondent court speaks of alleged business losses to ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are
justify the closure '21 but there is no clear showing that Tourist World Ermita Branch had in ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00
fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the
What the evidence discloses, on the other hand, is that following such an information (that sum of P5,000.00, as and for nominal and/or temperate damages.
Sevilla was working for another company), Tourist World's board of directors adopted two Costs against said private respondents.
resolutions abolishing the office of 'manager" and authorizing the corporate secretary, the SO ORDERED.
respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.
1962, the private respondents ended the lease over the branch office premises, incidentally,
without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita office was
padlocked, personally by the respondent Canilao, on the pretext that it was necessary to
Protect the interests of the Tourist World Service. " 22It is strange indeed that Tourist World
Service, Inc. did not find such a need when it cancelled the lease five months earlier. While
Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of
the closure, but surely, it was aware that after office hours, she could not have been anywhere
near the premises. Capping these series of "offensives," it cut the office's telephone lines,
paralyzing completely its business operations, and in the process, depriving Sevilla
articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish
Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to
elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of agency, the private
respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil
Code, moral damages may be awarded for "breaches of contract where the defendant acted
... in bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury
done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of
attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article
2219 (10) thereof —
ART. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.24
ART. 2219. Moral damages25 may be recovered in the following and
analogous cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34,
and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for
the same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence
has been shown that she had connived with Tourist World Service, Inc. in the disconnection
and padlocking incidents. She cannot therefore be held liable as a cotortfeasor.
SECOND DIVISION
G.R. No. 106108 February 23, 1995
CABALAN PASTULAN NEGRITO LABOR ASSOCIATION (CAPANELA) and JOSE ALVIZ,
SR. petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FERNANDO SANCHEZ, respondents.
REGALADO, J.:
A man said to the Universe,
Behold, I am born!
However, replied the Universe,
The fact does not create in me
A sense of obligation.
To most, these familiar verses express the article of faith for self-reliance. To the racist in
some countries, however, they mean that the world does not owe the Negroid or other colored
people equal solicitude. The neo-colonial in the Philippines would hold the Negrito or a
member of indigenous cultural communities to the same social bondage. But our Constitution
and our laws were precisely formulated under a sense of obligation to the marginalized and
the under privileged. Under such mandates, this Court has always accorded them scrupulous
and compassionate attention. In now resolving their predicament in the case at bar, it call
once again on the old Castilian tenet: A él que la vida ha dado menos, désele mas por la ley.1
In this petition for certiorari, the resolution of the National Labor Relations Commission
(hereafter, NLRC) dated February 28, 19922 which dismissed the appeal of herein petitioners
from the decision of the labor arbiter3 for failure to file a supersedeas bond, as well as its April
30, 19924 denying their motion for reconsideration, are assailed for having been rendered with
grave abuse of discretion.
The antecedents of the present recourse, as culled from the records, are that herein private
respondent, Fernando Sanchez, filed a complaint for illegal dismissal, non-payment of back
wages and other benefits on January 3, 1991 with Regional Office No. III of the Department of
Labor and Employment in Olongapo City originally docketed therein as NLRC Case No. RAB
III 01-1931-91. The complaint, naming Cabalan Pastulan Negrito Labor Association
(CAPANELA, for brevity) and its president, Jose Alviz, Sr., as respondents, alleged that the
former was employed by CAPANELA as a foreman with a monthly salary of P3,245.70 from
March, 1977 until he was illegally dismissed on January 1, 1990.5
Said complaint was later amended on February 22, 1991 to introduce the correction that
private respondent was illegally dismissed on March 27, 1990 (instead of January 1, 1990),
and to further pray for reinstatement without loss of seniority rights and payment of full back
wages and moral and exemplary damages.6 As no amicable settlement was arrived at during
the mandatory pre-conference despite efforts exerted by the labor arbiter, the parties were
required to simultaneously submit their respective position papers and/or affidavits. 7 The case
was submitted for resolution on March 11, 1991 on the bases of said position papers and
other evidence, but the parties were further allowed to submit their respective
memoranda,8 after which the case was deemed submitted for decision on May 29, 1991.9
A decision was rendered on June 24, 1991 in favor of herein private respondent, declaring his
dismissal illegal, and ordering herein petitioners, jointly and severally —
1. To pay the backwages of complainant from March 24, 1990 until June
24, 1991 and for 15 months at P3,245.70 a month equals P48,685.50;
2. To immediately reinstate complainant to his former or equivalent
position without loss of seniority rights and other privileges, and for this
purpose, respondents are hereby ordered to submit proof of the physical
or payroll reinstatement of the complainant within five (5) working days
from receipt hereof, provided further that should reinstatement (be) not
feasible due to any supervening event, respondents are further ordered to
pay the separation pay of complainant equivalent to one month salary for
every year of service, a fraction of at least six (6) months service
considered as in addition to his respondents are further one (1) whole
year, in addition to his backwages; . . . .
but dismissing the claim for moral and exemplary damages for want of substantial evidence. 10
The records further reveal that private respondent subsequently filed a motion for the
issuance of a writ of 11 This was opposed by execution on July 15, 1991. 11 This was opposed
by CAPANELA 12 through its new counsel, Atty. Isagani M. Jungco, who at the same time filed
a memorandum of appeal 13 in its behalf, although admittedly without posting a supersedeas
bond because of want of funds of either CAPANELA or its president and co-petitioner Alviz,
Sr. Private respondent, in his answer to CAPANELA's memorandum of, appeal 14 and reply to
opposition to motion for execution, 15 was unconvinced and adamantly insisted on the
dismissal of the appeal due to non-perfection thereof for failure to comply with the legal
requirement of posting a cash or surety bond as a requisite for the perfection of an appeal.
A partial writ of execution 16 was issued by Labor Arbiter Saludares on August 15, 1991
ordering the physical or payroll reinstatement of private respondent. The sheriff's return of
November 4, 1991, signed by Numeriano S. Reyes, Sheriff II of the NLRC Regional Arbitration
Branch No. III, stated that the writ expired without any indication of private respondent having
been reinstated. 17
As stated at the outset, the NLRC dismissed the appeal on February 28, 1992 for failure of
petitioners to post the supersedeas bond required by law, stating that "(r)espondents'
contention that it cannot post bond because it is insolvent deserve(s) scant consideration not
being accompanied by proof there(of)," and denied petitioner's motion for reconsideration.
The present controversy raises as principal issues for resolution by the Court whether or not
(1) the dismissal of private respondent was legal, and; (2) the appeal was perfected despite
failure to file a supersedeas bond.
Anent the first issue, before we delve into the matter of the alleged illegal dismissal of private
respondent Sanchez by petitioner CAPANELA, it is evidently necessary to ascertain the
existence of an employer-employee relationship between them.
Petitioners asseverate that CAPANELA is an association composed of Negritos who worked
inside the American naval base in Subic Bay (hereinafter referred to as the Base). They
initially received a daily wage of P100.00 and thus earned, on the average, less than
P3,000.00 per month. Said association organized the system of employment of members of
this cultural community who were accorded special treatment concededly because of the
occupancy of their ancestral lands as part of the operational area and military facility used by
the Base authorities.
CAPANELA, through its officers, saw to it that its members reported for work, recorded their
attendance, and distributed the workers' salaries paid by the Base at the end of a specific pay
period, without gaining any amount from such undertakings petitioner Alviz, Sr., for his part
and as president of CAPANELA, was himself only an employee at the Base. In other words,
neither CAPANELA nor its president was the employer of private respondent Sanchez; rather,
it was the United States Government acting through the military base authorities. 18
Contrarily, private respondent maintains that there existed an employer-employee
relationship, as allegedly supported by the evidence on record, and that petitioners
CAPANELA and Alviz, Sr. exercised control as employer over the means and methods by
which the work was accomplished. He further argues that since the determination of the
existence of an employer-employee relationship is a factual question, the findings of the labor
officials thereon should be considered conclusive and binding upon and respected by the
appellate courts.19
It is hence clearly apparent that the judgment of the labor arbiter, as affirmed by respondent
commission, declaring the dismissal of private respondent illegal and ordering the payment of
back wages to him together with his payroll or physical reinstatement, was premised on the
finding that there was an existing employer-employee relationship.
Indeed, findings of fact and conclusions of the labor arbiter, 20 as well as those of the
NLRC, 21 or, for that matter, any other adjudicative body which
can be considered as a trier of facts on specific matters within its field of expertise, 22 should
be considered as binding and conclusive upon the appellate courts. This is in addition to the
fact that they were in a better position to assess and evaluate the credibility of the contending
parties and the validity of their respective evidence. 23However, these doctrinal strictures hold
true only when such findings and conclusions are supported by substantial evidence. 24
In the case at bar, we are hard put to find sufficient evidential support for public respondent's
conclusion on the putative existence of an employer-employee relationship between
petitioners and private respondent. We are accordingly persuaded that there is ample
justification to disturb the findings of respondent NLRC and to hold that a reconsideration of its
challenged resolutions is in order.
A careful reevaluation of the documentary evidence of record belies the finding that
CAPANELA, through its president and co-petitioner, Jose Alviz, Sr., wielded control as an
employer over private respondent. It will be noted that in his affidavit dated March 4,
1991, 25 private respondent himself declared that through the intervention of CAPANELA, by
way of its June 13, 1389 letter26 to Lt. Mark S. Kistner, he was cleared of the charge of larceny
of U.S. government property. Thereafter, in an indorsement dated July 11, 1989 from the
Director of Security, U.S. Navy Public Works Center, the recommendation for his
reinstatement and the release of his gate pass to the Base was addressed to the Director,
Investigation Section, U.S. Facility Security Department via the Director of the Contracts
Administration Division. 27
This only goes to show that CAPANELA had in fact no control over the continued employment
of its members working in the U.S. naval base. For, after conducting its own investigation,
CAPANELA could only intervene in behalf of its members facing charges through a
recommendatory action request for favorable consideration. It could not, on its own authority,
exonerate such members from the charges, much less effect their reinstatement without the
approval of the Base authorities. Interestingly, in order to comply with the labor arbiter's
decision of June 24, 1991, CAPANELA even had to write to the Resident Officer-in-Charge of
the Facility Support Contracts at Subic Bay recommending the reinstatement of private
respondent to his former position. 28
Under their arrangement, CAPANELA, through its officers, could only impose disciplinary
sanctions upon its members for infractions of its own rules and regulations, to the extent of
ousting a member from the association when called for under the circumstances.
Nonetheless, such called termination of membership in the association, which could result in
curtailment of the privilege of working at the Base inasmuch as employment therein was
conditioned upon membership in CAPANELA, is not equivalent to the illegal dismissal from
employment contemplated in our labor laws. Petitioners, not being the employer, obviously
could not arrogate unto themselves an employer's prerogatives of hiring and firing workers.
As succinctly pointed out by the Solicitor General:
True, there was a stipulation to the effect that Fernando Sanchez was
employed by petitioner CAPANELA, but the real employer was the United
States government and petitioner was just a "labor-only contractor."
Annexes "G" and "H" of CAPANELA's Memorandum on Appeal show that
the award or contract of work was between CAPANELA and the United
States government through the U.S. Navy. The same contract likewise
clearly stipulated that CAPANELA was "to provide labor and material to
perform trash sorting services in the Base period for all work specified in
Section C." Annex "A" of complainant Fernando Sanchez' Answer to
petitioner's Memorandum on Appeal itself proves that the negotiation was
between CAPANELA and the U.S. Navy, with the former supplying the
labor and the U.S. government paying the wages. Since CAPANELA
merely provided the labor force, it cannot be deduced therefrom that
CAPANELA should also compensate the laborers; it is a case of non
sequitur. In other words, the actual mechanical act of making payments
was done by CAPANELA, but the monies therefor were provided and
disbursements made by the disbursing officer of the U.S. Naval Supply
Depot, Subic Bay (see Annexes "G" and "H").
Moreover, ingress and egress in the work premises were controlled not by
CAPANELA but by the U.S. Base authorities who could even reject entry
of CAPANELA members then duly employed as part of the project, and
impose disciplinary sanctions against them. Annex "1" of petitioners'
Position Paper as respondent in the NLRC Case No. RAB-III-01-193 1-91,
which was the letter of Lt. M.E. Kistner of the U.S. Navy, clearly proves
this. 29 (Emphasis in the original text.)
Prevailing case law enumerates the essential elements of an employer-employee relationship
as: (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. 30
The Solicitor General pertinently illustrates the glaring absence of these elements in the
present case:
. . . , as aforeshown, CAPANELA had no control of the premises as it was
the U.S. naval authorities who had the power to issue passes or deny their
issuance. In fact, CAPANELA did not have absolute control on the
disciplinary measures to be imposed on its members employed in the
Base. Annex "1" of CAPANELA's Position Paper submitted before the
NLRC Regional Arbitration Branch established the U.S. Navy's right to
impose disciplinary measures for violations or infractions of its rules and
regulations as well as the right to recommend suspensions or dismissals
 of the workers. Moreover, it was not shown that CAPANELA had control of
the means and methods or manner by which the workers were to go about
their work. These are indeed strong indicia of the U.S. Navy's right of
control over the workers as direct employer.
Third, there is evidence to prove that payment of wages was merely done
through CAPANELA, but the source of payment was actually the U.S.
government paying workers according to the volume of work
accomplished on rates agreed upon between CAPANELA and the U.S.
government. . . . 31
It would, therefore, be inutile to discuss the matter of the legality or illegality of the dismissal of
private respondent. Considering that petitioners cannot legally be considered as the employer
of herein private respondent, it follows that it cannot be made liable as such nor be required to
bear the responsibility for the legal consequences of the charge of illegal dismissal.
Granting arguendo that private respondent was illegally dismissed, the action should properly
be directed against the U.S. government which, through the Base authorities, was the true
employer in this case.
Neither can petitioners be deemed to have been engaged in permissible job contracting under
the law, for failure to satisfy the following prescribed conditions:
1. The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according
to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with performance of the
work except as to the results thereof; and
2. The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials which are
necessary in the conduct of his business. 32
In the present case, the setup was such that CAPANELA was merely tasked with organizing
the Negritos to facilitate the orderly administration of work made available to them at the base
facilities, that is, sorting scraps for recycling. CAPANELA recorded the attendance of its
members and submitted the same to the Base authorities for the determination of wages due
them and the preparation of the payroll. Payment of wages was coursed through CAPANELA
but the funds therefor came from the coffers of the Base. Once inside the Base, control over
the means and methods of work was exercised by the Base authorities. Accordingly,
CAPANELA functioned as just an administrator of its Negrito members employed at the Base.
From the legal standpoint, CAPANELA's activities may at most be considered akin to that of
labor-only contracting, albeit of a special or peculiar type, wherein CAPANELA, operating like
a contractor, merely acted as an agent or intermediary of the employer. 33
The Solicitor General ramifies this aspect:
. . . , petitioner CAPANELA could not be classified as an "independent
contractor" because it was not shown that it has substantial capital or
investments to qualify as such under the law. On the other hand, it was
apparent that the premises, tools, equipment, and other paraphernalia
used by the workers were all supplied by the U.S. government through the
U.S. Navy. What CAPANELA supplied was only the local labor force,
complainant Fernando Sanchez among them. It is therefore clear that
CAPANELA had no capital outlay involved in the business or in the
maintenance thereof. 34
While it is not denied that an association or a labor organization or union can at times be an
employer insofar as people hired by it to dispose of its business are concerned, 35 the situation
in this case is altogether different. A proper and necessary distinction should be made
between the employees of CAPANELA who actually attended to its myriad functions as an
association and its members who were employed in the jobsite inside the Base vis-a-
vis CAPANELA's relative position as the employer of the former and a mere administrator with
respect to the latter.
On the matter of the perfection of an appeal from the decision of the NLRC, petitioners plead
for a more considerate and humane application of the law as would allow their appeal to
prosper despite non-posting of a supersedeas bond on account of their insolvency. To dismiss
the appeal for failure to post said bond, petitioners aver, is tantamount to denial of the
constitutionally guaranteed right of access to courts by reason of poverty. 36 Private
respondent, on the other hand, argues that perfection of an appeal within the reglementary
period and in compliance with all requirements of the law therefor is jurisdictional. That
petitioners do not have the funds for the premiums for posting a supersedeas bond or for a
cash deposit, disdainfully says private respondent, "is not in the least our problem." 37
We have no quarrel with the provision of Article 223 of the Labor Code which, in part and
among others, requires that in case of a judgment involving a monetary award, an appeal by
the employer may be perfected only upon posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the commission in the amount equivalent to
the monetary award in the judgment appealed from. Perfection of an appeal within the period
and in the manner prescribed by law is jurisdictional 38 and non-compliance with such legal
requirements is fatal and has the effect of rendering the judgment final and executory. 39
However, in a number of recent cases, 40 the Court has eased the requirement of posting a
bond, as a condition for perfection of appeals in labor cases, when to do so would bring about
the immediate and appropriate resolution of controversies on the merits without over-
indulgence in technicalities, 41 ever mindful of the underlying spirit and intention of the Labor
Code to ascertain the facts of each case speedily and objectively without regard to technical
rules of law and procedure, all in the interest of due process. 42 Punctilious adherence to
stringent technical rules may be relaxed in the interest of the working man, 43 and should not
defeat the complete and equitable resolution of the rights and obligations of the
parties. 44 Moreover, it is the duty of labor officials to consider their decisions and inquire into
the correctness of execution, as supervening events may affect such execution. 45
The Solicitor General realistically assesses the situation, thus:
. . . As aforestated, above the technical consideration on whether failure to
post a supersedeas bond was fatal to petitioners' appeal is the importance
of first resolving whether there was indeed an employer-employee
relationship in this case so as not to render the execution of the NLRC's
resolution unenforceable or impossible to implement. . . . Besides, it is of
public notice that the U.S. Navy had withdrawn from the Subic Base in
view of the termination of the Bases Treaty. Even if CAPANELA were
ordered to reinstate complainant Fernando Sanchez, this is obviously an
impossible thing to perform as there is no longer any work to be done
inside the Base. Nor is petitioner CAPANELA in a position to pay
Sanchez's back wages considering that it was the U.S. Navy that paid his
wages. . . . 46
In light of the circumstances in this case, the Solicitor General further suggests two ways of
writing finis to this dispute, i.e., to reconsider public respondent's resolution of February 28,
1992 and April 30, 1992 and reinstate petitioner's appeal to give the latter a chance to prove
CAPANELA's insolvency or poverty, or to reverse the decision of the labor arbiter on the
ground that there was no employer-employee relationship between petitioner CAPANELA and
private respondent Sanchez. Harmonizing our evaluation of the facts of this case with the
greater interests of social justice, and considering that the parties involved are those upon
whose socio-economic status we prefaced this opinion, we opt for the latter.
While this Court, when it finds that a lower court or quasi-judicial body is in error, may simply
and conveniently nullify the challenged decision, resolution or order and remand the case
thereto for further appropriate action, it is well within the conscientious exercise of its broad
review powers to refrain from doing so and instead choose to render judgment on the merits
when all material facts have been duly laid before it as would buttress its ultimate conclusion,
in the public interest and for the expeditious administration of justice, such as where the ends
of justice would not be subserved by the remand of the case. 47
IN VIEW OF ALL THE FOREGOING PREMISES, the resolutions of February 28, 1992 and
April 30, 1992 of respondent National Labor Relations Commission are accordingly
ANNULLED, and the adjudgment of Labor Arbiter Dominador B. Saludares in NLRC Case No.
RAB III 01-1931-91 is hereby REVERSED and SET ASIDE.
SO ORDERED.
Narvasa, C.J., Bidin, Puno and Mendoza, JJ., concur.
SECOND DIVISION
G.R. No. L-43825 May 9, 1988
CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR JOSE T.
COLLADO and RODITO NASAYAO, respondents.
Benito P. Fabie for petitioners.
Narciso C. Parayno, Jr. for respondents.
PADILLA, J.:
In this petition for mandamus, prohibition and certiorari with preliminary injunction, petitioners
seek to annul and set aside the decision rendered by the respondent Arbitrator Jose T.
Collado, dated 29 December 1975, in NLRC Case No. LR-6151, entitled: "Rodito Nasayao,
complainant, versus Continental Marble Corp. and Felipe David, respondents," and the
resolution issued by the respondent Commission, dated 7 May 1976, which dismissed herein
petitioners' appeal from said decision.
In his complaint before the NLRC, herein private respondent Rodito Nasayao claimed that
sometime in May 1974, he was appointed plant manager of the petitioner corporation, with an
alleged compensation of P3,000.00, a month, or 25% of the monthly net income of the
company, whichever is greater, and when the company failed to pay his salary for the months
of May, June, and July 1974, Rodito Nasayao filed a complaint with the National Labor
Relations Commission, Branch IV, for the recovery of said unpaid varies. The case was
docketed therein as NLRC Case No. LR-6151.
Answering, the herein petitioners denied that Rodito Nasayao was employed in the company
as plant manager with a fixed monthly salary of P3,000.00. They claimed that the undertaking
agreed upon by the parties was a joint venture, a sort of partnership, wherein Rodito Nasayao
was to keep the machinery in good working condition and, in return, he would get the
contracts from end-users for the installation of marble products, in which the company would
not interfere. In addition, private respondent Nasayao was to receive an amount equivalent to
25% of the net profits that the petitioner corporation would realize, should there be any.
Petitioners alleged that since there had been no profits during said period, private respondent
was not entitled to any amount.
The case was submitted for voluntary arbitration and the parties selected the herein
respondent Jose T. Collado as voluntary arbitrator. In the course of the proceedings, however,
the herein petitioners challenged the arbitrator's capacity to try and decide the case fairly and
judiciously and asked him to desist from further hearing the case. But, the respondent
arbitrator refused. In due time, or on 29 December 1975, he rendered judgment in favor of the
complainant, ordering the herein petitioners to pay Rodito Nasayao the amount of P9,000.00,
within 10 days from notice.1
Upon receipt of the decision, the herein petitioners appealed to the National Labor Relations
Commission on grounds that the labor arbiter gravely abused his discretion in persisting to
hear and decide the case notwithstanding petitioners' request for him to desist therefrom: and
that the appealed decision is not supported by evidence.2
On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal on the ground that
the decision of the voluntary arbitrator is final, unappealable, and immediately
executory; 3 and, on 23 March 1976, he filed a motion for the issuance of a writ of execution. 4
Acting on the motions, the respondent Commission, in a resolution dated 7 May 1976,
dismissed the appeal on the ground that the decision appealed from is final, unappealable and
immediately executory, and ordered the herein petitioners to comply with the decision of the
voluntary arbitrator within 10 days from receipt of the resolution.5
The petitioners are before the Court in the present recourse. As prayed for, the Court issued a
temporary restraining order, restraining herein respondents from enforcing and/or carrying out
the questioned decision and resolution.6
The issue for resolution is whether or not the private respondent Rodito Nasayao was
employed as plant manager of petitioner Continental Marble Corporation with a monthly salary
of P3,000.00 or 25% of its monthly income, whichever is greater, as claimed by said
respondent, or entitled to receive only an amount equivalent to 25% of net profits, if any, that
the company would realize, as contended by the petitioners.
The respondent arbitrator found that the agreement between the parties was for the petitioner
company to pay the private respondent, Rodito Nasayao, a monthly salary of P3,000.00, and,
consequently, ordered the company to pay Rodito Nasayao the amount of P9,000.00 covering
a period of three (3) months, that is, May, June and July 1974.
The respondent Rodito Nasayao now contends that the judgment or award of the voluntary
arbitrator is final, unappealable and immediately executory, and may not be reviewed by the
Court. His contention is based upon the provisions of Art. 262 of the Labor Code, as
amended.
The petitioners, upon the other hand, maintain that "where there is patent and manifest abuse
of discretion, the rule on unappealability of awards of a voluntary arbitrator becomes flexible
and it is the inherent power of the Courts to maintain the people's faith in the administration of
justice." The question of the finality and unappealability of a decision and/or award of a
voluntary arbitrator had been laid to rest in Oceanic Bic Division (FFW) vs. Romero, 7and
reiterated in Mantrade FMMC Division Employees and Workers Union vs. Bacungan.8 The
Court therein ruled that it can review the decisions of voluntary arbitrators, thus-
We agree with the petitioner that the decisions of voluntary arbitrators
must be given the highest respect and as a general rule must be accorded
a certain measure of finality. This is especially true where the arbitrator
chosen by the parties enjoys the first rate credentials of Professor Flerida
Ruth Pineda Romero, Director of the U.P. Law Center and an
academician of unquestioned expertise in the field of Labor Law. It is not
correct, however, that this respect precludes the exercise of judicial review
over their decisions. Article 262 of the Labor Code making voluntary
arbitration awards final, inappealable, and executory except where the
money claims exceed P l 00,000.00 or 40% of paid-up capital of the
employer or where there is abuse of discretion or gross incompetence
refers to appeals to the National Labor Relations Commission and not to
judicial review.
Inspite of statutory provisions making 'final' the decisions of certain
administrative agencies, we have taken cognizance of petitions
questioning these decisions where want of jurisdiction, grave abuse of
discretion, violation of due process, denial of substantial justice, or
erroneous interpretation of the law were brought to our attention. There is
no provision for appeal in the statute creating the Sandiganbayan but this
 has not precluded us from examining decisions of this special court
brought to us in proper petitions. ...
The Court further said:
A voluntary arbitrator by the nature of her fucntions acts in quasi-judicial
capacity. There is no reason why herdecisions involving interpretation of
law should be beyond this Court's review. Administrative officials are
presumed to act in accordance with law and yet we do hesitate to pass
upon their work where a question of law is involved or where a showing of
abuse of authority or discretion in their official acts is properly raised in
petitions for certiorari.
The foregoing pronouncements find support in Section 29 of Republic Act No. 876, otherwise
known as the Arbitration Law, which provides:
Sec. 29. Appeals — An appeal may be taken from an order made in a
proceeding under this Act, or from a judgment entered upon an award
through certiorari proceedings, but such appeals shall be limited to
questions of law. The proceedings upon such an appeal, including the
judgment thereon shall be governed by the Rules of Court in so far as
they are applicable.
The private respondent, Rodito Nasayao, in his Answer to the petition, 9 also claims that the
case is premature for non-exhaustion of administrative remedies. He contends that the
decision of the respondent Commission should have been first appealed by petitioners to the
Secretary of Labor, and, if they are not satisfied with his decision, to appeal to the President of
the Philippines, before resort is made to the Court.
The contention is without merit. The doctrine of exhaustion of administrative remedies cannot
be invoked in this case, as contended. In the recent case of John Clement Consultants, Inc.
versus National Labor Relations Commission, 10 the Court said:
As is well known, no law provides for an appeal from decisions of the
National Labor Relations Commission; hence, there can be no review and
reversal on appeal by higher authority of its factual or legal conclusions.
When, however, it decides a case without or in excess of its jurisdiction, or
with grave abuse of discretion, the party thereby adversely affected may
obtain a review and nullification of that decision by this Court through the
extraordinary writ of certiorari. Since, in this case, it appears that the
Commission has indeed acted without jurisdiction and with grave abuse of
discretion in taking cognizance of a belated appeal sought to be taken
from a decision of Labor Arbiter and thereafter reversing it, the writ of
certiorari will issue to undo those acts, and do justice to the aggrieved
party.
We also find no merit in the contention of Rodito Nasayao that only questions of law, and not
findings of fact of a voluntary arbitrator may be reviewed by the Court, since the findings of
fact of the voluntary arbitrator are conclusive upon the Court.
While the Court has accorded great respect for, and finality to, findings of fact of a voluntary
arbitrator 11 and administrative agencies which have acquired expertise in their respective
fields, like the Labor Department and the National Labor Relations Commission, 12 their
findings of fact and the conclusions drawn therefrom have to be supported by substantial
evidence. ln that instant case, the finding of the voluntary arbitrator that Rodito Nasayao was
an employee of the petitioner corporation is not supported by the evidence or by the law.
On the other hand, we find the version of the petitioners to be more plausible and in accord
with human nature and the ordinary course of things. As pointed out by the petitioners, it was
illogical for them to hire the private respondent Rodito Nasayao as plant manager with a
monthly salary of P3,000.00, an amount which they could ill-afford to pay, considering that the
business was losing, at the time he was hired, and that they were about to close shop in a few
months' time.
Besides, there is nothing in the record which would support the claim of Rodito Nasayao that
he was an employee of the petitioner corporation. He was not included in the company
payroll, nor in the list of company employees furnished the Social Security System.
Most of all, the element of control is lacking. In Brotherhood Labor Unity Movement in the
Philippines vs. Zamora,13the Court enumerated the factors in determining whether or not an
employer-employee relationship exists, to wit:
In determining the existence of an employer-employee relationship, the
elements that are generally considered are the following: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee
with respect to the means and methods by which the work is to be
accomplished. It is the so-called "control test" that is the most important
element (Investment Planning Corp. of the Phils. vs. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario
Brothers, Inc. v. Ople, 131 SCRA 72).<äre||anº•1àw>
In the instant case, it appears that the petitioners had no control over the conduct of Rodito
Nasayao in the performance of his work. He decided for himself on what was to be done and
worked at his own pleasure. He was not subject to definite hours or conditions of work and, in
turn, was compensated according to the results of his own effort. He had a free hand in
running the company and its business, so much so, that the petitioner Felipe David did not
know, until very much later, that Rodito Nasayao had collected old accounts receivables, not
covered by their agreement, which he converted to his own personal use. It was only after
Rodito Nasayao had abandoned the plant following discovery of his wrong- doings, that Felipe
David assumed management of the plant.
Absent the power to control the employee with respect to the means and methods by which
his work was to be accomplished, there was no employer-employee relationship between the
parties. Hence, there is no basis for an award of unpaid salaries or wages to Rodito Nasayao.
WHEREFORE, the decision rendered by the respondent Jose T. Collado in NLRC Case No.
LR-6151, entitled: "Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe
David, respondents," on 29 December 1975, and the resolution issued by the respondent
National Labor Relations Commission in said case on 7 May 1976, are REVERSED and SET
ASIDE and another one entered DISMISSING private respondent's complaints. The
temporary restraning order heretofore isued by the Court is made permanent. Without costs.
SO ORDERED.
Yap, C.J, Melencio-Herrera, Paras and Sarmiento, JJ, concur.
EN BANC
G.R. No. L-16600 December 27, 1961
ILOILO CHINESE COMMERCIAL SCHOOL, petitioner,
vs.
LEONORA FABRIGAR and THE WORKMEN'S COMPENSATION
COMMISSION, respondents.
Luis G. Hofileña for petitioner.
J. T. de Leon for respondents.
PAREDES, J.:
As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs in the person of
Leonora Fabrigar (common-law wife) and their children, filed a claim for compensation with
the Workmen's Compensation Commission, Case No. 1085, W.C.C., entitled "Leonora
Fabrigar, et al., Claimants, vs. Iloilo Chinese Commercial School, Respondent." In this claim,
it was alleged that the cause of death was " pulmonary tuberculosis contracted during and as
a result of his employment as janitor." The Hearing Officer of the WCC denied the claim and
dismissed the case, finding that the claimant failed to prove the casual effect of employment
and death; nothing was shown that the disease was contracted in line of duty; that whatever
evidence claimant presented about the cause of death was only a mere suggestion that
progressively developed from tuberculosis with heart trouble to a sudden fatal turn, ending up
for the cause of "beriberi adult" at the time of death, as per certification of Sanitary Inspector
Dr. P. E. Labitoria, of Dao, Capiz (Exhibits C & 4).
The heirs of Santiago Fabrigar appealed the decision with the Workmen's Compensation
Commission which, on November 12, 1959, rendered judgment reversing the decision of its
Hearing Officer, making the following findings of facts:
That Santiago Fabrigar had been employed from 1947 to March 12, 1956, as a janitor-
messenger of the respondent Iloilo Chinese Commercial School, his work consisting of
sweeping and scrubbing the floors, cleaning the classrooms and the school premises, and
other janitorial chores; on March 11, 1956, preparatory to graduation day, he carried desks
and chairs from the classrooms to the auditorium, set the curtains and worked harder and
faster than usual; that although he felt shortness of breath and did not feel very well that day,
he continued working at the request of the overseer of respondent, that on the following day
he reported for work, but on March 13, he spat blood and stopped working; that from April 29,
1956 to May 15, 1956, he was under treatment by Dr. Quirico Villareal "for far advanced
pulmonary tuberculosis and for heart disease"; and that previous to said treatment, he was
attended by Dr. Jaranilla for pulmonary tuberculosis. The Commission concluded that the
short period of intervention between his last day of work (March 13, 1956) when he spat blood
and his death on June 28, 1956, due to pulmonary tuberculosis, indicated that he had been
suffering from such disease even during the time he was employed by the respondent and
considering the strenuous work he performed, his employment as janitor aggravated his pre-
existing illness; that although here is a discrepancy between the cause of death "beriberi
adult," as appearing in the death Certificate and the testimony of Dr. Villareal, the latter
deserves more credence, because the information (cause of death) was given by the sanitary
inspector who did not, in any way, examine the deceased before or after his death. The
Commission, therefore, ordered the respondent Chinese Commercial School, Inc., in said
case —
1. To pay to the claimant, for and in behalf of her minor children by the deceased,
namely, Carlito, Gloria, Rosita and Ernesto, all surnamed Fabrigar, the amount of
TWO THOUSAND FOUR HUNDRED NINETY SIX and 00/00 Pesos (P2,496.00) as
Death benefits; and
2. To pay to the Commission the amount of P25.00 as fees pursuant to Section 55
of Act 3428, as amended.
