Labor 04 (Sept 14) Dy Keh Beng - Alelin

7/25/2019 Labor 04 (Sept 14) Dy Keh Beng - Alelin

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DY KEH BENG vs. INTERNATIONAL LABOR and MARINE UNION OF

THE PHILIPPINES, ET AL.

G.R. No. L-32245 May 25, 1979

FACTS:

Petitioner, Dy Keh Beng, proprietor of basket factory, was charged with ULP

for discriminatory acts defined under Sec 4(a), subparagraph (1 & 4), R.A.

No. 875 by dismissing on September 28-29, 1960, respectively, Carlos N.Solano and Ricardo Tudla for their union activities.

After PI was conducted, a case was filed in the CIR for in behalf of the

ILMUP and two of its members, Solano and Tudla. 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. According to Dy Keh Beng, Solano was not his employee

for the following reasons:

(1) Solano never stayed long enough at Dy’s establishment;

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

him by Dy;

(3) When there were no orders needing his services there was nothing forhim to do;

(4) 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

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

(6)

According to petitioner, these facts show that respondents Solano and Tudla

are only piece workers, not employees under Republic Act 875, where an

employee is referred to as shall include any employee and shall not be

limited to the employee of a particular employer unless the act explicitlystates 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 ulp and who has not obtained any other substantially equivalent and

regular employment. While an employer includes any person acting in the

interest of an employer, directly or indirectly but shall not include any labor

organization (otherwise than when acting as an employer) or anyone acting

in the capacity of officer or agent of such labor organization.

Petitioner also contends that the private respondents "did not meet the

control test in the fight of the ... definition of the terms employer and

employee, because there was no evidence to show that petitioner had the

right to direct the manner and method of respondent's work. He points to the

case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-

13130, October 31, 1959, where the Court ruled that:

The test ... of the existence of employee and employer relationship is

whether there is an understanding between the parties that one is to

render personal services to or for the benefit of the other and recognition

by them of the right of one to order and control the other in the

performance of the work and to direct the manner and method of itsperformance.

The CIR found that there existed an employee-employer relationship

between Dy Keh Beng and complainants Tudla and Solano, although Solano

was admitted to have worked on piece basis.

Hence, this petition for certiorari.

ISSUE: Whether or not an employee employer relation existed between

petitioner Dy Keh Beng and the respondents Solano and Tudla.

HELD:

The SC also noted the decision of Justice Paras in the case of “Sunrise

Coconut Products Co. Vs. CIR (83 Phil 518, 523) 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.”

With regard to the control test the SC said that “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 ac tual exercise of the right.” Consideringthe finding by the Hearing Examiner that the establishment of Dy Keh Beng

is "engaged in the manufacture of baskets 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 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.

The petition was dismissed. The Court affirmed the decision of the CIR.

light

I. Piece work - just a method of compensation

II. Control test - not only the end but the means to be used



ALEJANDRO MARAGUINOT, JR. AND PAUILINO ENERO v. NLRC, VIC

DEL ROSARIO, VIVA FILMS

GR No. 120969 (1998)

Facts:

Maraguinot and Enero were separately hired by Vic Del Rosario under Viva

Films as part of the filming crew. Sometime in May 1992, sought the

assistance of their supervisor to facilitate their request that their salary beadjusted in accordance with the minimum wage law.

On June 1992, Mrs. Cesario, their supervisor, told them that Mr. Vic Del

Rosario would agree to their request only if they sign a blank employment

contract. Petitioners refused to sign such document. After which, the Mr.

Enero was forced to go on leave on the same month and refused to take him

back when he reported for work. Mr. Maraguinot on the other hand was

dropped from the payroll but was returned days after. He was again asked to

sign a blank employment contract but when he refused, he was terminated.

Consequently, the petitioners sued for illegal dismissal before the Labor Arbiter. The private respondents claim the following: (a) that VIVA FILMS is

the trade name of VIVA PRODUCTIONS, INC. and that it was primarily

engaged in the distribution & exhibition of movies- but not then making of

movies; (b) That they hire contractors called “producers” who act as

independent contractors as that of Vic Del Rosario; and (c) As such, there is

no employee-employer relation between petitioners and private respondents.

The Labor Arbiter held that the complainants are employees of the private

respondents. That the producers are not independent contractor but should

be considered as labor-only contractors and as such act as mere agent ofthe real employer. Thus, the said employees are illegally dismissed.

The private respondents appealed to the NLRC which reversed the decision

of the Labor Arbiter declaring that the complainants were project employees

due to the ff. reasons: (a) Complainants were hired for specific movie

projects and their employment was co-terminus with each movie project;

(b)The work is dependent on the availability of projects. As a result, the total

working hours logged extremely varied; (c) The extremely irregular working

days and hours of complainants work explains the lump sum payment for

their service; and (d) The respondents alleged that the complainants are not

prohibited from working with other movie companies whenever they are not

working for the independent movie producers engaged by the respondents.

A motion for reconsideration was filed by the complainants but was denied by

NLRC. In effect, they filed an instant petition claiming that NLRC committed a

grave abuse of discretion in: (a) Finding that petitioners were project

employees; (b) Ruling that petitioners were not illegally dismissed; and (c)

Reversing the decision of the Labor Arbiter.

In the instant case, the petitioners allege that the NLRC acted in total

disregard of evidence material or decisive of the controversy.

Issues:

(a) W/N there exist an employee- employer relationship between the

petitioners and the private respondents.

(b) W/N the private respondents are engaged in the business of making

movies.

(c) W/N the producer is a job contractor.

Held:

There exist an employee- employer relationship between the petitioners and

the private respondents because of the ff. reasons that nowhere in the

appointment slip does it appear that it was the producer who hired the crew

members. Moreover, it was VIVA’s corporate name appearing on heading of

the slip. It can likewise be said that it was VIVA who paid for the petitioners’

salaries.

Respondents also admit that the petitioners were part of a work pool wherein

they attained the status of regular employees because of the ff. requisites:(a) There is a continuous rehiring of project employees even after cessation

of a project; (b) The tasks performed by the alleged “project employees” are

vital, necessary and indispensable to the usual business or trade of the

employer; and (c) However, the length of time which the employees are

continually re-hired is not controlling but merely serves as a badge of regular

employment.

Since the producer and the crew members are employees of VIVA and that

these employees’ works deal with the making of movies. It can be said that

VIVA is engaged of making movies and not on the mere distribut ion of such.

Maraguinot - electrician; Enero - shooting crew

Includes loading/unloading, fix lighting system, cameraman/direk’s orders

1991 - P593 weekly

1992 - P118 to P135

Viva: Not their EEs; Project hires of assoc. producer who act as independent contractor



The producer is not a job contractor because of the ff. reasons: (Sec. Rule

VII, Book III of the Omnibus Rules Implementing the Labor Code.)

a. A 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

work except as to the results thereof. The said producer has a fix time frameand budget to make the movies.

b. The contractor should have substantial capital and materials necessary to

conduct his business. The said producer, Del Rosario, does not have his own

tools, equipment, machinery, work premises and other materials to make

motion pictures. Such materials were provided by VIVA.

It can be said that the producers are labor-only contractors. Under Article 106

of the Labor Code (reworded) where the contractor does not have the

requisites as that of the job contractors.

1. AP/Producers are not independent contractor/labor-only contractor.- not engaged in business of movie making

- no capital and investment

AND - not engaged in recruiting or placing EEs for VIVA

2. Assoc. Producers are agents of VIVA.

Thus, Maraguinot and Enero are EEs of Viva.

Control test:- acceptable quality films

- within budget - with Supervising Producer (eyes and ears of Viva)

Selection and Engagement - appointment slip bears the name of VIVA, not AP or Prod.

3. Project hires became regular EEs - continuous rehiring (2 years and 18 projects)

AND - necessary and indispensable

HOWEVER

- not tantamount to labor coddling as they are subject to no-work-no-pay principle - to prevent circumvention of laws on security of tenure

4. EEs illegally dismissed - reinstatement plus full backwages

- except for such period where there were no movie projects

can’tbe



Insular Life vs NLRC (March 12, 1998)

G.R. No. 119930. March 12, 1998.

FACTS:

Petitioner entered into an agency contract with respondent delos Reyes

authorizing the latter to solicit for life insurance and he would be paid

compensation in the form of commissions. It contained the stipulation that no

ER-EE relationship shall be created. However, delos Reyes was prohibitedby petitioner from working for any other life insurance company and violation

of this company was a ground of termination.

Petitioner and private respondent entered into another contract where the

latter was appointed as Acting Unit Manager under its office. One of the

duties of delos Reyes is to supervise and coordinate the underwriters. It was

similarly provided in the management contract that the relation of the acting

unit manager and/or the agents of his unit to the company shall be that of

independent contractor.

Private respondent worked concurrently as agent and Acting Unit Manageruntil he was notified by petitioner that his services were terminated. So, he

filed a complaint on the ground of illegal dismissal and for not paying him

salaries and separation pay.

ISSUE: W/N ER-EE relationship exists between Insular Life and delos Reyes

HELD: Yes.

Both petitioner and respondent NLRC treated the agency contract and the

management contract entered into between petitioner and de los Reyes as

contracts of agency. There exist major distinctions between the twoarrangements. While the first has the earmarks of an agency contract, the

second is far removed from the concepts of agency in that provided therein

are conditionality that indicates an employer-employee relationship.

Private respondent was appointed as Acting Unit Manager only upon

recommendation of the District Manager. This indicates that private

respondent was hired by petitioner because of the favorable endorsement of

its duly authorized officer. Then, the very designation of the appointment of

private respondent as “acting” unit manager obviously implies a temporary

employment status which may be made permanent only upon compliance

with company standards.

On the matter of payment of wages, petitioner points out that respondent was

compensated strictly on commission basis, the amount of which was totally

dependent on his total output. But, the manager’s contract, speaks

differently. Under the contract, delos Reyes must meet with the manpower

and production requirements as Act ing Unit Manager.

As to the matter involving the power of dismissal and control by the

employer, respondent’s duty to collect the company’s premiums usingcompany receipts is further evidence of petitioner’s control over respondent.

Thus, exclusi vity of service, control of assignments and removal of agents

under private respondent’s unit, collection of premiums, furnishing of

company facilities and materials as well as capital described are but

hallmarks of the management system in which herein private respondent

worked. Private respondent delos Reyes was an employee of herein

petitioner.

Wherefore, petition of Insular Li fe is denied.

1. Agency Contract - solicit life insurance business

2. Management Contract - supervise underwriters

If terminated, reverted to agent status.

1. Delos Reyes was an EE as far as the Management Contract is concerned

Test of Selection and Engagement - upon favorable endorsement of District Manager

- probationary status leading to permanent employment

Payment of Wages

- paid UDF monthly (P300 and 1,200) independent of quarterly performance review - wage may be on commission basis, Art. 97

Power of Dismissal - upon contracting with gov’t or another life insurance company

Power of Control - maintain manpower and production quotas

- assignment and removal of agents - duty to issue receipt for premium payments

Necessary and Beneficial - administrative functions

- furnishing of facilities and materials



ROGELIO NOGALES vs. CAPITOL MEDICAL CENTER et al.