The above decision is now before Us for Review on a Writ of Certiorari, after the motion for
reconsideration had been denied, petitioner alleging that the Commission erred:
1. In disregarding completely the evidentiary value of the death certificate of the
attending physician which was presented as evidence by both claimants and
respondent (Exhibits C & 4) to prove the cause of death;
2. In finding that the cause of death of said Santiago Fabrigar was tuberculosis and
was contracted during and as a result of the nature of his employment;
3. In holding that the herein petitioner was the employer of the deceased Santiago
Fabrigar; and
4. In not holding that the herein petitioner is exempt from the scope of the
Workmen's Compensation Law.lawphil.net
Petitioner contends that the preponderance of evidence on the matters involved in this case,
militates in its favor. Considering the doctrine that the Commission, like the Court of Industrial
Relations, is bound not by the rule of preponderance of evidence as in ordinary civil cases, but
by the rule of substantial evidence (Ang Tibay vs. CIR, 69 Phil. 635; Phil. Newspaper Guild vs.
Evening News, 47 Off. Gaz. No. 12, p. 6188; Secs. 43 & 46 Rep. Act No. 772, W.C. Act),
petitioner's pretension is without merit. Substantial evidence supports the decision of the
Commission. While seemingly there exists an inconsistency in the cause of death, as
appearing in the death certificate by Dr. Labitoria and in Dr. Villareal's diagnosis, it is a fact
found by the Commission, that the Sanitary Inspector did not examine the deceased before
and after his death. "Undoubtedly," says the Commission, "the information that he died
of beriberi adult, as appearing in the death certificate was given because it appears that the
deceased had also edema of the extremities (swollen legs)." The evidence of record sustains
the following findings of the Commission, is Fabrigar's cause of death to wit —
The short period of time intervening between his last day of work (March 13, 1956)
when he spat blood and his death June 28, 1956 due to pulmonary tuberculosis
indicates that he had been suffering from the disease even during the time that he
was employed by the respondent. Considering the strenuous work that he
performed while in the service of the respondents and the unusually long hours of
work he rendered (6:00 p.m. to 1:30 p.m. and from 2:00 p.m. to 6:00 p.m. or 7:00
p.m.) beyond the normal and legal working hours, we find that his
employment aggravated his pre-existing illness and brought about his death.
Moreover, our conclusion finds support in the fact that immediately preceding his
last day of work with the respondent, he had an unusually hard day lifting desks and
other furnitures and assisting in the preparations for the graduation exercises of the
school. Considering also his complaints during that day (March 11), among which
was "shortness of breath", we may also say that his work affected an already
existing heart ailment.
We find no plausible reason for altering or disturbing the above factual findings of the
Commission, in the present appeal by certiorari.
It is claimed that actually the deceased was not an employee of the petitioner, but by the Iloilo
Chinese Chamber of Commerce which was the one that furnished the janitor service in the
premises of its buildings, including the part thereof occupied by the petitioner; that the
Chamber of Commerce paid the salaries of janitors, including the deceased; that the petitioner
could not afford to pay rentals of its premises and janitor due to limited finances depended
largely on funds raised among its Board of Directors, the Chinese Chamber of Commerce and
Chinese nationals who helped the school. In other words, it is pretended that the deceased
was not an employee of the school but of the Chinese Chamber of Commerce which should
be the one responsible for the compensation of the deceased. On one hand, according to the
Commission, there is substantial proof to the effect that Fabrigar was employed by and
rendered service for the petitioner and was an employee within the purview of the Workmen's
Compensation Law. On the other hand, the most important test of employer-employee relation
is the power to control the employee's conduct. The records disclose that the person in charge
(encargado) of the respondent school supervised the deceased in his work and had control
over the manner he performed the same.
It is finally contended that petitioner is an institution devoted solely for learning and is not an
industry within the meaning of the Workmen's Compensation Law. Consequently, it is argued,
it is exempt from the scope of the same law. Considering that this factual question has not
been properly put in issue before the Commission, it may not now be entertained in this
appeal for the first time (Atlantic Gulf, etc. vs. CIR, et al., L-16992, Dec. 23, 1961, citing
International Oil Factory Union v. Hon. Martinez, et al., L-15560, Dec. 31, 1960). The decision
of the Commission does not show that the matter was taken up. We are at a loss to state
whether the issue was raised in the motion for reconsideration filed with the Commission,
because the said motion is not found in the record before us. And the resolution to the motion
for reconsideration does not touch this question.
IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and the decision
appealed from is affirmed, with costs against the herein petitioner.
Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon and De
Leon, JJ., concur.
Padilla, J., took no part.
THIRD DIVISION
G.R. No. 75112 August 17, 1992
FILAMER CHRISTIAN INSTITUTE, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity
as Judge of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO
KAPUNAN, SR., respondents.
Bedona & Bedona Law Office for petitioner.
Rhodora G. Kapunan for private respondents.
GUTIERREZ, JR., J.:
The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the
decision rendered by this Court on October 16, 1990 (Filamer Christian Institute v. Court of
Appeals, 190 SCRA 477) reviewing the appellate court's conclusion that there exists an
employer-employee relationship between the petitioner and its co-defendant Funtecha. The
Court ruled that the petitioner is not liable for the injuries caused by Funtecha on the grounds
that the latter was not an authorized driver for whose acts the petitioner shall be directly and
primarily answerable, and that Funtecha was merely a working scholar who, under Section 14,
Rule X, Book III of the Rules and Regulations Implementing the Labor Code is not considered
an employee of the petitioner.
The private respondents assert that the circumstances obtaining in the present case call for
the application of Article 2180 of the Civil Code since Funtecha is no doubt an employee of
the petitioner. The private respondents maintain that under Article 2180 an injured party shall
have recourse against the servant as well as the petitioner for whom, at the time of the
incident, the servant was performing an act in furtherance of the interest and for the benefit of
the petitioner. Funtecha allegedly did not steal the school jeep nor use it for a joy ride without
the knowledge of the school authorities.
After a re-examination of the laws relevant to the facts found by the trial court and the
appellate court, the Court reconsiders its decision. We reinstate the Court of Appeals' decision
penned by the late Justice Desiderio Jurado and concurred in by Justices Jose C. Campos,
Jr. and Serafin E. Camilon. Applying Civil Code provisions, the appellate court affirmed the
trial court decision which ordered the payment of the P20,000.00 liability in the Zenith
Insurance Corporation policy, P10,000.00 moral damages, P4,000.00 litigation and actual
expenses, and P3,000.00 attorney's fees.
It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar
of petitioner Filamer. He was, in relation to the school, an employee even if he was assigned
to clean the school premises for only two (2) hours in the morning of each school day.
Having a student driver's license, Funtecha requested the driver, Allan Masa, and was
allowed, to take over the vehicle while the latter was on his way home one late afternoon. It is
significant to note that the place where Allan lives is also the house of his father, the school
president, Agustin Masa. Moreover, it is also the house where Funtecha was allowed free
board while he was a student of Filamer Christian Institute.
Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a
sharp dangerous curb, and viewing that the road was clear. (TSN, April 4, 1983, pp. 78-79)
According to Allan's testimony, a fast moving truck with glaring lights nearly hit them so that
they had to swerve to the right to avoid a collision. Upon swerving, they heard a sound as if
something had bumped against the vehicle, but they did not stop to check. Actually, the Pinoy
jeep swerved towards the pedestrian, Potenciano Kapunan who was walking in his lane in the
direction against vehicular traffic, and hit him. Allan affirmed that Funtecha followed his advise
to swerve to the right. (Ibid., p. 79) At the time of the incident (6:30 P.M.) in Roxas City, the
jeep had only one functioning headlight.
Allan testified that he was the driver and at the same time a security guard of the petitioner-
school. He further said that there was no specific time for him to be off-duty and that after
driving the students home at 5:00 in the afternoon, he still had to go back to school and then
drive home using the same vehicle.
Driving the vehicle to and from the house of the school president where both Allan and
Funtecha reside is an act in furtherance of the interest of the petitioner-school. Allan's job
demands that he drive home the school jeep so he can use it to fetch students in the morning
of the next school day.
It is indubitable under the circumstances that the school president had knowledge that the
jeep was routinely driven home for the said purpose. Moreover, it is not improbable that the
school president also had knowledge of Funtecha's possession of a student driver's license
and his desire to undergo driving lessons during the time that he was not in his classrooms.
In learning how to drive while taking the vehicle home in the direction of Allan's house,
Funtecha definitely was not having a joy ride. Funtecha was not driving for the purpose of his
enjoyment or for a "frolic of his own" but ultimately, for the service for which the jeep was
intended by the petitioner school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80
ALR 722 [1932]; See also Association of Baptists for World Evangelism, Inc. v. Fieldmen's
Insurance Co., Inc. 124 SCRA 618 [1983]). Therefore, the Court is constrained to conclude
that the act of Funtecha in taking over the steering wheel was one done for and in behalf of
his employer for which act the petitioner-school cannot deny any responsibility by arguing that
it was done beyond the scope of his janitorial duties. The clause "within the scope of their
assigned tasks" for purposes of raising the presumption of liability of an employer, includes
any act done by an employee, in furtherance of the interests of the employer or for the
account of the employer at the time of the infliction of the injury or damage. (Manuel Casada,
190 Va 906, 59 SE 2d 47 [1950]) Even if somehow, the employee driving the vehicle derived
some benefit from the act, the existence of a presumptive liability of the employer is
determined by answering the question of whether or not the servant was at the time of the
accident performing any act in furtherance of his master's business. (Kohlman v. Hyland, 210
NW 643, 50 ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])
Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the
petitioner anchors its defense, was promulgated by the Secretary of Labor and Employment
only for the purpose of administering and enforcing the provisions of the Labor Code on
conditions of employment. Particularly, Rule X of Book III provides guidelines on the manner
by which the powers of the Labor Secretary shall be exercised; on what records should be
kept; maintained and preserved; on payroll; and on the exclusion of working scholars from,
and inclusion of resident physicians in the employment coverage as far as compliance with
the substantive labor provisions on working conditions, rest periods, and wages, is concerned.
In other words, Rule X is merely a guide to the enforcement of the substantive law on labor.
The Court, thus, makes the distinction and so holds that Section 14, Rule X, Book III of the
Rules is not the decisive law in a civil suit for damages instituted by an injured person during a
vehicular accident against a working student of a school and against the school itself.
The present case does not deal with a labor dispute on conditions of employment between an drive. The plaintiff and his heirs should not now be left to suffer without simultaneous recourse
alleged employee and an alleged employer. It invokes a claim brought by one for damages for against the petitioner for the consequent injury caused by a janitor doing a driving chore for
injury caused by the patently negligent acts of a person, against both doer-employee and his the petitioner even for a short while. For the purpose of recovering damages under the
employer. Hence, the reliance on the implementing rule on labor to disregard the primary prevailing circumstances, it is enough that the plaintiff and the private respondent heirs were
liability of an employer under Article 2180 of the Civil Code is misplaced. An implementing rule able to establish the existence of employer-employee relationship between Funtecha and
on labor cannot be used by an employer as a shield to avoid liability under the substantive petitioner Filamer and the fact that Funtecha was engaged in an act not for an independent
provisions of the Civil Code. purpose of his own but in furtherance of the business of his employer. A position of
There is evidence to show that there exists in the present case an extra-contractual obligation responsibility on the part of the petitioner has thus been satisfactorily demonstrated.
arising from the negligence or reckless imprudence of a person "whose acts or omissions are WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is
imputable, by a legal fiction, to other(s) who are in a position to exercise an absolute or limited hereby GRANTED. The decision of the respondent appellate court affirming the trial court
control over (him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915]) decision is REINSTATED.
Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a SO ORDERED.
driver's position in order that the petitioner may be held responsible for his grossly negligent Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.
act, it being sufficient that the act of driving at the time of the incident was for the benefit of the
petitioner. Hence, the fact that Funtecha was not the school driver or was not acting within the
scope of his janitorial duties does not relieve the petitioner of the burden of rebutting the
presumption juris tantum that there was negligence on its part either in the selection of a
servant or employee, or in the supervision over him. The petitioner has failed to show proof of
its having exercised the required diligence of a good father of a family over its employees
Funtecha and Allan.
The Court reiterates that supervision includes the formulation of suitable rules and regulations
for the guidance of its employees and the issuance of proper instructions intended for the
protection of the public and persons with whom the employer has relations through his
employees. (Bahia v. Litonjua and Leynes, supra, at p. 628; Phoenix Construction, v.
Intermediate Appellate Court, 148 SCRA 353 [1987])
An employer is expected to impose upon its employees the necessary discipline called for in
the performance of any act indispensable to the business and beneficial to their employer.
In the present case, the petitioner has not shown that it has set forth such rules and guidelines
as would prohibit any one of its employees from taking control over its vehicles if one is not
the official driver or prohibiting the driver and son of the Filamer president from authorizing
another employee to drive the school vehicle. Furthermore, the petitioner has failed to prove
that it had imposed sanctions or warned its employees against the use of its vehicles by
persons other than the driver.
The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled
manner by which Funtecha drove the vehicle. (Cangco v. Manila Railroad Co., 38 Phil. 768,
772 [1918]). In the absence of evidence that the petitioner had exercised the diligence of a
good father of a family in the supervision of its employees, the law imposes upon it the
vicarious liability for acts or omissions of its employees. (Umali v. Bacani, 69 SCRA 263
[1976]; Poblete v. Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v. Coronado, 176 SCRA
792 [1989]; Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989]; Pantranco North
Express, Inc. v. Baesa, 179 SCRA 384 [1989]) The liability of the employer is, under Article
2180, primary and solidary. However, the employer shall have recourse against the negligent
employee for whatever damages are paid to the heirs of the plaintiff.
It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a
party defendant in the civil case for damages. This is quite understandable considering that as
far as the injured pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha
who was the one driving the vehicle and presumably was one authorized by the school to
EN BANC
G.R. No. L-21278 December 27, 1966
FEATI UNIVERSITY, petitioner,
vs.
HON. JOSE S. BAUTISTA, Presiding Judge of the Court of Industrial Relations and
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondents.
----------------------------------------
G.R. No. L-21462 December 27, 1966
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
----------------------------------------
G.R. No. L-21500 December 27, 1966
FEATI UNIVERSITY, petitioner-appellant,
vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondent-appellee.
Rafael Dinglasan for petitioner.
Cipriano Cid and Associates for respondents.
ZALDIVAR, J.:
This Court, by resolution, ordered that these three cases be considered together, and the
parties were allowed to file only one brief for the three cases.
On January 14, 1963, the President of the respondent Feati University Faculty Club-PAFLU —
hereinafter referred to as Faculty Club — wrote a letter to Mrs. Victoria L. Araneta, President
of petitioner Feati University — hereinafter referred to as University — informing her of the
organization of the Faculty Club into a registered labor union. The Faculty Club is composed
of members who are professors and/or instructors of the University. On January 22, 1963, the
President of the Faculty Club sent another letter containing twenty-six demands that have
connection with the employment of the members of the Faculty Club by the University, and
requesting an answer within ten days from receipt thereof. The President of the University
answered the two letters, requesting that she be given at least thirty days to study thoroughly
the different phases of the demands. Meanwhile counsel for the University, to whom the
demands were referred, wrote a letter to the President of the Faculty Club demanding proof of
its majority status and designation as a bargaining representative. On February 1, 1963, the
President of the Faculty Club again wrote the President of the University rejecting the latter's
request for extension of time, and on the same day he filed a notice of strike with the Bureau
of Labor alleging as reason therefor the refusal of the University to bargain collectively. The
parties were called to conferences at the Conciliation Division of the Bureau of Labor but
efforts to conciliate them failed. On February 18, 1963, the members of the Faculty Club
declared a strike and established picket lines in the premises of the University, resulting in the
disruption of classes in the University. Despite further efforts of the officials from the
Department of Labor to effect a settlement of the differences between the management of the
University and the striking faculty members no satisfactory agreement was arrived at. On
March 21, 1963, the President of the Philippines certified to the Court of Industrial Relations
the dispute between the management of the University and the Faculty Club pursuant to the
provisions of Section 10 of Republic Act No. 875.
In connection with the dispute between the University and the Faculty Club and certain
incidents related to said dispute, various cases were filed with the Court of Industrial Relations
— hereinafter referred to as CIR. The three cases now before this Court stemmed from those
cases that were filed with the CIR.
CASE NO. G.R. NO. L-21278
On May 10, 1963, the University filed before this Court a "petition for certiorari and prohibition
with writ of preliminary injunction", docketed as G.R. No. L-21278, praying: (1) for the
issuance of the writ of preliminary injunction enjoining respondent Judge Jose S. Bautista of
the CIR to desist from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and V-30; (2) that the
proceedings in Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the orders dated March
30, 1963 and April 6, 1963 in Case No. 41-IPA, the order dated April 6, 1963 in Case No.
1183-MC, and the order dated April 29, 1963 in Case No. V-30, all be annulled; and (4) that
the respondent Judge be ordered to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of
the CIR.
On May 10, 1963, this Court issued a writ of preliminary injunction, upon the University's filing
a bond of P1,000.00, ordering respondent Judge Jose S. Bautista as Presiding Judge of the
CIR, until further order from this Court, "to desist and refrain from further proceeding in the
premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations)."1 On
December 4, 1963, this Court ordered the injunction bond increased to P100,000.00; but on
January 23, 1964, upon a motion for reconsideration by the University, this Court reduced the
bond to P50,000.00.
A brief statement of the three cases — CIR Cases 41-IPA, 1183-MC and V-30 — involved in
the Case G.R. No. L-21278, is here necessary.
CIR Case No. 41-IPA, relates to the case in connection with the strike staged by the members
of the Faculty Club. As we have stated, the dispute between the University and the Faculty
Club was certified on March 21, 1963 by the President of the Philippines to the CIR. On the
strength of the presidential certification, respondent Judge Bautista set the case for hearing on
March 23, 1963. During the hearing, the Judge endeavored to reconcile the part and it was
agreed upon that the striking faculty members would return to work and the University would
readmit them under a status quo arrangement. On that very same day, however, the
University, thru counsel filed a motion to dismiss the case upon the ground that the CIR has
no jurisdiction over the case, because (1) the Industrial Peace Act is not applicable to the
University, it being an educational institution, nor to the members of the Faculty Club, they
being independent contractors; and (2) the presidential certification is violative of Section 10 of
the Industrial Peace Act, as the University is not an industrial establishment and there was no
industrial dispute which could be certified to the CIR. On March 30, 1963 the respondent
Judge issued an order denying the motion to dismiss and declaring that the Industrial Peace
Act is applicable to both parties in the case and that the CIR had acquired jurisdiction over the
case by virtue of the presidential certification. In the same order, the respondent Judge,
believing that the dispute could not be decided promptly, ordered the strikers to return
immediately to work and the University to take them back under the last terms and conditions
existing before the dispute arose, as per agreement had during the hearing on March 23,
1963; and likewise enjoined the University, pending adjudication of the case, from dismissing
any employee or laborer without previous authorization from the CIR. The University filed on
April 1, 1963 a motion for reconsideration of the order of March 30, 1963 by the CIR en banc,
and at the same time asking that the motion for reconsideration be first heard by the CIR en
banc. Without the motion for reconsideration having been acted upon by the CIR en banc,
respondent Judge set the case for hearing on the merits for May 8, 1963. The University
moved for the cancellation of said hearing upon the ground that the court en banc should first
hear the motion for reconsideration and resolve the issues raised therein before the case is
heard on the merits. This motion for cancellation of the hearing was denied. The respondent
Judge, however, cancelled the scheduled hearing when counsel for the University manifested
that he would take up before the Supreme Court, by a petition for certiorari, the matter
regarding the actuations of the respondent Judge and the issues raised in the motion for
reconsideration, specially the issue relating to the jurisdiction of the CIR. The order of March
30, 1963 in Case 41-IPA is one of the orders sought to be annulled in the case, G.R. No. L-
21278.
Before the above-mentioned order of March 30, 1963 was issued by respondent Judge, the
University had employed professors and/or instructors to take the places of those professors
and/or instructors who had struck. On April 1, 1963, the Faculty Club filed with the CIR in
Case 41-IPA a petition to declare in contempt of court certain parties, alleging that the
University refused to accept back to work the returning strikers, in violation of the return-to-
work order of March 30, 1963. The University filed, on April 5,1963, its opposition to the
petition for contempt, denying the allegations of the Faculty Club and alleging by way of
special defense that there was still the motion for reconsideration of the order of March 30,
1963 which had not yet been acted upon by the CIR en banc. On April 6, 1963, the
respondent Judge issued an order stating that "said replacements are hereby warned and
cautioned, for the time being, not to disturb nor in any manner commit any act tending to
disrupt the effectivity of the order of March 30,1963, pending the final resolution of the
same."2 On April 8, 1963, there placing professors and/or instructors concerned filed, thru
counsel, a motion for reconsideration by the CIR en banc of the order of respondent Judge of
April 6, 1963. This order of April 6, 1963 is one of the orders that are sought to be annulled in
case G.R. No. L-21278.
CIR Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club
on March 8, 1963 before the CIR, praying that it be certified as the sole and exclusive
bargaining representative of all the employees of the University. The University filed an
opposition to the petition for certification election and at the same time a motion to dismiss
said petition, raising the very same issues raised in Case No. 41-IPA, claiming that the petition
did not comply with the rules promulgated by the CIR; that the Faculty Club is not a legitimate
labor union; that the members of the Faculty Club cannot unionize for collective bargaining
purposes; that the terms of the individual contracts of the professors, instructors, and
teachers, who are members of the Faculty Club, would expire on March 25 or 31, 1963; and
that the CIR has no jurisdiction to take cognizance of the petition because the Industrial Peace
Act is not applicable to the members of the Faculty Club nor to the University. This case was
assigned to Judge Baltazar Villanueva of the CIR. Before Judge Villanueva could act on the
motion to dismiss, however, the Faculty Club filed on April 3, 1963 a motion to withdraw the
petition on the ground that the labor dispute (Case No. 41-IPA) had already been certified by
the President to the CIR and the issues raised in Case No. 1183-MC were absorbed by Case
No. 41-IPA. The University opposed the withdrawal, alleging that the issues raised in Case
No. 1183-MC were separate and distinct from the issues raised in Case No. 41-IPA; that the
questions of recognition and majority status in Case No. 1183-MC were not absorbed by Case
No. 41-IPA; and that the CIR could not exercise its power of compulsory arbitration unless the
legal issue regarding the existence of employer-employee relationship was first resolved. The
University prayed that the motion of the Faculty Club to withdraw the petition for certification
election be denied, and that its motion to dismiss the petition be heard. Judge Baltazar
Villanueva, finding that the reasons stated by the Faculty Club in the motion to withdraw were
well taken, on April 6, 1963, issued an order granting the withdrawal. The University filed, on
April 24, 1963, a motion for reconsideration of that order of April 6, 1963 by the CIR en banc.
This order of April 6, 1963 in Case No. 1183-MC is one of the orders sought to be annulled in
the case, G.R. No. L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of court filed against the
administrative officials of the University. The Faculty Club, through the Acting Chief
Prosecutor of the CIR, filed with the CIR a complaint docketed as Case No. V-30, charging
President Victoria L. Araneta, Dean Daniel Salcedo, Executive Vice-President Rodolfo
Maslog, and Assistant to the President Jose Segovia, as officials of the University, with
indirect contempt of court, reiterating the same charges filed in Case No. 41-IPA for alleged
violation of the order dated March 30, 1963. Based on the complaint thus filed by the Acting
Chief Prosecutor of the CIR, respondent Judge Bautista issued on April 29, 1963 an order
commanding any officer of the law to arrest the above named officials of the University so that
they may be dealt with in accordance with law, and the same time fixed the bond for their
release at P500.00 each. This order of April 29, 1963 is also one of the orders sought to be
annulled in the case, G.R. No. L-2l278.
The principal allegation of the University in its petition for certiorari and prohibition with
preliminary injunction in Case G.R. No. L-21278, now before Us, is that respondent Judge
Jose S. Bautista acted without, or in excess of, jurisdiction, or with grave abuse of discretion,
in taking cognizance of, and in issuing the questioned orders in, CIR Cases Nos. 41-IPA
1183-MC and V-30. Let it be noted that when the petition for certiorari and prohibition with
preliminary injunction was filed on May 10, 1963 in this case, the questioned order in CIR
Cases Nos. 41-IPA, 1183-MC and V-30 were still pending action by the CIR en banc upon
motions for reconsideration filed by the University.
On June 10, 1963, the Faculty Club filed its answer to the petition for certiorari and prohibition
with preliminary injunction, admitting some allegations contained in the petition and denying
others, and alleging special defenses which boil down to the contentions that (1) the CIR had
acquired jurisdiction to take cognizance of Case No. 41-IPA by virtue of the presidential
certification, so that it had jurisdiction to issue the questioned orders in said Case No. 41-IPA;
(2) that the Industrial Peace Act (Republic Act 875) is applicable to the University as an
employer and to the members of the Faculty Club as employees who are affiliated with a duly
registered labor union, so that the Court of Industrial Relations had jurisdiction to take
cognizance of Cases Nos. 1183-MC and V-30 and to issue the questioned orders in those two
cases; and (3) that the petition for certiorari and prohibition with preliminary injunction was
prematurely filed because the orders of the CIR sought to be annulled were still the subjects
of pending motions for reconsideration before the CIR en banc when said petition
for certiorari and prohibition with preliminary injunction was filed before this Court.
CASE G.R. NO. L-21462
This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already stated Case
No. 1183-MC relates to a petition for certification election filed by the Faculty Club as a labor
union, praying that it be certified as the sole and exclusive bargaining representative of all
employees of the University. This petition was opposed by the University, and at the same
time it filed a motion to dismiss said petition. But before Judge Baltazar Villanueva could act
on the petition for certification election and the motion to dismiss the same, Faculty Club filed
a motion to withdraw said petition upon the ground that the issue raised in Case No. 1183-MC
were absorbed by Case No. 41-IPA which was certified by the President of the Philippines.
Judge Baltazar Villanueva, by order April 6, 1963, granted the motion to withdraw. The
University filed a motion for reconsideration of that order of April 6, 1963 by the CIR en banc.
That motion for reconsideration was pending action by the CIR en banc when the petition
for certiorariand prohibition with preliminary injunction in Case G.R. no. L-21278 was filed on
May 10, 1963. As earlier stated this Court, in Case G.R. No. L-21278, issued a writ of
preliminary injunction on May 10, 1963, ordering respondent Judge Bautista, until further order
from this Court, to desist and refrain from further proceeding in the premises (Cases Nos. 41-
IPA, 1183-MC and V-30 of the Court of Industrial Relations).
On June 5, 1963, that is, after this Court has issued the writ of preliminary injunction in Case
G.R. No. L-21278, the CIR en banc issued a resolution denying the motion for reconsideration
of the order of April 6, 1963 in Case No. 1183-MC.
On July 8, 1963, the University filed before this Court a petition for certiorari, by way of an
appeal from the resolution of the CIR en banc, dated June 5, 1963, denying the motion for
reconsideration of the order of April 6, 1963 in Case No. 1183-MC. This petition was docketed
as G.R. No. L-21462. In its petition for certiorari, the University alleges (1) that the resolution
of the Court of Industrial Relations of June 5, 1963 was null and void because it was issued in
violation of the writ of preliminary injunction issued in Case G.R. No. L-21278; (2) that the
issues of employer-employee relationship, the alleged status as a labor union, majority
representation and designation as bargaining representative in an appropriate unit of the
Faculty Club should have been resolved first in Case No. 1183-MC prior to the determination
of the issues in Case No. 41-IPA and therefore the motion to withdraw the petition for
certification election should not have been granted upon the ground that the issues in the first
case have been absorbed in the second case; and (3) the lower court acted without or in
excess of jurisdiction in taking cognizance of the petition for certification election and that the
same should have been dismissed instead of having been ordered withdrawn. The University
prayed that the proceedings in Case No. 1183-MC and the order of April 6, 1963 and the
resolution of June 5, 1963 issued therein be annulled, and that the CIR be ordered to dismiss
Case No. 1183-MC on the ground of lack of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying other, allegations in the
petition for certiorari; and specially alleging that the lower court's order granting the withdrawal
of the petition for certification election was in accordance with law, and that the resolution of
the court en banc on June 5, 1963 was not a violation of the writ of preliminary injunction
issued in Case G.R. No. L-21278 because said writ of injunction was issued against Judge
Jose S. Bautista and not against the Court of Industrial Relations, much less against Judge
Baltazar Villanueva who was the trial judge of Case No. 1183-MC.
CASE G.R. NO. L-21500
This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier stated, Case No.
41-IPA relates to the strike staged by the members of the Faculty Club and the dispute was
certified by the President of the Philippines to the CIR. The University filed a motion to dismiss
that case upon the ground that the CIR has no jurisdiction over the case, and on March 30,
1963 Judge Jose S. Bautista issued an order denying the motion to dismiss and declaring that
the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired
jurisdiction over the case by virtue of the presidential certification; and in that same order
Judge Bautista ordered the strikers to return to work and the University to take them back
under the last terms and conditions existing before the dispute arose; and enjoined the
University from dismissing any employee or laborer without previous authority from the court.
On April 1, 1963, the University filed a motion for reconsideration of the order of March 30,
1963 by the CIR en banc. That motion for reconsideration was pending action by the CIR en
banc when the petition for certiorari and prohibition with preliminary injunction in Case G.R.
No. L-21278 was filed on May 10, 1963. As we have already stated, this Court in said case
G.R. No. L-21278, issued a writ of preliminary injunction on May 10, 1963 ordering respondent
Judge Jose S. Bautista, until further order from this Court, to desist and refrain from further
proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial
Relations).
On July 2, 1963, the University received a copy of the resolution of the CIR en banc, dated
May 7, 1963 but actually received and stamped at the Office of the Clerk of the CIR on June
28, 1963, denying the motion for reconsideration of the order dated March 30, 1963 in Case
No. 41-IPA.
On July 23, 1963, the University filed before this Court a petition for certiorari, by way of an
appeal from the resolution of the Court of Industrial Relations en banc dated May 7, 1963 (but
actually received by said petitioner on July 2, 1963) denying the motion for reconsideration of
the order of March 30, 1963 in Case No. 41-IPA. This petition was docketed as G.R. No. L-
21500. In its petition for certiorari the University alleges (1) that the resolution of the CIR en
banc, dated May 7, 1963 but filed with the Clerk of the CIR on June 28, 1963, in Case No. 41-
IPA, is null and void because it was issued in violation of the writ of preliminary injunction
issued by this Court in G.R. No. L-21278; (2) that the CIR, through its Presiding Judge, had no
jurisdiction to take cognizance of Case No. 41-IPA and the order of March 30, 1963 and the
resolution dated May 7, 1963 issued therein are null and void; (3) that the certification made
by the President of the Philippines is not authorized by Section 10 of Republic Act 875, but is
violative thereof; (4) that the Faculty Club has no right to unionize or organize as a labor union
for collective bargaining purposes and to be certified as a collective bargaining agent within
the purview of the Industrial Peace Act, and consequently it has no right to strike and picket
on the ground of petitioner's alleged refusal to bargain collectively where such duty does not
exist in law and is not enforceable against an educational institution; and (5) that the return-to-
work order of March 30, 1963 is improper and illegal. The petition prayed that the proceedings
in Case No. 41-IPA be annulled, that the order dated March 30, 1963 and the resolution dated
May 7, 1963 be revoked, and that the lower court be ordered to dismiss Case 41-IPA on the
ground of lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss the
petition for certiorari on the ground that the petition being filed by way of an appeal from the
orders of the Court of Industrial Relations denying the motion to dismiss in Case No. 41-IPA,
the petition for certiorari is not proper because the orders appealed from are interlocutory in
nature.
This Court, by resolution of September 26, 1963, ordered that these three cases (G.R. Nos. L-
21278, L-21462 and L-21500) be considered together and the motion to dismiss in Case G.R.
No. L-21500 be taken up when the cases are decided on the merits after the hearing.
Brushing aside certain technical questions raised by the parties in their pleadings, We
proceed to decide these three cases on the merits of the issues raised.
The University has raised several issues in the present cases, the pivotal one being its claim
that the Court of Industrial Relations has no jurisdiction over the parties and the subject matter
in CIR Cases 41-IPA, 1183-MC and V-30, brought before it, upon the ground that Republic
Act No. 875 is not applicable to the University because it is an educational institution and not
an industrial establishment and hence not an "employer" in contemplation of said Act; and
neither is Republic Act No. 875 applicable to the members of the Faculty Club because the
latter are independent contractors and, therefore, not employees within the purview of the said
Act.
In support of the contention that being an educational institution it is beyond the scope of
Republic Act No. 875, the University cites cases decided by this Court: Boy Scouts of the
Philippines vs. Juliana Araos, L-10091, Jan. 29, 1958; University of San Agustin vs. CIR, et
al., L-12222, May 28, 1958; Cebu Chinese High School vs. Philippine Land-Air-Sea Labor
Union, PLASLU, L-12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et al., L-
13282, April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April 8,
1960; Far Eastern University vs. CIR, L-17620, August 31, 1962. We have reviewed these
cases, and also related cases subsequent thereto, and We find that they do not sustain the
contention of the University. It is true that this Court has ruled that certain educational
institutions, like the University of Santo Tomas, University of San Agustin, La Consolacion
College, and other juridical entities, like the Boy Scouts of the Philippines and Manila
Sanitarium, are beyond the purview of Republic Act No. 875 in the sense that the Court of
Industrial Relations has no jurisdiction to take cognizance of charges of unfair labor practice
filed against them, but it is nonetheless true that the principal reason of this Court in ruling in
those cases that those institutions are excluded from the operation of Republic Act 875 is that
those entities are not organized, maintained and operated for profit and do not declare
dividends to stockholders. The decision in the case of University of San Agustin vs. Court of
Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent. We quote a portion of
the decision:
It appears that the University of San Agustin, petitioner herein, is an educational
institution conducted and managed by a "religious non-stock corporation duly
organized and existing under the laws of the Philippines." It was organized not for
profit or gain or division of the dividends among its stockholders, but solely for
religious and educational purposes. It likewise appears that the Philippine
Association of College and University Professors, respondent herein, is a non-stock
association composed of professors and teachers in different colleges and
universities and that since its organization two years ago, the university has adopted
a hostile attitude to its formation and has tried to discriminate, harass and intimidate
its members for which reason the association and the members affected filed the
unfair labor practice complaint which initiated this proceeding. To the complaint of
unfair labor practice, petitioner filed an answer wherein it disputed the jurisdiction of
the Court of Industrial Relations over the controversy on the following grounds:
"(a) That complainants therein being college and/or university professors
were not "industrial" laborers or employees, and the Philippine Association
of College and University Professors being composed of persons engaged
in the teaching profession, is not and cannot be a legitimate labor
organization within the meaning of the laws creating the Court of Industrial
Relations and defining its powers and functions;
"(b) That the University of San Agustin, respondent therein, is not an
institution established for the purpose of gain or division of profits, and
consequently, it is not an "industrial" enterprise and the members of its
teaching staff are not engaged in "industrial" employment (U.S.T. Hospital
Employees Association vs. Sto. Tomas University Hospital, G.R. No. L-
6988, 24 May 1954; and San Beda College vs. Court of Industrial
Relations and National Labor Union, G.R. No. L-7649, 29 October 1955;
51 O.G. (Nov. 1955) 5636-5640);
"(c) That, as a necessary consequence, alleged controversy between
therein complainants and respondent is not an "industrial" dispute, and the
Court of Industrial Relations has no jurisdiction, not only on the parties but
also over the subject matter of the complaint."
The issue now before us is: Since the University of San Agustin is not an institution
established for profit or gain, nor an industrial enterprise, but one established
exclusively for educational purposes, can it be said that its relation with its
professors is one of employer and employee that comes under the jurisdiction of the
Court of Industrial Relations? In other words, do the provisions of the Magna Carta
on unfair labor practice apply to the relation between petitioner and members of
respondent association?
The issue is not new. Thus, in the case of Boy Scouts of the Philippines v. Juliana
V. Araos, G.R. No. L-10091, promulgated on January 29, 1958, this Court, speaking
thru Mr. Justice Montemayor, answered the query in the negative in the following
wise:
"The main issue involved in the present case is whether or not a
charitable institution or one organized not for profit but for more elevated
purposes, charitable, humanitarian, etc., like the Boy Scouts of the
Philippines, is included in the definition of "employer" contained in
Republic Act 875, and whether the employees of said institution fall under
the definition of "employee" also contained in the same Republic Act. If
they are included, then any act which may be considered unfair labor
practice, within the meaning of said Republic Act, would come under the
jurisdiction of the Court of Industrial Relations; but if they do not fall within
the scope of said Republic Act, particularly, its definitions of employer and
employee, then the Industrial Court would have no jurisdiction at all.
xxx xxx xxx
"On the basis of the foregoing considerations, there is every reason to
believe that our labor legislation from Commonwealth Act No. 103,
creating the Court of Industrial Relations, down through the Eight-Hour
Labor Law, to the Industrial Peace Act, was intended by the Legislature to
apply only to industrial employment and to govern the relations between
employers engaged in industry and occupations for purposes of profit and
gain, and their industrial employees, but not to organizations and entities
which are organized, operated and maintained not for profit or gain, but for
elevated and lofty purposes, such as, charity, social service, education
and instruction, hospital and medical service, the encouragement and
promotion of character, patriotism and kindred virtues in youth of the
nation, etc.
"In conclusion, we find and hold that Republic Act No. 875, particularly,
that portion thereof regarding labor disputes and unfair labor practice,
does not apply to the Boy Scouts of the Philippines, and consequently, the
Court of Industrial Relations had no jurisdiction to entertain and decide the
action or petition filed by respondent Araos. Wherefore, the appealed
 decision and resolution of the CIR are hereby set aside, with costs against
respondent."
There being a close analogy between the relation and facts involved in the two
cases, we cannot but conclude that the Court of Industrial Relations has no
jurisdiction to entertain the complaint for unfair labor practice lodged by respondent
association against petitioner and, therefore, we hereby set aside the order and
resolution subject to the present petition, with costs against respondent association.
The same doctrine was confirmed in the case of University of Santo Tomas v. Hon. Baltazar
Villanueva, et al., G.R. No. L-13748, October 30, 1959, where this Court ruled that:
In the present case, the record reveals that the petitioner University of Santo Tomas
is not an industry organized for profit but an institution of learning devoted
exclusively to the education of the youth. The Court of First Instance of Manila in its
decision in Civil Case No. 28870, which has long become final and consequently the
settled law in the case, found as established by the evidence adduced by the parties
therein (herein petitioner and respondent labor union) that while the University
collects fees from its students, all its income is used for the improvement and
enlargement of the institution. The University declares no dividend, and the
members of the corporation who founded it, as ordained in its articles of
incorporation, receive no material compensation for the time and sacrifice they
render to the University and its students. The respondent union itself in a case
before the Industrial Court (Case No. 314-MC) has averred that "the University of
Santo Tomas, like the San Beda College, is an educational institution operated not
for profit but for the sole purpose of educating young men." (See Annex "B" to
petitioner's motion to dismiss.). It is apparent, therefore, that on the face of the
record the University of Santo Tomas is not a corporation created for profit but an
educational institution and therefore not an industrial or business organization.
In the case of La Consolacion College, et al. vs. CIR, et al., G.R. No. L-13282, April 22, 1960,
this Court repeated the same ruling when it said:
The main issue in this appeal by petitioner is that the industry trial court committed
an error in holding that it has jurisdiction to act in this case even if it involves unfair
labor practice considering that the La Consolacion College is not a business
enterprise but an educational institution not organized for profit.
If the claim that petitioner is an educational institution not operated for profit is true,
which apparently is the case, because the very court a quo found that it has no
stockholder, nor capital . . . then we are of the opinion that the same does not come
under the jurisdiction of the Court of Industrial Relations in view of the ruling in the
case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R. No. L-10091,
decided on January 29, 1958.
It is noteworthy that the cases of the University of San Agustin, the University of Santo Tomas,
and La Consolacion College, cited above, all involve charges of unfair labor practice under
Republic Act No. 875, and the uniform rulings of this Court are that the Court of Industrial
Relations has no jurisdiction over the charges because said Act does not apply to educational
institutions that are not operated or maintained for profit and do not declare dividends. On the
other hand, in the cases of Far Eastern University v. CIR, et al., G.R. No. L-17620, August 31,
1962, this Court upheld the decision of the Court of Industrial Relations finding the Far
Eastern University, also an educational institution, guilty of unfair labor practice. Among the
findings of fact in said case was that the Far Eastern University made profits from the school
year 1952-1953 to 1958-1959. In affirming the decision of the lower court, this Court had
thereby ratified the ruling of the Court of Industrial Relations which applied the Industrial
Peace Act to educational institutions that are organized, operated and maintained for profit.
It is also noteworthy that in the decisions in the cases of the Boy Scouts of the Philippines, the
University of San Agustin, the University of Sto. Tomas, and La Consolacion College, this
Court was not unanimous in the view that the Industrial Peace Act (Republic Act No. 875) is
not applicable to charitable, eleemosynary or non-profit organizations — which include
educational institutions not operated for profit. There are members of this Court who hold the
view that the Industrial Peace Act would apply also to non-profit organizations or entities —
the only exception being the Government, including any political subdivision or instrumentality
thereof, in so far as governmental functions are concerned. However, in the Far Eastern
University case this Court is unanimous in supporting the view that an educational institution
that is operated for profit comes within the scope of the Industrial Peace Act. We consider it a
settled doctrine of this Court, therefore, that the Industrial Peace Act is applicable to any
organization or entity — whatever may be its purpose when it was created — that is operated
for profit or gain.
Does the University operate as an educational institution for profit? Does it declare dividends
for its stockholders? If it does not, it must be declared beyond the purview of Republic Act No.
875; but if it does, Republic Act No. 875 must apply to it. The University itself admits that it has
declared dividends.3 The CIR in its order dated March 30, 1963 in CIR Case No. 41-IPA —
which order was issued after evidence was heard — also found that the University is not for
strictly educational purposes and that "It realizes profits and parts of such earning is
distributed as dividends to private stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-
x and 4-x)"4 Under this circumstance, and in consonance with the rulings in the decisions of
this Court, above cited, it is obvious that Republic Act No. 875 is applicable to herein petitioner
Feati University.
But the University claims that it is not an employer within the contemplation of Republic Act
No. 875, because it is not an industrial establishment. At most, it says, it is only a lessee of the
services of its professors and/or instructors pursuant to a contract of services entered into
between them. We find no merit in this claim. Let us clarify who is an "employer" under the
Act. Section 2(c) of said Act provides:
Sec. 2. Definitions.—As used in this Act —
(c) The term employer include any person acting in the interest of an employer,
directly or indirectly, but shall not include any labor organization (otherwise than
when acting as an employer) or any one acting in the capacity or agent of such
labor organization.
It will be noted that in defining the term "employer" the Act uses the word "includes", which it
also used in defining "employee". [Sec. 2 (d)], and "representative" [Sec. 2(h)]; and not the
word "means" which the Act uses in defining the terms "court" [Sec. 2(a)], "labor organization"
[Sec. 2(e)], "legitimate labor organization [Sec. 2(f)], "company union" [Sec. 2(g)], "unfair labor
practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec. 2(l)] and "lock-out" [Sec. 2(m)]. A
methodical variation in terminology is manifest. This variation and distinction in terminology
and phraseology cannot be presumed to have been the inconsequential product of an
oversight; rather, it must have been the result of a deliberate and purposeful act, more so
when we consider that as legislative records show, Republic Act No. 875 had been
meticulously and painstakingly drafted and deliberated upon. In using the word "includes" and
not "means", Congress did not intend to give a complete definition of "employer", but rather
that such definition should be complementary to what is commonly understood as employer.
Congress intended the term to be understood in a broad meaning because, firstly, the
statutory definition includes not only "a principal employer but also a person acting in the
interest of the employer"; and, secondly, the Act itself specifically enumerated those who are
not included in the term "employer", namely: (1) a labor organization (otherwise than when
acting as an employer), (2) anyone acting in the capacity of officer or agent of such labor
organization [Sec. 2(c)], and (3) the Government and any political subdivision or
instrumentality thereof insofar as the right to strike for the purpose of securing changes or
modifications in the terms and conditions of employment is concerned (Section 11). Among
these statutory exemptions, educational institutions are not included; hence, they can be
included in the term "employer". This Court, however, has ruled that those educational
institutions that are not operated for profit are not within the purview of Republic Act No. 875.5
As stated above, Republic Act No. 875 does not give a comprehensive but only a
complementary definition of the term "employer". The term encompasses those that are in
ordinary parlance "employers." What is commonly meant by "employer"? The term "employer"
has been given several acceptations. The lexical definition is "one who employs; one who
uses; one who engages or keeps in service;" and "to employ" is "to provide work and pay for;
to engage one's service; to hire." (Webster's New Twentieth Century Dictionary, 2nd ed.,
1960, p. 595). The Workmen's Compensation Act defines employer as including "every
person or association of persons, incorporated or not, public or private, and the legal
representative of the deceased employer" and "includes the owner or lessee of a factory or
establishment or place of work or any other person who is virtually the owner or manager of
the business carried on in the establishment or place of work but who, for reason that there is
an independent contractor in the same, or for any other reason, is not the direct employer of
laborers employed there." [Sec. 39(a) of Act No. 3428.] The Minimum Wage Law states that
"employer includes any person acting directly or indirectly in the interest of the employer in
relation to an employee and shall include the Government and the government corporations".
[Rep. Act No. 602, Sec. 2(b)]. The Social Security Act defines employer as "any person,
natural or juridical, domestic or foreign, who carries in the Philippines any trade, business,
industry, undertaking, or activity of any kind and uses the services of another person who is
under his orders as regards the employment, except the Government and any of its political
subdivisions, branches or instrumentalities, including corporations owned or controlled by the
Government." (Rep. Act No. 1161, Sec. 8[c]).
This Court, in the cases of the The Angat River Irrigation System, et al. vs. Angat River
Workers' Union (PLUM), et al., G.R. Nos. L-10934 and L-10944, December 28, 1957, which
cases involve unfair labor practices and hence within the purview of Republic Act No. 875,
defined the term employer as follows:
An employer is one who employs the services of others; one for whom employees
work and who pays their wages or salaries (Black Law Dictionary, 4th ed., p. 618).
An employer includes any person acting in the interest of an employer, directly or
indirectly (Sec. 2-c, Rep. Act 875).
Under none of the above definitions may the University be excluded, especially so if it is
considered that every professor, instructor or teacher in the teaching staff of the University, as
per allegation of the University itself, has a contract with the latter for teaching services, albeit
for one semester only. The University engaged the services of the professors, provided them
work, and paid them compensation or salary for their services. Even if the University may be
considered as a lessee of services under a contract between it and the members of its
Faculty, still it is included in the term "employer". "Running through the word `employ' is the
thought that there has been an agreement on the part of one person to perform a certain
service in return for compensation to be paid by an employer. When you ask how a man is
employed, or what is his employment, the thought that he is under agreement to perform
some service or services for another is predominant and paramount." (Ballentine Law
Dictionary, Philippine ed., p. 430, citing Pinkerton National Detective Agency v. Walker, 157
Ga. 548, 35 A. L. R. 557, 560, 122 S.E. Rep. 202).
To bolster its claim of exception from the application of Republic Act No. 875, the University
contends that it is not state that the employers included in the definition of 2 (c) of the Act.
This contention can not be sustained. In the first place, Sec. 2 (c) of Republic Act No. 875
does not state that the employers included in the definition of the term "employer" are only
and exclusively "industrial establishments"; on the contrary, as stated above, the term
"employer" encompasses all employers except those specifically excluded by the Act. In the
second place, even the Act itself does not refer exclusively to industrial establishments and
does not confine its application thereto. This is patent inasmuch as several provisions of the
Act are applicable to non-industrial workers, such as Sec. 3, which deals with "employees'
right to self-organization"; Sections 4 and 5 which enumerate unfair labor practices; Section 8
which nullifies private contracts contravening employee's rights; Section 9 which relates to
injunctions in any case involving a labor dispute; Section 11 which prohibits strikes in the
government; Section 12 which provides for the exclusive collective bargaining representation
for labor organizations; Section 14 which deals with the procedure for collective bargaining;
Section 17 which treats of the rights and conditions of membership in labor organizations;
Sections 18, 19, 20 and 21 which provide respectively for the establishment of conciliation
service, compilation of collective bargaining contracts, advisory labor-management relations;
Section 22 which empowers the Secretary of Labor to make a study of labor relations; and
Section 24 which enumerates the rights of labor organizations. (See Dissenting Opinion of
Justice Concepcion in Boy Scouts of the Philippines v. Juliana Araos, G.R. No. L-10091,
January 29, 1958.)
This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had occasion to state
that the Industrial Peace Act "refers only to organizations and entities created and operated
for profits, engaged in a profitable trade, occupation or industry". It cannot be denied that
running a university engages time and attention; that it is an occupation or a business from
which the one engaged in it may derive profit or gain. The University is not an industrial
establishment in the sense that an industrial establishment is one that is engaged in
manufacture or trade where raw materials are changed or fashioned into finished products for
use. But for the purposes of the Industrial Peace Act the University is an industrial
establishment because it is operated for profit and it employs persons who work to earn a
living. The term "industry", for the purposes of the application of our labor laws should be
given a broad meaning so as to cover all enterprises which are operated for profit and which
engage the services of persons who work to earn a living.
The word "industry" within State Labor Relations Act controlling labor relations in
industry, cover labor conditions in any field of employment where the objective is
earning a livelihood on the one side and gaining of a profit on the other. Labor Law
Sec. 700 et seq. State Labor Relations Board vs. McChesney, 27 N.Y.S. 2d 866,
868." (Words and Phrases, Permanent Edition, Vol. 21, 1960 edition p. 510).
The University urges that even if it were an employer, still there would be no employer-
employee relationship between it and the striking members of the Faculty Club because the
latter are not employees within the purview of Sec. 2(d) of Republic Act No. 875 but are
independent contractors. This claim is untenable.
Section 2 (d) of Republic Act No. 875 provides:
(d) The term "employee" shall include any employee and shall not be limited to the
employee of a particular employer unless the act explicitly states otherwise and
shall include any individual whose work has ceased as a consequence of, or in
connection with, any current labor dispute or because of any unfair labor practice
and who has not obtained any other substantially equivalent and regular
employment.
This definition is again, like the definition of the term "employer" [Sec. 2(c)], by the use of the
term "include", complementary. It embraces not only those who are usually and ordinarily
considered employees, but also those who have ceased as employees as a consequence of a
labor dispute. The term "employee", furthermore, is not limited to those of a particular
employer. As already stated, this Court in the cases of The Angat River Irrigation System, et
al. v. Angat River Workers' Union (PLUM), et al., supra, has defined the term "employer" as
"one who employs the services of others; one for whom employees work and who pays their
wages or salaries. "Correlatively, an employee must be one who is engaged in the service of
another; who performs services for another; who works for salary or wages. It is admitted by
the University that the striking professors and/or instructors are under contract to teach
particular courses and that they are paid for their services. They are, therefore, employees of
the University.
In support of its claim that the members of the Faculty Club are not employees of the
University, the latter cites as authority Francisco's Labor Laws, 2nd ed., p. 3, which states:
While the term "workers" as used in a particular statute, has been regarded as
limited to those performing physical labor, it has been held to embrace
stenographers and bookkeepers. Teachers are not included, however.
It is evident from the above-quoted authority that "teachers" are not to be included among
those who perform "physical labor", but it does not mean that they are not employees. We
have checked the source of the authority, which is 31 Am. Jur., Sec. 3, p. 835, and the latter
cites Huntworth v. Tanner, 87 Wash 670, 152 P. 523, Ann Cas 1917 D 676. A reading of the
last case confirms Our view.
That teachers are "employees' has been held in a number of cases (Aebli v. Board of
Education of City and County of San Francisco, 145 P. 2d 601, 62 Col. App 2.d 706; Lowe &
Campbell Sporting Goods Co. v. Tangipahoa Parish School Board, La. App., 15 So. 2d 98,
100; Sister Odelia v. Church of St. Andrew, 263 N. W. 111, 112, 195 Minn. 357, cited in
Words and Phrases, Permanent ed., Vol. 14, pp. 806-807). This Court in the Far Eastern
University case, supra, considered university instructors as employees and declared Republic
Act No. 875 applicable to them in their employment relations with their school. The professors
and/or instructors of the University neither ceased to be employees when they struck, for
Section 2 of Rep. Act 875 includes among employees any individual whose work has ceased
as consequence of, or in connection with a current labor dispute. Striking employees maintain
their status as employees of the employer. (Western Cartridge Co. v. NLRB, C.C.A. 7, 139
F2d 855, 858).
The contention of the University that the professors and/or instructors are independent
contractors, because the University does not exercise control over their work, is likewise
untenable. This Court takes judicial notice that a university controls the work of the members
of its faculty; that a university prescribes the courses or subjects that professors teach, and
when and where to teach; that the professors' work is characterized by regularity and
continuity for a fixed duration; that professors are compensated for their services by wages
and salaries, rather than by profits; that the professors and/or instructors cannot substitute
others to do their work without the consent of the university; and that the professors can be
laid off if their work is found not satisfactory. All these indicate that the university has control
over their work; and professors are, therefore, employees and not independent contractors.
There are authorities in support of this view.
The principal consideration in determining whether a workman is an employee or an
independent contractor is the right to control the manner of doing the work, and it is
not the actual exercise of the right by interfering with the work, but the right to
control, which constitutes the test. (Amalgamated Roofing Co. v. Travelers' Ins. Co.,
133 N.E. 259, 261, 300 Ill. 487, quoted in Words and Phrases, Permanent ed., Vol.
14, p. 576).
Where, under Employers' Liability Act, A was instructed when and where to work . . .
he is an employee, and not a contractor, though paid specified sum per square.
(Heine v. Hill, Harris & Co., 2 La. App. 384, 390, in Words and Phrases, loc, cit.) .
Employees are those who are compensated for their labor or services by wages
rather than by profits. (People vs. Distributors Division, Smoked Fish Workers Union
Local No. 20377, Sup. 7 N. Y. S. 2d 185, 187 in Words and Phrases, loc, cit.)
Services of employee or servant, as distinguished from those of a contractor, are
usually characterized by regularity and continuity of work for a fixed period or one of
indefinite duration, as contrasted with employment to do a single act or a series of
isolated acts; by compensation on a fixed salary rather than one regulated by value
or amount of work; . . . (Underwood v. Commissioner of Internal Revenue, C.C.A.,
56 F. 2d 67, 71 in Words and Phrases, op. cit., p. 579.)
Independent contractors can employ others to work and accomplish contemplated
result without consent of contractee, while "employee" cannot substitute another in
his place without consent of his employer. (Luker Sand & Gravel Co. v. Industrial
Commission, 23 P. 2d 225, 82 Utah, 188, in Words and Phrases, Vol. 14, p. 576).
Moreover, even if university professors are considered independent contractors, still they
would be covered by Rep. Act No. 875. In the case of the Boy Scouts of the Philippines v.
Juliana Araos, supra, this Court observed that Republic Act No. 875 was modelled after the
Wagner Act, or the National Labor Relations Act, of the United States, and this Act did not
exclude "independent contractors" from the orbit of "employees". It was in the subsequent
legislation — the Labor Management Relation Act (Taft-Harley
Act) — that "independent contractors" together with agricultural laborers, individuals in
domestic service of the home, supervisors, and others were excluded. (See Rothenberg on
Labor Relations, 1949, pp. 330-331).
It having been shown that the members of the Faculty Club are employees, it follows that they
have a right to unionize in accordance with the provisions of Section 3 of the Magna Carta of
Labor (Republic Act No. 875) which provides as follows:
Sec. 3. Employees' right to self-organization.—Employees shall have the right to
self-organization and to form, join or assist labor organizations of their own choosing
for the purpose of collective bargaining through representatives of their own
choosing and to engage in concerted activities for the purpose of collective
bargaining and other mutual aid or protection. . . .
We agree with the statement of the lower court, in its order of March 30, 1963 which is sought
to be set aside in the instant case, that the right of employees to self-organization is
guaranteed by the Constitution, that said right would exist even if Republic Act No. 875 is
repealed, and that regardless of whether their employers are engaged in commerce or not.
Indeed, it is Our considered view that the members of the faculty or teaching staff of private
universities, colleges, and schools in the Philippines, regardless of whether the university,
college or school is run for profit or not, are included in the term "employees" as contemplated
in Republic Act No. 875 and as such they may organize themselves pursuant to the above-
quoted provision of Section 3 of said Act. Certainly, professors, instructors or teachers of
private educational institutions who teach to earn a living are entitled to the protection of our
labor laws — and one such law is Republic Act No. 875.
The contention of the University in the instant case that the members of the Faculty Club can
not unionize and the Faculty Club can not exist as a valid labor organization is, therefore,
without merit. The record shows that the Faculty Club is a duly registered labor organization
and this fact is admitted by counsel for the University.5a
The other issue raised by the University is the validity of the Presidential certification. The
University contends that under Section 10 of Republic Act No. 875 the power of the President
of the Philippines to certify is subject to the following conditions, namely: (1) that here is a
labor dispute, and (2) that said labor dispute exists in an industry that is vital to the national
interest. The University maintains that those conditions do not obtain in the instant case. This
contention has also no merit.
We have previously stated that the University is an establishment or enterprise that is included
in the term "industry" and is covered by the provisions of Republic Act No. 875. Now, was
there a labor dispute between the University and the Faculty Club?
Republic Act No. 875 defines a labor dispute as follows:
The term "labor dispute" includes any controversy concerning terms, tenure or
conditions of employment, or concerning the association or representation of
persons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or
conditions of employment regardless of whether the disputants stand in proximate
relation of employer and employees.
The test of whether a controversy comes within the definition of "labor dispute" depends on
whether the controversy involves or concerns "terms, tenure or condition of employment" or
"representation." It is admitted by the University, in the instant case, that on January 14, 1963
the President of the Faculty Club wrote to the President of the University a letter informing the
latter of the organization of the Faculty Club as a labor union, duly registered with the Bureau
of Labor Relations; that again on January 22, 1963 another letter was sent, to which was
attached a list of demands consisting of 26 items, and asking the President of the University to
answer within ten days from date of receipt thereof; that the University questioned the right of
the Faculty Club to be the exclusive representative of the majority of the employees and
asked proof that the Faculty Club had been designated or selected as exclusive
representative by the vote of the majority of said employees; that on February 1, 1963 the
Faculty Club filed with the Bureau of Labor Relations a notice of strike alleging as reason
therefor the refusal of the University to bargain collectively with the representative of the
faculty members; that on February 18, 1963 the members of the Faculty Club went on strike
and established picket lines in the premises of the University, thereby disrupting the schedule
of classes; that on March 1, 1963 the Faculty Club filed Case No. 3666-ULP for unfair labor
practice against the University, but which was later dismissed (on April 2, 1963 after Case 41-
IPA was certified to the CIR); and that on March 7, 1963 a petition for certification election,
Case No. 1183-MC, was filed by the Faculty Club in the CIR.6 All these admitted facts show
that the controversy between the University and the Faculty Club involved terms and
conditions of employment, and the question of representation. Hence, there was a labor
dispute between the University and the Faculty Club, as contemplated by Republic Act No.
875. It having been shown that the University is an institution operated for profit, that is an
employer, and that there is an employer-employee relationship, between the University and
the members of the Faculty Club, and it having been shown that a labor dispute existed
between the University and the Faculty Club, the contention of the University, that the
certification made by the President is not only not authorized by Section 10 of Republic Act
875 but is violative thereof, is groundless.
Section 10 of Republic Act No. 875 provides:
When in the opinion of the President of the Philippines there exists a labor dispute in
an industry indispensable to the national interest and when such labor dispute is
certified by the President to the Court of Industrial Relations, said Court may cause
to be issued a restraining order forbidding the employees to strike or the employer
to lockout the employees, and if no other solution to the dispute is found, the Court
may issue an order fixing the terms and conditions of employment.
This Court had occasion to rule on the application of the above-quoted provision of Section 10
of Republic Act No. 875. In the case of Pampanga Sugar Development Co. v. CIR, et al., G.R.
No. L-13178, March 24, 1961, it was held:
It thus appears that when in the opinion of the President a labor dispute exists in an
industry indispensable to national interest and he certifies it to the Court of Industrial
Relations the latter acquires jurisdiction to act thereon in the manner provided by
law. Thus the court may take either of the following courses: it may issue an order
forbidding the employees to strike or the employer to lockout its employees, or,
failing in this, it may issue an order fixing the terms and conditions of employment. It
has no other alternative. It can not throw the case out in the assumption that the
certification was erroneous.
xxx xxx xxx
. . . The fact, however, is that because of the strike declared by the members of the
minority union which threatens a major industry the President deemed it wise to
certify the controversy to the Court of Industrial Relations for adjudication. This is
the power that the law gives to the President the propriety of its exercise being a
matter that only devolves upon him. The same is not the concern of the industrial
court. What matters is that by virtue of the certification made by the President the
case was placed under the jurisdiction of said court. (Emphasis supplied)
To certify a labor dispute to the CIR is the prerogative of the President under the law, and this
Court will not interfere in, much less curtail, the exercise of that prerogative. The jurisdiction of
the CIR in a certified case is exclusive (Rizal Cement Co., Inc. v. Rizal Cement Workers Union
(FFW), et al., G.R. No. L-12747, July 30, 1960). Once the jurisdiction is acquired pursuant to
the presidential certification, the CIR may exercise its broad powers as provided in
Commonwealth Act 103. All phases of the labor dispute and the employer-employee
relationship may be threshed out before the CIR, and the CIR may issue such order or orders
as may be necessary to make effective the exercise of its jurisdiction. The parties involved in
the case may appeal to the Supreme Court from the order or orders thus issued by the CIR.
And so, in the instant case, when the President took into consideration that the University "has
some 18,000 students and employed approximately 500 faculty members", that `the continued
disruption in the operation of the University will necessarily prejudice the thousand of
students", and that "the dispute affects the national interest",7and certified the dispute to the
CIR, it is not for the CIR nor this Court to pass upon the correctness of the reasons of the
President in certifying the labor dispute to the CIR.
The third issue raised by the University refers to the question of the legality of the return-to-
work order (of March 30, 1963 in Case 41-IPA) and the order implementing the same (of April
6, 1963). It alleges that the orders are illegal upon the grounds: (1) that Republic Act No. 875,
supplementing Commonwealth Act No. 103, has withdrawn from the CIR the power to issue a
return-to-work order; (2) that the only power granted by Section 10 of Republic Act No. 875 to
the CIR is to issue an order forbidding the employees to strike or forbidding the employer to
lockout the employees, as the case may be, before either contingency had become a fait
accompli; (3) that the taking in by the University of replacement professors was valid, and the
return-to-work order of March 30, 1963 constituted impairment of the obligation of contracts;
and (4) the CIR could not issue said order without having previously determined the legality or
illegality of the strike.
The contention of the University that Republic Act No. 875 has withdrawn the power of the
Court of Industrial Relations to issue a return-to-work order exercised by it under
Commonwealth Act No. 103 can not be sustained. When a case is certified by the President
to the Court of Industrial Relations, the case thereby comes under the operation of
Commonwealth Act No. 103, and the Court may exercise the broad powers and jurisdiction
granted to it by said Act. Section 10 of Republic Act No. 875 empowers the Court of Industrial
Relations to issue an order "fixing the terms of employment." This clause is broad enough to
authorize the Court to order the strikers to return to work and the employer to readmit them.
This Court, in the cases of the Philippine Marine Officers Association vs. The Court of
Industrial Relations, Compania Maritima, et al.; and Compañia Martima, et al. vs. Philippine
Marine Radio Officers Association and CIR, et al., G.R. Nos. L-10095 and L-10115, October
31, 1957, declared:
We cannot subscribe to the above contention. We agree with counsel for the
Philippine Radio Officers' Association that upon certification by the President under
Section 10 of Republic Act 875, the case comes under the operation of
Commonwealth Act 103, which enforces compulsory arbitration in cases of labor
disputes in industries indispensable to the national interest when the President
certifies the case to the Court of Industrial Relations. The evident intention of the law
is to empower the Court of Industrial Relations to act in such cases, not only in the
manner prescribed under Commonwealth Act 103, but with the same broad powers
and jurisdiction granted by that act. If the Court of Industrial Relations is granted
authority to find a solution to an industrial dispute and such solution consists in the
ordering of employees to return back to work, it cannot be contended that the Court
of Industrial Relations does not have the power or jurisdiction to carry that solution
into effect. And of what use is its power of conciliation and arbitration if it does not
have the power and jurisdiction to carry into effect the solution it has adopted?
Lastly, if the said court has the power to fix the terms and conditions of employment,
it certainly can order the return of the workers with or without backpay as a term or
condition of employment.
The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, et
al., G.R. No. L-13364, July 26, 1960.
When a case is certified to the CIR by the President of the Philippines pursuant to Section 10
of Republic Act No. 875, the CIR is granted authority to find a solution to the industrial dispute;
and the solution which the CIR has found under the authority of the presidential certification
and conformable thereto cannot be questioned (Radio Operators Association of the
Philippines vs. Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29, 1957,
54 O.G. 3218).
Untenable also is the claim of the University that the CIR cannot issue a return-to-work order
after strike has been declared, it being contended that under Section 10 of Republic Act No.
875 the CIR can only prevent a strike or a lockout — when either of this situation had not yet
occurred. But in the case of Bisaya Land Transportation Co., Inc. vs. Court of Industrial
Relations, et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:
There is no reason or ground for the contention that Presidential certification of labor
dispute to the CIR is limited to the prevention of strikes and lockouts. Even after a
strike has been declared where the President believes that public interest demands
arbitration and conciliation, the President may certify the ease for that purpose. The
practice has been for the Court of Industrial Relations to order the strikers to
work, pending the determination of the union demands that impelled the strike.
There is nothing in the law to indicate that this practice is abolished." (Emphasis
supplied)
Likewise untenable is the contention of the University that the taking in by it of replacements
was valid and the return-to-work order would be an impairment of its contract with the
replacements. As stated by the CIR in its order of March 30, 1963, it was agreed before the
hearing of Case 41-IPA on March 23, 1963 that the strikers would return to work under
the status quo arrangement and the University would readmit them, and the return-to-work
order was a confirmation of that agreement. This is a declaration of fact by the CIR which we
cannot disregard. The faculty members, by striking, have not abandoned their employment
but, rather, they have only ceased from their labor (Keith Theatre v. Vachon et al., 187 A.
692). The striking faculty members have not lost their right to go back to their positions,
because the declaration of a strike is not a renunciation of their employment and their
employee relationship with the University (Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13,
138). The employment of replacements was not authorized by the CIR. At most, that was a
temporary expedient resorted to by the University, which was subject to the power of the CIR
to allow to continue or not. The employment of replacements by the University prior to the
issuance of the order of March 30, 1963 did not vest in the replacements a permanent right to
the positions they held. Neither could such temporary employment bind the University to retain
permanently the replacements.
Striking employees maintained their status as employees of the employer (Western
Castridge Co. v. National Labor Relations Board, C.C.A. 139 F. 2d 855, 858) ; that
employees who took the place of strikers do not displace them as `employees." '
(National Labor Relations Board v. A. Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206,
207.)
It is clear from what has been said that the return-to-work order cannot be considered as an
impairment of the contract entered into by petitioner with the replacements. Besides, labor
contracts must yield to the common good and such contracts are subject to the special laws
on labor unions, collective bargaining, strikes and similar subjects (Article 1700, Civil Code).