G.R. No. 142625, December 19, 2006

Facts:

Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was then

37 years old, was under the exclusive prenatal care of Dr. Oscar Estrada

("Dr. Estrada") beginning on her fourth month of pregnancy or as early as

December 1975. Around midnight of 25 May 1976, Corazon started toexperience mild labor pains prompting Corazon and Rogelio Nogales

("Spouses Nogales") to see Dr. Estrada at his home. After examining

Corazon, Dr. Estrada advised her immediate admission to the Capitol

Medical Center ("CMC"). t 6:13 a.m., Corazon started to experience

convulsionsAt 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low

forceps to extract Corazon's baby. In the process, a 1.0 x 2.5 cm. piece of

cervical tissue was allegedly torn.At 6:27 a.m., Corazon began to manifest

moderate vaginal bleeding which rapidly became profuse. Corazon died at

9:15 a.m. The cause of death was "hemorrhage, post partum.

Issue:Whether or not CMC is vicariously liable for the negligence of Dr. Estrada.

Ruling:

Private hospitals, hire, fire and exercise real control over their attending and

visiting "consultant" staff. The basis for holding an employer solidarily

responsible for the negligence of its employee is found in Article 2180 of the

Civil Code which considers a person accountable not only for his own acts

but also for those of others based on the former's responsibility under a

relationship of patria potestas.

In general, a hospital is not liable for the negligence of an independent

contractor-physician. There is, however, an exception to this principle. The

hospital may be liable if the physician is the "ostensible" agent of the

hospital. This exception is also known as the "doctrine of apparent authority”.

For a hospital to be liable under the doctrine of apparent authority, a plaintiff

must show that: (1) the hospital, or its agent, acted in a manner that would

lead a reasonable person to conclude that the individual who was alleged to

be negligent was an employee or agent of the hospital; (2) where the acts of

the agent create the appearance of authority, the plaintiff must also prove

that the hospital had knowledge of and acquiesced in them; and (3) the

plaintiff acted in reliance upon the conduct of the hospital or its agent,

consistent with ordinary care and prudence. In the instant case, CMC

impliedly held out Dr. Estrada as a member of its medical staff. Through

CMC's acts, CMC clothed Dr. Estrada with apparent authority thereby

leading the Spouses Nogales to believe that Dr. Estrada was an employee or

agent of CMC.

forceps, a handheld hinged instrument hysterectomy, removal of womb or portion thereofs

RTC:1. Dr. Estrada solely liable

- exclusively under his pre-natal care;

- failure to treat pre-eclamptic condition (high blood, high protein) - misapplied forceps

2. No evidence adduced as to the liability of the other doctors and CMC

CA: Affirmed - Estrada is an independent contractor - no control in OR

- Estrada is a visiting physician

- CMC is not liable as it only permitted physician to practice medicine and use its facilities

SC: 1. Dr. Estrada is in fact an independent contractor

- that he enjoyed staff privileges did not make him an employee of CMC

2. GR: Hospital not liable for negligence of IC

Exception: Physician is ostensible agent, under doctrine of apparent authority a. led patient to believe that physician was an employee or agent

- extended medical facilities

- consent on admission form, consent to operation form - involvement of head of OB Gyne dept

b. patient’s reliance upon the conduct of CMC/agent

- accepting services of Dr. Estrada because he is connected with CMC as a reputable hospital

2:30

AM



Calamba Medical Center, Inc. vs National Labor Relations Commission

G.R. No. 176484. November 25, 2008

FACTS:

Ronaldo Lanzanas and Merceditha Lanzanas are doctors employed

by Calamba Medical Center, Inc. They are given a retainer’s fee by

the hospital as well as shares from fees obtained from patients.

One time, Ronaldo was overheard by Dr. Trinidad talking to anotherdoctor about how low the admission rate to the hospital is. That

conversation was reported to Dr. Desipeda who was then the

Medical Director of the hospital.

Eventually Ronaldo was suspended. Ronaldo filed a case for Illegal

Suspension in March 1998. In the same month, the rank and file

employees organized a strike against the hospital for unfair labor

practices. Desipeda eventually fired Ronaldo for his alleged

participation in the strike, which is not allowed under the Labor Code

for he is a managerial employee. Desipeda also fired Merceditha on

the ground that she is the wife of Ronaldo who naturally sympathizes

with him.

The Labor Arbiter ruled that there was no Illegal Suspension for

there was no employer-employee relationship because the hospital

has no control over Ronaldo as he is a doctor who even gets shares

from the hospitals earnings.

The National Labor Relations Commission as well as the Court of

Appeals reversed the LA.

ISSUE: Whether or not there is an employer-employee relationship?

HELD: Yes. Under the control test, an employment relationship existsbetween a physician and a hospital if the hospital controls both the means

and the details of the process by which the physician is to accomplish his

task. There is control in this case because of the fact that Desipeda

schedules the hours of work for Ronaldo and his wife.

The doctors are also registered by the hospital under the SSS which is

premised on an employer-employee relat ionship.

There is Illegal Dismissal committed against Rolando for there was no notice

and hearing held. It was never shown that Rolando joined the strike. But

even if he did, he has the right to do so for he is not a part of the managerial

or supervisory employees. As a doctor, their decisions are still subject to

revocation or revision by Desipeda.

There is Illegal Dismissal committed against Merceditha for the ground

therefor was not mentioned in Article 282 of the Labor Code.

When is Control (One of the Four Tests of Employer-Employee Relationship)

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 is

compensated according to the result of his efforts and not the amount

thereof, the element of control is absent.

1) Tests Wages

- monthly retainer’s fee

- percentage of patient fees

Control

- work schedule (twice weekly, 24-hour shifts) - monitored by nursing supervisor, change nurses, orderlies

- overruled/reviewed as to admission of patients, characterising cases, treatment

2) Badges of Management Structure

- SSS, premised on ER and EE relationship - Employee ID

3) IRR of Labor Code Book III, Rule X, Sec 15 - ER-EE relationship between resident physician and training hospitals unless there is

a training agreement

4) Illegally dismissed

- position is neither managerial or supervisory

- does not recommend managerial/administrative functions- not barred from union

- no proof that he joined strike and refused thereafter to return to work - no notice and hearing



Professional Services, Inc. vs CA

2010, J. Corona

Facts:

2nd Motion For Reconsideration

Quick recap: To recall the salient facts, PSI, together with Dr. Miguel

Ampil (Dr. Ampil) and Dr. Juan Fuentes (Dr. Fuentes), was impleaded by

Enrique Agana and Natividad Agana (later substituted by her heirs), in acomplaint for damages filed in the Regional Trial Court (RTC) of Quezon

City, Branch 96, for the injuries suffered by Natividad when Dr. Ampil

and Dr. Fuentes neglected to remove from her body two gauzes which

were used in the surgery they performed on her on April 11, 1984 at the

Medical City General Hospital. PSI was impleaded as owner, operator

and manager of the hospital.

RTC held PSI solidarily liable with Dr. Ampil and Dr. Fuentes for

damages. On appeal, the Court of Appeals, absolved Dr. Fuentes but

affirmed the liability of Dr. Ampil and PSI, subject to the right of PSI to

claim reimbursement from Dr. Ampil

2007 SC decision, affirmed the CA decision. PSI filed a motion for

reconsideration but the Court denied it in a resolution dated February 11,

2008.

Held:

PSI is liable to the Aganas, not under the principle of respondeat

superior for lack of evidence of an employment relationship with Dr.

Ampil but under the principle o f ostensible agency for the negligence of

Dr. Ampil and, pro hac vice, under the principle of corporate negligence

for its failure to perform its duties as a hospital

Control test is still applied in the determination E-E relationship. If thehospital controls both the means and the details of the process by which

the physic ian is to accomplish his task, there is E-E relationship. For

control test to apply, it is not essential for the employer to actually

supervise the performance of duties of the employee, it being enough

that it has the right to wield the power

SC maintains the ruling that PSI is vicariously liable for the negligence of

Dr. Ampil as its ostensible agent

The hospital had the power to review or cause the review of what may

have irregularly transpired within its walls strictly for the purpose of

determining whether some form of negligence may have attended any

Captain of the ship rule applied

PSI defined the standards of its corporate conduct under the

circumstances of this case, specifically: (a) that it had a corporate duty

to Natividad even after her operation to ensure her safety as a patient;

(b) that its corporate duty was not limited to having its nursing staff note

or record the two missing gauzes and (c) that its corporate duty extended

to determining Dr. Ampil's role in it, bringing the matter to his attention,

and correcting his negligence

Indications of negligence of PSI:! There were missing gauzes but Dr. Ampil assured them that he

would personally notify the patient about it. PSI claimed that

there was no reason for it to act on the report on the two missing

gauzes because Natividad Agana showed no signs of

complications. She did not even inform the hospital about her

discomfort

! SI had the duty to take notice of medical records prepared by its

own staff and submitted to its custody, especially when these

bear earmarks of a surgery gone awry

! PSI took no heed of the record of operation and consequently

did not initiate a review of what transpired during Natividad’s

operation

SC: PSI is liable.

1. Ostensible Agency

a) implied manifestation that doctor was its agent b) patient’s reliance upon such manifestation

- Mr. Agana though Dr. Ampil was a staff of Medical City, a prominent hospital

- Consent for hospital care - as advised by Dr. Ampil

2. Corporate Negligence - power to review or cause the review of irregular operations

- judicial admission of duty to act on Agana’s discomfort had she informed them

a) duty of care to Mrs. Agana

b) not limited to have its nurse record 2 missing gauzes c) correcting Dr. Ampil’s negligence

Facts: 1. Agana was taken to Medical City for difficulty of bowel movement

and bloody anal discharge; diagnosed with cancer of the sigmoid colon.

2. Performed hysterectomy since malignancy spread to her left ovary 3. Went to US for further treatment

4. Upon return, daughter found a piece of gauze (1.5 in) protruding from her vagina 5. Recto-vaginal fistula was formed forcing stool to secrete through her vagina.

6. Natividad died.



JOSE SONZA vs. ABS-CBN BROADCASTING CORPORATION

G.R. No. 138051 June 10, 2004

FACTS: In May 1994, ABS-CBN signed an agreement with the Mel and Jay

Management and Development Corporation (MJMDC). ABS-CBN was

represented by its corporate officers while MJMDC was represented by

Sonza, as President and general manager, and Tiangco as its EVP and

treasurer. Referred to in the agreement as agent, MJMDC agreed to provide

Sonza’s ser vices exclusively to ABS-CBN as talent for radio and television.

ABS-CBN agreed to pay Sonza a monthly talent fee of P310, 000 for the first

year and P317, 000 for the second and third year.

On April 1996, Sonza wrote a letter to ABS-CBN's President, Eugenio Lopez

III, where he irrevocably resigned in view of the recent events concerning his

program and career. The acts of the station are violative of the Agreement

and said letter will serve as notice of rescission of said contract . The letter

also contained the waiver and renunciation for recovery of the remaining

amount stipulated but reserves the right to seek recovery of the other

benefits under said Agreement.

After the said letter, Sonza filed with the Department of Labor and

Employment a complaint alleging that ABS-CBN did not pay his salaries,

separation pay, service incentive pay,13th month pay, signing bonus, travel

allowance and amounts under the Employees Stock Option Plan (ESOP).

ABS-CBN contended that no employee-employer relationship existed

between the parties. However, ABS-CBN continued to remit Sonza’s monthly

talent fees but opened another account for the same purpose.

The Labor Arbiter dismissed the complaint and found that there is no

employee-employer relationship. The LA ruled that he is not an employee by

reason of his peculiar skill and talent as a TV host and a radio broadcaster.