Likewise unsustainable is the contention of the University that the Court of Industrial Relations
could not issue the return-to-work order without having resolved previously the issue of the
legality or illegality of the strike, citing as authority therefor the case of Philippine Can
Company v. Court of Industrial Relations, G.R. No. L-3021, July 13, 1950. The ruling in said
case is not applicable to the case at bar, the facts and circumstances being very different. The
Philippine Can Company case, unlike the instant case, did not involve the national interest
and it was not certified by the President. In that case the company no longer needed the
services of the strikers, nor did it need substitutes for the strikers, because the company was
losing, and it was imperative that it lay off such laborers as were not necessary for its
operation in order to save the company from bankruptcy. This was the reason of this Court in
ruling, in that case, that the legality or illegality of the strike should have been decided first
before the issuance of the return-to-work order. The University, in the case before Us, does
not claim that it no longer needs the services of professors and/or instructors; neither does it
claim that it was imperative for it to lay off the striking professors and instructors because of
impending bankruptcy. On the contrary, it was imperative for the University to hire
replacements for the strikers. Therefore, the ruling in the Philippine Can case that the legality
of the strike should be decided first before the issuance of the return-to-work order does not
apply to the case at bar. Besides, as We have adverted to, the return-to-work order of March
30, 1963, now in question, was a confirmation of an agreement between the University and
the Faculty Club during a prehearing conference on March 23, 1963.
The University also maintains that there was no more basis for the claim of the members of
the Faculty Club to return to their work, as their individual contracts for teaching had expired
on March 25 or 31, 1963, as the case may be, and consequently, there was also no basis for
the return-to-work order of the CIR because the contractual relationships having ceased there
were no positions to which the members of the Faculty Club could return to. This contention is
not well taken. This argument loses sight of the fact that when the professors and instructors
struck on February 18, 1963, they continued to be employees of the University for the
purposes of the labor controversy notwithstanding the subsequent termination of their
teaching contracts, for Section 2(d) of the Industrial Peace Act includes among employees
"any individual whose work has ceased a consequence of, or in connection with, any current
labor dispute or of any unfair labor practice and who has not obtained any other substantially
equivalent and regular employment."
The question raised by the University was resolved in a similar case in the United States. In
the case of Rapid Roller Co. v. NLRB 126 F. 2d 452, we read:
On May 9, 1939 the striking employees, eighty-four in number, offered to the
company to return to their employment. The company believing it had not committed
any unfair labor practice, refused the employees' offer and claimed the right to
employ others to take the place of the strikers, as it might see fit. This constituted
discrimination in the hiring and tenure of the striking employees. When the
employees went out on a strike because of the unfair labor practice of the company,
their status as employees for the purpose of any controversy growing out of that
unfair labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp. v. National
Labor Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed. 1271, 133 A.L.R.
1217.
For the purpose of such controversy they remained employees of the company. The
company contended that they could not be their employees in any event since the
"contract of their employment expired by its own terms on April 23, 1939."
In this we think the company is mistaken for the reason we have just pointed out,
that the status of the employees on strike became fixed under Sec. 2 (3) of the Act
because of the unfair labor practice of the company which caused the strike.
The University, furthermore, claims that the information for indirect contempt filed against the
officers of the University (Case No. V-30) as well as the order of April 29, 1963 for their arrest
were improper, irregular and illegal because (1) the officers of the University had complied in
good faith with the return-to-work order and in those cases that they did not, it was due to
circumstance beyond their control; (2) the return-to-work order and the order implementing the
same were illegal; and (3) even assuming that the order was legal, the same was not Yet final
because there was a motion to reconsider it.
Again We find no merit in this claim of Petitioner. We have already ruled that the CIR had
jurisdiction to issue the order of March 30, 1963 in CIR Case 41-IPA, and the return-to-work
provision of that order is valid and legal. Necessarily the order of April 6, 1963 implementing
that order of March 30, 1963 was also valid and legal.
Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations of any
Judge thereof to punish direct and indirect contempts as provided in Rule 64 (now Rule 71) of
the Rules of Court, under the same procedure and penalties provided therein. Section 3 of
Rule 71 enumerates the acts which would constitute indirect contempt, among which is
"disobedience or resistance to lawful writ, process, order, judgment, or command of a court,"
and the person guilty thereof can be punished after a written charge has been filed and the
accused has been given an opportunity to be heard. The last paragraph of said section
provides:
But nothing in this section shall be so construed as to prevent the court from issuing
process to bring the accused party into court, or from holding him in custody
pending such proceedings.
The provision authorizes the judge to order the arrest of an alleged contemner (Francisco, et
al. v. Enriquez, L-7058, March 20, 1954, 94 Phil., 603) and this, apparently, is the provision
upon which respondent Judge Bautista relied when he issued the questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is unwarranted. The return-to-
work order allegedly violated was within the court's jurisdiction to issue.
Section 14 of Commonwealth Act No. 103 provides that in cases brought before the Court of
Industrial Relations under Section 4 of the Act (referring to strikes and lockouts) the appeal to
the Supreme Court from any award, order or decision shall not stay the execution of said
award, order or decision sought to be reviewed unless for special reason the court shall order
that execution be stayed. Any award, order or decision that is appealed is necessarily not
final. Yet under Section 14 of Commonwealth Act No. 103 that award, order or decision, even
if not yet final, is executory, and the stay of execution is discretionary with the Court of
Industrial Relations. In other words, the Court of Industrial Relations, in cases involving strikes
and lockouts, may compel compliance or obedience of its award, order or decision even if the
award, order or decision is not yet final because it is appealed, and it follows that any
disobedience or non-compliance of the award, order or decision would constitute contempt
against the Court of Industrial Relations which the court may punish as provided in the Rules
of Court. This power of the Court of Industrial Relations to punish for contempt an act of non-
compliance or disobedience of an award, order or decision, even if not yet final, is a special
one and is exercised only in cases involving strikes and lockouts. And there is reason for this
special power of the industrial court because in the exercise of its jurisdiction over cases
involving strikes and lockouts the court has to issue orders or make decisions that are
necessary to effect a prompt solution of the labor dispute that caused the strike or the lockout,
or to effect the prompt creation of a situation that would be most beneficial to the management
and the employees, and also to the public — even if the solution may be temporary, pending
the final determination of the case. Otherwise, if the effectiveness of any order, award, or
decision of the industrial court in cases involving strikes and lockouts would be suspended
pending appeal then it can happen that the coercive powers of the industrial court in the
settlement of the labor disputes in those cases would be rendered useless and nugatory.
The University points to Section 6 of Commonwealth Act No. 103 which provides that "Any
violation of any order, award, or decision of the Court of Industrial Relations shall after such
order, award or decision has become final, conclusive and executory constitute contempt of
court," and contends that only the disobedience of orders that are final (meaning one that is
not appealed) may be the subject of contempt proceedings. We believe that there is no
inconsistency between the above-quoted provision of Section 6 and the provision of Section
14 of Commonwealth Act No. 103. It will be noted that Section 6 speaks of order, award or
decision that is executory. By the provision of Section 14 an order, award or decision of the
Court of Industrial Relations in cases involving strikes and lockouts are
immediately executory, so that a violation of that order would constitute an indirect contempt
of court.
We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is also
authorized under Section 19 of Commonwealth Act No. 103 which provides as follows:
SEC. 19. Implied condition in every contract of employment.—In every contract of
employment whether verbal or written, it is an implied condition that when any
dispute between the employer and the employee or laborer has been submitted to
the Court of Industrial Relations for settlement or arbitration pursuant to the
provisions of this Act . . . and pending award, or decision by the Court of such
dispute . . . the employee or laborer shall not strike or walk out of his employment
when so enjoined by the Court after hearing and when public interest so requires,
and if he has already done so, that he shall forthwith return to it, upon order of the
Court, which shall be issued only after hearing when public interest so requires or
when the dispute cannot, in its opinion, be promptly decided or settled; and if the
employees or laborers fail to return to work, the Court may authorize the employer
to accept other employees or laborers. A condition shall further be implied that while
such dispute . . . is pending, the employer shall refrain from accepting other
employees or laborers, unless with the express authority of the Court, and shall
permit the continuation in the service of his employees or laborers under the last
terms and conditions existing before the dispute arose. . . . A violation by the
employer or by the employee or laborer of such an order or the implied contractual
condition set forth in this section shall constitute contempt of the Court of Industrial
Relations and shall be punished by the Court itself in the same manner with the
same penalties as in the case of contempt of a Court of First Instance. . . .
We hold that the CIR acted within its jurisdiction when it ordered the arrest of the officers of
the University upon a complaint for indirect contempt filed by the Acting Special Prosecutor of
the CIR in CIR Case V-30, and that order was valid. Besides those ordered arrested were not
yet being punished for contempt; but, having been charged, they were simply ordered
arrested to be brought before the Judge to be dealt with according to law. Whether they are
guilty of the charge or not is yet to be determined in a proper hearing.
Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being
questioned in Case G.R. No. L-21278 before this Court in a special civil action for certiorari.
The University did not appeal from that order. In other words, the only question to be resolved
in connection with that order in CIR Case V-30 is whether the CIR had jurisdiction, or had
abused its discretion, in issuing that order. We hold that the CIR had jurisdiction to issue that
order, and neither did it abuse its discretion when it issued that order.
In Case G.R. No. L-21462 the University appealed from the order of Judge Villanueva of the
CIR in Case No. 1183-MC, dated April 6, 1963, granting the motion of the Faculty Club to
withdraw its petition for certification election, and from the resolution of the CIR en banc, dated
June 5, 1963, denying the motion to reconsider said order of April 6, 1963. The ground of the
Faculty Club in asking for the withdrawal of that petition for certification election was because
the issues involved in that petition were absorbed by the issues in Case 41-IPA. The
University opposed the petition for withdrawal, but at the same time it moved for the dismissal
of the petition for certification election.
It is contended by the University before this Court, in G.R. L-21462, that the issues of
employer-employee relationship between the University and the Faculty Club, the alleged
status of the Faculty Club as a labor union, its majority representation and designation as
bargaining representative in an appropriate unit of the Faculty Club should have been
resolved first in Case No. 1183-MC prior to the determination of the issues in Case No. 41-
IPA, and, therefore, the motion to withdraw the petition for certification election should not
have been granted upon the ground that the issues in the first case were absorbed in the
second case.
We believe that these contentions of the University in Case G.R. No. L-21462 have been
sufficiently covered by the discussion in this decision of the main issues raised in the principal
case, which is Case G.R. No. L-21278. After all, the University wanted CIR Case 1183-MC
dismissed, and the withdrawal of the petition for certification election had in a way produced
the situation desired by the University. After considering the arguments adduced by the
University in support of its petition for certiorari by way of appeal in Case G.R. No. L-21278,
We hold that the CIR did not commit any error when it granted the withdrawal of the petition
for certification election in Case No. 1183-MC. The principal case before the CIR is Case No.
41-IPA and all the questions relating to the labor disputes between the University and the
Faculty Club may be threshed out, and decided, in that case.
In Case G.R. No. L-21500 the University appealed from the order of the CIR of March 30,
1963, issued by Judge Bautista, and from the resolution of the CIR en banc promulgated on
June 28, 1963, denying the motion for the reconsideration of that order of March 30, 1963, in
CIR Case No. 41-IPA. We have already ruled that the CIR has jurisdiction to issue that order
of March 30, 1963, and that order is valid, and We, therefore, hold that the CIR did not err in
issuing that order of March 30, 1963 and in issuing the resolution promulgated on June 28,
1963 (although dated May 7, 1963) denying the motion to reconsider that order of March 30,
1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with preliminary
injunction in Case G.R. No. L-21278 is dismissed and the writs prayed for therein are denied.
The writ of preliminary injunction issued in Case G.R. No. L-21278 is dissolved. The orders
and resolutions appealed from, in Cases Nos. L-21462 and L-21500, are affirmed, with costs
in these three cases against the petitioner-appellant Feati University. It is so ordered.
Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and Castro, JJ., concur.
Reyes, J.B.L., J., concurs but reserves his vote on the teacher's right to strike.
EN BANC
G.R. No. L-17620 August 31, 1962
FAR EASTERN UNIVERSITY, petitioner,
vs.
THE COURT OF INDUSTRIAL RELATIONS, PHILIPPINE ASSOCIATION OF COLLEGES
AND UNIVERSITY PROFESSORS (PACUP) and TOMAS N. AGUIRRE, respondents.
CONCEPCION, J.:
Appeal by certiorari, taken by the Far Eastern University, hereafter referred to as the
University, from resolution of the Court of Industrial Relations sitting en banc, modifying a
decision of one of the Judges of said Court. The main facts are set forth in said decision, from
which we quote:
From the evidence on record, it appears that Tomas N. Aguirre became a faculty
member of the respondent in 1948. He was first employed at the rate of P6.00 per
hour and then was contracted to teach in the Boys' High School Department in the
same university at the rate of P30.00 per class, earning an average of P500.00 to
P600.00 a month. Aguirre joined the PACUP, a legitimate labor organization in June
1953. In July or August, 1953, upon orders of the president of the PACUP, Jose M.
Hernandez, Aguirre began to campaign and recruit members for the PACUP. As a
result of his efforts in campaigning for membership, he was able to influence seven
members from the faculty of the university (Exhibits "B", "B-1" to "B-6", inclusive). In
his campaign for membership, he approached practically all of the faculty members
of the respondent's Institute of Education and some from the Arts and Sciences,
Business Administration and Finance, but most of them were afraid to join the union.
They were afraid of any retaliation that the respondent may make because of their
joining the union.
In the year 1953, respondent formed a committee to classify all faculty members
and determine the rates of their backpay and assignments. Ninety-six of the more
than four hundred faculty members were classified as full time instructors. Aguirre
was one of those who was classified by the said committee as full time instructor in
the respondent's Institute of Education, with a fixed compensation of P450.00 a
month, effective September 1, 1953.
During the months of December, 1953 up to May, 1954, for teaching in the Far
Eastern University, respondent herein, Aguirre was paid the following: December,
1953-P210.00; January, 1954 — P302.40; February, 1954 — P313.20; March, 1954
— P249.00. In June, 1954, respondent stopped giving him teaching assignments.
Aguirre claims that in June, 1954, he was no longer given an assignment because
of his union activities while respondent claims that Aguirre was not given
assignment because of decreased enrollment in the university. He further avers that
after recruiting some members, his classification as full time instructor changed to
reserved full time instructor and his teaching load was decreased to two hours a
day. Hence, his reduced earnings from December, 1953 to May, 1954 as previously
mentioned. His salary as a full time instructor was P5,400.00 per annum or P450.00
per month, irrespective of his teaching load. Respondent, thru its witness, the dean
in the Institute of Education where Aguirre was teaching, testified and admitted that
the reason for Aguirre's not receiving any teaching assignment in June, 1954 was
because enrollment in the Institute of Education was going down steadily in the
Filipino Language class where Aguirre was teaching. Among the other Filipino
Language instructors are Baldomero de Jesus, Teodoro Gener, Rosario Bernards,
Dolores Gupit, Inigo Regalado, and Flordeliza Mendoza who are older members of
the faculty than Aguirre except Regalado, Bernards and Mendoza. The dean of the
Institute of Education, Luz A. Zafra, admitted also that in the assignment of subjects
to faculty members, length of service, experience, preparation and professional
growth as well as student-faculty relation were taken into consideration. Hence if
these above-mentioned factors, particularly length of service and experience, were
really taken into consideration, Aguirre a full time professor should have been given
the assignment in stead of Regalado and Mendoza who were only part time
professors and who started teaching after him. The other Tagalo instructors
(professors under the classification) who were given assignments when Aguirre was
not, are not members of the PACUP. It should also be noted that since before the
last war, Aguirre had been teaching in the University of the Philippines.
It is true that there were charges brought by respondent against Aguirre but the
same had been investigated and found to be groundless. On the other hand, Aguirre
brought charge against the respondent before the Department of Education when
his teaching load was reduced and the Director of Private Schools, in his decision of
November 9, 1954, directed the respondent to pay the salary differential which
Aguirre fail to earn from December 1, 1953 to 1954 and to give Aguirre assignment
in the college department during the first semester of the current school year under
the same condition before his teaching load was reduced. The Secretary of
Education, in his decision, dated June 22, 1955, affirmed the decision of the Director
of Private Schools and on December 8, 1956, the Executive Secretary, by authority
of the President of the Philippines affirmed the decision of the Director of Private
School as well as the Secretary of Education's decision, previously mentioned. Of
course, those proceedings in no way could considered as controlling or affecting the
case at bar. At best, they may serve as a grim reminder of the actions, of the
governmental entity that could do something to bolster the relationship between the
university and the faculty members. The allegation of respondent to the effect that it
suffered reduce enrollment in 1953-1954, hence necessitating the laying off of
Aguirre, cannot be taken into consideration after a careful examination of the
balance sheet submitted by the respondent in relation to its motion to dismiss. Said
balance sheet shows that in the 1952-1953 fiscal year, respondent made a net profit
of P158,035.25 and in 1953-1954, P258,619.98, while in 1954-1955, a net profit of
P707,003.70 and in 1955-1956, P999,766.88. The figures show that respondent
from 1952 to 1956, has been steadily increasing its income until in 1958-1959 when
it made net income of P1,511,293.42. And even on the assumption the enrollment in
the department where Aguirre was teaching reduced, still the Court cannot validly
reconcile the fact that Aguirre who was a full time professor receiving a fixed
monthly salary could not any further be given assignment the time professors and
whose length of service in the university cannot compare with that of Aguirre were
given assignment and suffered no reeducating in salary. Undoubtedly, this Court
cannot but conclude that when the respondent changed status of Aguirre from a full
time professor at P450.00 a month to that of a reserved full time professor with a
teaching load of two hours and finally got no assignments in June, 1964, it was
motivated other than decreased enrollment, especially in the case of the evidence
that Aguirre campaigned for union membership among the professors, instructors
 and teachers of the respondent and the further fact, that other full time instructors
similarly situated but are not union members did not suffer the same facts of abrupt
reduction in their teaching load and salary. As indicated, Aguirre was later deprived
of any teaching load in the Institute of Education. Even part time professors as
Panganiban, Mendoza and Regalado had assignments to the exclusion of Aguirre
who was a full time professor. This eventuality, was apparently, the fear of most of
the faculty members who refused to join the PACUP when Aguirre asked them to
become members.
Ordinarily, back wages are granted whenever there is a finding of a commission of
unfair labor practices. However, in this particular case the testimony of Aguirre,
himself as well as the documentary evidence on the record show that since June,
1958, Aguirre began teaching at the Philippine College of Commerce with an
income of P100.00 a month and on November 17, 1955, he began working as a
permanent employee in the Central Bank of the Philippines with a compensation of
P3,000.00 per annum. On September 5, 1956, his salary was raised to P3,600.00
per annum. The permanent employment obtained by Aguirre in the Central Bank of
the Philippines as well as in the Philippine College of Commerce is substantial and
under the concept of the Industrial Peace Act, his employment elsewhere in a
permanent capacity is sufficient to bar his reinstatement to his former position in the
respondent. While it may be true that his earnings with the Central Bank may be
less than that he was receiving from the Far Eastern University, yet his status with
the Central Bank, is permanent and he could teach as a sideline in any school, as in
fact he is connected with the Philippine College of Commerce, a fact that could not
happen if he were still connected with the Far Eastern University.
At the instance of the Philippine Association of Colleges and University Professors, hereafter
referred to as the PACUP, and/or Tomas N. Aguirre, on September 28, 1954, an Acting
Prosecutor of the Court of Industrial Relations filed a complaint for unfair labor practice
against the University, which later moved on November 17, 1954, to dismiss the complaint.
Subsequently, or on February 4, 1955, the complainant and/or the offended party, Tomas N.
Aguirre filed a motion to withdraw said complaint upon the ground that there was a decision of
the Director of Private Schools ordering his reinstatement and the payment of back wages, as
well as wage differential, and that the University was "using the pendency" of the case "as a
ground for not complying with the said decision". Acting upon this latter motion, on March 29,
1955, the Court dismissed said complaint. However, on August 30, 1955 the order of
dismissal was, on motion of the complainant dated April 22, 1955, set aside for the reason
that the expected amicable settlement of the case had not materialized. On October 16, 1955,
the University filed a "supplemental pleading" to its motion to dismiss of November 17, 1954
both of which were denied by the Court on June 23, 1956. Later on the University filed its
answer and, the issue having been joined, the case was tried, after which Judge Arsenio L.
Martinez of said Court rendered the aforementioned decision finding the University guilty of
unfair labor practice and sentencing said institution to pay to Aguirre the salary differential due
him from December 1, 1953 to May 31, 1954, based on Aguirre's salary of P450.00 a month,
as well as back wages at the same rate, from June 1, 1954 to November 17, 1955, after
deducting therefrom the compensation paid to him by the Philippine College of Commerce
from June 1, 1955 to November 17, 1955, as well as to cease and desist from further
committing unfair labor practices. However, said Judge did not order the reinstatement of
Aguirre in the University, upon the ground that his employment in the Central Bank of the
Philippines, is, within the purview of the Industrial Peace Act, a substantial equivalent of his
position as full time instructor in said University.
On motion for reconsideration filed by the complainant, a majority of the judges of said Court
sitting en banc, affirmed the decision of Judge Martinez, insofar as the commission of unfair
labor practice charged and the payment of the salary differential and back wages are
concerned, but held that Aguirre's employment in the Central Bank and the Philippine College
of Commerce are not the substantial equivalent of his aforementioned position as full time
instructor in the University, and, accordingly, modified said decision by, likewise, sentencing
the University to reinstate Tomas N. Aguirre, in addition to paying him the aforementioned
wages differential and back wages plus "other emoluments". Hence this appeal by certiorari
taken by the University. The Court of Industrial Relation, as one of the appellees herein, has
filed a motion, which we consider as its answer, to dismiss the appeal for lack of merit upon
the ground that appellant raises no question of law.
Appellant's contention is that the employment of Aguirre in the Central Bank and his teaching
load in the Philippine College of Commerce are substantially equivalent to his former position
in the University. Upon the other hand, the resolution appealed reached the opposite
conclusion for the following reasons:
(a) Aguirre's work in the respondent university is that of a professor, ]while his work
in the Central Bank is clerical in nature;
(b) As professor Aguirre's maximum teaching period is five (5) hours daily; while in
the bank he works eight (8) hours a day;
(c) Although his work in the bank allows him to teach part time in the Philippine
College of Commerce for one hour, he could also do the same work even if he were
employed in the university; and
(d) Aguirre was receiving from the respondent university P5,400.00 a year, while he
receives from the Central Bank P3,000.00 a year only. This alone fact decides the
issue, namely, that Aguirre's position in the Central Bank is not substantially
equivalent to his position in the Far Eastern University. "Any employment at lower
wage rate is not substantially equivalent employment" [Willard, Inc. (1937 2 NLRB
1094, Moorseville Cotton Mills vs. NLRB (CCA-4, 1940), 2. Labor Cases. 18.576;
110 fed. (2d) 79; Puleski Veneer Corn. (1938) 10 NLRB 136; Quidnick Dye Works,
Inc. (1937) 2 NLRB 963].
Although Mr. Aguirre was, not a professor, but a full time instructor in the University, we agree
with the opinion of the lower court, sitting en banc. In addition to the circumstances relied
upon by the latter, one important factor, not mentioned in the resolution appealed from, is
decisively in favor of the conclusion therein reached, and that is that Mr. Aguirre is an
instructor in Tagalog, and that, as such, his position as researcher in the Central Bank has no
future for him. The situation would perhaps have been different had his line been economics.
Inasmuch, however, as Mr. Aguirre has especialized in the Tagalog dialect, his work as a
researcher in the Central Bank is inferior to his job as full time instructor in the University, not
so much because his salary in the latter is substantially bigger, even if we add thereto his
emoluments in the Philippine College of Commerce, but, specially, because of the future his
position as instructor in the University offers him as a career, which is non-existent in the
Central Bank.
WHEREFORE, the resolution appealed from is hereby affirmed, with costs against petitioner.
It is so ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Parades, Dizon, Regala and Makalintal, JJ., concur.
FIRST DIVISION
G.R. No. L-32245 May 25, 1979
DY KEH BENG, petitioner,
vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET
AL., respondents.
A. M Sikat for petitioner.
D. A. Hernandez for respondents.
DE CASTRO, J.:
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial
Relations dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of
June 10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy
Keh Beng guilty of the unfair labor practice acts alleged and order him to
reinstate Carlos Solano and Ricardo Tudla to their former jobs with
backwages from their respective dates of dismissal until fully reinstated
without loss to their right of seniority and of such other rights already
acquired by them and/or allowed by law. 1
Now, Dy Keh Beng assigns the following errors 2 as having been committed by the Court of
Industrial Relations:
I less. 6
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS
SOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS
SOLANO AND TUDLA WERE DISMISSED FROM THEIR
EMPLOYMENT BY PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES
ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES
(SIC) A PATTERN OF DISCRIMINATION BY THE PETITIONER
HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY
OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED
IN THE COMPLAINT.
V connection with any current labor dispute or because of any unfair labor
RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE
RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM
THEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY
REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND
OF SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR
ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory,
for discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic
Act No. 875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano
and Ricardo Tudla for their union activities. After preliminary investigation was conducted, a
case was filed in the Court of Industrial Relations for in behalf of the International Labor and
Marine Union of the Philippines and two of its members, Solano and Tudla In his answer, Dy
Keh Beng contended that he did not know Tudla and that Solano was not his employee
because the latter came to the establishment only when there was work which he did
on pakiaw basis, each piece of work being done under a separate contract. Moreover, Dy Keh
Beng countered with a special defense of simple extortion committed by the head of the labor
union, Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by
the Court of Industrial Relations. An employee-employer relationship was found to have
existed between Dy Keh Beng and complainants Tudla and Solano, although Solano was
admitted to have worked on piece basis.4 The issue therefore centered on whether there
existed an employee employer relation between petitioner Dy Keh Beng and the respondents
Solano and Tudla .
According to the Hearing Examiner, the evidence for the complainant Union tended to show
that Solano and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15,
1955, 5 respectively, and that except in the event of illness, their work with the establishment
was continuous although their services were compensated on piece basis. Evidence likewise
showed that at times the establishment had eight (8) workers and never less than five (5);
including the complainants, and that complainants used to receive ?5.00 a day. sometimes
According to Dy Keh Beng, however, Solano was not his employee for the following reasons:
(1) Solano never stayed long enought at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
(3) order given him by Dy;
(4) When there were no orders needing his services there was nothing for
him to do;
(5) When orders came to the shop that his regular workers could not fill it
was then that Dy went to his address in Caloocan and fetched him for
these orders; and
(6) Solano's work with Dy's establishment was not continuous. , 7
According to petitioner, these facts show that respondents Solano and Tudla are only piece
workers, not employees under Republic Act 875, where an employee 8 is referred to as
shall include any employee and shag not be limited to the employee of a
particular employer unless the Act explicitly states otherwise and shall
include any individual whose work has ceased as a consequence of, or in
practice and who has not obtained any other substantially equivalent and
regular employment.
while an employer 9
includes any person acting in the interest of an employer, directly or
indirectly but shall not include any labor organization (otherwise than
when acting as an employer) or anyone acting in the capacity of officer or
agent of such labor organization.
Petitioner really anchors his contention of the non-existence of employee-employer
relationship on the control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves
Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled that:
 The test ... of the existence of employee and employer relationship is Nevertheless, considering that about eighteen (18) years have already elapsed from the time
whether there is an understanding between the parties that one is to the complainants were dismissed, 15 and that the decision being appealed ordered the
render personal services to or for the benefit of the other and recognition payment of backwages to the employees from their respective dates of dismissal until finally
by them of the right of one to order and control the other in the reinstated, it is fitting to apply in this connection the formula for backwages worked out by
performance of the work and to direct the manner and method of its Justice Claudio Teehankee in "cases not terminated sooner." 16 The formula cans for fixing
performance. the award of backwages without qualification and deduction to three years, "subject to
Petitioner contends that the private respondents "did not meet the control test in the fight of deduction where there are mitigating circumstances in favor of the employer but subject to
the ... definition of the terms employer and employee, because there was no evidence to show increase by way of exemplary damages where there are aggravating
that petitioner had the right to direct the manner and method of respondent's circumstances. 17 Considering there are no such circumstances in this case, there is no
work. 10 Moreover, it is argued that petitioner's evidence showed that "Solano worked on reason why the Court should not apply the abovementioned formula in this instance.
a pakiaw basis" and that he stayed in the establishment only when there was work. WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein
While this Court upholds the control test 11 under which an employer-employee relationship modified to an award of backwages for three years without qualification and deduction at the
exists "where the person for whom the services are performed reserves a right to control not respective rates of compensation the employees concerned were receiving at the time of
only the end to be achieved but also the means to be used in reaching such end, " it finds no dismissal. The execution of this award is entrusted to the National Labor Relations
merit with petitioner's arguments as stated above. It should be borne in mind that the control Commission. Costs against petitioner.
test calls merely for the existence of the right to control the manner of doing the work, not the SO ORDERED.
actual exercise of the right. 12 Considering the finding by the Hearing Examiner that the Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ., concur.
establishment of Dy Keh Beng is "engaged in the manufacture of baskets known as kaing, 13 it Fernandez, J., took no part.
is natural to expect that those working under Dy would have to observe, among others, Dy's
requirements of size and quality of the kaing. Some control would necessarily be exercised by
Dy as the making of the kaing would be subject to Dy's specifications. Parenthetically, since
the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor
Dy could easily exercise control on the men he employed.
As to the contention that Solano was not an employee because he worked on piece basis, this
Court agrees with the Hearing Examiner that
circumstances must be construed to determine indeed if payment by the
piece is just a method of compensation and does not define the essence
of the relation. Units of time ... and units of work are in establishments like
respondent (sic) just yardsticks whereby to determine rate of
compensation, to be applied whenever agreed upon. We cannot construe
payment by the piece where work is done in such an establishment so as
to put the worker completely at liberty to turn him out and take in another
at pleasure.
At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo
Paras who penned the decision in "Sunrise Coconut Products Co. v. Court of Industrial
Relations" (83 Phil..518, 523), opined that
judicial notice of the fact that the so-called "pakyaw" system mentioned in
this case as generally practiced in our country, is, in fact, a labor contract -
between employers and employees, between capitalists and laborers.
Insofar as the other assignments of errors are concerned, there is no showing that the Court
of Industrial Relations abused its discretion when it concluded that the findings of fact made
by the Hearing Examiner were supported by evidence on the record. Section 6, Republic Act
875 provides that in unfair labor practice cases, the factual findings of the Court of Industrial
Relations are conclusive on the Supreme Court, if supported by substantial evidence. This
provision has been put into effect in a long line of decisions where the Supreme Court did not
reverse the findings of fact of the Court of Industrial Relations when they were supported by
substantial evidence. 14
EN BANC system." The drivers did not receive salaries or wages from the owner. Their day's earning
G.R. No. L-9417 December 22, 1958 were the excess over the P7.50 they paid for the use of the jeepneys. In the event that they
ISABELO DOCE, petitioner, did not earn more, the owner did not have to pay them anything. In holding that the employer-
vs. employee relationship existed between the owner of the jeepneys and the driven even if the
WORKMEN'S COMPENSATION COMMISSION and DADO JADAO, respondents. latter worked under the boundary system, this court said:
Apacible, Suanes and Associates for petitioner. The only features that would make the relationship of lessor and lessee between the
Cipriano Manansala for respondent Dado Jadao. respondent, owner of the jeeps, and the drivers, members of the petitioner union,
are the fact that he does not pay them any fixed wage but their compensation is the
excess of the total amount of fares earned or collected by them over and above the
BAUTISTA ANGELO, J.: amount of P7.50 which they agreed to pay to the respondent, and the fact that the
Dado Jadao filed with the Workmen's Compensation Commission a claim for compensation gasoline burned by the jeeps is for the account of the drivers. These two features
against Isabelo Doce for injuries he suffered in an accident that occurred on June 11, 1953 in are not, however, sufficient to withdraw the relationship between them from that of
the City of Manila while working as a conductor of a bus belonging to the latter under a employer-employee, because the estimated earnings for fares must be over and
boundary system. Doce interposed the defense that there was no employer-employee above the amount they agreed to pay to the respondent for a ten-hour shift or ten-
relationship between him and Jadao and hence the Commission has no jurisdiction to act on hour a day operation of the jeeps. Not having any interest in the business because
the claim. they did not invest anything in the acquisition of the jeeps and did not participate in
The claim was assigned to a referee for hearing who, after receiving the evidence, rendered the management thereof, their service as drivers of the jeeps being their only
decision holding that a conductor who works under the boundary system in the operation of contribution to the business, the relationship of lessor and lessee cannot be
the bus of another is considered an employee of the latter within the meaning of the law and sustained.
as such Doce is responsible to pay to Jadao the compensation prescribed in the Workmen's The contention of petitioner that the relation that existed between him and the respondent is
Compensation Act. Consequently, the referee ordered Doce to pay Jadao a compensation of only one of lessor and lessee cannot therefore be sustained.
P757.43, plus the cost of the medical and surgical expenses incurred by the latter, and to pay Wherefore, the decision appealed from is affirmed, with costs against petitioner.
the Commission the amount of P8.00 as fees in accordance with the law. This decision was Paras, C. J., Bengzon, Padilla, Labrador, Concepcion, Reyes, J. B. L. and Endencia, JJ.,
affirmed by the Commission on July 2, 1955. Doce interposed the present petition for review. concur.
The facts as found by the Commission are: Dado Jadao was a conductor of Bus No. 9 of the
B-Twelve Liner owned and operated by Isabelo Doce who was paid under the boundary
system. His average daily earnings as conductor was P4.00, working five days a week. On
June 11, 1953, while acting as such conductor, Jadao was pinned by two buses on Quezon
Boulevard, Manila, suffering injuries on the right leg, head and left ear. He was treated in the
North General Hospital and in the National Orthopedic Hospital, and as a result he suffered
temporary total disability from June 11, 1953 to May 10, 1954 and a partial loss of the use of
his right leg.
It was also proven that under the boundary system adopted by petitioner and respondent, the
driver and conductor of the bus gave to the owner a fixed amount out of the daily earnings
derived from its operation. In this case, the conductor and the driver used to give to
respondent P15.00 daily. The owner supplied the gasoline at the beginning but its cost is later
reimbursed out of the earnings of the day. After deducting the cost of the gasoline and the
rental of P15.00, the remainder is divided between the conductor and the driver.lawphil.net
The issue to be determined is whether the employer-employee relationship existed between
the owner of the bus and the conductor considering that the latter worked under a boundary
system as explained above and is not paid directly by the former.
This case falls squarely within our ruling in National Labor Union vs. Dinglasan, 52 Off. Gaz.,
No. 4, 1933, wherein this Court held that a driver of a jeep who operates the same under the
boundary system is considered an employee within the meaning of the law and as such the
case comes under the jurisdiction of the Court of Industrial Relations. In that case, Benedicto
Dinglasan was the owner and operator of TPU jeepneys which were driven by petitioners
under verbal contracts that they will pay P7.50 for 10 hours use under the so-called "boundary
THIRD DIVISION
G.R. No. L-72654-61 January 22, 1990
ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME
BARBIN, NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO
BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING
ENTERPRISES and/or ARSENIO DE GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.
Tomas A. Reyes for private respondent.
FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermen-crew members of
the trawl fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman
Fishing Enterprises, and if so, whether or not they were illegally dismissed from their
employment.
Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one
of several fishing vessels owned and operated by private respondent De Guzman Fishing
Enterprises which is primarily engaged in the fishing business with port and office at
Camaligan, Camarines Sur. Petitioners rendered service aboard said fishing vessel in various
capacities, as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief
engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor
Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular business of "trawl"
fishing, petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de
Guzman, cashier of private respondent. As agreed upon, they received thirteen percent (13%)
of the proceeds of the sale of the fish-catch if the total proceeds exceeded the cost of crude oil
consumed during the fishing trip, otherwise, they received ten percent (10%) of the total
proceeds of the sale. The patron/pilot, chief engineer and master fisherman received a
minimum income of P350.00 per week while the assistant engineer, second fisherman, and
fisherman-winchman received a minimum income of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de
Guzman, president of private respondent, to proceed to the police station at Camaligan,
Camarines Sur, for investigation on the report that they sold some of their fish-catch at midsea
to the prejudice of private respondent. Petitioners denied the charge claiming that the same
was a countermove to their having formed a labor union and becoming members of Defender
of Industrial Agricultural Labor Organizations and General Workers Union (DIALOGWU) on
September 3, 1983.
During the investigation, no witnesses were presented to prove the charge against petitioners,
and no criminal charges were formally filed against them. Notwithstanding, private respondent
refused to allow petitioners to return to the fishing vessel to resume their work on the same
day, September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and
non-payment of 13th month pay, emergency cost of living allowance and service incentive
pay, with the then Ministry (now Department) of Labor and Employment, Regional Arbitration
Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They
uniformly contended that they were arbitrarily dismissed without being given ample time to
look for a new job.
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de
Guzman, submitted its position paper denying the employer-employee relationship between
private respondent and petitioners on the theory that private respondent and petitioners were
engaged in a joint venture. 3
After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case
for joint hearing furnishing the parties with notice and summons. On December 27, 1983, after
two (2) previously scheduled joint hearings were postponed due to the absence of private
respondent, one of the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman
II, testified, among others, on the manner the fishing operations were conducted, mode of
payment of compensation for services rendered by the fishermen-crew members, and the
circumstances leading to their dismissal. 4
On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S.
Coralde rendered a joint decision 5 dismissing all the complaints of petitioners on a finding that
a "joint fishing venture" and not one of employer-employee relationship existed between
private respondent and petitioners.
From the adverse decision against them, petitioners appealed to the National Labor Relations
Commission.
On May 30, 1985, the National Labor Relations Commission promulgated its
resolution 6 affirming the decision of the labor arbiter that a "joint fishing venture" relationship
existed between private respondent and petitioners.
Hence, the instant petition.
Petitioners assail the ruling of the public respondent NLRC that what exists between private
respondent and petitioners is a joint venture arrangement and not an employer-employee
relationship. To stress that there is an employer-employee relationship between them and
private respondent, petitioners invite attention to the following: that they were directly hired by
private respondent through its general manager, Arsenio de Guzman, and its operations
manager, Conrado de Guzman; that, except for Laurente Bautu, they had been employed by
private respondent from 8 to 15 years in various capacities; that private respondent, through
its operations manager, supervised and controlled the conduct of their fishing operations as to
the fixing of the schedule of the fishing trips, the direction of the fishing vessel, the volume or
number of tubes of the fish-catch the time to return to the fishing port, which were
communicated to the patron/pilot by radio (single side band); that they were not allowed to join
other outfits even the other vessels owned by private respondent without the permission of the
operations manager; that they were compensated on percentage commission basis of the
gross sales of the fish-catch which were delivered to them in cash by private respondent's
cashier, Mrs. Pilar de Guzman; and that they have to follow company policies, rules and
regulations imposed on them by private respondent.
Disputing the finding of public respondent that a "joint fishing venture" exists between private
respondent and petitioners, petitioners claim that public respondent exceeded its jurisdiction
and/or abused its discretion when it added facts not contained in the records when it stated
that the pilot-crew members do not receive compensation from the boat-owners except their
share in the catch produced by their own efforts; that public respondent ignored the evidence
of petitioners that private respondent controlled the fishing operations; that public respondent
did not take into account established jurisprudence that the relationship between the fishing
boat operators and their crew is one of direct employer and employee.
Aside from seeking the dismissal of the petition on the ground that the decision of the labor
arbiter is now final and executory for failure of petitioners to file their appeal with the NLRC
within 10 calendar days from receipt of said decision pursuant to the doctrine laid down in Vir-
Jen Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor
General claims that the ruling of public respondent that a "joint fishing venture" exists between
private respondent and petitioners rests on the resolution of the Social Security System (SSS)
in a 1968 case, Case No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting De
Guzman Fishing Enterprises, private respondent herein, from compulsory coverage of the
SSS on the ground that there is no employer-employee relations between the boat-owner and
the fishermen-crew members following the doctrine laid down in Pajarillo vs. SSS, 17 SCRA
1014 (1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra, that there
is no employer-employee relationship between the boat-owner and the pilot and crew
members when the boat-owner supplies the boat and equipment while the pilot and crew
members contribute the corresponding labor and the parties get specific shares in the catch
for their respective contribution to the venture, the Solicitor General pointed out that the boat-
owners in the Pajarillo case, as in the case at bar, did not control the conduct of the fishing
operations and the pilot and crew members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide the instant case on
the merits rather than to dismiss it on a mere technicality. In so doing, we exercise the
prerogative accorded to this Court enunciated in Firestone Filipinas Employees Association, et
al. vs. Firestone Tire and Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the
well-settled doctrine is that in labor cases before this Tribunal, no undue sympathy is to be
accorded to any claim of a procedural misstep, the idea being that its power be exercised
according to justice and equity and substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel
regularly engaged in trawl fishing, as in the case of petitioners herein, who spend one (1)
whole week or more 7 in the open sea performing their job to earn a living to support their
families, convince Us to adopt a more liberal attitude in applying to petitioners the 10-calendar
day rule in the filing of appeals with the NLRC from the decision of the labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984
only on July 3,1984 by their non-lawyer representative during the arbitration proceedings,
Jose Dialogo who received the decision eight (8) days earlier, or on June 25, 1984. As
adverted to earlier, the circumstances peculiar to petitioners' occupation as fishermen-crew
members, who during the pendency of the case understandably have to earn a living by
seeking employment elsewhere, impress upon Us that in the ordinary course of events, the
information as to the adverse decision against them would not reach them within such time
frame as would allow them to faithfully abide by the 10-calendar day appeal period. This
peculiar circumstance and the fact that their representative is a non-lawyer provide equitable
justification to conclude that there is substantial compliance with the ten-calendar day rule of
filing of appeals with the NLRC when petitioners filed on July 10, 1984, or seven (7) days after
receipt of the decision, their appeal with the NLRC through registered mail.
We have consistently ruled that in determining the existence of an employer-employee
relationship, the elements that are generally considered are the following (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee with respect to the means and methods by
which the work is to be accomplished. 8 The employment relation arises from contract of hire,
express or implied. 9 In the absence of hiring, no actual employer-employee relation could
exist.
From the four (4) elements mentioned, We have generally relied on the so-called right-of-
control test 10 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.
The test calls merely for the existence of the right to control the manner of doing the work, not
the actual exercise of the right. 11
The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the
ruling that a "joint fishing venture" existed between private respondent and petitioners is not
applicable in the instant case. There is neither light of control nor actual exercise of such right
on the part of the boat-owners in the Pajarillo case, where the Court found that the pilots
therein are not under the order of the boat-owners as regards their employment; that they go
out to sea not upon directions of the boat-owners, but upon their own volition as to when, how
long and where to go fishing; that the boat-owners do not in any way control the crew-
members with whom the former have no relationship whatsoever; that they simply join every
trip for which the pilots allow them, without any reference to the owners of the vessel; and that
they only share in their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case.
The conduct of the fishing operations was undisputably shown by the testimony of Alipio
Ruga, the patron/pilot of 7/B Sandyman II, to be under the control and supervision of private
respondent's operations manager. Matters dealing on the fixing of the schedule of the fishing
trip and the time to return to the fishing port were shown to be the prerogative of private
respondent. 12 While performing the fishing operations, petitioners received instructions via a
single-side band radio from private respondent's operations manager who called the
patron/pilot in the morning. They are told to report their activities, their position, and the
number of tubes of fish-catch in one day. 13 Clearly thus, the conduct of the fishing operations
was monitored by private respondent thru the patron/pilot of 7/B Sandyman II who is
responsible for disseminating the instructions to the crew members.
The conclusion of public respondent that there had been no change in the situation of the
parties since 1968 when De Guzman Fishing Enterprises, private respondent herein, obtained
a favorable judgment in Case No. 708 exempting it from compulsory coverage of the SSS law
is not supported by evidence on record. It was erroneous for public respondent to apply the
factual situation of the parties in the 1968 case to the instant case in the light of the changes
in the conditions of employment agreed upon by the private respondent and petitioners as
discussed earlier.
Records show that in the instant case, as distinguished from the Pajarillo case where the crew
members are under no obligation to remain in the outfit for any definite period as one can be
the crew member of an outfit for one day and be the member of the crew of another vessel the
next day, the herein petitioners, on the other hand, were directly hired by private respondent,
through its general manager, Arsenio de Guzman, and its operations manager, Conrado de
Guzman and have been under the employ of private respondent for a period of 8-15 years in
various capacities, except for Laurente Bautu who was hired on August 3, 1983 as assistant
engineer. Petitioner Alipio Ruga was hired on September 29, 1974 as patron/captain of the
fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968 until he was promoted
as chief engineer of the fishing vessel; Jose Parma was employed on September 29, 1974 as
assistant engineer; Jaime Barbin started as a pilot of the motor boat until he was transferred
as a master fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as
winchman on August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of employment,
nevertheless the hiring of petitioners to perform work which is necessary or desirable in the
usual business or trade of private respondent for a period of 8-15 years since 1968 qualify
them as regular employees within the meaning of Article 281 of the Labor Code as they were
indeed engaged to perform activities usually necessary or desirable in the usual fishing
business or occupation of private respondent. 14
Aside from performing activities usually necessary and desirable in the business of private
respondent, it must be noted that petitioners received compensation on a percentage
commission based on the gross sale of the fish-catch i.e. 13% of the proceeds of the sale if
the total proceeds exceeded the cost of the crude oil consumed during the fishing trip,
otherwise only 10% of the proceeds of the sale. Such compensation falls within the scope and
meaning of the term "wage" as defined under Article 97(f) of the Labor Code, thus:
(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 included 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. . . .
The claim of private respondent, which was given credence by public respondent, that
petitioners get paid in the form of share in the fish-catch which the patron/pilot as head of the
team distributes to his crew members in accordance with their own understanding 15 is not
supported by recorded evidence. Except that such claim appears as an allegation in private
respondent's position paper, there is nothing in the records showing such a sharing scheme
as preferred by private respondent.
Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly
sold their fish-catch at midsea without the knowledge and consent of private respondent,
petitioners were unjustifiably not allowed to board the fishing vessel on September 11, 1983 to
resume their activities without giving them the opportunity to air their side on the accusation
against them unmistakably reveals the disciplinary power exercised by private respondent
over them and the corresponding sanction imposed in case of violation of any of its rules and
regulations. The virtual dismissal of petitioners from their employment was characterized by
undue haste when less extreme measures consistent with the requirements of due process
should have been first exhausted. In that sense, the dismissal of petitioners was tainted with
illegality.
Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private
respondent virtually resulting in their dismissal evidently contradicts private respondent's
theory of "joint fishing venture" between the parties herein. A joint venture, including
partnership, presupposes generally a parity of standing between the joint co-venturers or
partners, in which each party has an equal proprietary interest in the capital or property
contributed 16 and where each party exercises equal lights in the conduct of the business. 17 It
would be inconsistent with the principle of parity of standing between the joint co-venturers as
regards the conduct of business, if private respondent would outrightly exclude petitioners
from the conduct of the business without first resorting to other measures consistent with the
nature of a joint venture undertaking, Instead of arbitrary unilateral action, private respondent
should have discussed with an open mind the advantages and disadvantages of petitioners'
action with its joint co-venturers if indeed there is a "joint fishing venture" between the parties.
But this was not done in the instant case. Petitioners were arbitrarily dismissed
notwithstanding that no criminal complaints were filed against them. The lame excuse of
private respondent that the non-filing of the criminal complaints against petitioners was for
humanitarian reasons will not help its cause either.
We have examined the jurisprudence on the matter and find the same to be supportive of
petitioners' stand. In Negre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew
members who were recruited by one master fisherman locally known as "maestro" in charge
of recruiting others to complete the crew members are considered employees, not industrial
partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973)
where petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not
the employer of the fishermen crew members because of an alleged partnership agreement
between him, as financier, and Simplicio Panganiban, as his team leader in charge of
recruiting said fishermen to work for him, we affirmed the finding of the WCC that there
existed an employer-employee relationship between the boat-owner and the fishermen crew
members not only because they worked for and in the interest of the business of the boat-
owner but also because they were subject to the control, supervision and dismissal of the
boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong; that
while these fishermen crew members were paid in kind, or by "pakiao basis" still that fact did
not alter the character of their relationship with Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112
SCRA 159 (1982), we held that the employer-employee relationship between the crew
members and the owners of the fishing vessels engaged in deep sea fishing is merely
suspended during the time the vessels are drydocked or undergoing repairs or being loaded
with the necessary provisions for the next fishing trip. The said ruling is premised on the
principle that all these activities i.e., drydock, repairs, loading of necessary provisions, form
part of the regular operation of the company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution
of the National Labor Relations Commission dated May 30,1985 is hereby REVERSED and
SET ASIDE. Private respondent is ordered to reinstate petitioners to their former positions or
any equivalent positions with 3-year backwages and other monetary benefits under the law.
No pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin and Cortés, JJ., concur.
Feliciano, J., concurs in the result.
EN BANC
G.R. No. L-21696 February 25, 1967
VISAYAN STEVEDORE TRANSPORTATION COMPANY (VISTRANCO) and RAFAEL
XAUDARO, petitioners,
vs.
COURT OF INDUSTRIAL RELATIONS, UNITED WORKERS' & FARMERS' ASSOCIATION
(UWFA) VENANCIO DANO-OG, BUENAVENTURA AGARCIO and 137
others, respondents.
Pelaez, Jalandoni & Jamir for petitioners.
Luis B. Presbiterio for respondents.
Mariano B. Tuason for respondent Court of Industrial Relations.
CONCEPCION, C.J.:
Appeal by certiorari, taken by the Visayan Stevedoring Transportation Co. — hereinafter
referred to as the Company — and Rafael Xaudaro from an order of the Court of Industrial
Relations the dispositive part of which reads:
The Court, finding respondents guilty of unfair labor practice as charged, directs
them to cease and desist from such unfair labor practice and to reinstate the
complainants, with back wages from the date they were laid off until reinstated.
The Company is engaged in the loading and unloading of vessels, with a branch office in
Hinigaran, Negros Occidental, under the management of said Rafael Xaudaro. Its workers are
supplied by the United Workers and Farmers Association, a labor organization — hereinafter
referred to as UWFA — whose men (affiliated to various labor unions) have regularly worked
as laborers of the Company during every milling season since immediately after World War II
up to the milling season immediately preceding November 11, 1955, when the Company
refused to engage the services of Venancio Dano-og, Buenaventura, Agarcio and 137 other
persons named in the complaint filed in case No. 62-ULP-Cebu of the Court of Industrial
Relations — and hereinafter referred to as the Complainants — owing, they claim, to their
union activities. At the behest of the UWFA and the Complainants, a complaint for unfair labor
practice was, accordingly, filed against the Company and Xaudaro with the Court of Industrial
Relations — hereinafter referred to as the CIR — in which it was docketed as Case No. 62-
ULP-Cebu. In due course, its Presiding Judge issued the order appealed from, which was
affirmed by the CIR sitting en banc. Hence this petition for review by certiorari.
The issues raised in this appeal, are (1) whether there is employer-employee relationship
between the Company and the Complainants; (2) whether the Company has been guilty of
unfair labor practice; and (3) whether the order of reinstatement of Complainants, with
backpay, is a reversible error.1äwphï1.ñët
With respect to the first question, the Company maintains that it had never had an employer-
employee relationship with the Complainants, the latter's services having allegedly been
engaged by the UWFA not by the Company, and that, in any event, whatever contractual
relation there may have been between the Company and the Complainants had ceased at the
end of each milling season, so that the Company can not be guilty of unfair labor practice in
refusing to renew said relation at the beginning of the milling season in November, 1955.
This pretense is untenable. Although Complainants, through the labor union to which they
belong, form part of UWFA, there was no independent contract between the latter, as an
organization, and the Company. After the first milling season subsequently to the liberation of
the Philippines, Complainants merely reported for work, at the beginning of each succeeding
milling season, and their services were invariably availed of by the Company, although an
officer of the UWFA or union concerned determined the laborers who would work at a given
time, following a rotation system arranged therefor.
In the performance of their duties, Complainants worked, however, under the direction and
control of the officers of the Company, whose paymaster, or disbursing officer paid the
corresponding compensation directly to said Complainants, who, in turn, acknowledged
receipt in payrolls of the Company. We have already held that laborers working under these
conditions are employees of the Company,1 in the same manner as watchmen or security
guards furnished, under similar circumstances, by watchmen or security agencies,2 inasmuch
as the agencies and/or labor organizations involved therein merely performed the role of a
representative or agent of the employer in the recruitment of men needed for the operation of
the latter's business.3
As regards the alleged termination of employer-employee relationship between the Company
and the Complainants at the conclusion of each milling season, it is, likewise, settled that the
workers concerned are considered, not separated from the service, but, merely on leave of
absence, without pay, during the off-season, their employer-employee relationship being
merely deemed suspended, not severed, in the meanwhile.4
Referring to the unfair labor practice charge against the Company, we find, with the CIR, that
said charge is substantially borne out by the evidence of record, it appearing that the workers
not admitted to work beginning from November, 1955, were precisely those belonging to the
UWFA and the Xaudaro, the Company Branch Manager, had told them point-blank that
severance of their connection with the UWFA was the remedy, if they wanted to continue
working with the Company.
As to the payment of back wages, the law5 explicitly vests in the CIR discretion to order the
reinstatement with back pay of laborers dismissed due to union activities, and the record does
not disclose any cogent reason to warrant interference with the action taken by said Court.6
Wherefore, the order and resolution appealed from are hereby affirmed, with costs against
petitioners herein. It is so ordered.
Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ.,
concur.
EN BANC
G.R. No. 109704 January 17, 1995
ALFREDO B. FELIX, petitioner,
vs.
DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO BAÑEZ, JR., in
his capacity as Administrator, both of the National Center for Mental Health, and the
CIVIL SERVICE COMMISSION, respondents.
KAPUNAN, J.:
Taking advantage of this Court's decisions involving the removal of various civil servants
pursuant to the general reorganization of the government after the EDSA Revolution,
petitioner assails his dismissal as Medical Specialist I of the National Center for Mental Health
(formerly the National Mental Hospital) as illegal and violative of the constitutional provision on
security of tenure allegedly because his removal was made pursuant to an invalid
reorganization.
In Mendoza vs. Quisumbing1 and the consolidated cases involving the reorganization of
various government departments and agencies we held:
We are constrained to set aside the reorganizations embodied in these
consolidated petitions because the heads of departments and agencies
concerned have chosen to rely on their own concepts of unlimited
discretion and "progressive" ideas on reorganization instead of showing
that they have faithfully complied with the clear letter and spirit of the two
Constitutions and the statutes affecting reorganization.2
In De Guzman vs. CSC3 , we upheld the principle, laid down by Justice J.B.L. Reyes in Cruz
vs. Primicias4 that a valid abolition of an office neither results in a separation or removal,
likewise upholding the corollary principle that "if the abolition is void, the incumbent is deemed
never to have ceased to hold office," in sustaining therein petitioner's right to the position she
held prior to the reorganization.
The instant petition on its face turns on similar facts and issues, which is, that petitioner's
removal from a permanent position in the National Center for Mental Health as a result of the
reorganization of the Department of Health was void.
However, a closer look at the facts surrounding the instant petition leads us to a different
conclusion.
After passing the Physician's Licensure Examinations given by the Professional Regulation
Commission in June of 1979, petitioner, Dr. Alfredo B. Felix, joined the National Center for
Mental Health (then the National Mental Hospital) on May 26, 1980 as a Resident Physician
with an annual salary of P15,264.00.5 In August of 1983, he was promoted to the position of
Senior Resident Physician6 a position he held until the Ministry of Health reorganized the
National Center for Mental Health (NCMH) in January of 1988, pursuant to Executive Order
No. 119.
Under the reorganization, petitioner was appointed to the position of Senior Resident
Physician in a temporary capacity immediately after he and other employees of the NCMH
allegedly tendered their courtesy resignations to the Secretary of Health. 7 In August of 1988,
petitioner was promoted to the position of Medical Specialist I (Temporary Status), which
position was renewed the following year.8
In 1988, the Department of Health issued Department Order No. 347 which required board
certification as a prerequisite for renewal of specialist positions in various medical centers,
hospitals and agencies of the said department. Specifically, Department Order No. 347
provided that specialists working in various hospitals and branches of the Department of
Health be recognized as "Fellows" of their respective specialty societies and/or "Diplomates"
of their specialty boards or both. The Order was issued for the purpose of upgrading the
quality of specialties in DOH hospitals by requiring them to pass rigorous theoretical and
clinical (bedside) examinations given by recognized specialty boards, in keeping up with
international standards of medical practice.
Upon representation of the Chiefs of Hospitals of various government hospitals and medical
centers, (then) Secretary of Health Alfredo Bengzon issued Department Order No. 347
providing for an extension of appointments of Medical Specialist positions in cases where the
termination of medical specialist who failed to meet the requirement for board
certification might result in the disruption of hospital services. Department Order No. 478
issued the following guidelines:
1. As a general policy, the provision of Department Order No. 347, Sec. 4
shall apply unless the Chief of Hospital requests for exemption, certifies
that its application will result in the disruption of the delivery service
together with the steps taken to implement Section 4, and submit a plan of
action, lasting no more than 3-years, for the eventual phase out of non-
Board certified medical specialties.
2. Medical specialist recommended for extension of appointment shall
meet the following minimum criteria:
a. DOH medical specialist certified
b. Has been in the service of the Department at least
three (3) years prior to December 1988.
c. Has applied or taken the specialty board
examination.
3. Each recommendation for extension of appointment must be
individually justified to show not only the qualification of the
recommendee, but also what steps he has taken to be board certified.
4. Recommendation for extension of appointment shall be evaluated on a
case to case basis.
5. As amended, the other provisions of Department Order No. 34/s. 1988
stands.
Petitioner was one of the hundreds of government medical specialist who would have been
adversely affected by Department Order No. 347 since he was no yet accredited by the
Psychiatry Specialty Board. Under Department Order No. 478, extension of his appointment
remained subject to the guidelines set by the said department order. On August 20, 1991,
after reviewing petitioner's service record and performance, the Medical Credentials
Committee of the National Center for Mental Health recommended non-renewal of his
appointment as Medical Specialist I, informing him of its decision on August 22, 1991. He was,
however, allowed to continue in the service, and receive his salary, allowances and other
benefits even after being informed of the termination of his appointment.
On November 25, 1991, an emergency meeting of the Chiefs of Service was held to discuss,
among other matters, the petitioner's case. In the said meeting Dr. Vismindo de Grecia,
petitioner's immediate supervisor, pointed out petitioner's poor performance, frequent
tardiness and inflexibility as among the factors responsible for the recommendation not to
renew his appointment.9 With one exception, other department heads present in the meeting
expressed the same opinion, 10 and the overwhelming concensus was for non-renewal. The
matter was thereafter referred to the Civil Service Commission, which on February 28, 1992
ruled that "the temporary appointment (of petitioner) as Medical Specialist I can be terminated
at any time . . ." and that "[a]ny renewal of such appointment is within the discretion of the
appointing authority." 11 Consequently, in a memorandum dated March 25, 1992 petitioner
was advised by hospital authorities to vacate his cottage since he was no longer with said
memorandum petitioner filed a petition with the Merit System Protection Board (MSPB)
complaining about the alleged harassment by respondents and questioning the non-renewal
of his appointment. In a Decision rendered on July 29, 1992, the (MSPB) dismissed
petitioner's complaint for lack of merit, finding that:
As an apparent incident of the power to appoint, the renewal of a
temporary appointment upon or after its expiration is a matter largely
addressed to the sound discretion of the appointing authority. In this case,
there is no dispute that Complainant was a temporary employee and his
appointment expired on August 22, 1991. This being the case, his re-
appointment to his former position or the renewal of his temporary
appointment would be determined solely by the proper appointing
authority who is the Secretary, Department of Health upon the favorable
recommendation of the Chief of Hospital III, NCMH. The Supreme Court in
the case of Central Bank vs. Civil Service Commission G.R. Nos. 80455-
56 dated April 10, 1989, held as follows:
The power of appointment is essentially a political question involving
considerations of wisdom which only the appointing authority can decide.
In this light, Complainant therefore, has no basis in law to assail the non-
renewal of his expired temporary appointment much less invoke the aid of
this Board cannot substitute its judgment to that of the appointing authority
nor direct the latter to issue an appointment in the complainant's favor.
Regarding the alleged Department Order secured by the complainant from
the Department of Health (DOH), the Board finds the same
inconsequential. Said Department Order merely allowed the extension of
tenure of Medical Specialist I for a certain period but does not mandate
the renewal of the expired appointment.
The Board likewise finds as baseless complainant's allegation of harassment. It should be
noted that the subsistence, quarters and laundry benefits provided to the Complainant were in
connection with his employment with the NCMH. Now that his employment ties with the said
agency are severed, he eventually loses his right to the said benefits. Hence, the Hospital
Management has the right to take steps to prevent him from the continuous enjoyment
thereof, including the occupancy of the said cottage, after his cessation form office.
In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to have been
tainted with any legal infirmity, thus rendering as baseless, this instant complaint.
Said decision was appealed to the Civil Service Commission which dismissed the same in its
Resolution dated December 1, 1992. Motion for Reconsideration was denied in CSC
Resolution No. 93-677 dated February 3, 1993, hence this appeal, in which petitioner
interposes the following assignments of errors:
I traditional tests for determining employer-employee relationships, but because the focus of
THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN
HOLDING THAT BY SUBMITTING HIS COURTESY RESIGNATION AND
ACCEPTING HIS TEMPORARY APPOINTMENT PETITIONER HAD
EFFECTIVELY DIVESTED HIMSELF OF HIS SECURITY OF TENURE,
CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY
RESIGNATION AND ACCEPTANCE OF APPOINTMENT.
II
THE RESPONDENT COMMISSION IN NOT DECLARING THAT THE
CONVERSION OF THE PERMANENT APPOINTMENT OF PETITIONER
TO TEMPORARY WAS DONE IN BAD FAITH IN THE GUISE OF
REORGANIZATION AND THUS INVALID, BEING VIOLATIVE OF THE
PETITIONER'S RIGHT OF SECURITY OF TENURE.
Responding to the instant petition, 12 the Solicitor General contends that 1) the petitioner's
temporary appointment after the reorganization pursuant to E.O. No. 119 were valid and did
not violate his constitutional right of security of tenure; 13 2) petitioner is guilty of estoppel or
laches, having acquiesced to such temporary appointments from 1988 to 1991; 14 and 3) the
respondent Commission did not act with grave abuse of discretion in affirming the petitioner's
non-renewal of his appointment at the National Center for Mental Hospital.15
We agree.
The patent absurdity of petitioner's posture is readily obvious. A residency or resident
physician position in a medical specialty is never a permanent one. Residency connotes
training and temporary status. It is the step taken by a physician right after post-graduate
internship (and after hurdling the Medical Licensure Examinations) prior to his recognition as a
specialist or sub-specialist in a given field.
A physician who desires to specialize in Cardiology takes a required three-year accredited
residency in Internal Medicine (four years in DOH hospitals) and moves on to a two or three-
year fellowship or residency in Cardiology before he is allowed to take the specialty
examinations given by the appropriate accrediting college. In a similar manner, the accredited
Psychiatrist goes through the same stepladder process which culminates in his recognition as
a fellow or diplomate (or both) of the Psychiatry Specialty Board. 16 This upward movement
from residency to specialist rank, institutionalized in the residency training process,
guarantees minimum standards and skills and ensures that the physician claiming to be a
specialist will not be set loose on the community without the basic knowledge and skills of his
specialty. Because acceptance and promotion requirements are stringent, competitive, and
based on merit. acceptance to a first year residency program is no guaranty that the physician
will complete the program. Attribution rates are high. Some programs are pyramidal.
Promotion to the next post-graduate year is based on merit and performance determined by
periodic evaluations and examinations of knowledge, skills and bedside manner. 17 Under this
system, residents, specialty those in university teaching hospitals 18 enjoy their right to
security of tenure only to the extent that they periodically make the grade, making the situation
quite unique as far as physicians undergoing post-graduate residencies and fellowships are
concerned. While physicians (or consultants) of specialist rank are not subject to the same
stringent evaluation procedures, 19 specialty societies require continuing education as a
requirement for accreditation for good standing, in addition to peer review processes based on
performance, mortality and morbidity audits, feedback from residents, interns and medical
students and research output. The nature of the contracts of resident physicians meet
residency is training, they are neither here nor there. Moreover, stringent standards and
requirements for renewal of specialist-rank positions or for promotion to the next post-
graduate residency year are necessary because lives are ultimately at stake.
Petitioner's insistence on being reverted back to the status quo prior to the reorganizations
made pursuant to Executive Order No. 119 would therefore be akin to a college student
asking to be sent back to high school and staying there. From the position of senior resident
physician, which he held at the time of the government reorganization, the next logical step in
the stepladder process was obviously his promotion to the rank of Medical Specialist I, a
position which he apparently accepted not only because of the increase in salary and rank but
because of the prestige and status which the promotion conferred upon him in the medical
community. Such status, however, clearly carried with it certain professional responsibilities
including the responsibility of keeping up with the minimum requirements of specialty rank, the
responsibility of keeping abreast with current knowledge in his specialty rank, the
responsibility of completing board certification requirements within a reasonable period of
time. The evaluation made by the petitioner's peers and superiors clearly showed that he was
deficient in a lot of areas, in addition to the fact that at the time of his non-renewal, he was not
even board-certified.
It bears emphasis that at the time of petitioner's promotion to the position of Medical Specialist
I (temporary) in August of 1988, no objection was raised by him about the change of position
or the temporary nature of designation. The pretense of objecting to the promotion to
specialist rank apparently came only as an afterthought, three years later, following the non-
renewal of his position by the Department of Health.
We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of his
temporary Specialist I contracts in 1989 and 1990, clearly demonstrating his acquiescence to
— if not his unqualified acceptance of the promotion (albeit of a temporary nature) made in
1988. Whatever objections petitioner had against the earlier change from the status of
permanent senior resident physician to temporary senior physician were neither pursued nor
mentioned at or after his designation as Medical Specialist I (Temporary). He is therefore
estopped from insisting upon a right or claim which he had plainly abandoned when he, from
all indications, enthusiastically accepted the promotion. His negligence to assert his claim
within a reasonable time, coupled with his failure to repudiate his promotion to a temporary
position, warrants a presumption, in the words of this Court in Tijam vs. Sibonghanoy, 20that
he "either abandoned (his claim) or declined to assert it."
There are weighty reasons of public policy and convenience which demand that any claim to
any position in the civil service, permanent, temporary of otherwise, or any claim to a violation
of the constitutional provision on security of tenure be made within a reasonable period of
time. An assurance of some degree of stability in the civil service is necessary in order to
avoid needless disruptions in the conduct of public business. Delays in the statement of a right
to any position are strongly discouraged. 21 In the same token, the failure to assert a claim or
the voluntary acceptance of another position in government, obviously without reservation,
leads to a presumption that the civil servant has either given up his claim of has already
settled into the new position. This is the essence of laches which is the failure or neglect, for
an unreasonable and unexplained length of time to do that which, by exercising due diligence,
could or should have been done earlier; it is the negligence or omission to assert a right within
a reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. 22
In fine, this petition, on its surface, seems to be an ordinary challenge against the validity of
the conversion of petitioner's position from permanent resident physician status to that of a
temporary resident physician pursuant to the government reorganization after the EDSA
Revolution. What is unique to petitioner's averments is the fact that he hardly attempts to
question the validity of his removal from his position of Medical Specialist I (Temporary) of the
National Center for Mental Health, which is plainly the pertinent issue in the case at bench.