Unlike an ordinary employee, he was free to perform his services in

accordance with his own style. NLRC and CA affirmed the LA. Should there

be any complaint, it does not arise from an employer-employee relationship

but from a breach of contract.

ISSUE: W/N there was employer-employee relationship between the parties.

HELD: There is no employer-employee relationship between Sonza and

ABS-CBN. Petition denied. Judgment decision affirmed.

Case law has consistently held that the elements of an employee-employer

relationship are selection and engagement of the employee, the payment of

wages, the power of dismissal and the employer’s power to control the

employee on the means and methods by which the work is accomplished.

The last element, the so-called "control test", is the most important element.

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’s services to co-host its television and radio

programs because of SONZA’s peculiar skills, talent and celebrity status.

SONZA contends that the “discretion used by respondent in specifically

selecting and hiring complainant over other broadcasters of possibly similar

experience and qualification as complainant belies respondent’s clai m of

independent contractorship.”

However, independent contractors often present themselves to possess

unique skills, expertise or talent to distinguish them from ordinary employees.

The specific selection and hiring of SONZA, because of his unique skills,

talent and celebrity status not possessed by ordinary employees, is acircumstance indicative, but not conclusive, of an independent contractual

relationship. If SONZA did not possess such unique skills, talent and

celebrity status, ABS-CBN would not have entered into the Agreement with

SONZA but would have hired him through its personnel department just like

any other employee.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his

fees going to MJMDC. SONZA asserts that this mode of fee payment shows

that he was an employee of ABS-CBN. SONZA also points out that ABS-

CBN granted him benefits and privileges “which he would not have enjoyed if

he were truly the subject of a valid job contract.”

All the talent fees and benefits paid to SONZA were the result of negotiations

that led to the Agreement. If SONZA were ABS-CBN’s employee, there

would be no need for the parties to stipulate on benefits such as “SSS,

Medicare, x x x and 13th month pay” which the law automat ically

incorporates into every employer-employee contract. Whatever benefits

SONZA enjoyed arose from contract and not because of an employer-

employee relationship. In addition, SONZA’s talent fees are so huge and out

of the ordinary that they indicate more an independent contractualIC - individuals with special skills , expertise or talent enjoy freedom to offer services Action contractual in nature. NLRC no jurisdiction. Labor Code does not apply.



relationship rather than an employer-employee relationship. ABS-CBN

agreed to pay SONZA such huge talent fees precisely because of SONZA’s

unique skills, talent and celebrity status not possessed by ordinary

employees.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate

their relationship. SONZA failed to show that ABS-CBN could terminate his

services on grounds other than breach of contract, such as retrenchment to

prevent losses as provided under labor laws.

During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent

fees as long as “AGENT and Jay Sonza shall faithfully and completely

perform each condition of this Agreement.” Even if it suffered severe

business losses, ABS-CBN could not retrench SONZA because ABS-CBN

remained obligated to pay SONZA’s talent fees during the life of the

Agreement. This circumstance indicates an independent contractual

relationship between SONZA and ABS-CBN. SONZA admits that even after

ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him histalent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement

to continue paying SONZA’s talent fees during the remaining life of the

Agreement even if ABS-CBN cancelled SONZA’s programs through no fault

of SONZA.

D. Power of Control

First, SONZA contends that ABS-CBN exercised control over the means and

methods of his work. SONZA’s argument is misplaced. ABS -CBN engaged

SONZA’s services specifically to co-host the “Mel & Jay” programs. ABS-

CBN did not assign any other work to SONZA. To perform his work, SONZA

only needed his skills and talent. How SONZA delivered his lines, appeared

on television, and sounded on radio were outside ABS-CBN’s control.

SONZA did not have to render eight hours of work per day. The Agreement

required SONZA to attend only rehearsals and tapings of the shows, as well

as pre- and post-production staff meetings. ABS-CBN could not dictate the

contents of SONZA’s script. However, the Agreement prohibited SONZA

from criticizing in his shows ABS-CBN or its interests. The clear implication is

that SONZA had a free hand on what to say or discuss in his shows provided

he did not attack ABS-CBN or its interests.

Second, SONZA urges us to rule that he was ABS-CBN’s employee because

ABS-CBN subjected him to its rules and standards of performance. SONZA

claims that this indicates ABS-CBN’s control “not only [over] his manner of

work but also the quality of his work." The Agreement stipulates that SONZA

shall abide with the rules and standards of performance “covering talents” of

ABS-CBN. The Agreement does not require SONZA to comply with the rules

and standards of performance prescribed for employees of ABS- CBN. The

code of conduct imposed on SONZA under the Agreement refers to the

“Television and Radio Code of the Kapisanan ng mga Broadcaster sa

Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as

its Code of Ethics.” The KBP code applies to broadcasters, not to employees

of radio and television stations. Broadcasters are not necessarily employees

of radio and television stations. Clearly, the rules and standards of

performance referred to in the Agreement are those applicable to talents and

not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party

indicate that the latter is an employee of the former. In this case, SONZA

failed to show that these rules controlled his performance. We find that thesegeneral rules are merely guidelines towards the achievement of the mutually

desired result, which are top-rating television and radio programs that comply

with standards of the industry.

Lastly, SONZA insists that the “exclusivity clause” in the Agreement is the

most extreme form of control which ABS-CBN exercised over him. This

argument is futile. Being an exclusive talent does not by itself mean that

SONZA is an employee of ABS-CBN. Even an independent contractor can

validly provide his services exclusively to the hiring party. In the broadcast

industry, exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the

entertainment industry. This practice is not designed to control the means

and methods of work of the talent, but simply to protect the investment of the

broadcast station. The broadcast station normally spends substantial

amounts of money, time and effort “in building up its talents as well as the

programs they appear in and thus expects that said talents remain exclusi ve

with the station for a commensurate period of time.” Normally, a much higher

fee is paid to talents who agree to work exclusively for a particular radio or

television station. In short, the huge talent fees partially compensates for

exclusivity, as in the present case.

MJMDC is not labor-only contractor/agent of ABSCBN.It is an agent of Sonza, being owned by Sonza and Tiangco.



ABS-CBN BROADCASTING CORPORATION vs. MARLYN NAZARENO et

al. G.R. No. 164156, September 26, 2006

Facts:

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the

broadcasting business and owns a network of television and radio stations,

whose operations revolve around the broadcast, transmission, and relay of

telecommunication signals. It sells and deals in or otherwise utilizes the

airtime it generates from its radio and television operations. It has a franchise

as a broadcasting company, and was likewise issued a license and authority

to operate by the National Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan

as production assistants (PAs) on different dates. They were assigned at the

news and public affairs, for various radio programs in the Cebu Broadcasting

Station. On December 19, 1996, petitioner and the ABS-CBN Rank-and-File

Employees executed a Collective Bargaining Agreement (CBA) to be

effective during the period from December 11, 1996 to December 11, 1999.

However, since petitioner refused to recognize PAs as part of the bargaini ngunit, respondents were not included to the CBA.

On October 12, 2000, respondents filed a Complaint for Recognition of

Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay,

Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay

with Damages against the petitioner before the NLRC. The Labor Arbiter

rendered judgment in favor of the respondents, and declared that they were

regular employees of petitioner as such, they were awarded monetary

benefits. NLRC affirmed the decision of the Labor Arbiter. Petitioner filed a

motion for reconsideration but CA dismissed it.

Issue: W/N respondents were considered regular employees of ABS-CBN.

Ruling:

The respondents are regular employees of ABS-CBN. It was held that where

a person has rendered at least one year of service, regardless of the nature

of the activity performed, or where the work is continuous or intermittent, the

employment is considered regular as long as the activity exists, the reason

being that a customary appointment is not indispensable before one may be

formally declared as having at tained regular status.

In Universal Robina Corporation v. Catapang, the Court states that the

primary standard, therefore, of determining regular employment is the

reasonable connection between the particular activity performed by the

employee in relation to the usual trade or business of the employer. The test

is whether the former is usually necessary or desirable in the usual business

or trade of the employer. The connection can be determined by considering

the nature of work performed and its relation to the scheme of the particular

business or trade in its entirety. Also, if the employee has been performing

the job for at least a year, even if the performance is not continuous and

merely intermittent, the law deems repeated and continuing need for its

performance as sufficient evidence of the necessity if not indispensability of

that activity to the business. Hence, the employment is considered regular,

but only with respect to such activity and while such activity exists.

Additionally, respondents cannot be considered as project or program

employees because no evidence was presented to show that the duration

and scope of the project were determined or specified at the time of their

engagement. In the case at bar, however, the employer-employee

relationship between petitioner and respondents has been proven. In theselection and engagement of respondents, no peculiar or unique skill, talent

or celebrity status was required from them because they were merely hired

through petitioner’s personnel department just like any ordinary employee.

Respondents did not have the power to bargain for huge talent fees, a

circumstance negating independent contractual relationship. Respondents

are highly dependent on the petitioner for continued work. The degree of

control and supervision exercised by petitioner over respondents through its

supervisors negates the allegation that respondents are independent

contractors.

The presumption is that when the work done is an integral part of the regular

business of the employer and when the worker, relative to the employer,

does not furnish an independent business or professional service, such work

is a regular employment of such employee and not an independent

contractor. As regular employees, respondents are entitled to the benefits

granted to all other regular employees of petitioner under the CBA . Besides,

only talent-artists were excluded from the CBA and not production assistants

who are regular employees of the respondents. Moreover, under Article 1702

of the New Civil Code: “In case of doubt, all labor legislation and all labor

contracts shall be construed in favor of the safety and decent living of the

laborer.”

1. Regular Employee - at least one year; necessary or dispensable

2. Not a fixed-term contract; not an indenpendnt contractor

Presumption that one is EE: integral to businsess + no ind. biz or prof service



Thelma Dumpit-Murillo vs Court of Appeals

G.R. No. 164652. June 8, 2007

FACTS:

Thelma Dumpit-Murillo was hired by ABC as a newscaster in 1995. Her

contract with the TV station was repeatedly renewed until 1999. She then

wrote Jose Javier (VP for News and Public Affairs of ABC) advising him of

her intention to renew the contract.

Javier did not respond.

Dumpit then demanded reinstatement as well as her backwages, service

incentive leave pays and other monetary benefits.

ABC said they could only pay her backwages but her other claims had no

basis as she was not entitled thereto because she is considered as a talent

and not a regular employee.

Dumpit sued ABC. The Labor Arbiter ruled against Dumpit. The National

Labor Relations Commission reversed the LA. The Court of Appeals

reversed the NLRC and ruled that as per the contract between ABC and

Dumpit, Dumpit is a fixed term employee.

ISSUE:

Whether or not Dumpit is a regular employee.

HELD:

Yes. Dumpit was a regular employee under contemplation of law. The

practice of having fixed-term contracts in the industry does not automatically

make all talent contracts valid and compliant with labor law. The assertion

that a talent contract exists does not necessarily prevent a regular

employment status.

The duties of Dumpit as enumerated in her employment contract indicate that

ABC had control over the work of Dumpit. Aside from control, ABC also

dictated the work assignments and payment of petitioner’s wages. ABC also

had power to dismiss her. All these being present, clearly, there existed an

employment relationship between Dumpit and ABC.

In addition, her work was continuous for a period of four years. This

repeated engagement under contract of hire is indicative of the necessity and

desirability of the Dumpit’s work in ABC’s business.