The reason for this is at once apparent, for there is a deliberate and dishonest attempt to a
skirt the fundamental issue first, by falsely claiming that petitioner was forced to submit his
courtesy resignation in 1987 when he actually did not; and second, by insisting on a right of
claim clearly abandoned by his acceptance of the position of Medical Specialist I (Temporary),
which is hence barred by laches.
The validity of the government reorganization of the Ministry of Health pursuant to E.O. 119
not being the real issue in the case at bench, we decline to make any further pronouncements
relating to petitioner's contentions relating to the effect on him of the reorganization except to
say that in the specific case of the change in designation from permanent resident physician
to temporary resident physician, a change was necessary, overall, to rectify a ludicrous
situation whereby some government resident physicians were erroneously being classified as
permanent resident physicians in spite of the inherently temporary nature of the designation.
The attempts by the Department of Health not only to streamline these positions but to make
them conform to current standards of specialty practice is a step in a positive direction. The
patient who consults with a physician of specialist rank should at least be safe in the
assumption that the government physician of specialist rank: 1.) has completed all necessary
requirements at least assure the public at large that those in government centers who claim to
be specialists in specific areas of Medicine possess the minimum knowledge and skills
required to fulfill that first and foremost maxim, embodied in the Hippocratic Oath, that they do
their patients no harm. Primium non nocere.
Finally, it is crystal clear, from the facts of the case at bench, that the petitioner accepted a
temporary appointment (Medical Specialist I). As respondent Civil Service Commission has
correctly pointed out 23, the appointment was for a definite and renewable period which, when
it was not renewed, did not involve a dismissal but an expiration of the petitioner's term.
ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo,
Quiason, Puno, Vitug and Mendoza, JJ., concur.
FIRST DIVISION
G.R. No. 76452 July 26, 1994
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE LOS
REYES, petitioners,
vs.
HON. ARMANDO ANSALDO, in his capacity as Insurance Commissioner, and RAMON
MONTILLA PATERNO, JR., respondents.
Ponce Enrile, Cayetano, Reyes and Manalastas for petitioners.
Oscar Z. Benares for private respondent.
QUIASON, J.:
This is a petition for certiorari and prohibition under Rule 65 of the Revised Rules of Court,
with preliminary injunction or temporary restraining order, to annul and set aside the Order
dated November 6, 1986 of the Insurance Commissioner and the entire proceedings taken in
I.C. Special Case No. 1-86.
We grant the petition.
The instant case arose from a letter-complaint of private respondent Ramon M. Paterno, Jr.
dated April 17, 1986, to respondent Commissioner, alleging certain problems encountered by
agents, supervisors, managers and public consumers of the Philippine American Life
Insurance Company (Philamlife) as a result of certain practices by said company.
In a letter dated April 23, 1986, respondent Commissioner requested petitioner Rodrigo de los
Reyes, in his capacity as Philamlife's president, to comment on respondent Paterno's letter.
In a letter dated April 29, 1986 to respondent Commissioner, petitioner De los Reyes
suggested that private respondent "submit some sort of a 'bill of particulars' listing and citing
actual cases, facts, dates, figures, provisions of law, rules and regulations, and all other
pertinent data which are necessary to enable him to prepare an intelligent reply" (Rollo, p. 37).
A copy of this letter was sent by the Insurance Commissioner to private respondent for his
comments thereon.
On May 16, 1986, respondent Commissioner received a letter from private respondent
maintaining that his letter-complaint of April 17, 1986 was sufficient in form and substance,
and requested that a hearing thereon be conducted.
Petitioner De los Reyes, in his letter to respondent Commissioner dated June 6, 1986,
reiterated his claim that private respondent's letter of May 16, 1986 did not supply the
information he needed to enable him to answer the letter-complaint.
On July 14, a hearing on the letter-complaint was held by respondent Commissioner on the
validity of the Contract of Agency complained of by private respondent.
In said hearing, private respondent was required by respondent Commissioner to specify the
provisions of the agency contract which he claimed to be illegal.
On August 4, private respondent submitted a letter of specification to respondent
Commissioner dated July 31, 1986, reiterating his letter of April 17, 1986 and praying that the
provisions on charges and fees stated in the Contract of Agency executed between Philamlife
and its agents, as well as the implementing provisions as published in the agents' handbook,
agency bulletins and circulars, be declared as null and void. He also asked that the amounts
of such charges and fees already deducted and collected by Philamlife in connection
therewith be reimbursed to the agents, with interest at the prevailing rate reckoned from the
date when they were deducted.
Respondent Commissioner furnished petitioner De los Reyes with a copy of private
respondent's letter of July 31, 1986, and requested his answer thereto.
Petitioner De los Reyes submitted an Answer dated September 8, 1986, stating inter alia that:
(1) Private respondent's letter of August 11, 1986 does not contain any of
the particular information which Philamlife was seeking from him and
which he promised to submit.
(2) That since the Commission's quasi-judicial power was being invoked
with regard to the complaint, private respondent must file a verified formal
complaint before any further proceedings.
In his letter dated September 9, 1986, private respondent asked for the resumption of the
hearings on his complaint.
On October 1, private respondent executed an affidavit, verifying his letters of April 17, 1986,
and July 31, 1986.
In a letter dated October 14, 1986, Manuel Ortega, Philamlife's Senior Assistant Vice-
President and Executive Assistant to the President, asked that respondent Commission first
rule on the questions of the jurisdiction of the Insurance Commissioner over the subject matter
of the letters-complaint and the legal standing of private respondent.
On October 27, respondent Commissioner notified both parties of the hearing of the case on
November 5, 1986.
On November 3, Manuel Ortega filed a Motion to Quash Subpoena/Notice on the following
grounds;
1. The Subpoena/Notice has no legal basis and is premature because:
(1) No complaint sufficient in form and contents has been filed;
(2) No summons has been issued nor received by the respondent De los Reyes,
and hence, no jurisdiction has been acquired over his person;
(3) No answer has been filed, and hence, the hearing scheduled on November 5,
1986 in the Subpoena/Notice, and wherein the respondent is required to appear, is
premature and lacks legal basis.
II. The Insurance Commission has no jurisdiction over;
(1) the subject matter or nature of the action; and
(2) over the parties involved (Rollo, p. 102).
In the Order dated November 6, 1986, respondent Commissioner denied the Motion to Quash.
The dispositive portion of said Order reads:
NOW, THEREFORE, finding the position of complainant thru counsel
tenable and considering the fact that the instant case is an informal
administrative litigation falling outside the operation of the aforecited
memorandum circular but cognizable by this Commission, the hearing
officer, in open session ruled as it is hereby ruled to deny the Motion to
Quash Subpoena/Notice for lack of merit (Rollo, p. 109).
Hence, this petition.
II
The main issue to be resolved is whether or not the resolution of the legality of the Contract of
Agency falls within the jurisdiction of the Insurance Commissioner.
Private respondent contends that the Insurance Commissioner has jurisdiction to take
cognizance of the complaint in the exercise of its quasi-judicial powers. The Solicitor General,
upholding the jurisdiction of the Insurance Commissioner, claims that under Sections 414 and
415 of the Insurance Code, the Commissioner has authority to nullify the alleged illegal
provisions of the Contract of Agency.
III
The general regulatory authority of the Insurance Commissioner is described in Section 414 of
the Insurance Code, to wit:
The Insurance Commissioner shall have the duty to see that all laws
relating to insurance, insurance companies and other insurance matters,
mutual benefit associations and trusts for charitable uses are faithfully
executed and to perform the duties imposed upon him by this Code, . . .
On the other hand, Section 415 provides:
In addition to the administrative sanctions provided elsewhere in this
Code, the Insurance Commissioner is hereby authorized, at his discretion,
to impose upon insurance companies, their directors and/or officers and/or
agents, for any willful failure or refusal to comply with, or violation of any
provision of this Code, or any order, instruction, regulation or ruling of the
Insurance Commissioner, or any commission of irregularities, and/or
conducting business in an unsafe and unsound manner as may be
determined by the the Insurance Commissioner, the following:
(a) fines not in excess of five hundred pesos a day;
and
(b)
suspension, or
after due
hearing,
removal of
directors
and/or officers
and/or agents.
A plain reading of the above-quoted provisions show that the Insurance Commissioner has
the authority to regulate the business of insurance, which is defined as follows:
(2) The term "doing an insurance business" or "transacting an insurance
business," within the meaning of this Code, shall include
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as
a vocation and not as merely incidental to any other legitimate business or
activity of the surety; (c) doing any kind of business, including a
reinsurance business, specifically recognized as constituting the doing of
an insurance business within the meaning of this Code; (d) doing or
proposing to do any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this
Code. (Insurance Code, Sec. 2[2]; Emphasis supplied).
Since the contract of agency entered into between Philamlife and its agents is not included
within the meaning of an insurance business, Section 2 of the Insurance Code cannot be
invoked to give jurisdiction over the same to the Insurance Commissioner. Expressio unius est
exclusio alterius.
With regard to private respondent's contention that the quasi-judicial power of the Insurance
Commissioner under Section 416 of the Insurance Code applies in his case, we likewise rule
in the negative. Section 416 of the Code in pertinent part, provides:
The Commissioner shall have the power to adjudicate claims and
complaints involving any loss, damage or liability for which an insurer may
be answerable under any kind of policy or contract of insurance, or for
which such insurer may be liable under a contract of suretyship, or for
which a reinsurer may be used under any contract or reinsurance it may
have entered into, or for which a mutual benefit association may be held
liable under the membership certificates it has issued to its members,
where the amount of any such loss, damage or liability, excluding interest,
costs and attorney's fees, being claimed or sued upon any kind of
insurance, bond, reinsurance contract, or membership certificate does not
exceed in any single claim one hundred thousand pesos.
A reading of the said section shows that the quasi-judicial power of the Insurance
Commissioner is limited by law "to claims and complaints involving any loss, damage or
liability for which an insurer may be answerable under any kind of policy or contract of
insurance, . . ." Hence, this power does not cover the relationship affecting the insurance
company and its agents but is limited to adjudicating claims and complaints filed by the
insured against the insurance company.
While the subject of Insurance Agents and Brokers is discussed under Chapter IV, Title I of
the Insurance Code, the provisions of said Chapter speak only of the licensing requirements
and limitations imposed on insurance agents and brokers.
The Insurance Code does not have provisions governing the relations between insurance
companies and their agents. It follows that the Insurance Commissioner cannot, in the
exercise of its quasi-judicial powers, assume jurisdiction over controversies between the
insurance companies and their agents.
We have held in the cases of Great Pacific Life Assurance Corporation v. Judico, 180 SCRA
445 (1989), and Investment Planning Corporation of the Philippines v. Social Security
Commission, 21 SCRA 904 (1962), that an insurance company may have two classes of
agents who sell its insurance policies: (1) salaried employees who keep definite hours and
work under the control and supervision of the company; and (2) registered representatives,
who work on commission basis.
Under the first category, the relationship between the insurance company and its agents is
governed by the Contract of Employment and the provisions of the Labor Code, while under
the second category, the same is governed by the Contract of Agency and the provisions of
the Civil Code on the Agency. Disputes involving the latter are cognizable by the regular
courts.
WHEREFORE, the petition is GRANTED. The Order dated November 6, 1986 of the
Insurance Commission is SET ASIDE.
SO ORDERED.
Cruz, Davide, Jr. and Kapunan, JJ., concur.
Bellosillo, J,. is on leave.
SECOND DIVISION
G.R. No. L-37790 March 25, 1976
MAFINCO TRADING CORPORATION, petitioner,
vs.
THE HON. BLAS F. OPLE, in his capacity as Secretary of Labor, The NATIONAL LABOR
RELATIONS COMMISSION RODRIGO REPOMANTA and REY MORALDE, respondents.
Tanada, Sanchez, Tanada & Tanada for petitioner.
Jose T. Maghari for private respondents.
Solicitor General Estelito P. Mendoza for all other respondents.
AQUINO, J.:
Mafinco Trading Corporation (Mafinco for short) filed these special civil actions of certiorari
and prohibition in order to annul the decision of the Secretary of Labor dated April 16, 1973. In
that decision the Secretary reversed an order of the old National Labor Relations Commission
(NLRC) and held that the NLRC had jurisdiction over the complaint lodged by the Federacion
Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas (FOITAF) against Mafinco
for having dismissed Rodrigo Repomanta and Rey Moralde (NLRC Case No. LR-086). The
voluminous record reveals the following facts:
Peddling contracts and their termination. — On April 30, 1968 Cosmos Aerated Water
Factory, Inc., hereinafter called Cosmos, a firm based at Malabon, Rizal, appointed Mafinco
as its sole distributor of Cosmos soft drinks in Manila. On May 31, 1972 Rodrigo Repomanta
and Mafinco executed a peddling contract whereby Repomanta agreed to "buy and sell"
Cosmos soft drinks. Rey Moralde entered into a similar contract. The contracts were to remain
in force for one year unless sooner terminated by either party upon five days notice to the
other.1 The contract with Repomanta reads as follows:
PEDDLING CONTRACT
KNOW ALL MEN BY THESE PRESENTS:
This CONTRACT, entered into by and between:
The MAFINCO TRADING CORPORATION, a domestic corporation duly
organized and existing under the laws of the Philippines, doing business
at Rm. 715 Equitable Bank Bldg., Juan Luna St., Manila, under the style
MAFINCO represented in this act by its General Manager, SALVADOR C.
PICA, duly authorized for the purpose and hereinafter referred to as
MAFINCO, and RODRIGO REPOMANTA, married/single, of legal age,
and a resident of 70-D Bo. Potrero, MacArthur Highway, Malabon, Rizal
hereinafter referred to as PEDDLER, WITNESSETH:
WHEREAS, MAFINCO has been appointed as the exclusive distributor of
'COSMOS' Soft Drink Products for and within the City of Manila;
WHEREAS, the PEDDLER is desirous of buying and selling in Manila the
'COSMOS' Soft Drink Products handled by MAFINCO;
NOW THEREFORE, for and in consideration of the foregoing premises
and the covenants and conditions hereinafter set forth, the parties hereto
has agreed as follows:
1. That in consideration of the competence of the PEDDLER and his ability to promote mutual
benefits for the parties hereto, MAFINCO shall provide the PEDDLER with a delivery truck
with which the latter shall exclusively peddle the soft drinks of the former, under the terms set
forth herein;
2. The PEDDLER himself shall, carefully and in strict observance to traffic regulations, drive
the truck furnished him by MAFINCO or should he employ a driver or helpers such driver or
helpers shall be his employees under his direction and responsibility and not that of
MAFINCO, and their compensation including salaries, wages, overtime pay, separation pay,
bonus or other remuneration and privileges shall be for the PEDDLER'S own account; The
PEDDLER shall likewise bind himself to comply with the provisions of the Social Security Act
and all the applicable labor laws in relation to his employees;
3. The PEDDLER shall be responsible for any damage to property, death or injuries to
persons or damage to the truck used by him caused by his own acts or omission or that of his
driver and helpers;
4. MAFINCO shall furnish the gasoline and oil to run the said truck in business trips, bear the
cost of maintenance and repairs of the said truck arising from ordinary wear and tear;
5. The PEDDLER shall secure at his own expense all necessary licenses and permits
required by law or ordinance and shall bear any and all expenses which may be incurred by
him in the sales of the soft drink products covered by the contract;
6. All purchases by the PEDDLER shall be charged to him at a price of P2.52 per case of 24
bottles, ex-warehouse; PROVIDED, However, that if the PEDDLER purchases a total of not
less than 250 cases a day, he shall be entitled further to a Peddler's Discount of P11.00;
7. Upon the execution of this contract, the PEDDLER shall give a cash bond in the amount of
P1,500.00 against which MAFINCO shall charge the PEDDLER with any unpaid account at
the end of each day or with any damage to the truck of other account which is properly
chargeable to the PEDDLER; within 30 days after the termination of this contract, the cash
bond, after deducting proper charges, shall be returned to the PEDDLER;
8. The PEDDLER shall liquidate and pay all his accounts to MAFINCO'S authorized
representative at the end of each day, and his failure to do so shall subject his cash bond at
once to answer for any unliquidated accounts;
9. This contract shall be effective up to May 31, 1973 and supersedes any or all other
previous contracts, if any, that may have been entered into between the parties; However,
either of the parties may terminate the same upon five (5) days prior notice to the other;
10. Upon the. termination of this contract, unless the same is renewed, the delivery truck and
such other equipment furnished by MAFINCO to the PEDDLER shall be returned by the latter
in good order and workable condition, ordinary wear and tear excepted, und shall promptly
settle his outstanding account if any, with MAFINCO;
11. To assure performance by the PEDDLER of his obligation to his employees under the
Social Security Act, the applicable labor laws and for damages suffered by third persons,
PEDDLER shall furnish a performance bond of P1,000.00 in favor of MAFINCO from a
SURETY COMPANY acceptable to MAFINCO.
IN WITNESS WHEREOF, the parties hereto have signed this instrument
at the City of Manila, Philippines, this May 31, 1972.
MAFINCO TRADING CORPORATION
By:
(Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR C. PICA
Peddler General Manager
(Witnesses and notarial acknowledgment are omitted)
On December 7, 1972 Mafinco, pursuant to section 9 of the contract, terminated the same.
The notice to Repomanta reads as follows:
Dear Mr. Repomanta:
 This has reference to the Peddling Contract you executed with the
Mafinco Trading Corporation on May 31, 1972. Please be informed that in
accordance with the provisions of paragraph 9 of the said peddling
contract, we are hereby serving notice of termination thereof effective on
December 12, 1972.
Yours truly,
(Sgd.) SALVADOR C. PICA
General Manager
Complaints of Repomanta and Moralde and NLRCs dismissal thereof. — Four days later or on
December 11, 1972 Repomanta and Moralde, through their union, the FOITAF, filed a
complaint with the NLRC, charging the general manager of Mafinco with having violated
Presidential Decree No. 21, issued on October 14, 1972, which created the NLRC and which
was intended "to promote industrial peace, maximize productivity and secure social justice for
all". The brief complaint reads as follows:
Hon. Amado Gat Inciong, Chairman
National Labor Relations Commission
Phoenix Bldg., Intramuros,
Manila
Sir:
Pursuant to the Presidential Decree No. 21, Sections 2 and 11, the
FOITAF files a complaint against SALVADOR C. PICA, General Manager
of MAFINCO TRADING CORP. located at Room 715, Equitable Bank
Bldg., Juan Luna, Manila, for terminating union officials (sic), Mr. Rodrigo
Refumanta and Mr. Rey Moralde, which is a violation of the above
mentioned decree.
Notice of termination is herewith attach (sic).
We anticipate your due attention and assistance.
Respectfully yours,
(Signed by National Secretary of FOITAF)
Mafinco filed a motion to dismiss the complaint on the ground that the NLRC had no
jurisdiction because Repomanta and Moralde were not its employees but were independent
contractors. It stressed that there was termination of the contract, not a dismissal of an
employee. In Repomanta's case, it pointed out that he was registered with the Social Security
System as an employer who, as a peddler, paid premiums for his employees; that he secured
the mayor's permit to do business and the corresponding peddler's license and paid the
privilege tax and that he obtained workmen's compensation insurance for his own employees
or helpers. It alleged that Moralde was in the same situation as Repomanta.
Mafinco further alleged that the Bureau of Labor Relations denied the application of peedlers
for registration as a labor union because they were not employees but employers in their own
right of delivery helpers (Decision dated January 4, 1966 by the Registrar of Labor
Organizations in Registration Proceeding No. 4, In the Matter of Cosmos Supervisors
Association-PTGWO); that the Court of Industrial Relations in Case No. 4399-ULP, Cosmos
Supervisors' Association — PTGWO vs. Manila Cosmos Aerated Water Factory, Inc., held in
its decision dated July 17, 1967 that the peddlers were not employees of Cosmos, and that
the Court of Appeals held in Rapajon vs. Fong Kui and Figueras vs. Asierto, CA-G.R. No.
19477-R and 21397-R, March 18, 1958 that the delivery helpers of the peddlers were not
employees of Cosmos, a ruling which this Court refused to review (L-14072-74, Rapajon vs.
Fung Kui, Resolution dated July 16, 1958).
The complaint was referred to a factfinder who in a lengthy report dated January 22, 1973
found, after "exhaustively and impartially" considering the contentions of the parties, that the
peddlers were employers or "independent businessmen', as held by the Court of Industrial
Relations and the Court of Appeals, and that that holding has the force of res judicata. The
factfinder recommended the dismissal of the complaint.
The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and Ricardo O. Castro,
adopted that recommendation in its order dated February 2, 1973. That order, which analyzes
the peddling contract and reviews the court rulings on the matter, is quoted below:
The question of whether peddling contracts of the kind entered into
between the parties give rise to an employer-employee relationship is not
new. Nor are the contracts themselves of recent vintage.
For at least twenty years respondent MAFINCO and its predecessor
and/or principal, the Manila-Cosmos Aerated Water Factory, have entered
into contracts with peddlers, under the terms of which the latter buy from
the former at a special price, and sell in Manila, the former's soft drink
products. The distributor provides the peddler with a delivery truck with the
distributor answering for the cost of fuel and maintenance. If a peddler
buys a certain number of cases or more a day, he is entitled to a fixed
amount of peddler's discount.
The peddler himself drives the truck but if he engages a driver or helpers,
the latter are his employees and he assumes all the responsibilities of an
employer in relation to them. He also obtains at his own expense all
licenses and permits required by law of salesmen.
The peddler clears his accounts with the distributor at the end of each
day, and unpaid accounts are charged against the cash deposit or bond
which he gives the distributor upon the execution of the peddling contract.
He answers for damages caused by him or his employees to third
persons.
Ruling upon this type of contracts, and the practices and relationships that
attended its implementation, the Court of Appeals, in CA-G.R. No. 19477-
R, said that it did not create a relationship of employer and employee; that
the peddlers under such contract were not employees of the manufacturer
or distributor, and accordingly dismissed the complaints in the said case.
(The peddler-complainants in that case were claiming overtime pay and
damages, among others.) Elevated to the Supreme Court on review (G.R.
Nos.
L-14072 to L-14074, 2 August 1958), the decision of the Court of Appeals
was in effect affirmed, for the petition for review was dismissed by the
Supreme Court 'for being factual and for lack of merit!
The Court of Industrial Relations is of the same persuasion. After inquiring
extensively into substantially the same terms and conditions of peddling
contracts and the practices and relationships that went into their
implementation, the Court said in Case No. 4399ULP that the peddlers of
the Manila-Cosmos Aerated Water Factory were not employees of the
latter.
 These precedents apply squarely to the case at hand. The complainants
here have not shown that their peddling contracts with the respondent
differ in any substantial degree from those that were at issue in the Court
of Industrial Relations, the Court of Appeals and the Supreme Court in the
cases cited above. Indeed, a comparison between the contracts involved
in those cases and those in the instant litigation do not show any
difference that would warrant a different conclusion than that reached by
those courts. If at all, the additional stipulations in the present contracts
strengthen the position that the complainant peddlers are independent
contractors or businessman, not employees of the respondent.
Nor has there been shown any substantial change in the old practices of
peddlers vis-a-vis the distributor or manufacturer. The points raised by the
complainants in their pleadings regarding these practices were extensively
discussed by the CIR in the ULP case above referred to.
We are not prepared to depart from this rule of long standing. It is the law
of the case.
We therefore hold that the complainants in this case were not employees
of MAFINCO and Presidential Decree No. 21 does not I apply to them.
Complainants' appeal and the Labor Secretary's decision that they were employees of
Mafinco. — Complainants Repomanta and Moralde appealed to the Secretary of Labor. They
argued that the NLRC erred (1) in holding that they were independent contractors and not
employees; (2) in relying on the peddler's contract to determine the existence of employer-
employee relationship; (3) in anchoring its decisions on precedents which have only
persuasive force and which did not rule squarely on the issue of employer-employee
relationship, and (4) in dismissing their complaint.
As stated at the outset, the Secretary in his decision reversed al the NLRC order. He ruled
that Repomanta and Moralde were employees of Mafinco and that, consequently, the NLRC
had jurisdiction over their complaint. The Secretary directed the NLRC to hear the case on the
merits.
The Secretary found that the complainants "were driver-salesmen of the company, driving the
trucks and distributing the products of the company" and that they were not independent
contractors because they had no capital of their own. That finding was based on the following
considerations:
(1) That the contracts are Identical; (2) that the complainants were
originally plant drivers' of the company; (3) that the complainants had no
capital of their own; (4) that their delivery trucks were provided by the
company; (5) that the use of the trucks were 'exclusively' for peddling the
products of the company; (6) that they were required to observe
regulations; (7) that they were required to drive the trucks; (8) that the
company furnished the gasoline and oil to run the said trucks in business
trips; (9) that the company shouldered the cost of maintenance and repair
of the said trucks arising from an ordinary wear and tear; (10) that the
company required them to secure the necessary licenses and permits;
(11) that the company prohibited them from selling the company's
products higher than the fixed price of the company; and (12) that they
and their helpers were paid on commission basis.
The Secretary relied on this Court's ruling that a person who possesses no capital or money
of his own to pay his obligations to his workers but relies-entirely upon the contract price to be
paid by the company, falls short of the requisites or conditions necessary for an independent
contractor (Mansal vs. Gocheco Lumber Co., 96 Phil. 941).
He observed that "behind the peddling cloak there was in fact employee-employer
relationship". He said:
While, generally, written employment contracts are held sufficient in
determining the nature of employment, such contracts, however, cannot
be always held conclusive where the actual circumstances of employment
indicate otherwise. For example, some employers, in order to avoid or
evade coverage of the Workmen's Compensation Act, enter into pseudo
contracts with their employees who are named as 'employers' or
'independent contractors'. Such 'written contracts as distinguished from
oral Agreements, purporting to make persons independent contractors, no
matter how 'adroitly framed', can be carefully scanned and the real
relationship ascertained' (Glielmi vs. Netherlands Dairy Co., 254 N.Y. 60
(1930), Morabe & Inton, Workmen's Compensation Act. p. 69).
If the Peddling Contract were carefully scanned, the conclusion may be
drawn that the contract is but a device and subterfuge to evade coverage
under the labor laws. There is more than meets the eye in item 2 of the
Peddling Contract which required the peddlers to do that which the law
intends the employer to have done.
In fact, such contracts, as the one in question, exempting or tending to
exempt the employers from their legal obligations to their workers are null
and void under Sec. 7 of the Workmen's Compensation Act, as amended,
which states:
Any contract, regulation or device of any sort intended to exempt the
employer from all or part of the liability created by this Act shall be null and
void.
To rule otherwise would be to open the floodgate to employers in this
territory to evade liabilities to their workers by simply letting contracts for
the doing of their business. 'Such construction could not only narrow the
provisions of the Act, but would defeat its intent and purposes in their
entirety. (Andoyo vs. Manila Railroad Co., supra).
The motion for the reconsideration of the decision was denied by the Secretary in his order of
July 16,1973.
The Committee's report that the peddlers are independent contractors. — On July 25, 1973
Mafinco moved for the clarification of the decision by inquiring whether the question of
employee-employer relationship would be included in the hearing on the merits.
Action on the said motion was deferred until the receipt of the report of the committee created
to study the status of peddlers of Cosmos products. On September 3, 1973- the Secretary
directed the committee composed of Ernesto Valencia, Vicente R. Guzman and Eleo Cayapas
to conduct an in-depth study of the actual relationship existing between the Cosmos Bottling
Co. and its peddlers.
The committee in its report dated September 17, 1973 arrived at the conclusion that the
relationship actually existing between Cosmos and Mafinco, on one hand, and the peddlers of
Cosmos products, on the other, is not one of employer and employee and "that the peddlers
are independent contractors".
The committee after a perusal of the record of NLRC Case No. LR-086 interviewed twenty
peddlers, an officer of Cosmos and an officer of Mafinco. In the conduct of the interviews it 44
observed judicious adherence to impartiality and openmindedness but with a modicum of
friendliness and much of informality". The report reads in part as follows:
(1) Implications of the 'Agreement To Peddler Soft Drinks'. — Of vital importance to the mind
of your committee is the fact that this Agreement entered into between Cosmos and the
Peddlers has, as its prefatory statement but before the enumeration of its terms and
conditions, the following:
That the Peddler has agreed to buy and sell the products of the
MANUFACTURER under the following conditions:
Similarly, the 'Peddling Contract' entered into between Mafinco and the
Peddlers. contains peculiarly Identical wordings. viz:
WHEREAS, the PEDDLER is desirious of buying and selling in Manila the
'COSMOS' Soft Drink Products handled by
MAFINCO:
It is immediately clear from the beginning that the relationship that the
parties would want to establish between them is one of buyer and seller of
the Cosmos Products. Moreover, this type of Agreement or Contract has
its roots since some twenty (20) years earlier, with modifications only with
respect to the factory price, the amount of over prices or what the
peddlers refer to as commission, and the amount pertaining to the dealer's
discount. which appear to vary depending upon the market demands.
We are, however, tempted to argue, as did the Peddlers, that this
Agreement or Contract might have been contrived as a device to evade
responsibilities imposed upon Cosmos or Mafinco under our labor laws as
well as under other national or municipal laws. Nevertheless, a close
reading thereof will show a flaw in this line of insistence, when we
consider that this type of Agreement or Contract has been substantially
the same since the beginning of this relationship. More than this, it has
withstood the test of time by pronouncements of the CIR in ULP Case No.
4399, Cosmos Supervisors Association vs. Manila Cosmos Aerated Water
Factory, Inc.' July 17, 1967; by judicial review of the Court of Appeals in
CA-G.R. Nos. 19477-R, 19478-R and 21397-R, 'Eustaquio Repajon, et al.
vs. Manila Cosmos Aerated Water Factory, Inc.', promulgated on March
18, 1958; and impliedly by resolution of the Supreme Court in G.R. Nos.
L-14072 to L-14074 when the Court of Appeals cases were appealed to
that Tribunal.
But the more basic and indeed forceful ratiocination in favor of the validity
of the Agreement or Contract which covenants that the relationship
between the Peddlers and Cosmos or Mafinco is one of buyer and seller
of the Cosmos Products on the part of the Peddlers, and, therefore, one of
an independent contractorship, finds substantive support in our Civil Code
which provides: (here arts. 1370 and 1374 of the Civil Code regarding
interpretation of contracts are quoted).
For its adjective interpretation, our Rules of Court specifically provides:
(Here parol evidence rule in see. 7, Rule 130, Rules of Court is quoted)
It must b restated at this point for purposes of emphasis that the validity of
the aforesaid Agreement or Contract has not been seriously assailed by
the parties. In fact, their rallying cause was the Agreement or Contract
itself. To strengthen these provisions of the Civil Code and the Rules of
Court, stabilized jurisprudence have held that it is elementary rule of
contract that the laws in force at the time the contract was made must
govern its interpretation and application; that the terms of the contract,
where unambiguous, are conclusive, in the absence of averment and
proof of mistake, the question being, not what intention existed in the
minds of the parties, but what intention is expressed by the language
used; that interpretation of an agreement does not include its
modifications or the creation of a new or different one; that Courts cannot
make for the parties better agreements than they themselves have been
satisfied to make, or rewrite contracts because they operate harshly or
inequitably as to one of the parties; and that there is no right to interpret
an agreement as meaning something different from what the parties
intended as expressed by the language they saw fit to employ.
xxx xxx xxx
(1) The selection and engagement of the employees.-Nothing in the Agreement to Peddler
Soft Drinks in the case of Cosmos and in the Peddling Contract in the case of Mafinco, will
reveal and we cannot logically infer therefrom, that the Peddlers were engaged as employees
of Cosmos or Mafinco. The selection of the Peddlers who will buy and sell Cosmos products is
left entirely between the parties; it is not the sole prerogative of either one of the parties. There
must be meeting of the minds in order to consummate the Agreement or Contract and no
evidence of coercion or imposition of the will of one over the other is evident or apparent from
the Peddlers' or Managements' interviews had by the members of your Committee. This test,
therefore, cannot be invoked by the Peddlers in their attempt at presenting arguments to the
effect that they are employees of Cosmos or Mafinco. Upon the other hand, the Agreement or
Contract itself provides that the Peddlers can hire helpers and drivers under their direction and
responsibility, and to whom they shall be liable for payment of 'salaries, wages, overtime pay,
separation pay, bonus and other remuneration and privileges.' As a matter of fact, drivers
were employed by Mrs. Victoria Ariz and M. Fong Kui, who are peddlers in their own right.
This evidently shows the discretion granted the peddlers to hire employees of their own.
(2) The payment of wages. — On the basis of the clear terms of the Agreement or Contract,
no mention is made of the wages of the Peddlers; neither can an inference be made that any
salary or wage is given to Peddlers. In the interviews, however, with the Peddlers, they
vehemently take the position that the 'dealer's discount' which was given to them at the rate of
Pll.50 in excess of 200 cases of Cosmos products they sell a day, constitutes their 'wages'.
The term 'wages' as defined in Section 2 of the Minimum Wage Law (Rep. Act No. 602, as
amended) is as follows:
(g) '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, commission basis, or other method of calculating the same, which is payable
by an employer to an under a written or unwritten contract of employement 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. ...
Section 10 (k) of the same law provides as follows:
(k) Notification of wage conditions. — It shall be the duty of every employer to notify his
employees at the time of hiring of the wage conditions under which they are employed, which
shall include the following particulars:
(1) The rate of wages payable;
(2) The method of calculation of wages;
(3) The periodicity of wage payment; the day, the hour and pIace of payment; and
(4) Any change with respect to any of the foregoing items.
To the Committee's mind, all these requirements have not been shown to
exist in the relationship between the Peddlers and the Cosmos or Mafinco.
If it were true that the Pedders' 'dealer's discount' is in the nature of
wages, then they must be notifed fully of the wage conditions. Moreover,
such 'wages' must be paid to them periodically at least once every two
weeks or twice a month. (See Par. (h) of See. 10 of Act No. 602, as
amended). The absence of such notification to the Peddlers and the lack
of periodicity of such payment in the manner and procedure contemplated
in the Minimum Wage Law destroy, quiet evidently, their allegation that
the 'dealer's discount' was their 'wage'. Take note that the 'dealer's
discount' was given only about a week after the end of the month, and
from the evidence submitted by Cosmos, it appears clearly that the
'dealer's discount' varies from month to month. Thus, the earnings of Mr.
Salvador Abonales, who is a Peddler, from January to August, 1973,
amounted to P12,520.70, while that of Mr. Alberto S. Garcia, for the same
period, amounted to P13,633.42, and 4 their earnings every month vary
decisively. This factor defeats factually the insistence of the Peddlers that
they are employees of Cosmos or Mafinco.
Upon the other hand, the Peddlers' declarations reveal that the wages of
their helpers are taken from the overprice or what is ordinarily termed as
'commission' of ten centavos (P0.10) per case that they get-a factor which
indicates that they are themselves employers of their helpers. In addition,
the Peddlers are reported as Employers of these helpers with the Social
Security System, and that they also purchase workmen's compensation
policies in their names as Employers of their own helpers for purposes of
workmen's compensation insurance of their liabilities, which are all in
accordance with the terms and conditions of the Agreement or Contract
and indicative of an attribute of one who is an independent merchant.
(3) The power of dismissal. — In the case of 'Rodrigo Repomanta and Rey Moralde vs.
Mafinco Trading Corp.,' NLRC Case No. LR-086, which served as one of our bases for this
study, the complainants therein appear to have complained before the National Labor
Relations Commission for being allegedly illegally dismissed or that their services were
terminated without cause. A search of the alleged dismissal however shows that the Identical
letters both dated December 7, 1972 addressed to the said complainants were not actually
what complainants pictured them to be, but the termination of the peddling in accordance with
paragraph 9 of said Contract.
xxx xxx xxx
Thus, complainants' services were not terminated, only their Peddling
Contracts with Mafinco were. The power of dismissal is not lodged with
either Mafinco or Cosmos, for based on the Agreement or Contract none
whatsoever exists. Certainly, to attribute a power of dismissal to Cosmos
or Mafinco where none exists is careless imprudence and a height of
inaccuracy. This power of dismissal by Cosmos or Mafinco is not
countenanced in the Agreement or Contract.
There is, however, an allegation by the Peddlers that the hiring and firing
of the helpers ultimately rest on Cosmos or Mafinco. This allegation
nevertheless, is controverted by Cosmos and Mafinco. Nonetheless, we
checked the basic document — the Agreement or Contract — and we find
that the hiring and, impliedly firing, we is a prerogative of the Peddlers and
not of Cosmos or Mafinco.
(4) The power to control the employee's conduct. — From the interviews had by your
Committee with both the Peddlers and the representatives of Cosmos and Mafinco, we gather
that the following findings on the power of control are substantially correct:
(a) That the delivery trucks assigned to the Peddlers are available to them
early in the morning and are free to get them, which they usually do
between 5:30 A.M. to 6:30 A.M. There was no compulsion on the part of
the Peddlers to report for work at that time, as in fact, they did not sign
any time record. The practice of getting the delivery trucks early in the
morning is more beneficial to the Peddlers than to Cosmos or Mafinco
since they can finish the peddling of Cosmos products much earlier and
spend the rest of the day at their own pleasure. The signing of the
'logbooks' is both pertinent and necessary since the trucks used in the
delivery of Cosmos products are owned by Cosmos or Mafinco and are
simply utilized by Peddlers as a measure of convenience and for
advertising purposes. But peddlers are not precluded from getting trucks
of their own should they so desire.
(b) That liaison officers (supervisors) are assigned by Cosmos or Mafinco
in definite areas routes or zones, not so much of supervision over
Peddlers, since their areas, routes or zones were already agreed upon or
pre-arranged among them through the Cosmos Peddlers Association, Inc.
of which all Peddlers are members, as principally for market analysis
since soft drinks selling is a highly competitive business, and also to
inquire or check on sales, and the result of which, report is made direct to
the Office of Cosmos or Mafinco.
(c) That the use of the uniform does not seem to be an imposition by
management of Cosmos or Mafinco upon the Peddlers, but a voluntary
arrangement among the Peddlers themselves. For, from the documents
submitted to this Committee, it appears that the Cosmos Peddlers
Association, in a meeting held on August 5, 1967, adopted a resolution to
'always wear their uniform while in the performance of their sales work,'
and in their meeting on January 25, 1969, it adopted another resolution
penalizing Peddlers who failed to wear their uniform in the amount of
P2.00 per violation. Certainly, the resolutions of the Cosmos Peddlers
Association, an independent association of Peddlers and duly registered
with the Securities and Exchange Commission, and possessing an
entirely distinct existence, cannot be taken as impositions from Cosmos or
Mafinco.
(d) That the matter of turning in of sales of collection which, if found short,
is charged against the Peddler's cash bond, is to the mind of the
Committee, giving effect to the valid terms and conditions of the
Agreement or Contract, and also an ordinary business practice which
necessarily requires liquidation of the day's accounts. We do not see any
evidence of control on the part of Cosmos or Mafinco over the activities,
including the sales, of the Cosmos products by the Peddlers themselves
who are, apparently, left to their own choices of routes, areas or zones as
pre-arranged, with no definite, much less supervised, time schedule.
(e) That in the matter of reprimand or discipline which the peddlers
attempt to project when they failed to report for work, your Committee
found no substantial evidence on this point. The evidence shows that the
peddlers are free to choose their time. Obviously, any absence that they
may incur means so much reduction from their earnings. Thus, if their
attention is incidentally called on this matter it is for the observance of
their agreements which is present in any contractual relations.
As to the aspect of employer-employee relation, therefore, between
Cosmos or Mafinco and the Peddlers, your Committee does not have
sufficient basis to reasonably sustain the stand of the Peddlers that there
is such relationship.
(c) Attributes of an independent contractor. — As a countercheck, as it
were, to the issue of employer-employee relationship your committee has
taken the task of testing such relationship against the attributes of an
independent contractor which, from the interviews and documents
submitted by the parties, appear to exists on the part of the Peddlers. The
earlier case of Andoyo vs. Manila Railroad Co., G.R. No. 34722,
promulgated on March 28, 1932, furnishes us the definition of an
'independent contractor.' Our Supreme Court of pre-war composition,
ruled:
An independent contractor is one who exercises independent employment
and contracts to do a piece of work according to his own methods and
without being subject to control of his employer except as to the resuIt of
thework. A person who has no capital or money of his own to pay his
laborers or to comply with his obligations to them, who files no bond to
answer for the fulfillment of his contract with his employer, falls short of
the requisites or conditions necessary to classify him as independent
contractor.
These requisites and conditions were reiterated in the postwar cases
of Philippine Manufacturing Co., Inc. vs. Geronimo, G. R. No. L-6968,
promulgated on November 29, 1954, and Koppel (Phil.), Inc. vs. Darlucio
et, al., G.R. No. L-14903, promulgated on August. 29, 1960. Analyzing the
definition of 'independent contractor', the following may be gathered from
the relationship between the Peddlers, on the one hand, and Cosmos or
Mafinco, on the other:
(1) Peddlers contract to sell and buy Cosmos products from Cosmos or Mafinco, the latter
furnishing the delivery truck, but the former sell Cosmos products according to their own
methods, subject to the pre-arranged routes, areas and zones, and go back to the Company
compound to return the delivery truck and to make accounting of the day's sales collection at
any time in the morning or in the afternoon. Essentially, control, if at all, extends only as to
observance of traffic regulations which is inherent in ownership of the delivery truck by
Cosmos or Mafinco and the end result which is the liquidation of the sales collection. Control
over the details of the Peddlers' sales activities seems to be farfetched in this case.
(2) Capital or money of the Peddlers to pay their own helpers is evidently within their
prerogative, although it appears that the wages of helpers are uniform at P6.00 per trip. But
can we safely say that the cash bond of Pl,500.00 by the Peddlers constitute their capital? For
big-time businessmen, this small amount may not be considered capital, but when it is taken
as a 'deposit on consignment' since the same answers for any deficiencies that the Peddlers
may incur during the day's sales collection, then it can be taken to mean 'capital' within its
signification that it allocates to every day business dealing. The amount of capital, to us, is
immaterial; it is the purpose for which the same is deposited that is most significant.
(3) The Peddlers are required under the Agreement to Peddler Soft Drinks and Peddling
Contract to put up not only the cash bond of P1,500.00, but also a performance bond of
P1,000.00 as embodied in said Agreement to Peddler Soft Drinks as follows:
(4) To assure performance by the PEDDLER of his obligation to his employees under the
Social Security Act, the applicable labor laws, and for damages suffered by third persons
PEDDLER shall furnish a performance bond of P1,000.00 in favor of the MANUFACTURER
from a surety Company acceptable to the MANUFACTURER. And, in case Performance Bond
within 30 days from the date of signing of this Contract, such failure shall be sufficient ground
for the MANUFACTURER to suspend the business relationship with the Peddler until the
Peddler complies with this provision.
Again, to the mind of your Committee, the amount of the Performance
Bond is not so relevant and material as to the purpose for which the same
is executed- which is to assure performance of the Peddlers' obligations
as employer of his helpers. This is an attribute of an independent
contractor to which the Peddlers are bound under the Agreement or
Contract.
(4) Peddlers are doing business for themselves since they took out
licenses in the City of Manila, and have paid their corresponding
professional or occupation tax to the Bureau of Internal Avenue. This fact
strengthens the Committee findings that the peddlers are carrying on a
business as independent merchants.
The Secretary in his resolution of October 18, 1973 ignored the committee's conclusion. He
clarified that the NLRC should determine whether the two complainants were illegally
dismissed and that the jurisdictional issue should not be taken up anymore.
The instant petition; the issue and the ruling thereon. — Mafinco filed the instant actions on
November 14, 1973. It prayed for a declaration that the Secretary of Labor and the NLRC had
no jurisdiction to entertain the complaints of Repomanta and Moralde; that the Secretary's
decision should be set aside, and that the NLRC and the Secretary be enjoined from further
proceeding in NLRC Case No. LR-086.
Parenthetically, it should be noted that under section 5 of Presidential Decree No. 21 the
Secretary's decision "is appealable" to the President of the Philippines (Nation Multi Service
Labor Union vs. Agcaoili, L-39741, May 30, 1975, 64 SCRA 274). However, under section 22
of the old NLRC regulations, an appeal to the President should be made only "in national
interest cases".
On the other hand, judicial review of the decision of an administrative agency or official
exercising quasi-judicial functions is proper in cases of lack of jurisdiction, error of law, grave
abuse of discretion, fraud or collusion or in case the administrative action or resolution is
"corrupt, arbitrary or capricious (San Miguel Corporation vs. Secretary of Labor, L-39195, May
16, 1975, 64 SCRA 56; Commissioner of Customs vs. Valencia, 100 Phil. 165; Villegas vs.
Auditor General, L-21352, November 29, 1966, 18 SCRA 877, 891).
After the parties had submitted their illuminating memoranda, Mafinco filed a motion in this
Court for the dismissal of the complaint in the defunct NLRC on three grounds, to wit: (1) that
the NLRC had no jurisdiction over the case because Repomanta and Moralde had not sought
reinstatement or backwages; (2) that the employer's failure to secure written clearance from
the Secretary of Labor before dismissing an employee might constitute a crime punishable
under article 327 of the Labor Code and not mere contempt, as contemplated in section 10 of
Presidential Decree No. 21, and (3) that the contempt provisions of that decree were
abrogated by the Labor Code.
Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. Ines-Melale Veneer &
Plywood, Inc., L-38088, August 30, 1974, 58 SCRA 771, where it was held that the regular
court, not the NLRC, has jurisdiction over an employee's action for damages against his
employer's act of demoting him.
Respondent Repomanta and Moralde opposed that motion to dismiss. They Pointed out that,
inasmuch as their complaint is pending in the new NLRC, this Court cannot dismiss it. They
also observed that article 327 was eliminated from the Labor Code which, as amended by
Presidential Decrees Nos. 570-A, 626 and 643, contains only 292 articles. Article 327 was
superseded by article 278 of the amended Code.
The truth is that Mafinco's motion merely adduced additional grounds to support its stand that
the Secretary of Labor had no jurisdiction over the complaint of Repomanta and Moralde.
This case was not rendered moot by the Labor Code. Although the Code abolished the old
NLRC (Art. 289), it created a new NLRC (Art. 213) and provided that cases pending before
the old NLRC should be transferred to, and processed by, the corresponding labor relations
division or the new NLRC and should be decided in accordance with Presidential Decree No.
21 and the rules and regulations adopted thereunder (Art. 290. See Sec. 5, P.D. No. 626).
The issue is whether the dismissal of Repomanta and Moralde was within the jurisdiction of
the old NLRC. If, as held by the old NLRC, it had no jurisdiction over their complaint because
they were not employees of Mafinco but independent contractors, then the Secretary of Labor
had no jurisdiction to remand the case to the NLRC for a hearing on the merits of the
complaint.
Hence, the crucial issue is whether Repomanta and Moralde were employees of Mafinco
under the peddling contract already quoted. Is the contract an employment contract or a
contract to sell or distribute Cosmos products?
The question of whether an employer-employee relationship exists in a certain situation has
bedevilled the courts. Businessmen, with the aid of lawyers, have tried to avoid the bringing
about of an employer-employee relationship in some of their enterprises because that juridical
relation spawns obligations connected with workmen's compensation, social security,
medicare, minimum wage, termination pay and unionism.
Presidential Decree No. 21 provides:
SEC. 2. The Commission shall have original and exclusive jurisdiction
over the following:
1) All matters involving employee-employer relations including all disputes and grievances
which may otherwise lead to strikes and lockouts under Republic Act No. 875;
xxx xxx xxx
SEC. 10. The President of the Philippines, on recommendation of the
Commission and the Secretary of Labor, may order the arrest and
detention of any person held in contempt by the Commission for non-
compliance and defiance of any subpoena, order or decision duly issued
by the Commission in accordance with this Decree and its implementing
rules and regulations and for any violation of the provisions of this Decree.
SEC. 11. No employer may shut down his establishment or dismiss or
terminate the services of regular employees with at least one year of
service without the written clearance of the Secretary of , Labor.
The Solicitor General, as counsel for the old NLRC and the Secretary of Labor, argues that
the question of whether Repomanta and Morale are independent contractors or employees is
factual in character and cannot be resolved by merely construing the peddling contracts; that
other relevant facts aliunde or dehors the said contracts should be taken into account, and
that the contracts were a part of an "intricate network of devices (of Mafinco and Cosmos)
developed. and perfected through the years to conceal the true nature of their relationship to
their sales agents".
Repomanta and Moralde contend that their peddling contracts were terminated because of
their activities in organizing a union among the peddlers. Annexed to their memorandum is a
joint affidavit of sixty-three sales agents of Cosmos products who described therein the nature
of their work, the organization of their union and the dismissal of Repomanta and Moralde.
Annexed to their answer is Resolution No. 921 of the Social Security Commission dated
November 16, 1972 in SSS Case No. 602 wherein it was held that peddlers and their helpers
were employees of Cosmos.
Like the Solicitor General, Repomanta and Moralde harp on the argument that the peddling
contracts were a scheme to camouflage an employer-employee relationship and thus evade
the coverage of labor laws.
The parties in their pleadings and memoranda injected conflicting factual allegations to
support their diametrically opposite contentions. From the factual angle, the case has become
highly controversial.
In a certiorari and prohibition case, like the instant case, only legal issues affecting the
jurisdiction of the tribunal, board or officer involved may be resolved on the basis of
undisputed facts. Sections 1, 2 and 3, Rule 65 of the Rules of Court require that in the verified
petition for certiorari, mandamus and prohibition the petitioner should allege "facts with
certainty".
In this case the facts have become uncertain. Controversial evidentiary facts have been
alleged. What is certain and indubitable is that a notarized peddling contract was executed.
This Court is not a trier of facts. It would be difficult, if not anomalous, to decide the
jurisdictional issue on the basis of the parties' contradictory factual submissions. The record
has become voluminous because of their efforts to persuade this Court to accept their
discordant factual statements.
Pro hac vice the issue of whether Repomanta and Moralde were employees of Mafinco or
were independent contractors should be resolved mainly in the light of their peddling
contracts. A different approach would lead this Court astray into the field of factual controversy
where its legal pronouncements would not rest on solid grounds.
A restatement of the provisions of the peddling contract is necessary in order to find out
whether under that instrument Repomanta and Moralde were independent contractors or
mere employees of Mafinco.
Under the peddling contract, Mafinco would provide the peddler with a delivery truck to be
used in the distribution of Cosmos soft drinks (Par. 1). Should the peddler employ a driver and
helpers, he would be responsible for their compensation and social security contributions and
he should comply with applicable labor laws "in relation to his employees" (Par. 2).
The peddler would be responsible for any damage to persons or property or to the truck
caused by his own acts or omissions or those of his driver and helpers (Par. 3). Mafinco would
bear the cost of gasoline and maintenance of the truck (Par. 4). The peddler would secure at
his own expense the necessary licenses and permits and bear the expenses to be incurred in
the sale of Cosmos products (Par. 5).
The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-
warehouse. Should he purchase at least 250 cases a day, he would be entitled to a peddler's
discount of eleven pesos (Par. 6). The peddler would post a cash bond in the sum of P1,500
to answer for his obligations to Mafinco (Par. 7) and another cash bond of P1,000 to answer
for his obligations to his employees (Par. 11). He should liquidate his accounts at the end of
each day (Par. 8). The contract would be effective up to May 31, 1973. Either party might
terminate it upon five days' prior notice to the other (Par. 9).
We hold that under their peddling contracts Repomanta and Moralde were not employees of
Mafinco but were independent contractors as found by the NLRC and its fact-finder and by the
committee appointed by the Secretary of Labor to look into the status of Cosmos and Mafinco
peddlers. They were distributors of Cosmos soft drinks with their own capital and employees.
Ordinarily, an employee or a mere peddler does not execute a formal contract of employment.
He is simply hired and he works under the direction and control of the employer.
Repomanta and Moralde voluntarily executed with Mafinco formal peddling contracts which
indicate the manner in which they would sell Cosmos soft drinks. That Circumstance signifies
that they were acting as independent businessmen. They were to sign or not to sign that
contract. If they did not want to sell Cosmos products under the conditions defined in that
contract; they were free to reject it.
But having signed it, they were bound by its stipulations and the consequences thereof under
existing labor laws. One such stipulation is the right of the parties to terminate the contract
upon five days' prior notice (Par. 9). Whether the termination in this case was an unwarranted
dismissal of an employee, as contended by Repomanta and Moralde, is a point that cannot be
resolved without submission of evidence. Using the contract itself as the sole criterion, the
termination should perforce be characterized as simply the exercise of a right freely stipulated
upon by the parties.
"In determining the existence of employer-employee relationship, the following elements are
generally considered, namely: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employees'
conduct-although the latter is the most important element" (Viana vs. Al-Lagadan and Piga, 99
Phil. 408, 411, citing 35 Am. Jur. 445).
On the other hand, an independent contractor is "one who exercises independent employment
and contracts to do a piece of work according to his own methods and without being subject to
control of his employer except as to the result of the work" (Mansal vs. P.P. Gocheco Lumber
Co., supra).
Among the factors to be considered are whether the contractor is carrying
on an independent business; whether the work is part of the employer's
general business; the nature and extent of the work; the skill required; the
term and duration of the relationship; the right to assign the performance
of the work to another; the power to terminate the relationship; the
existence of a contract for the performance of a specified piece of work;
the control and supervision of the work; the employer's powers and duties
with respect to the hiring, firing, and payment of the contractor's servants;
the control of the premises; the duty to supply the premises, tools,
appliances, material and labor; and the mode, manner, and terms of
payment. (56 C.J.S. 46).
Those tests to determine the existence of an employer-employee relationship or whether the
person doing a particular work for another is an independent contractor cannot be
satisfactorily applied in the instant case. It should be obvious by now that the instant case is a
penumbral, sui generis case lying on the shadowy borderline that separates an employee
from an independent contractor.
In determining whether the relationship is that of employer and employee or whether one is an
independent contractor, "each case must be determined on its own facts and all the features
of the relationship are to be considered" (56 C.J.S. 45). We are convinced that on the basis of
the peddling contract, no employer-employee relationship was created. Hence, the old NLRC
had no jurisdiction over the termination of the peddling contract.
However, this ruling is without prejudice to the right of Repomanta and Moralde and the other
peddlers to sue in the proper Court of First Instance and to ask for a reformation of the
instrument evidencing the contract or for its annulment or to secure a declaration that,
disregarding the peddling contract, the actual juridical relationship between them and Mafinco
or Cosmos is that of employer and employee. In that action a fulldress trial may be held and
the parties may introduce the evidence necessary to sustain their respective contentions.
Paragphrasing the dictum in the Quisaba case, supra, if Mafinco and Cosmos had acted
oppressively towards their peddlers, as contemplated in article 1701 of the Civil Code, then
they should file the proper action for damages in the regular courts. Where there is a right,
there is a remedy (Ubi jus, ubi remedium).
WHEREFORE, the decision, order and resolution of the Secretary of Labor in NLRC Case No.
LR-086 dated April 16, July 16 and October 18, 1973, respectively, are set aside and the
order of the NLRC dated February 2, 1973, dismissing the case for lack of jurisdiction, is
affirmed. No costs.
SO ORDERED.
Barredo, Antonio, Concepcion, Jr. and Martin, JJ., concur.
Mr. Justice Fernando is on leave.
Mr. Justice Martin was designated to sit in the Second Division.
SECOND DIVISION
G.R. No. 64948 September 27, 1994
MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.
Bito, Misa & Lozada for petitioner.
Remberto Z. Evio for private respondent.
NARVASA, C.J.:
The question before the Court here is whether or not persons rendering caddying services for
members of golf clubs and their guests in said clubs' courses or premises are the employees
of such clubs and therefore within the compulsory coverage of the Social Security System
(SSS).
That question appears to have been involved, either directly or peripherally, in three separate
proceedings, all initiated by or on behalf of herein private respondent and his fellow caddies.
That which gave rise to the present petition for review was originally filed with the Social
Security Commission (SSC) via petition of seventeen (17) persons who styled themselves
"Caddies of Manila Golf and Country Club-PTCCEA" for coverage and availment of benefits
under the Social Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial
Employees Association," with which the petitioners claimed to be affiliated. The petition,
docketed as SSC Case No. 5443, alleged in essence that although the petitioners were
employees of the Manila Golf and Country Club, a domestic corporation, the latter had not
registered them as such with the SSS.
At about the same time, two other proceedings bearing on the same question were filed or
were pending; these were:
(1) a certification election case filed with the Labor Relations Division of
the Ministry of Labor by the PTCCEA on behalf of the same caddies of the
Manila Golf and Country Club, the case being titled "Philippine Technical,
Clerical, Commercial Association vs. Manila Golf and Country Club" and
docketed as Case No. R4-LRDX-M-10-504-78; it appears to have been
resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo
who was thereafter upheld by Director Carmelo S. Noriel, denying the
Club's motion for reconsideration; 1
(2) a compulsory arbitration case initiated before the Arbitration Branch of
the Ministry of Labor by the same labor organization, titled "Philippine
Technical, Clerical, Commercial Employees Association (PTCCEA),
Fermin Lamar and Raymundo Jomok vs. Manila Golf and Country Club,
Inc., Miguel Celdran, Henry Lim and Geronimo Alejo;" it was dismissed for
lack of merit by Labor Arbiter Cornelio T. Linsangan, a decision later
affirmed on appeal by the National Labor Relations Commission on the
ground that there was no employer-employee relationship between the
petitioning caddies and the respondent Club. 2
In the case before the SSC, the respondent Club filed answer praying for the dismissal of the
petition, alleging in substance that the petitioners, caddies by occupation, were allowed into
the Club premises to render services as such to the individual members and guests playing
the Club's golf course and who themselves paid for such services; that as such caddies, the
petitioners were not subject to the direction and control of the Club as regards the manner in
which they performed their work; and hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim
for social security coverage, avowedly coming to realize that indeed there was no employment
relationship between them and the Club. The case continued, and was eventually adjudicated
by the SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and
Raymundo Jomok. The Commission dismissed the petition for lack of merit, 3ruling:
. . . that the caddy's fees were paid by the golf players themselves and not
by respondent club. For instance, petitioner Raymundo Jomok averred
that for their services as caddies a caddy's Claim Stub (Exh. "1-A") is
issued by a player who will in turn hand over to management the other
portion of the stub known as Caddy Ticket (Exh. "1") so that by this
arrangement management will know how much a caddy will be paid (TSN,
p. 80, July 23, 1980). Likewise, petitioner Fermin Llamar admitted that
caddy works on his own in accordance with the rules and regulations
(TSN, p. 24, February 26, 1980) but petitioner Jomok could not state any
policy of respondent that directs the manner of caddying (TSN, pp. 76-77,
July 23, 1980). While respondent club promulgates rules and regulations
on the assignment, deportment and conduct of caddies (Exh. "C") the
same are designed to impose personal discipline among the caddies but
not to direct or conduct their actual work. In fact, a golf player is at liberty
to choose a caddy of his preference regardless of the respondent club's
group rotation system and has the discretion on whether or not to pay a
caddy. As testified to by petitioner Llamar that their income depends on
the number of players engaging their services and liberality of the latter
(TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondent's
assertion that the caddies are never their employees in the absence of
two elements, namely, (1) payment of wages and (2) control or
supervision over them. In this connection, our Supreme Court ruled that in
the determination of the existence of an employer-employee relationship,
the "control test" shall be considered decisive (Philippine Manufacturing
Co. vs. Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco
Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel
Co., 101 Phil. 358, LVN Pictures Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also
to Investment Planning Corporation Phil. vs. SSS 21 SCRA 925).
Records show the respondent club had reported for SS coverage
Graciano Awit and Daniel Quijano, as bat unloader and helper,
respectively, including their ground men, house and administrative
personnel, a situation indicative of the latter's concern with the rights and
welfare of its employees under the SS law, as amended. The unrebutted
testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the
caddies merely intended to identify the holders as accredited caddies of
the club and privilege(d) to ply their trade or occupation within its premises
which could be withdrawn anytime for loss of confidence. This gives us a
 reasonable ground to state that the defense posture of respondent that
petitioners were never its employees is well taken.4
From this Resolution appeal was taken to the Intermediate appellate Court by the union
representing Llamar and Jomok. After the appeal was docketed 5 and some months before
decision thereon was reached and promulgated, Raymundo Jomok's appeal was dismissed at
his instance, leaving Fermin Llamar the lone appellant. 6
The appeal ascribed two errors to the SSC:
(1) refusing to suspend the proceedings to await judgment by the Labor
Relations Division of National Capital Regional Office in the certification
election case (R-4-LRD-M-10-504-78) supra, on the precise issue of the
existence of employer-employee relationship between the respondent club
and the appellants, it being contended that said issue was "a function of
the proper labor office"; and
(2) adjudicating that self same issue a manner contrary to the ruling of the
Director of the Bureau of Labor Relations, which "has not only become
final but (has been) executed or (become) res adjudicata." 7
The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of
the least importance. Nor, it would appear, did it find any greater merit in the second alleged
error. Although said Court reserved the appealed SSC decision and declared Fermin Llamar
an employee of the Manila Gold and Country Club, ordering that he be reported as such for
social security coverage and paid any corresponding benefits, 8 it conspicuously ignored the
issue of res adjudicata raised in said second assignment. Instead, it drew basis for the
reversal from this Court's ruling in Investment Planning Corporation of the Philippines
vs. Social Security System, supra 9 and declared that upon the evidence, the questioned
employer-employee relationship between the Club and Fermin Llamar passed the so-called
"control test," establishment in the case — i.e., "whether the employer controls or has
reserved the right to control the employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished," — the Club's
control over the caddies encompassing:
(a) the promulgation of no less than twenty-four (24) rules and regulations
just about every aspect of the conduct that the caddy must observe, or
avoid, when serving as such, any violation of any which could subject him
to disciplinary action, which may include suspending or cutting off his
access to the club premises;
(b) the devising and enforcement of a group rotation system whereby a
caddy is assigned a number which designates his turn to serve a player;
(c) the club's "suggesting" the rate of fees payable to the caddies.
Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid
by the players, not by the Club, that they observed no definite working hours and earned no
fixed income. It quoted with approval from an American decision 10 to the effect that: "whether
the club paid the caddies and afterward collected in the first instance, the caddies were still
employees of the club." This, no matter that the case which produced this ruling had a slightly
different factual cast, apparently having involved a claim for workmen's compensation made
by a caddy who, about to leave the premises of the club where he worked, was hit and injured
by an automobile then negotiating the club's private driveway.
That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as
already pointed out, is now among the mainways of the private respondent's defenses to the
petition for review. Considered in the perspective of the incidents just recounted, it illustrates
as well as anything can, why the practice of forum-shopping justly merits censure and punitive
sanction. Because the same question of employer-employee relationship has been dragged
into three different fora, willy-nilly and in quick succession, it has birthed controversy as to
which of the resulting adjudications must now be recognized as decisive. On the one hand,
there is the certification case [R4-LRDX-M-10-504-78), where the decision of the Med-Arbiter
found for the existence of employer-employee relationship between the parties, was affirmed
by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never
thereafter appealed according to the private respondent; on the other, the compulsory
arbitration case (NCR Case No. AB-4-1771-79), instituted by or for the same respondent at
about the same time, which was dismissed for lack of merit by the Labor Arbiter, which was
afterwards affirmed by the NLRC itself on the ground that there existed no such relationship
between the Club and the private respondent. And, as if matters were not already complicated
enough, the same respondent, with the support and assistance of the PTCCEA, saw fit, also
contemporaneously, to initiate still a third proceeding for compulsory social security coverage
with the Social Security Commission (SSC Case No. 5443), with the result already mentioned.
Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the
certification case had never become final, being in fact the subject of three pending and
unresolved motions for reconsideration, as well as of a later motion for early
resolution. 11 Unfortunately, none of these motions is incorporated or reproduced in the record
before the Court. And, for his part, the private respondent contends, not only that said
decision had been appealed to and been affirmed by the Director of the BLR, but that a
certification election had in fact been held, which resulted in the PTCCEA being recognized as
the sole bargaining agent of the caddies of the Manila Golf and Country Club with respect to
wages, hours of work, terms of employment, etc. 12 Whatever the truth about these opposing
contentions, which the record before the Court does not adequately disclose, the more
controlling consideration would seem to be that, however, final it may become, the decision in
a certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the
parties as to the existence, or non-existence, of employer-employee relationship between
them.
It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the
following essential requisites must concur: (1) there must be a final judgment or order; (2) said
judgment or order must be on the merits; (3) the court rendering the same must have
jurisdiction over the subject matter and the parties; and (4) there must be between the two
cases identity of parties, identity of subject matter and identity of cause of action. 13
Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior
Judgment" that would operate in bar of a subsequent action between the same parties for the
same cause, be adversarial, or contentious, "one having opposing parties; (is) contested, as
distinguished from an ex parte hearing or proceeding. . . . of which the party seeking relief has
given legal notice to the other party and afforded the latter an opportunity to contest it" 14 and
a certification case is not such a proceeding, as this Court already ruled:
A certification proceedings is not a "litigation" in the sense in which the
term is commonly understood, but mere investigation of a non-adversary,
fact-finding character, in which the investigating agency plays the part of a
disinterested investigator seeking merely to ascertain the desires of the
employees as to the matter of their representation. The court enjoys a
 wide discretion in determining the procedure necessary to insure the fair may work with any other golf club or he may seek employment a caddy or
and free choice of bargaining representatives by the employees.15 otherwise with any entity or individual without restriction by petitioner. . . .
Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested . . . In the final analysis, petitioner has no was of compelling the presence
issue of employer-employee relationship between present petitioner and the private of the caddies as they are not required to render a definite number of
respondent, it would logically be that rendered in the compulsory arbitration case (NCR Case hours of work on a single day. Even the group rotation of caddies is not
No. AB-4-771-79, supra), petitioner having asserted, without dispute from the private absolute because a player is at liberty to choose a caddy of his preference
respondent, that said issue was there squarely raised and litigated, resulting in a ruling of the regardless of the caddy's order in the rotation.
Arbitration Branch (of the same Ministry of Labor) that such relationship did not exist, and It can happen that a caddy who has rendered services to a player on one
which ruling was thereafter affirmed by the National Labor Relations Commission in an appeal day may still find sufficient time to work elsewhere. Under such
taken by said respondent. 16 circumstances, he may then leave the premises of petitioner and go to
In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to such other place of work that he wishes (sic). Or a caddy who is on call for
which of the conflicting ruling just adverted to should be accorded primacy, given the fact that a particular day may deliberately absent himself if he has more profitable
it was he who actively sought them simultaneously, as it were, from separate fora, and even if caddying, or another, engagement in some other place. These are things
the graver sanctions more lately imposed by the Court for forum-shopping may not be applied beyond petitioner's control and for which it imposes no direct sanctions on
to him retroactively. the caddies. . . . 18
Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is
adjudicata; on contrary, it acted correctly in doing so. reversed and set aside, it being hereby declared that the private respondent, Fermin Llamar,
Said Court’s holding that upon the facts, there exists (or existed) a relationship of employer is not an employee of petitioner Manila Golf and Country Club and that petitioner is under no
and employee between petitioner and private respondent is, however, another matter. The obligation to report him for compulsory coverage to the Social Security System. No
Court does not agree that said facts necessarily or logically point to such a relationship, and to pronouncement as to costs.
the exclusion of any form of arrangements, other than of employment, that would make the SO ORDERED.
respondent's services available to the members and guest of the petitioner. Regalado and Mendoza, JJ., concur.