FUJI TELEVISION NETWORK, INC. VS. ARLENE S. ESPIRITU

G.R. NO. 204944-45, DECEMBER 3, 2014, J. Leonen

FACTS:

Arlene S. Espiritu (Arlene) was engaged by Fuji Television Network, Inc.

(Fuji) as a news correspondent/producer tasked to report Philippine news to

Fuji through its Manila Bureau field office. The employment contract was

initially for one year, but was successively renewed on a yearly basis with

salary adjustments upon every renewal.

In January 2009, Arlene was diagnosed with lung cancer. She informed Fuji

about her condition, and the Chief of News Agency of Fuji, Yoshiki Aoki,

informed the former that the company had a problem with renewing her

contract considering her condition. Arlene insisted she was still fit to work as

certified by her attending physician.

After a series of verbal and written communications, Arlene and Fuji signed a

non-renewal contract. In consideration thereof, Arlene acknowledged the

receipt of the total amount of her salary from March-May 2009, year-endbonus, mid-year bonus and separation pay. However, Arlene executed the

non-renewal contract under protest .

Arlene filed a complaint for illegal dismissal with the NCR Arbitration Br anch

of the NLRC, alleging that she was forced to sign the non-renewal contract

after Fuji came to know of her illness. She also alleged that Fuji withheld her

salaries and other benefits when she refused to sign, and that she was left

with no other recourse but to sign the non-renewal contract to get her

salaries.

ISSUES:

1. Was Arlene an independent contractor? No

2. Was Arlene a regular employee?

3. Was Arlene illegally dismissed?

4. Did the Court of Appeals correctly awarded reinstatement, damages

and attorney’s fees?

LAWS:

Art. 280. Regular and casual employment. The provisions of written

agreement to the contrary notwithstanding and regardless of the oral

agreement of the parties, an employment shall be deemed to be regular

where the employee has been engaged to perform activities which are

usually necessary or desirable in the usual business or trade of the

employer, except where the employment has been fixed for a specific project

or undertaking the completion or termination of which has been determined

at the time of the engagement of the employee or where the work or services

to be performed is seasonal in nature and the employment is for the duration

of the season.

An employment shall be deemed to be casual if it is not covered by the

preceding paragraph; Provided, That, any employee who has rendered at

least one year of service, whether such service is continuous or broken, shall

be considered a regular employee with respect to the activity in which he is

employed and his employment shall continue while such activity exist.

Art. 279. Security of tenure. In cases of regular employment, the employer

shall not terminate the services of an employee except for a just cause of

when authorized by this Title. An employee who is unjustly dismissed from

work shall be entitled to reinstatement without loss of seniority rights and

other privileges and to his full backwages, inclusive of allowances, and to hisother benefits or their monetary equivalent computed from the time his

compensation was withheld from him up to the time of his actual

reinstatement.

Thus, on the right to security of tenure, no employee shall be dismissed,

unless there are just or authorized causes and only after compliance with

procedural and substantive due process is conducted.

Art. 284. Disease as ground for termination. An employer may terminate the

services of an employee who has been found to be suffering from any

disease and whose continued employment is prohibited by law or is

prejudicial to his health as well as to the health of his co-employees:

Provided, That he is paid separation pay equivalent to at least one (1) month

salary or to one-half (1/2) month salary for every year of service, whichever is

greater, a fraction of at least six (6) months being considered as one (1)

whole year.

Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor

Code. Disease as a ground for dismissal. – Where the employee suffers from

a disease and his continued employment is prohibited by law or prejudicial to

his health or to the health of his co-employees, the employer shall not

Fuji TV based in Tokyo, Japan

In 200



terminate his employment unless there is a certification by a competent

public health authority that the disease is of such nature or at such a stage

that it cannot be cured within a period of six (6) months even with proper

medical treatment. If the disease or ailment can be cured within the period,

the employer shall not terminate the employee but shall ask the employee to

take a leave. The employer shall reinstate such employee to his former

position immediately upon the restoration of his normal health.

CASE HISTORY:

Labor Arbiter dismissed the complaint and held that Arlene was not a

regular employee but an independent contractor. The NLRC reversed the

Labor Arbiter’s decision and ruled that Arlene was a regular employee since

she continuously rendered services that were necessary and desirable to

Fuji’s business.

The Court of Appeals affirmed that NLRC ruling with modification that Fuji

immediately reinstate Arlene to her position without loss of seniority rights

and that she be paid her backwages and other emoluments withheld from

her. The Court of Appeals agreed with the NLRC that Arlene was a regularemployee, engaged to perform work that was necessary or desirable in the

business of Fuji, and the successive renewals of her fixed-term contract

resulted in regular employment. The case of Sonza does not apply in the

case because Arlene was not contracted on account of a special talent or

skill. Arlene was illegally dismissed because Fuji failed to comply with the

requirements of substantive and procedural due process. Arlene, in fact,

signed the non-renewal contract under protest as she was left without a

choice.

Fuji filed a petition for review on certiorari under Rule 45 before the Supreme

Court, alleging that Arlene was hired as an independent contractor; that Fuji

had no control over her work; that the employment contracts were renewed

upon Arlene’s insistence; that there was no illegal dismissal because she

freely agreed not to renew her fixed-term contract as evidenced by her email

correspondences. Arlene filed a manifestation stating that the SC could not

take jurisdiction over the case since Fuji failed to authorize Corazon Acerden,

the assigned attorney-in-fact for Fuji, to sign the verification.

RULING:

1. Arlene was not an independent contractor.

Fuji alleged that Arlene was an independent contractor citing the Sonza

case. She was hired because of her skills. Her salary was higher than the

normal rate. She had the power to bargain with her employer. Her contract

was for a fixed term. It also stated that Arlene was not forced to sign the non-

renewal agreement, considering that she sent an email with another version

of her non-renewal agreement.

Arlene argued (1) that she was a regular employee because Fuji had cont rol

and supervision over her work; (2) that she based her work on instructions

from Fuji; (3) that the successive renewal of her contracts for four years

indicated that her work was necessary and desirable; (4) that the payment of

separation pay indicated that she was a regular employee; (5) that the Sonza

case is not applicable because she was a plain reporter for Fuji; (6) that her

illness was not a ground for her dismissal; (7) that she signed the non-

renewal agreement because she was not in a position to reject the same.

Distinctions among fixed-term employees, independent contractors, and

regular employees

Fixed Term Employment

1) The fixed period of employment was knowingly and voluntarily agreed

upon by the parties without any force, duress, or improper pressure being

brought to bear upon the employee and absent any other circumstances

vitiating his consent; or

2) It satisfactorily appears that the employer and the employee dealt with

each other on more or less equal terms with no moral dominance exercised

by the former or the latter.These indications, which must be read together, make the Brent doctrine

applicable only in a few special cases wherein the employer and employee

are on more or less in equal footing in entering into the contract. The reason

for this is evident: when a prospective employee, on account of special skills

or market forces, is in a position to make demands upon the prospective

employer, such prospective employee needs less protection than the

ordinary worker. Lesser limitations on the parties’ freedom of contract are

thus required for the protect ion of the employee.155 (Citations omit ted)

Brent School v. Zamora

Fuji: Stringer (freelance journalist/photographer)



For as long as the guidelines laid down in Brent are satisfied, this court will

recognize the validity of the fixed-term contract. (GMA Network, Inc. vs.

Pabriga)

Independent Contractor

One who carries on a distinct and independent business and undertakes to

perform the job, work, or service on its own account and under one’s own

responsibility according to one’s own manner and method, f ree from thecontrol and direction of the principal in all matters connected with the

performance of the work except as to the results thereof.

No employer-employee relationship exists between the independent

contractors and their principals.

Art. 106. Contractor or subcontractor. Whenever an employer 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 subcontractor, if any, shall be

paid in accordance with the provisions of this Code.

XXX

The Secretary of Labor and Employment may, by appropriate regulations,

restrict or prohibit the contracting-out of labor to protect the rights of workers

established under this Code. In so prohibiting or restricting, he may make

appropriate distinctions between labor-only contracting and job contracting

as well as differentiations within these types of contracting and determine

who among the parties involved shall be considered the employer for

purposes of this Code, to prevent any violation or circumvention of any

provision of this Code.

There is “labor -only” contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of tools,

equipment, machineries, work premises, among others, and the workers

recruited and placed by such person are performing activities which are

directly related to the principal business of such employer. In such cases, the

person or intermediary shall be considered merely as an agent of the

employer who shall be responsible to the workers in the same manner and

extent as if the latter were directly employed by him.

Department Order No. 18-A, Series of 2011, Section 3

(c) . . . an arrangement whereby a principal agrees to put out or farm out with

a contractor the performance or completion of a specific job, work or service

within a definite or predetermined period, regardless of whether such job,

work or service is to be performed or completed within or outside the

premises of the principal.

This department order also states that there is a trilateral relationship in

legitimate job contracting and subcontracting arrangements among the

principal, contractor, and employees of the contractor. There is no employer-

employee relationship between the contractor and principal who engages the

contractor’s services, but there is an employer -employee relationship

between the contractor and workers hired to accomplish the work for the

principal.162chanRoblesvirtualLawlibrary

Jurisprudence has recognized another kind of independent contractor:

individuals with unique skills and talents that set them apart from ordinary

employees. There is no trilateral relationship in this case because the

independent contractor himself or herself performs the work for the principal.

In other words, the relationship is bilateral.

XXX

There are different kinds of independent contractors: those engaged in

legitimate job contracting and those who have unique skills and talents that

set them apart from ordinary employees.

Since no employer-employee relationship exists between independent

contractors and their principals, their contracts are governed by the Civil

Code provisions on contracts and other applicable laws.

Regular Employees

Contracts of employment are different and have a higher level of regulation

because they are impressed with public interest. Article 13, Section 3 of the

1987 Consti tution provides full protection to labor.

Apart from the Constitutional guarantee, Articl e 1700 of the Civil Code states

that : The relations between capital and labor are not merely contractual.

They are so impressed with public interest that labor contracts must yield to

the common good. Therefore, such contracts are subject to the special laws



on labor unions, collective bargaining, strikes and lockouts, closed shop,

wages, working conditions, hours of labor and similar subjects.

In contracts of employment, the employer and the employee are not on equal

footing. Thus, it is subject to regulatory review by the labor tribunals and

courts of law. The law serves to equalize the unequal. The labor force is a

special class that is constitutionally protected because of the inequality

between capital and labor. This presupposes that the labor force is weak.

The level of protection to labor should vary from case to caese. When a

prospective employee, on account of special skills or market forces, is in a

position to make demands upon the prospective employer, such prospective

employee needs less protection than the ordinary worker.

The level of protection to labor must be determined on the basis of the nature

of the work, qualifications of the employee, and other relevant circumstances

such as but not limited to educational attainment and other special

qualifications.

Fuji’s argument that Arlene was an independent contractor under a fixed -

term contract is contradictory. Employees under fixed-term contracts cannot

be independent contractors because in fixed-term contracts, an employer-

employee relationship exists. The test in this kind of contract is not the

necessity and desirability of the employee’s activities, “but the day certain

agreed upon by the parties for the commencement and termination of the

employment relationship.” For regular employees , the necessity and

desirability of their work in the usual course of the employer’s business are

the determining factors. On the other hand, independent contractors do not

have employer-employee relationships with their principals.

To determine the status of employment, the existence of employer-employee

relationship must first be settled with the use of the four-fold test, especially

the qualifications for the power to control.