As long as it is, the list made in the appealed decision detailing the various matters of conduct, Padilla, J., is on leave.
dress, language, etc. covered by the petitioner's regulations, does not, in the mind of the Puno, J., took no part.
Court, so circumscribe the actions or judgment of the caddies concerned as to leave them
little or no freedom of choice whatsoever in the manner of carrying out their services. In the
very nature of things, caddies must submit to some supervision of their conduct while enjoying
the privilege of pursuing their occupation within the premises and grounds of whatever club
they do their work in. For all that is made to appear, they work for the club to which they attach
themselves on sufference but, on the other hand, also without having to observe any working
hours, free to leave anytime they please, to stay away for as long they like. It is not pretended
that if found remiss in the observance of said rules, any discipline may be meted them beyond
barring them from the premises which, it may be supposed, the Club may do in any case even
absent any breach of the rules, and without violating any right to work on their part. All these
considerations clash frontally with the concept of employment.
The IAC would point to the fact that the Club suggests the rate of fees payable by the players
to the caddies as still another indication of the latter's status as employees. It seems to the
Court, however, that the intendment of such fact is to the contrary, showing that the Club has
not the measure of control over the incidents of the caddies' work and compensation that an
employer would possess.
The Court agrees with petitioner that the group rotation system so-called, is less a measure of
employer control than an assurance that the work is fairly distributed, a caddy who is absent
when his turn number is called simply losing his turn to serve and being assigned instead the
last number for the day. 17
By and large, there appears nothing in the record to refute the petitioner's claim that:
(Petitioner) has no means of compelling the presence of a caddy. A caddy
is not required to exercise his occupation in the premises of petitioner. He
FIRST DIVISION
G.R. No. 118101 September 16, 1996
EDDIE DOMASIG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), CATA GARMENTS
CORPORATION and/or OTTO ONG and CATALINA CO., respondents.
PADILLA, J.:
This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify and set
aside the Resolution 1of respondent National Labor Relations Commission (NLRC) rendered
on 20 September 1994 remanding the records of the case to the arbitration branch of origin
for further proceedings.
The antecedent facts as narrated by public respondent in the assailed resolution are as
follows:
The complaint was instituted by Eddie Domasig against respondent Cata
Garments Corporation, a company engaged in garments business and its
owner/manager Otto Ong and Catalina Co for illegal dismissal, unpaid
commission and other monetary claim[s]. Complainant alleged that he
started working with the respondent on July 6, 1986 as Salesman when
the company was still named Cato Garments Corporation; that three (3)
years ago, because of a complaint against respondent by its workers, its
changed its name to Cata Garments Corporation; and that on August 29,
1992, he was dismissed when respondent learned that he was being
pirated by a rival corporation which offer he refused. Prior to his dismissal,
complainant alleged that he was receiving a salary of P1,500.00 a month
plus commission. On September 3, 1992 he filed the instant complaint.
Respondent denied complainant's claim that he is a regular employee
contending that he is a mere commission agent who receives a
commission of P5.00 per piece of article sold at regular price and P2.50
per piece sold in [sic] bargain price; that in addition to commission,
complainant received a fixed allowance of P1,500.00 a month; that he had
no regular time schedule; and that the company come [sic] into existence
only on September 17, 1991. In support of its claim that complainant is a
commission agent, respondent submitted as Annexes "B" and "B-1" the
List of Sales Collections, Computation of Commission due, expenses
incurred, cash advances received for the month of January and March
1992 (Rollo, p. 22-27). Respondent further contends that complainant
failed to turn over to the respondent his collection from two (2) buyers as
per affidavit executed by these buyers (Rollo p. 28-29) and for which,
according to respondent it initiated criminal proceedings against the
complainant.
The Labor Arbiter held that complainant was illegally dismissed and
entitled to reinstatement and backwages as well as underpayment of
salary; 13th month pay; service incentive leave and legal holiday. The
Arbiter also awarded complainant his claim for unpaid commission in the
amount of P143,955.00. 2
Private respondents appealed the decision of the labor arbiter to public respondent. As
aforesaid, the NLRC resolved to remand the case to the labor arbiter for further proceeding. It
declared as follows:
We find the decision of the Labor Arbiter not supported by evidence on
record. The issue of whether or not complainant was a commission agent
was not fully resolved in the assailed decision. It appears that the Labor
Arbiter failed to appreciate the evidences submitted by respondent as
Annexes "B" and "B-1" (Rollo p. 22-27) in support of its allegation as
regard[s] the nature of complainant's employment. Neither is there a
showing that the parties were required to adduce further to support their
respective claim. The resolution of the nature of complainant's
employment is vital to the case at bar considering that it would be
determinative to his entitlement of monetary benefits. The same is
similarly true as regard the claim [sic] for unpaid commission. The amount
being claim [sic] for unpaid commission as big as it is requires substantial
proof to establish the entitlement of the complainant proof to establish the
entitlement of the complainant to the same. We take not of the
respondent's claim that "while they admit that complainant has an unpaid
commission due him, the same is only for his additional sale of 4,027
pieces at regular price and 1,047 pieces at bargain price for a total sum of
(P20,135.00 + 2,655.00) or P22,820.00 as appearing in the list of Sales
and unpaid commission" (Annex "C" and "C-1" Appeal, Rollo p. 100-102).
Said amount according to respondent is being withheld by them pending
the accounting of money collected by complainant from his two (2) buyers
which was not remitted to them. Considering the conflicting version of the
parties regarding the issues on hand, it was incumbent on the Labor
Arbiter to conduct further proceedings thereon. The ends of justice would
better be served if both partied are given the opportunity to ventilate
further their positions. 3
In their comment on the petition at bar, private respondents agree with the finding of the
NLRC that the nature of petitioner's employment with private respondents is vital to the case
as it will determine the monetary benefits to which he is entitled. They further aver that the
evidence presented upon which the labor arbiter based her decision is insufficient, so that the
NLRC did not commit grave abuse of discretion in remanding the case to the arbitration
branch of origin for further proceedings.
The comment of the Solicitor General is substantially the same as that of private
respondents, i.e., there is no sufficient evidence to prove employer-employee relationship
between the parties. Furthermore, he avers that the order of the NLRC to the labor arbiter for
further proceedings does not automatically translate to a protracted trial on the merits for such
can be faithfully complied with through the submission of additional documents or pleadings
only.
The only issue to be resolved in this petition is whether or not the NLRC gravely abused its
discretion in vacating and setting aside the decision of the labor arbiter and remanding the
case to the arbitration branch of origin for further proceedings.
In essence, respondent NLRC was not convinced that the evidence presented by the
petitioner, consisting of the identification card issued to him by private respondent corporation
and the cash vouchers reflecting his monthly salaries covering the months stated therein,
settled the issue of employer-employee relationship between private respondents and
petitioner.
It has long been established that in administrative and quasi-judicial proceedings, substantial
evidence is sufficient as a basis for judgment on the existence of employer-employee
relationship. No particular form of evidence is required is required to prove the existence of
such employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted. 4
Substantial evidence has been defined to be such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion, and its absence is not shown by stressing
that there is contrary evidence on record, direct or circumstantial, for the appellate court
cannot substitute its own judgment or criterion for that of the trial court in determining wherein
lies the weight of evidence or what evidence is entitled to belief. 5
In a business establishment, an identification card is usually provided not only as a security
measure but mainly to identify the holder thereof as a bona fide employee of the firm that
issues it. Together with the cash vouchers covering petitioner's salaries for the months stated
therein, we agree with the labor arbiter that these matters constitute substantial evidence
adequate to support a conclusion that petitioner was indeed an employee of private
respondent.
Section 4, Rule V of the Rules of Procedure of the National Labor Relations Commission
provides thus:
Sec. 4. Determination of Necessity of Hearing. — Immediately after the
submission of the parties of their position papers/memoranda, the Labor
Arbiter shall motu propio determine whether there is need for a formal trial
or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant
documentary evidence, if any, from any party or witness.
It is clear from the law that it is the arbiters who are authorized to
determine whether or not there is a necessity for conducting formal
hearings in cases brought before them for adjudication. Such
determination is entitled to great respect in the absence of arbitrariness. 6
In the case at bar, we do not believe that the labor arbiter acted arbitrarily. Contrary to the
finding of the NLRC, her decision at least on the existence of an employer-employee
relationship between private respondents and petitioner, is supported by substantial evidence
on record.
The list of sales collection including computation of commissions due, expenses incurred and
cash advances received (Exhibits "B" and "B-1") which, according to public respondent, the
labor arbiter failed to appreciate in support of private respondents" allegation as regards the
nature of petitioner's employment as a commission agent, cannot overcome the evidence of
the ID card and salary vouchers presented petitioner which private respondents have not
denied. The list presented by private respondents would even support petitioner's allegations
that, aside from a monthly salary of P1,500.00, he also received commissions for his work as
a salesman of private respondents.
Having been in the employ of private respondents continuously for more than one year, under
the law, petitioner is considered a regular employee. Proof beyond reasonable doubt is not
required as a basis for judgment on the legality of an employer's dismissal of an employee,
nor even preponderance of evidence for that matter, substantial evidence being
sufficient. 7 Petitioner's contention that private respondents terminated his employment due to
their suspicion that he was being enticed by another firm to work for it was not refuted by
private respondents. The labor arbiter's conclusion that petitioner's dismissal is therefore
illegal, is not necessarily arbitrary or erroneous. It is entitled to great weight and respect.
It was error and grave abuse of discretion for the NLRC to remand the case for further
proceedings to determine whether or not petitioner was private respondents' employee. This
would only prolong the final disposition of the complaint. It is stressed that, in labor cases,
simplification of procedures, without regard to technicalities and without sacrificing the
fundamental requisites of due process, is mandated to ensure the speedy administration of
justice. 8
After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad
powers, including issuance of subpoena, requiring the attendance and testimony of witnesses
or the production of such documentary evidence as may be material to a just determination of
the matter under investigation.
Additionally, the National Labor Relations Commission and the labor arbiter have authority
under the Labor Code to decide a case based on the position papers and documents
submitted without resorting to the technical rules of evidence. 9
However, in view of the need for further and correct computation of the petitioner's
commissions in the light of the exhibits presented and the dismissal of the criminal cases filed
against petitioner, the labor arbiter is required to undertake a new computation of the
commissions to which petitioner may be entitled, within thirty (30) days from the submission
by the partied of all necessary documents.
WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9
November 1994 are SET ASIDE. The decision of the labor arbiter dated 19 may 1993 us
REINSTATED and AFFIRMED subject to the modification above-stated as regards a re-
computation by the labor arbiter of the commissions to which petitioner maybe actually
entitled.
SO ORDERED.
Bellosillo, Vitug, Kapunan and Hermosisisma, Jr., JJ., concur.
FIRST DIVISION delivered to the stockyard x x x. The arrivals of these trucks and the deliveries of
G.R. No. 154463 September 5, 2006 scrap metal are not regular and the schedules of deliveries x x x to the stockyard x x
CEBU METAL CORPORATION, petitioner, x are not known before hand by the respondent (petitioner company).
vs. x x x [t]he trucks used in the delivery of scrap metal are owned and/or rented by the
GREGORIO ROBERT SALILING, ELIAS BOLIDO, MANUEL ALQUIZA, and BENJIE different suppliers of scrap metal. These trucks have their own driver and truck boys
AMPARADO, respondents. employed by these different suppliers. Sometimes, these trucks do not have any
DECISION truck boys, and in these instances, the respondent hires the services of people for
CHICO-NAZARIO, J.: the purpose of unloading the scrap metal from these trucks.
The Case It is for this reason that the unloaders hired by the respondent to unload the scrap
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the metal from these trucks are basically seasonal workers. They are hired only
reversal of the Decision1dated 18 February 2002, and the Resolution2 dated 27 June 2002, whenever there are trucks of suppliers of scrap metal that deliver scrap metal to the
rendered by the Court of Appeals in CA-G.R. SP No. 66480, which annulled and set aside the yard of the respondent and these trucks happen not to have any accompanying
decision3 dated 9 October 2000, and resolution4 dated 2 July 2001, of the National Labor truck boys. Whoever are available and whoever are willing to help unload x x x on a
Relations Commission (NLRC) in NLRC Case No.V-000840-99. In its decision, the NLRC particular occasion are hired to unload x x x.
reversed and set aside the decision5 dated 27 May 1999 of Labor Arbiter Jesus N. Rodriguez, Usually, there is a leader for a particular group who is tasked to unload the scrap
Jr. in favor of complainant employees, herein respondents Gregorio Saliling, Elias Bolido, metal from a particular truck. It is this leader who distributes the individual take of
Manuel Alquiza and Benjie Amparado, RAB Case No. 06-01-10019-97. each member of the particular group unloading the scrap metal from a particular
The Facts truck.
Parties herein are somewhat at variance with respect to the basic facts of the case at bar. In contrast, respondent complainants, Gregorio Saliling, Elias Bolido, Manuel Alquiza and
The facts of the case as recounted6 by petitioner Cebu Metal Corporation are as follows: Benjie Amparado, in their position paper8 submitted to the Labor Arbiter, narrate:
Respondent (Cebu Metal Corporation) is a corporation engage (sic) in buying and 1. That complainants Gregorio Saliling was employed by defendant Corporation x x
selling of scrap iron x x x. In the Bacolod Branch, it has three regular (3) employees x in 1988, complainant Elias Bolido was hired in 1992 and complainant Benjie
holding such positions as Officer-in-Charge, a scaler and a yardman, x x x whose Amparado was hired by respondent in 1994; x x x.
salaries are paid directly by its main office in Cebu while others are undertaking 2. The aforesaid complainants, from the time they were employed by respondent,
pakiao work in the unloading of scrap iron for stockpiling. they received their salary on (sic) the following rate:
Among those workers who presented for work in the unloading of scrap iron in the GREGORIO ROBERT SALILING ------- P5.00/hour in 1988
area are the unemployed persons or trisicad drivers standing by in the vicinity some 5.00/hour in 1989
of whom are the herein complainants x x x Gregorio Robert Saliling, Elias Bolido, 6.00/hour in 1990
Manuel Alquiza, Benjie Amparado and non-complainants Arnel Allera, Eliseo 7.00/hour in 1991
Torralba or any other persons who wanted to augment their income aside from their 7.00/hour in 1992
regular jobs. Robert Gregorio Saliling started working in 1996, Elias Bolido on (sic) 7.00/hour in 1993
October 1995 while Manuel Alquiza and Benjie Amparado, on (sic) February 1996. 7.00/hour in 1994
As compensation for their services, these workers including the herein complainants 7.50/hour in 1995
are paid at the rate of P15.00 per ton for which each person can unload at least two 8.75/hour in 1996
(2) to three (3) tons per hour or can earn at least P240.00 to P360.00 in eight (8)
hours if work is only available which payment necessarily includes cost of living ELIAS BOLIDO ------- P100.00/day in 1992
allowance (COLA) and 13th-month pay. 7.00/hour in 1993
xxxx 7.00/hour in 1994
Petitioner company further elaborated7 on the nature of its business and the circumstances 7.50/hour in 1995
surrounding the employment of respondent complainants, to wit: 8.75/hour in 1996
The Bacolod buying station is mainly a stockyard where scrap metal delivered by its BENJIE AMPARADO -------
P7.00/hour in 1994
suppliers are stockpiled. 7.50/hour in 1995
The supply of scrap metal is not steady as it depends upon many factors, such as 8.75/hour in 1996
availability of supplies, price, competition and demand among others. There are 3. That the aforesaid complainants never received any other benefits from the
therefore (sic) instances when in a single week , one or two trucks of scrap metal respondent, except the amount indicated above; (sic) They received the sum of
are delivered while there are weeks when not a single truck of scrap metal are
delivered although there may also be weeks when quite a number of trucks are
 P10.93 per hour in case of overtime work, but they never received additional 3. Manuel Alquiza
benefits in case, (sic) they worked on Saturdays, Sundays, and Holidays; A) Backwages ----- P42,238.30
Complainants likewise never received 13th month pay, holiday pay, incentive leave
pay, bonuses and other labor benefits; B) 13th Month Pay ----- 7,912.34
4. Complainants were required to work from 8:00 A.M. to 12:00 noon and from 1:00 C) ERA ----- 1,139.83
P.M. to 5:00 P.M. or for eight hours a day; seven days a week and thirty days a D) COLA ----- 12,961.91
month;
TOTAL ----- P64,252.38
5. When these complainants demanded from respondent for the increase of their
salary, respondent through Marlon got irritated and instructed complainants to stop 4. Benjie Amparado
working, thus, complainants, effective December 1996 were precluded from entering A) Backwages ----- P42,238.30
respondent loading and unloading compound x x x. B) 13 Month Pay
th ----- 7,912.34
On 10 January 1997, respondent complainants filed a Complaint9 before the Regional
C) ERA ----- 1,139.83
Arbitration Branch No VI, Bacolod City for underpayment of wages and non-payment of the
following benefits: 1) 13th month pay; 2) holiday pay; and 3) service incentive leave pay. D) COLA ----- 12,961.91
On 6 March 1998, respondent complainants manifested10 that they were including in their TOTAL ----- P64,252.38
complaint against petitioner company, the claim for illegal dismissal. Such belated filing was GRAND TOTAL ----- P257,009.52
alleged to have been due to the fact that they were only dismissed after the filing of their In case reinstatement is no longer feasible, complainants are to be given separation
complaint. pay equivalent to fifteen (15) days to be given for every year of service.
On 27 May 1999, the Labor Arbiter rendered a decision11 the dispositive of which reads: Attorney's fees of five percent (5%) of the total judgment award of the amount of
CONFORMABLY TO THE FOREGOING, respondent Cebu Metal Corporation, Twelve Thousand Eight Hundred fifty Pesos and Forty-Eight Centavos (P12,850.48)
through its manager, MARLON RADEN, is hereby ordered to REINSTATE is also awarded.
complainants to their former positions with backwages limited to one (1) year and In ordering the reinstatement of respondent complainants, the Labor Arbiter found them to
13th month pay, ERA and COLA as follows: have been illegally dismissed from their employment with petitioner company. The decision
NAME OF COMPLAINANTS: explained that:
1. Gregorio Robert Saliling Regarding the second issue which is illegal dismissal, we find the same meritorious.
A) Backwages ----- P42,238.30 Under Article 280 of the Labor Code, complainants are regular employees since
B) 13th Month Pay ----- 7,912.34 they are "engaged to perform activities which are necessary and desirable in the
usual business or trade of the employer", (sic) x x x. Complainants job of loading,
C) ERA ----- 1,139.83
unloading and stockpiling scrap iron is necessary and part of the business of
D) COLA ----- 12,961.91 respondent. Since complainants were dismissed without cause and due process of
TOTAL ----- P64,252.38 law, they are entitled to reinstatement with backwages limited to one (1) year.
2. Elias Bolido Aggrieved, petitioner company appealed the foregoing decision to the NLRC.
In a Decision12 promulgated on 9 October 2000, the Fourth Division of the
A) Backwages ----- P42,238.30
NLRC reversed and set aside the ruling of the Labor Arbiter. Instead, the Commission held
B) 13 Month Pay
th ----- 7,912.34 that respondent complainants were not regular employees of petitioner company, thus, they
C) ERA ----- 1,139.83 could not have been illegally dismissed. The order of reversal was based on the
D) COLA ----- 12,961.91 Commission's finding that the petty cash vouchers13 submitted by petitioner company
confirmed the fact that unloaders were paid on "pakiao" or task basis at P15.00 per metric ton.
TOTAL ----- P64,252.38 The Commission further rationalized that with the irregular nature of the work involved, the
stoppage and resumption of which depended solely on the availability or supply of scrap
A) Backwages ----- P42,238.30 metal, it necessarily follows that after the job of unloading was completed and "unloaders"
B) 13th Month Pay ----- 7,912.34 were paid the contract price, the latter's working relationship with petitioner company legally
C) ERA ----- 1,139.83 ended. They were then free to offer their services to others.
As an aside, the Commission observed that it was erroneous for the Labor Arbiter to rule on
D) COLA ----- 12,961.91
the question of whether or not respondent complainants were illegally dismissed since the
TOTAL ----- P64,252.38 complaint filed on 10 January 1997 failed to include such matter. To be sure, the complaint
merely imputed the following causes of action: 1) underpayment of wages; and 2) non-
payment of a) 13th month pay; b) holiday pay; and c) service incentive leave pay. Nowhere
was the matter of illegal dismissal written on the same. The issue was formally brought up
only on 6 March 1998, via a Manifestation, long after the filing of the parties' respective
position papers.
In view of the above, the Commission declared that respondent complainants invalidly raised
the issue of illegal dismissal in the position paper they filed before the Labor Arbiter.
Dissatisfied by the above, it was the turn of respondent complainants to challenge the same
but this time before the Court of Appeals.
In a Decision dated 18 February 2002, the Court of Appeals annulled and set aside the
assailed decision of the NLRC. Said Decision was grounded exclusively on the argument that
the Commission committed grave abuse of discretion in reversing and setting aside the
Decision of the Labor Arbiter since petitioner company did not make an issue out of the Labor
Arbiter's action in ruling on a cause of action, i.e., illegal dismissal, not specifically stated in
the complaint. Stated differently, the NLRC gravely abused its discretion in ruling on an issue
that was allegedly not raised on appeal before it.
The Court of Appeals decision ended in this wise:
WHEREFORE, foregoing premises considered, the PETITION HAVING MERIT is
hereby GIVEN DUE COURSE. RESULTANTLY, the challenged decision of Public
Respondent National Labor Relations Commission is hereby ANNULLED AND SET
ASIDE AND THE JUDGMENT OF THE LABOR ARBITER IN RAB-CASE No. 06-
01-10019-97 REINSTATED. No costs.
SO ORDERED.
The Issues
Its Motion for Reconsideration having been denied14, petitioner company now comes to this
Court imputing the following errors on the Court of Appeals:
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR
RELATIONS COMMISSION FOURTH DIVISION, CEBU CITY HAD NO
AUTHORITY TO DISMISS PRIVATE RESPONDENT'S CLAIMS FOR ILLEGAL
DISMISSAL AND OTHER MONEY CLAIMS;
II.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE NATIONAL LABOR
RELATIONS COMMISSION FOURTH DIVISION, CEBU CITY HAD NO
AUTHORITY TO REVERSE THE LABOR ARBITER'S DECISION; and
III.
THE COURT OF APPEALS ERRED IN GRANTING THE PETITION FOR
CERTIORARI IN CA G.R. SP. NO. 66480 AND IN ANNULING (sic) THE DECISION
OF THE NATIONAL LABOR RELATIONS COMMISSION.
In essence, the issue for resolution in the case at bar is whether or not the Court of Appeals
committed reversible error in ruling that the NLRC had no authority to adjudicate on an issue
not properly raised in petitioner company's Memorandum on Appeal.
Petitioner company posits that contrary to the argument of the appellate court, the main or
primary reason for the reversal of the Labor Arbiter's decision was the finding that respondent
complainants could not be regarded, based on the facts of the case and the evidence
presented, as regular employees of petitioner company.
Conversely, respondent complainants allege that an appellate court has no power to resolve
an unassigned error that does not affect the court's jurisdiction or is an error that is neither
plain nor clerical. Likewise, they contend that "there is nothing to show that petitioner
company made an issue of the Labor Arbiter's action in ruling on a cause of action not
specifically stated in the complaint."
The Court's Ruling
We find merit in the petition.
It was plain error for the Court of Appeals to annul and set aside the decision of the NLRC on
the lone reason that the latter "dismissed Petitioner's appeal on the basis of an issue not
raised by Private Respondent in its appeal x x x."15 A painstaking review of the decision of the
NLRC will readily reveal that the Commission's finding that respondent complainants were not
regular employees was the raison d'être for the subsequent turnaround of the state of affairs.
What the NLRC made use of to reverse the Labor Arbiter's decision was precisely the
conclusion of the latter that respondent complainants were regular employees of petitioner
company. According to the Commission, such conclusion was predicated merely on the
consideration that respondent complainants were performing activities necessary and
desirable to the business or trade of their employer. Based on the facts of the case and the
evidence presented by the parties to the case at bar, however, the NLRC arrived at a
divergent conclusion, which we fully agree in. We quote with approval its disquisition:
It is interesting to note that the Labor Arbiter had given credence and probative
value to the Petty Cash Vouchers submitted by the respondents. Thus he said:
"The petty cash vouchers (Annexes "1" to"1-A-62", respondents position
paper) show that complainants are not paid on hourly or daily basis as
they would like this office to believe but on "pakiao" or task basis at
P15.00 per metric ton. There is no basis then for complainants to claim
that they are underpaid since there is no minimum wage in this type of
work. Complainants' earnings depend upon their own diligence and speed
in unloading and stockpiling scrap iron. More importantly, it depends upon
the availability of scrap iron to be unloaded and stockpiled."
The above findings validate respondent's position as to the nature of complainants'
work. Their services are needed only when scrap metals are delivered which occurs
only one or twice a week or sometimes no delivery at all in a given week. The
irregular nature of work, stoppage of work and then work again depending on the
supply of scrap metal has not been denied by complainants. On the contrary they
even admitted the same in their Reply to respondent's Appeal. x x x. Indeed, it
would be unjust to require respondent to maintain complainants in the payroll even if
there is no more work to be done. To do so would make complainants privileged
retainers who collect payment from their employer for work not done. This is
extremely unfair and amount to cuddling of labor at the expense of management.16
It should be remembered that The Philippine Constitution, while inexorably committed towards
the protection of the working class from exploitation and unfair treatment, nevertheless
mandates the policy of social justice so as to strike a balance between an avowed predilection
for labor, on the one hand, and the maintenance of the legal rights of capital, the proverbial
hen that lays the golden egg, on the other. Indeed, we should not be unmindful of the legal
norm that justice is in every case for the deserving, to be dispensed with in the light of
established facts, the applicable law, and existing jurisprudence.17
Under the circumstances abovestated:
 x x x there can be no illegal dismissal to speak of. Besides, complainants cannot
claim regularity in the hiring every time a truck comes loaded with scrap metal. This
is confirmed in the Petty cash Vouchers which are in the names of different leaders
who apportion the amount earned among his members.18
And, quite telling is the fact that not every truck delivery of scrap metal requires the services of
respondent complainants when a particular truck is accompanied by its own "unloader." And
whenever required, respondent complainants were not always the ones contracted to
undertake the unloading of the trucks since the work was offered to whomever were available
at a given time.
Finally, the judgment of the Commission that the Labor Arbiter acted incorrectly in ruling on a
cause of action, i.e., illegal dismissal, not specifically stated in the complaint, did not constitute
grave abuse of discretion on its part.
It is well settled that an act of a court or tribunal may only be considered to have been done in
grave abuse of discretion when the same was performed in a capricious or whimsical exercise
of judgment which is equivalent to lack of jurisdiction.19 The abuse of discretion must be so
patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a
duty enjoined or to a ct at all in contemplation of law, as where the power is exercised in an
arbitrary power and despotic manner by reason of passion or personal hostility.20
In the case at bar, from the preceding definition, it is quite apparent that no grave abuse of
discretion can be attributed to the NLRC. Its decision simply expressed an observation, to wit:
Moreover, We note that in the complaint filed last January 10, 1997, the issue of
illegal dismissal was not raised as a cause of action although it was later discussed
in their position paper filed on January 12, 1998. x x x. [Emphasis supplied.]
The use of the word "moreover" clearly expresses NLRC's position in treating the matter of the
non-inclusion of the issue of illegal dismissal in the complaint merely as an add-on, adjunct or
a supplement to its finding that respondent complainants' were not regular employees of
petitioner company.
At any rate, the Court is clothed with authority to review matters, even if they are not assigned
as errors in their appeal, if it finds that their consideration is necessary in arriving at a just
decision of the case.21
WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated
18 February 2002, and the Resolution dated 27 June 2002, both rendered by the Court of
Appeals in CA-G.R. SP No. 66480, are hereby REVERSED and SET ASIDE. Accordingly, the
Decision of the NLRC dated 9 October 2000 is REINSTATED. Costs against respondent
complainants.
SO ORDERED.
Panganiban, C.J. Chairman, Ynares-Santiago, Austria-Martinez, Callejo, Sr., J.J., concur.
FIRST DIVISION
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO
TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA
and RAMON ESCUETA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and
set aside the Decision and Resolution of the Court of Appeals dated October 29, 2004 1 and
October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515 dismissing the complaint for
constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court
reversed and set aside the Decision of the National Labor Relations Commission (NLRC)
dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the
decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01,
finding that private respondents were liable for constructive dismissal.
In 1995, 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 business permits, construction permits and other licenses for the initial
operation of the company. 5
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. 6
In 1996, 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, especially with the Bureau of Internal
Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to
administer all other matters pertaining to the operation of Kasei Restaurant which is owned
and operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000
her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of
Kasei Corporation. 8
In January 2001, 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. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up
to September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner 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. 10
On October 15, 2001, 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. 11
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.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They
alleged that petitioner was hired in 1995 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. Petitioner had no daily time record and she came to the office any time she
wanted. The company never interfered with her work except that from time to time, the
management would ask her opinion on matters relating to her profession. Petitioner did not go
through the usual procedure of selection of employees, but her services were engaged
through a Board Resolution designating her as technical consultant. The money received by
petitioner from the corporation was her professional fee subject to the 10% expanded
withholding tax on professionals, and that she was not one of those reported to the BIR or
SSS as one of the company’s employees. 12
Petitioner’s designation as technical consultant depended solely upon the will of management.
As such, her consultancy may be terminated any time considering that her services were only
temporary in nature and dependent on the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private respondents
submitted a list of employees for the years 1999 and 2000 duly received by the BIR showing
that petitioner was not among the employees reported to the BIR, as well as a list of payees
subject to expanded withholding tax which included petitioner. SSS records were also
submitted showing that petitioner’s latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant’s dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of
seniority rights and jointly and severally pay complainant her money claims in accordance with
the following computation:
a. Backwages 10/2001 – 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 – 09/2001) 22,500.00
c. Housing Allowance (01/2001 – 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney’s fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay complainant separation
pay with additional backwages that would accrue up to actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the
dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at one month per
year of service in addition to full backwages from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit in the
respective accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorney’s fees shall be based on salary differential award only;
4) The awards representing salary differentials, housing allowance, mid year bonus and 13th
month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor
Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a
new one is hereby rendered dismissing the complaint filed by private respondent against
Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioner’s motion for reconsideration, hence, the present
recourse.
The core issues to be resolved in this case are (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.
Considering the conflicting findings by the Labor Arbiter and the National Labor Relations
Commission on one hand, and the Court of Appeals on the other, there is a need to
reexamine the records to determine which of the propositions espoused by the contending
parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 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. There are instances when, aside from the employer’s
power to control the employee with respect to the means and methods by which the work is to
be accomplished, economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.
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 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 us with 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.
The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and
lately in Leonardo v. Court of Appeals, 20 where we held that there is an employer-employee
relationship when the person for whom the services are performed reserves the right to
control not only the end achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we 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, 22 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. 23
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. 24 In the United
States, the touchstone of economic reality in analyzing possible employment relationships for
purposes of the Federal Labor Standards Act is dependency. 25 By analogy, the benchmark of
economic reality in analyzing possible employment relationships for purposes of the Labor
Code ought to be the economic dependence of the worker on his employer.
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. 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 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.
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. 26 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. 27
It is therefore apparent that petitioner is economically dependent on respondent corporation
for her continued employment in the latter’s line of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business diminution of pay, an unreasonable situation arises which creates an adverse working
establishment, an identification card is provided not only as a security measure but mainly to environment rendering it impossible for such employee to continue working for her employer.
identify the holder thereof as a bona fide employee of the firm that issues it. Together with the Hence, her severance from the company was not of her own making and therefore amounted
cash vouchers covering petitioner’s salaries for the months stated therein, these matters to an illegal termination of employment.
constitute substantial evidence adequate to support a conclusion that petitioner was an In affording full protection to labor, this Court must ensure equal work opportunities regardless
employee of private respondent. of sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the relationship between employees and employers, we are mindful of the fact that the policy of
SSS is proof that the latter were the former’s employees. The coverage of Social Security Law the law is to apply the Labor Code to a greater number of employees. This would enable
is predicated on the existence of an employer-employee relationship. employees to avail of the benefits accorded to them by law, in line with the constitutional
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it
that petitioner never acted as Corporate Secretary and that her designation as such was only as a primary social economic force in furtherance of social justice and national development.
for convenience. The actual nature of petitioner’s job was as Kamura’s direct assistant with WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of
the duty of acting as Liaison Officer in representing the company to secure construction Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515
permits, license to operate and other requirements imposed by government agencies. are ANNULLED and SET ASIDE. The Decision of the National Labor Relations Commission
Petitioner was never entrusted with corporate documents of the company, nor required to dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case
attend the meeting of the corporation. She was never privy to the preparation of any document is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Francisco’s
for the corporation, although once in a while she was required to sign prepared documentation full backwages from the time she was illegally terminated until the date of finality of this
for the company. 30 decision, and separation pay representing one-half month pay for every year of service, where
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 a fraction of at least six months shall be considered as one whole year.
affidavit has been allegedly withdrawn by Kamura himself from the records of the SO ORDERED.
case. 31 Regardless of this fact, we are convinced that the allegations in the first affidavit are CONSUELO YNARES-SANTIAGO
sufficient to establish that petitioner is an employee of Kasei Corporation. Associate Justice
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not
generally look with favor on any retraction or recanted testimony, for it could have been
secured by considerations other than to tell the truth and would make solemn trials a mockery
and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A
recantation does not necessarily cancel an earlier declaration, but like any other testimony the
same is subject to the test of credibility and should be received with caution. 33
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 backwages. 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. 34
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. 35 In Globe Telecom, Inc. v. Florendo-
Flores, 36 we ruled that where an employee ceases to work due to a demotion of rank or a