The distinction is in this guise:

Rules that merely serve as guidelines towards the achievement of a mutually

desired result without dictating the means or methods to be employed

creates no employer-employee relationship; whereas those that control or fix

the methodology and bind or restrict the party hired to the use of such mea ns

creates the relationship.

In appliacation, Arlene was hired by Fuji as a news producer, but there was

no evidence that she was hired for her unique skills that would distinguish

her from ordinary employees. Her monthly salary appeared to be a

substantial sum. Fuji had the power to dismiss Arlene, as provided for in her

employment contract. The contract also indicated that Fuji had control over

her work as she was rquired to report for 8 hours from Monday to Friday. Fuji

gave her instructions on what to report and even her mode of transportation

in carrying out her functions was controlled.

Therefore, Arlene could not be an independent contractor.

2. Arlene was a regular employee with a fixed-term contract.

In determining whether an employment should be considered regular or non-

regular, the applicable test is the reasonable connection between the

particular activity performed by the employee in relation to the usual business

or trade of the employer. The standard, supplied by the law itself, is whether

the work undertaken is necessary or desirable in the usual business or tradeof the employer, a fact that can be assessed by looking into the nature of the

services rendered and its relation to the general scheme under which the

business or trade is pursued in the usual course. It is distinguished from a

specific undertaking that is divorced from the normal activities required in

carrying on the particular business or trade.

However, there may be a situation where an employee’s work is necessary

but is not always desirable in the usual course of business of the employer.

In this situation, there is no regular employment.

Fuji’s Manila Bureau Office is a small unit213 and has a few employees.

Arlene had to do all activities related to news gathering.

A news producer “plans and supervises newscast [and] works with reporters

in the field planning and gathering information, including monitoring and

getting news stories, rporting interviewing subjects in front of a video camera,

submission of news and current events reports pertaining to the Philippines,

and traveling to the regional office in Thailand.” She also had to report for

work in Fuji’s office in Manila from Mondays to Fridays, eight per day. She

had no equipment and had to use the facilities of Fuji to accomplish her

tasks.

1. test of control and supervision - YES

2. test of reasonable connection bet work and business - YES

4 tests: (a) selection/engagement; (b) payment of wages; (c) dismissal; (d) control



The successive renewals of her contract indicated the necessity and

desirability of her work in the usual course of Fuji’s business. Because of

this, Arlene had become a regular employee with the right to security of

tenure.

Ar lene’s contract indicating a fixed term did not automatically mean that she

could never be a regular employee. For as long as it was the employee who

requested, or bargained, that the contract have a “definite date of

termination,” or that the fixed-term contract be freely entered into by the

employer and the employee, then the validity of the fixed-term contract will

be upheld.

3. Arlene was illegally dismissed.

As a regular employee, Arlene was entitled to security of tenure under Artic le

279 of the Labor Code and could be dismissed only for just or authorized

causaes and after observance of due process.

The expiration of the contract does not negate the finding of illegal dismissal.

The manner by which Fuji informed Arlene of non-renewal through email a

month after she informed Fuji of her illness is tantamount to constructive

dismissal. Further, Arlene was asked to sign a letter of resignation prepared

by Fuji. The existence of a fixed-term contract should not mean that there

can be no illegal dismissal. Due process must still be observed.

Moreoever, disease as a ground for termination under Article 284 of the

Labor Code and Book VI, Rule 1, Section 8 of the Omnibus Rules

Implementing the Labor Code require two requirements to be complied with:

(1) the employee’s disease cannot be cured within six months and his

continued employment is prohibited by law or prejudicial to his health as well

as to the health of his co-employees; and (2) certification issued by a

competent public health authority that even with proper medical treatment,

the disease cannot be cured within six months. The burden of proving

compliance with these requisites is on the employer. Non-compliance leads

to illegal dismissal. blesvirtualLawlibrary

Arlene was not accorded due process. After informing her employer of her

lung cancer, she was not given the chance to present medical certificates.

Fuji immediately concluded that Arlene could no longer perform her duties

because of chemotherapy. Neither did it suggest for her to take a leave. It did

not present any certificate from a competent public health authority.

Therefore, Arlene was illegally dismissed.

4. The Court of Appeals correctly awarded reinstatement, damages and

attorney’s fees.

The Court of Appeals awarded moral and exemplary damages and attorney’s

fees. It also ordered reinstatement, as the grounds when separation pay was

awarded in lieu of reinstatement were not proven.

The Labor Code provides in Article 279 that illegally dismissed employees

are entitled to reinstatement, backwages including allowances, and all other

benefits.

Separation pay in lieu of reinstatement is allowed only (1) when the employer

has ceased operations; (2) when the employee’s position is no longer

available; (3) strained relations; and (4) a substantial period has lapsed fromdate of filing to date of finality.

The doctrine of strained relations should be strictly applied to avoid

deprivation of the right to reinstatement. In the case at bar, no evidence was

presented by Fuji to prove that reinstatement was no longer feasible. Fuji did

not allege that it ceased operations or that Arlene’s position was no longer

feasible. Nothing showed that the reinstatement would cause an atmosphere

of antagonism in the workplace.

Moral damages are awarded “when the dismissal is attended by bad faith or

fraud or constitutes an act oppressive to labor, or is done in a manner

contrary to good morals, good customs or public policy.” On the other hand,

exemplary damages may be awarded when the dismissal was effected “in a

wanton, oppressive or malevolent manner.

After Arl ene had informed Fuji of her cancer, she was informed that there

would be problems in renewing her contract on account of her condition. This

information caused Arlene mental anguish, serious anxiety, and wounded

feelings. The manner of her dismissal was effected in an oppressive

approach with her salary and other benefits being withheld until May 5, 2009,

when she had no other choice but to sign the non-renewal contract.



With regard to the award of attorney’s fees, Article 111 of the Labor Code

states that “[i]n cases of unlawful withholding of wages, the culpable party

may be assessed attorney’s fees equivalent to ten percent of the amount of

wages recovered.” In actions for recovery of wages or where an employee

was forced to litigate and, thus, incur expenses to protect his rights and

interest, the award of attorney’s fees is legally and morally justifiablen.” Due

to her illegal dismissal, Arlene was forced to litigate.

Therefore, the awards for reinstatement, damages and attorney’s fees were

proper.



LEGEND HOTEL (MANILA), OLWNED BY TITANIUM CORPORATION

AND/OR, NELSON NAPUD, IN HIS CAPACITY AS THE PRESIDENT OF

PETITIONER CORPORATION, VS. HERNANI S. REALUYO, ALSO

KNOWN AS JOEY ROA

G.R. No. 153511, July 18, 2012

FACTS:

This labor case for illegal dismissal involves a pianist employed to

perform in the restaurant of a hotel.

August 9, 1999: Realuyo, whose stage name was Joey R. Roa, filed a

complaint for alleged unfair labor practice, constructive illegal dismissal,

and the underpayment/nonpayment of his premium pay for holidays,

separation pay, service incentive leave pay, and 13th month pay. He

prayed for attorney’s fees, moral damages of P100,000.00 and

exemplary damages for P100,000.00

Roa averred that he had worked as a pianist at the Legend Hotel’s

Tanglaw Restaurant from September 1992 with an initial rate of

P400.00/night; and that it had increased to P750.00/night. During his

employment, he could not choose the time of performance, which hadbeen fixed from 7:00PM to 10:00pm for three to six times a week.

July 9, 1999: the management had notified him that as a cost-cutting

measure, his services as a pianist would no longer be required effecti ve

July 30, 1999.

In its defense, petitioner denied the existence of an employer-employee

relationship with Roa, insisting that he had been only a talent engaged to

provide live music at Legend Hotel’s Madison Coffee Shop for three

hours/day on two days each week; and stated that the economic crisis

that had hit the country constrained management to dispense with his

services. December 29,1999: the Labor Arbiter (LA) dismissed the complaint for

lack of merit upon finding that the parties had no employer-employee

relationship, because Roa was receiving talent fee and not salary, which

was reinforced by the fact that Roa received his talent fee nightly, unlike

the regular employees of the hotel who are paid monthly.

NLRC affirmed the LA’s decision on May 31, 2001.

CA set aside the decision of the NLRC, saying CA failed to take into

consideration that in Roa’s line of work, he was supervised and

controlled by the hotel’s restaurant manager who at certain times would

require him to perform only tagalong songs or music, or wear barong

tagalong to conform with the Filipinana motif of the place and the time of

his performance is fixed. As to the status of Roa, he is considered a

regular employee of the hotel since his job was in furtherance of the

restaurant business of the hotel. Granting that Roa was initially a

contractual employee, by the sheer length of service he had rendered for

the company, he had been converted into a regular employee.

CA held that the dismissal was due to retrenchment in order to avoid or

minimize business losses, which is recognized by law under Art. 283 of

the Labor Code.

ISSUES:

WON there was employer- employee relationship between the two,

and if so,

WON Roa was validly terminated

RULING:

YES. Employer-employee relationship existed between the parties.

! Roa was undeniably employed as a pianist of the restaurant. The

hotel wielded the power of selection at the time it entered into the

service contract dated Sept. 1, 1992 with Roa. The hotel could notseek refuge behind the service contract entered into with Roa. It is

the law that defines and governs an employment relationship, whose

terms are not restricted to those fixed in the written contract, for other

factors, like the nature of the work the employee has been called

upon to perform, are also considered.

! The law affords protection to an employee, and does not

countenance any attempt to subvert its spirit and intent. Any

stipulation in writing can be ignored when the employer utilizes the

stipulation to deprive the employee of his security of tenure. The

inequality that characterizes employer-employee relationshipgenerally tips the scales in favor of the employer, such that the

employee is often scarcely provided real and better options.

! The argument that Roa was receiving talent fee and not salary is

baseless. There is no denying that the remuneration denominated as

talent fees was fixed on the basis of his talent, skill, and the quality of

music he played during the hours of his performance. Roa’s

remuneration, albeit denominated as talent fees, was still considered

as included in the term wage in the sense and context of the Labor

Code, regardless of how petitioner chose to designate the

remuneration, as per Article 97(f) of the Labor Code.

A. Bonifacio St, Makati Cit



! The power of the employer to control the work of the employee is

considered the most significant determinant of the existence of an

employer-employee relationship. This is the so-called control test,

and is premised on whether the person for whom the services are

performed reserves the right to control both the end achieved and

the manner and means used to achieve that end.

! Lastly, petitioner claims that it had no power to dismiss respondent

due to his not being even subject to its Code of Discipline, and that

the power to terminate the working relationship was mutually vested

in the parties, in that either party might terminate at will, with or

without cause. This claim is contrary to the records. Indeed, the

memorandum informing respondent of the discountinuance of his

service because of the financial condition of petitioner showed the

latter had the power to dismiss him from employment.

NO. Roa was not validly terminated.

! The conclusion that Roa’s termination was by reason of

retrenchment due to an authorized cause under the labor Code is

inevitable.! Retrenchment is one of the authorized causes for the dismissal of

employees recognized by the Labor Code. It is a management

prerogative resorted to by employers to avoid ro to minimize

business losses. On this matter, Article 283 of the Labor Code

states:

Article 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 undertakingunless 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. xxx. 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.

! Justifications for retrenchment:

a. The expected losses should be substantial and not m erely de

minimis in extent;

b. The substantial losses apprehended must be reasonably

imminent;

c. The retrenchment must be reasonably necessary and likely to

effectively prevent the expected losses; and

d. The alleged losses, if already incurred, and the expected

imminent losses sought to be forestalled must be proved by

sufficient and convincing evidence.

! In termination cases, the burden of proving that the dismissal was for

a valid or authorized cause rests upon the employer. Here, petitioner

did not submit evidence of the losses to its business operations and

the economic havoc it would thereby imminently sustain. It only

claimed that Roa’s termination was due to its “present

business/financial condition.” This bare statement fell short of the

norm to show a valid retrenchment. Hence, there was no valid cause

for the retrenchment of respondent. Since the lapse of time since the

retrenchment might have rendered Roa’s reinstatement to his former job no longer feasible, Legend Hotel should pay him separation pay

at the rate of one month pay for every year of service computed from

September 1992 until the finality of this decision, and full backwages

from the time his compensation was withheld until the finality of this

decision.

Petition denied.



WPP MARKETING COMMUNICATIONS, INC., vs. JOCELYN M. GALERA

ALIEN EMPLOYMENT PERMIT

2nd DIVISION G.R. No. 169207 March 25, 2010

The Ruling of the Court

1. Whether Galera is an Employee or a Corporate Officer: Corporate officers

are such by virtue of either the Corporation Code or the corporation’s by -laws.

a. Galera’s appointment as Vice-President with the operational title of

Managing Director of Mindshare was an appointment to a non-existent

corporate office.

b. The four-fold test will show that Galera was an employee

(1) employment contract states where and how often she is to perform her

work; WPP completely controls the compensation she receives; and she is

subject to the regular disciplinary procedures of WPP.

(2) contract states that she is a permanent employee.(3) contract states that the rights to any invention, discovery, improvement in

procedure, trademark, or copyright created or discovered by GALERA during

her employment shall automatically belong to WPP. The Intellectual Property

Code states that this occurs if the creator is an employee of the one entitled

to the patent or copyright.

(4) the Employment Contract, states that her right of redress (in cases of

disciplinary matters) is through Mindshare’s Chief Executive Officer for the

Asia-Pacific.

c. GALERA signed the DOLE Alien Employment Permit and the application

for a 9(g) BID visa as WPP’ Vice President. These should not be considered

against her. Assuming that her appointment as Vice-President was a valid

act, these appointments occurred after she was hired as a regular employee,

with no appreciable change in her duties.

2. Labor Arbiter and the NLRC have jurisdiction.

3. Whether WPP illegally dismissed Galera

a. WPP failed to prove any just or authorized cause, belied further by Galer’s

documentary evidence which contents are contrary to the reasons in the

termination letter.

b. The law requires that the employer to issue the worker two written notices:

(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. WPP’s did not

comply with the two-notice rule.

3. Whether Galera is entitled to the monetary award: Galera worked in the

Philippines without a proper work permit. The Labor Code and its

Implementing Rules and Regulations state that the employment permit must

be acquired prior to employment. To grant Galera’s prayer is to sanction

violation of the Philippine labor laws requiring aliens to secure work permits

before their employment .

The status quo must prevail; however, Galera may seek relief from other

jurisdictions.

FACTS:

1. Jocelyn Galera, a US citizen, was hired as Managing Director ofMindshare PH effective Sept 1, 1999.2. After 4 months, WPP designated her as VP in her application for workingvisa.3. On Dec. 14, 2000, she was verbally dismissed by the CEO on account ofher incompetence.

LA: WPP liable for illegal dismissal

NLRC: Galera was VP and therefore a corporate officer when she wasdismissed. Thus, it had no jurisdiction to hear and decide on intra- corporate disputes. It was with the SEC. now transferred to the RTC.

CA: Appointment was ultra vires as it was against By-laws, which allowedfor only 1 VP and a maximum of 5 directors.

SC: Illegally dismissed but not entitled to monetary award - did not acquire permit PRIOR to employment, which is a violation of theIRR of Labor Code, Book 1, Rule 14, Section 4

Galera is not a corporate officer.



Marticio Semblante and Dubrick Pilar v CA, Gallera de

Mandaue/Spouses Loot | 2011 | Velasco, Jr.

G.R. No. 196426. August 15, 2011

Facts:1993: Semblante and Pilar were hired by Spouses Loot (owners of

Gallera de Mandaue cockpit) as masiador and sentenciador, respectively.

As masiador, Semblante calls and takes the bets from the gamecock owners

and other bettors and orders the start of the cockfight. He also distributes the

winnings after deducting the arriba, or the commission for the cockpit.

Meanwhile, as the sentenciador, Pilar oversees the proper gaffing of fighting

cocks, determines the fighting cocks’ physical condition and capabilities to

continue the cockfight, and eventually declares the result of the cockfight.

Semblante receives 2k per week or 8k per month while Pilar gets 3.5k per

week or 14k per month. They work Tuesday, Wednesday, Saturday and

Sunday every week excluding monthly derbies and cockfights on special

holidays. Their work is at 1pm until 12 midnight or until the early hours of the

morning. Petitioners were issued employee IDs that they wear every time

they report for duty. They alleged never incurring violations of the cockpit

rules and regulations.Nov. 14, 2003, petitioners were denied entry per instructions of respondents

and were informed of termination of their services. Petitioners then filed for

illegal dismissal.

Respondents, in answer, said petitioner were not employees and alleged

they were associates of respondents’ independent contractor, Vega.

Respondent have no regular working time and are free to decide whether to

report or not. In times when there are a few cockfights in their cockpit,

petitioners would go to other cockpits in the vicinity. Lastly, petitioners were

given IDs to indicate they were free from the entrance fee and to differentiate

them from the public.

The LA found petitioners to be regular employees since what they performed

was necessary and indispensible to the usual trade or business of the

respondents for a number of years. There was illegal dismissal so

respondents ordered to pay backwages and separation pay.

Respondents filed the appeal within the 10 day appeal period but failed to

post a cash or surety bond on equivalent to the monetary award granted by

the LA within the same time. Hence, NLRC denied the appeal.

Subsequently, however, NLRC reversed itself saying that the appeal was

meritorious and the belated filing of the bond is a substantial compliance with

the rules. NLRC then found no employer-employee relationship saying that

respondents had no part in the selection and engagement of petitioner, and

that no separate individual contract with respondents was ever executed by

petitioners.

CA agreed with NLRC. It said that that referees and bet-takers in a cockfight

need to have the kind of expertise that is characteristic of the game to

interpret messages conveyed by mere gestures. Hence, petitioners are akin

to independent contractors who possess unique skills, expertise, and talent

to distinguish them from ordinary employees. Further, respondents did not

supply petitioners with the tools and instrumentalities they needed to perform

work. Petitioners only needed their unique skills and talents to perform their

job asmasiador and sentenciador.

Issue:

W/N NLRC and CA correct in allowing the MFR although the appeal bond

was belatedly posted. YES.

- Time and again, however, this Court, considering the substantial

merits of the case, has relaxed the rule on, and excused the late posting of,

the appeal bond when there are strong and compelling reasons for the

liberality;- After all, technical rules cannot prevent courts from exercising their

duties to determine and settle, equitably and completely, the rights and

obligations of the parties;

- This is one case where the exception to the general rule lies.

W/N there was employer-employee relationship. No.

Relationship between the parties fails to pass muster the four-fold test of

employment:

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, which is the most

important element.

At case:

- Both NLRC and CA found that:

o Respondents had no part in petitioners’ selection and management;

o Petitioners’ compensation was paid out of the arriba (which is a

percentage deducted from the total bets), not by petitioners; and



o Petitioners performed their functions as masiador and sentenciador

free from the direction and control of respondents.

- In the conduct of their work, petitioners relied mainly on their

expertise that is characteristic of the cockfight gambling, and were never

given by respondents any tool needed for the performance of their work;

- No illegal dismissal since petitioners were not employees;

- The rule on the posting of an appeal bond cannot defeat the

substantive rights of respondents to be free from an unwarranted burden of

answering for an illegal dismissal for which they were never responsible.

CA AFFIRMED.



CESAR C. LIRIO, doing business under the name and style of CELKOR

AD SONICMIX v. WILMER D. GENOVIA

G.R. No. 169757: November 23, 2011, PERALTA, J.

FACTS:

Genovia was allegedly hired on August 15, 2001 as studio manager by

petitioner Lirio, owner of Celkor Ad Sonicmix Recording Studio (Celkor). A

few days after he started working as a studio manager, Lirio approached him

and told him about his project to produce an album for his 15-year-old

daughter. Lirio asked respondent to compose and arrange songs for Celine

and promised that he (Lirio) would draft a contract to assure respondent of

his compensation for such services. As agreed upon, the additional services

that respondent would render included composing and arranging musical

scores only, while the technical aspect in producing the album, such as

digital editing, mixing and sound engineering would be performed by

respondent in his capacity as studio manager for which he was paid on a

monthly basis.

Respondent reminded petitioner about his compensation as composer andarranger of the album. Petitioner verbally assured him that he would be duly

compensated. By mid-November 2001, respondent finally finished the

compositions and musical arrangements of the songs to be included in the

album.

Thereafter, Genovia was tasked by petitioner to prepare official

correspondence, establish contacts and negotiate with various radio stations,

malls, publishers, record companies and manufacturers, record bars and

other outlets in preparation for the promotion of the said album. By early

February 2002, the album was in its manufacturing stage.

On February 26, 2002, respondent again reminded petitioner about the

contract on his compensation as composer and arranger of the album.

Petitioner told respondent that since he was practically a nobody and had

proven nothing yet in the music industry, respondent did not deserve a high

compensation, and he should be thankful that he was given a job to feed his

family. Petitioner informed respondent that he was entitled only to 20% of the

net profit, and not of the gross sales of the album, and that the salaries he

received and would continue to receive as studio manager of Celkor would

be deducted from the said 20% net profit share. Respondent objected and

insisted that he be properly compensated. On March 14, 2002, petitioner

verbally terminated respondent's services, and he was instructed not to

report for work. On July 9, 2002, respondent Wilmer D. Genovia filed a

complaint against petitioner for illegal dismissal, non-payment of commission

and award of moral and exemplary damages.

Petitioner asserted that from the aforesaid terms and conditions, his

relationship with respondent is one of an informal partnership under Article

1767 of the New Civil Code, since they agreed to contribute money, property

or industry to a common fund with the intention of dividing the profits among

themselves. Petitioner had no control over the time and manner by which

respondent composed or arranged the songs, except on the result thereof.

ISSUE:

Whether or not an employer-employee relationship existed between

petitioner and respondent

HELD:

The elements to determine the existence of an employment relationship are:

(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.

The most important element is the employer's control of the employee's

conduct, not only as to the result of the work to be done, but also as to the

means and methods to accomplish it.

It is settled that no particular form of evidence is required to prove the

existence of an employer-employee relationship. Any competent and relevant

evidence to prove the relationship may be admitted.

In this case, the documentary evidence presented by respondent to pro ve

that he was an employee of petitioner are as follows: (a) a document

denominated as "payroll" certified correct by petitioner, which showed that

respondent received a monthly salary of P7,000.00 (P3,500.00 every 15th of

the month and another P3,500.00 every 30th of the month) with the

corresponding deductions due to absences incurred by respondent; and (2)

copies of petty cash vouchers, showing the amounts he received and signed

for in the payrolls.



The said documents showed that petitioner hired respondent as an employee

and he was paid monthly wages of P7,000.00. Petitioner wielded the power

to dismiss as respondent stated that he was verbally dismissed by petitioner,

and respondent, thereafter, filed an action for illegal dismissal against

petitioner. The power of control refers merely to the existence of the power. It

is not essential for the employer to actually supervise the performance of

duties of the employee, as it is sufficient that the former has a right to wield

the power. Nevertheless, petitioner stated in his Position Paper that it was

agreed that he would help and teach respondent how to use the studio

equipment. In such case, petitioner certainly had the power to check on the

progress and work of respondent.

On the other hand, petitioner failed to prove that his relationship with

respondent was one of partnership. Such claim was not supported by any

written agreement. It is a well-settled doctrine, that if doubts exist between

the evidence presented by the employer and the employee, the scales of

justice must be tilted in favor of the latter.

Based on the foregoing, it is clear that an employer-employee relationshipexisted between petitioner and respondent.

LA: ER-EE relationship existed based on positive assertion anddocumentary evidence.

NLRC: reversed - failed to prove selection, power to dismiss and power of control

CA: reversed - Lirio failed to establish by substantial evidence the existence of a

partnership; burden of proof with the ER



Wilhelmina Orozco vs Court of Appeals

G.R. No. 155207. August 13, 2008.

562 SCRA 36 – Labor Law – Labor Standards – Employer-employee

Relationship in a Publication – Four Fold Test – Control Test

FACTS

In March 1990, Wilhelmina Orozco was hired as a writer by the Philippine

Daily Inquirer (PDI). She was the columnist of “Feminist Reflections” under

the Lifestyle section of the publication. She writes on a weekly basis and on a

per article basis (P250-300/article).

In 1991, Leticia Magsanoc as the editor-in-chief sought to improve the

Lifestyle section of the paper. She said there were too many Lifestyle writers

and that it was time to reduce the number of writers. Orozco’s column was

eventually dropped.

Orozco filed for a case for Illegal Dismissal against PDI and Magsanoc.

Orozco won in the Labor Arbiter where the arbiter ruled that there exists anemployer-employee relat ionship between PDI and Orozco.

The case eventually reached the Court of Appeals where the CA ruled that

there is no such relationship.

Orozco insists that by applying the four-fold test, it can be seen that she is an

employee of PDI; Orozco insists that PDI had been exercising the power of

control over her because:

a) PDI provides the guidelines as to what her article content should be;

b) PDI sets deadlines as to when Orozco must submit her article/s;

c) PDI controls the number of articles to be submitted by Orozco;

d) PDI requires a certain discipline from their writers so as to maintain their

readership.

ISSUE: Whether or not a newspaper columnist is an employee of the

newspaper which publishes the column.

HELD: No. The type of control being argued by Orozco is not the type of

control contemplated under the four fold test principle in labor law. The

Supreme Court emphasized: The main determinant to test control is whether

the rules set by the employer are meant to control not just the results of the

work but also the means and method to be used by the hired party in order to

achieve such results.

In this case, the “control” exercised by PDI over Orozco, as mentioned

earlier, is not that “control” contemplated under the four fold test. In fact, such

standards set by PDI is merely incidental or inherent in the newspaper

business and is not an exercise of control over Orozco.

Orozco has not shown that PDI, acting through its editors, dictated how she

was to write or produce her articles each week. There were no restraints on

her creativity; Orozco was free to write her column in the manner and style

she was accustomed to and to use whatever research method she deemed

suitable for her purpose. The apparent limitation that she had to write only on

subjects that befitted the Lifestyle section did not translate to control, but was

simply a logical consequence of the fact that her column appeared in thatsection and therefore had to cater to the preference of the readers of that

section.

Orozco:

1) PDI had control over her work - Contents: must be a “lifestyle” article, prerogative to reject

- Space: length, 2-3 pages

- Time/Discipline: produce an article weekly 2) regular employee

- article published weekly for 3 years now

SC: No ER-EE relationship

1) Control Test - general guidelines in order to achieve mutually desired results are not indicative

of control

- control is merely on the desired result and not on the means - no restraints on creativity

2) Economic Reality Test - EE’s economic dependence on ER - primary occupation: women’s rights advocate

- contributes to other publications

- thus, independent contractor - unique skills, talent and celebrity statusnot possessed by ordinary employees



Bitoy Javier (Danilo Javier) v. Fly Ace Corporation and Flordelyn

Castillo G.R. No. 192558. February 15, 2012.

Facts:

1. Since 2007, Danilo ‘Bitoy’ Javier was an employee of Fly Ace

Performed various tasks, such as cleaning and arranging the

canned items before their delivery, except in instances when he

would be ordered to accompany the company's delivery

vehicles, as pahinante

Reported for work M to S from 7AM to 5PM

He wasn’t issued an ID and payslips

2. May 6, 2008: He was no longer allowed to enter the premises, upon

instruction of Mr. Ong, his superior

As he was begging the security guard to let him enter, he saw

Mr. Ong, whom he approached and asked why he was being

barred from entering

“Tanungin mo anak mo” – Mr. Ong

Bitoy discovered that Mr. Ong had been courting his daughter

Annalyn; that Annalyn tried to talk to Mr. Ong and convince himto spare Bitoy from trouble, but he refused; that Mr. Ong then

fired Bitoy

3. May 23, 2008: Bitoy filed a complaint with the NLRC for

underpayment of salaries and other labor standard benefits

His evidence: affidavit of Bengie Valenzuela, who alleged that

Bitoy was a stevedore or pahinante of Fly Ace from Sept. 2007

to Jan. 2008

Fly Ace said it was in the business of importation and sales of

groceries

That Bitoy was cont racted by Mr. Ong as extra helper on

a pakyaw basis for 5-6 times a month, whenever the

vehicle of its contracted hauler, Milmar Hauling Services,

was unavailable;

Rate was P300 (increased to P325)

That on April 30, they no longer needed his services

That Bitoy was not their employee, and there was no

illegal dismissal

Evidence: Agreement with Milmar Hauling Services (the

contracted hauler) and copies of acknowledgment

receipts evidencing payment to Javier – “daily manpower

(pakyaw/piece rate pay)”

4. LA: Dismissed, Bitoy failed to present proof he was a regular

employee of Fly Ace

He has no ID nor any document showing he received benefits

accorded to regular employees

Bitoy was contracted on “pakiao” basis because Fly Ace has a

regular hauler to deliver its products

Claim for underpayment of salaries unfounded; payroll presented

had Bitoy’s signature, which, despite not being uniform,

appeared to be his true signature

5. NLRC: Favored Bitoy

LA wrong because it immediately concluded Bitoy as not a

regular employee simply because he failed to present proof

That a pakyaw-basis arrangement did not preclude the existence

of employer-employee relationship because payment is a

method of compensation, it does not define the essence of therelation – “It is a mere method of computing compensation, not a

basis for determining the existence or absence of an employer-

employee relationship.”

Just because the work done was not directly related to the trade

or business or the work was considered as “extra,” it does not

follow that Bitoy is a job contractor, rather than an employee

There was sufficient basis on the existence of an ER-EE

relationship

There was a reasonable connection between the activity

performed (as pahinante) in relation to the business or trade

of the employer (importation, sales , delivery of groceries)

Not an independent contractor because he could not

exercise judgment in the delivery of products, he was only a

“helper”

Bitoy is entitled to security of tenure; Fly Ace did not present

proof for a valid cause of termination, so it is liable for illegal

dismissal, backwages, and separation pay



6. CA: Annulled the NLRC, reinstated the LA

In an illegal dismissal case, the onus probandi rests on the

employer; however, before an illegal dismissal case can prosper,

an ER-EE relationship must first be established

Incumbent upon Bitoy to prove he is an employee, but he failed

to discharge this burden

Bitoy’s failure to present salary vouchers, playslips or other

pieces of evidence to bolster his contention

The facts alleged by Bitoy did NOT pass the “control test”

He contracted work outside the premises

He was not required to observe definite hours

He was not required to report daily

He was free to accept work elsewhere

7. Appeal to the SC

Issues:

1. WON Bitoy is a regular employee

2. WON he is entitled to his monetary claims

Held:

1. NO, he is not a regular employee; affirmed CA

- Bitoy: Fly Ace has nothing to substantiate that he was engaged on a

pakyaw basis; and assuming he was hird on pakyaw basis, it does

not preclude his regular employment; acknowledgement receipts

with his signature do not show true nature of employment (relied on

Chavez v. NLRC)

o His tasks as pahinante are related to Fly Air’s business

o He was subject to the control and supervision of the company

(reported M to S, 7AM to 5PM)

o List of deliverable goods prepared by Fly Ace – Bitoy was subject to

compliance with company rules

o He was illegally dismissed by Fly Ace

- Fly Ace: Bitoy had no substantial evidence to prove ER-EE

relationship

o Despite having Milmar Hauling under service contract, they

contracted Bitoy as an extra helper or pahinante, on a mere “per trip

basis”

o Bitoy and the company driver would have the vehicle and products in

their custody, and when they left company premises, they use their

own means, method, best judgment and discretion (i.e., no control by

Fly Ace)

o Claims of employment by Bitoy are BASELESS, and nothing was

presented to substantiate this

o Lopez v. Bodega City: In an illegal dismissal case, the burden of

proof is upon the complainant w ho claims to be an employee. It is

essential that an employer-employee relationship be proved by

substantial evidence

o Bitoy merely offers factual assertions, unsupported by proof

o Bitoy was not subject to Fly Ace’s control, he performed his work

outside the premises, he was not made to report at regular work

hours, he was free to leave any time

- SC: Evoked equity jurisdiction to examine the factual issues

- The LA and CA found that Bito y’s claim of employment is wanting

and deficient; the Court is constrained to agree

- Bitoy needs to show by substantial evidence (Sec. 10, Rule VII, New

Rules of Procedure of the NLRC) that he was indeed an employee

against which he claims illegal dismissal

- In sum, the rule of thumb remains: the onus probandi falls onpetitioner to establish or substantiate such claim by the requisite

quantum of evidence.32 "Whoever claims entitlement to the benefits

provided by law should establish his or her right thereto . . . ." – Bitoy

failed to adduce substantial evidence as basis for the grant of relief

- All Bitoy presented were self-serving statements showing his

activities as employee, but failed to pass the substantiality

requirement (as concluded also by the LA and the CA), from which

the SC sees no reason to depart

o Affidavit of Bengie Valenzuela that Bitoy presented was insufficient

because all it provided was that he would frequently see Bitoy at the

workplace where he (Bengie) was a stevedore

o SC: Mere presence falls short of proving employment

- SC: The burden is on Bitoy to pass the control test

o Bitoy was not able to persuade the Court that the elements exist (no

competent proof that he was a regular employee, that Fly Ace paid

wages as an employee, that Fly Ace could dictate what his conduct

wuld be while at work)

- SC: Fly Ace does not dispute having contracted Javier and paid him

on a "per trip" rate as a stevedore, albeit on a pakyaw basis.

o They presented documentary proof – acknowledgment receipts



2. Moot. No need to resolve the second issue.

Obiter: "payment by the piece is just a method of compensation and does not

define the essence of the relation."

Payment on a piece-rate basis does not negate regular employment.

The term 'wage' is 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

Payment by the piece is just a method of compensation and does not

define the essence of the relations

Disposition: Petit ion is DENIED.



JARL CONSTRUCTION and ARMANDO K. TEJADA vs. SIMEON A.

ATENCIO

G.R. No. 175969.August 1, 2012.

Burden of proof and presumptions in administrative cases

In dismissing an employee from service, the employer has the burden of

proving its observance of the two-notice requirement and its accordance to

the employee of a real opportunity to be heard.

Facts:

JARL, through Tejada, hired Atencio as its chief operating manager, primary

function was to direct and manage construction projects in accordance with

its company policies and contracts. Atencio’s employment contract states

that, when the execution of a project requires a contract modification, the

chief operating manager has the duty to report the needed changes to the

company President, for the latter’s approval. Further, as chief operating

manager, he is the recommending authority with respect to the award of

subcontracts and purchase orders.

During Atencio’s tenure as chief operating manager, his employer JARL had

an existing contract with Caltex. The contract prohibited JARL from

subcontracting the project.

According to Atencio, he discovered during his employment that JARL did

not have the proper facilities, personnel, and equipment to undertake the

Caltex project; hence he and Tejada discussed the need for hiring

subcontractors. It was during these meetings that Tejada agreed to hire

Atencio’s construction company, Safemark Construction and Development

Corporation (Safemark), to perform works for the Caltex project.

Further, Tejada allegedly gave Atencio full authority as JARL’s chief

operating manager to hire other subcontractors if necessary. Pursuant to his

blanket authority, Atencio hired DDK Steel Construction and Building Multi-

Technology (DDK Steel) for the electrical installations of the Caltex project.

Tejada informed Atencio and Safemark that JARL was terminating Atencio’s

management and supervision works for the Caltex project. JARL assured

Atencio and Safemark that it will pay for the rendered services.

Atencio construed such as a termination of the subcontract between his

company and JARL. Thus, he threatened JARL and Tejada that he will report

their unethical conduct with the Philippine Accreditation Board for possible

sanctions.

Believing, however, that his employment as JARL’s chief operating manager

was separate from their subcontracting agreement, Atencio allegedly

continued reporting for work to the Caltex project site until, sometime in June

1999, he was barred from entering the said premises.

Atencio filed a complaint for illegal dismissal, nonpayment of salaries, and

13th month pay with the NLRC against JARL and Tejada.

He maintained that JARL did not inform him of the charges leveled against

him and of his termination from employment. He claimed learning of his

termination only through the letter that JARL sent to Caltex Philippines. He

also maintained that JARL never paid him his monthly salary and 13th month

pay as chief operating manager.

JARL and Tejada asserted that that the termination of the services of Atencio

was done for just causes and with substantial compliance with the procedural

requirements. They allegedly lost confidence in Atencio after the latter

entered into a Subcontract Agreement with DDK Steel in the Caltex project,

without the consent of the top management of JARL and in violation of

JARL’s contract with Caltex. He even sent letters to Caltex that jeopardized

JARL’s relationship with its client. Further, he instigated JARL’s proj ect

engineer to fabricate the project accomplishment report and he habitually

defied company policies and procedures. Lastly, they maintained that they

have adequately compensated Atencio for his services as evidenced by

Safemark’s two official receipts.

Atencio maintained that the amounts that JARL paid to Safemark were

payments for the company’s services as subcontractor, not payment of

Atencio’s salaries as chief operating manager.

The Labor Arbiter found just cause for Atencio’s Removal but found the

dismissal ineffectual because of petitioners’ failure to observe the twin

requirements of due process .



The NLRC reversed the Labor Arbiter’s Decision. The NLRC gave emphasis

to two letters adduced in evidence. The first is Atencio ’s letter to JARL

wherein Atencio acknowledges his mistakes and apologizes for them and

JARL’s earlier letter which clearly informed Atencio of its decision to

terminate his employment as its chief operating manager.

The CA held that Atencio’s dismissal was ineffectual for the employer’s

failure to observe the procedural requirements for a proper termination of

employment. CA also reversed the NLRC with respect to the issue of the

unpaid salaries and 13th month pay. It held that the employer should have

presented the pertinent personnel files, payrolls, records, remittances, and

other similar documents, which are in its custody and control. JARL did not

present any of these relevant documents in support of its contention that it

has duly paid Atencio for his services as chief operating manager. JARL’s

failure to produce said evidence gives the impression that Atencio had not

been paid.

Issues:

1. Whether petitioners were able to prove their substantial compliancewith the procedural due process requirements (NO!)

2. Whether the receipts issued by Safemark evidencing JARL’s

payment for "Professional Services" suffice as proof of payment of

salaries and 13th month pay (NO!)

Held:

The Court agrees with the shared conclusions of the Labor Arbiter and the

appellate court that petitioners’ evidence fails to prove their contention that

they afforded Atencio with due process. The letter, which allegedly proves

Atencio’s knowledge of the charges against him, and which allegedly

constitutes Atencio’s explanation, clearly discusses an entirely different topic

– which is the removal of his construction company from the Caltex project.

In the letter, Atencio states that he was wrong for assuming that there was a

subcontracting agreement between his firm and JARL. He took responsibility

for the misunderstanding between them and apologized. Nowhere in the said

letter does Atencio refer to the charges, which JARL mentioned before the

Labor Arbiter as the causes for his dismissal. Logically, he did not also

explain himself as regards the said charges.

As for the letter which allegedly constitutes the notice of termination of

Atencio’s employment as JARL’s chief operating manager, the Court agrees

with the CA’s appreciation that the said letter involves the termination of the

subcontracting agreement between JARL and Atencio’s company, and not

the termination of Atencio’s employment.

With respect to the issue of unpaid salaries and 13th month pay, the Court

agrees with the appellate court that petitioners’ evidence does not support

their contention of payment.

Since JARL admits that the said company actually rendered services for

JARL on its Caltex project, the payment can only be assumed as covering for

the said services. There is nothing on the face of the receipts to support the

conclusion that Atencio (and not his company) received it as payment for his

service as a JARL employee.



Sarona vs NLRC 2012

G.R. No. 185280. January 18, 2012

Facts:

Petitioner, a security guard in Sceptre since April 1976, was asked by

Sceptre’s operations manager on June 2003, to submit a resignation

letter as a requirement for an application in Royale and to fill up an

employment application form for the said company. He was then

assigned at Highlight Metal Craft Inc. from July 29 to August 8, 2003 and

was later transferred to Wide Wide World Express Inc. On September

2003, he was informed that his assignment at WWWE Inc. was

withdrawn because Royale has been allegedly replaced by another

security agency which he later discovered to be untrue. Nevertheless, he

was once again assigned at Highlight Metal sometime in September

2003 and when he reported at Royale’s office on October 1, 2003, he

was informed that he would no longer be given any assignment as

instructed by Sceptre’s general manager.

He thus filed acomplaint for illegal dismissal. The LA ruled in petitioner’sfavor as he found him illegally dismissed and was not convinced by the

respondent’s claim on petitioner’s abandonment.

Respondents were ordered to pay back wages computed from the day

he was dismissed up to the promulgation of his decision on May 11,

2005.The LA also ordered for the payment of separation pay but refused

to pierce Royale’s corporate veil.

Respondents appealed to the NLRC claiming that the LA acted with

grave abuse of discretion upon ruling on the illegal dismissal of

petitioner. NLRC partially affirmed the LA’s decision with regard to

petitioner’s illegal dismissal and separation pay but modified the amount

of backwages and limited it to only 3 months of his last month salary

reducing P95, 600 to P15, 600 since he worked for Royale for only 1

month and 3 days.

Petitioner did not appeal to LA but raised the validity of LA’s findings on

piercing Royale’s corporate personality and computation of his

separation pay and such petition was dismissed by the NLRC. Petitioner

elevated NLRC’s decision to the CA on a petition for certiorari, and the

CA disagreed with the NLRC’s decision of not proceeding to review the

evidence for determining if Royale is Sceptre’s alt er ego that would

warrant the piercing of its corporate veil.

Issue:

Whether or not Royale’s corporate fiction should be pierced for the

purpose of compelling it to recognize the petitioner’s length of service

with Sceptre and for holding it liable for the benefits that have accrued to

him arising from his employment with Sceptre.

Whether or not petitioner’s back wages should be limited to his salary for

3 months

Ruling:

The doctrine of piercing the corporate veil is applicable on alter ego

cases, where a corporation is merely a farce since it is a mere alter ego

or business conduit of a person, or where the corporation is so organized

and controlled and its affairs are so conducted as to make it merely an

instrumentality, agency, conduit or adjunct of another corporation.

The respondents’ scheme reeks of bad faith and fraud and

compassionate justice dictates that Royale and Sceptre be merged as a

single entity, compelling Royale to credit and recognize the petitioner’s

length of service with Sceptre. The respondents cannot use the legal

fiction of a separate corporate personality for ends subversive of the

policy and purpose behind its creation or which could not have been

intended by law to which it owed its being.

Also, Sceptre and Royale have the same principal place of business. As

early as October 14, 1994, Aida and Wilfredo became the owners of the

property used by Sceptre as its principal place of business by virtue of a

Deed of Absolute Sale they executed with Roso. Royale, shortly after its

incorporation, started to hold office in the same property. These, the

respondents failed to dispute.

Royale also claimed a right to the cash bond which the petitioner posted

when he was still with Sceptre. If Sceptre and Royale are indeed

separate entities, Sceptre should have released the petitioner’s cash

bond when he resigned and Royale would have required the petitioner to

post a new cash bond in its favor.



The way on how petitioner was made to resign from Sceptre then later

on made an employee of Royale, reflects the use of the legal fiction of

the separate corporate personality and is an implication of continued

employment. Royale is a continuation or successor or Sceptre since the

employees of Sceptre and of Royale are the same and said companies

have the same principal place of business .

Because petitioner’s rights were violated and his employer has not

changed, he is entitled to separation pay which must be computed from

the time he was hired until the finality of this decision. Royale is also

ordered to pay him backwages from his dismissal on October 1, 2003

until the finality of this decision.

However, the amount already received by petitioner from the

respondents shall be deducted. He is also awarded moral and exemplary

damages amounting to P 25, 000.00 each for his dismissal which was

tainted with bad faith and fraud. Petition is granted. CA’s decision is

reversed and set aside.



De Leon et al. v. NLRC

G.R. No. 112661. May 30, 2001.

Facts:

Petitioners are security guards assigned in the premises of Fortune Tobacco

Services, Inc. (FTC) pursuant to a contract for security services with Fortune

Integrated Services Inc. (FISI). Sometime after, FISI stockholders executed a

“Deed of Sale of Shares of Stock” in favor of a group of new stockholders, it

also amended its Articles of Incorporation changing its name to Magnum

Integrated Services, Inc. (MISI). FTC terminated the contract with FISI which

resulted in the displacement of some 582 security guards assigned to FTC,

including petitioners herein.

FTC Labor Union which is an affiliate of NAFLU, sent a Notice of Strike which

resulted in the picketing of the premises of FTC, however, RTC of Pasig,

issued a writ of injunction to enjoin the picket. Petitioners then filed the

instant case to the Arbitration branch of the NLRC.

Petitioners that they were regular employees of FTC which was also usingthe corporate names FISI and MISI, averring that they work under the control

and supervision of FTC’s security supervisors, and that, they were dismissed

without just cause and due process. They also claimed that their dismissal

was the design of their employer to bust their newly organized union.

Respondent FTC, on the other hand, maintained that there was no EE-ER

relationship, that petitioners were employee of MISI a separate and distinct

corporation from FTC.

LA ruled for respondents . NLRC reversed.

Issue: WON respondents are guilty of ULP.

Held: Yes, respondents are guilty of ULP.

Ratio: Respondents were guilty of interfering with the right of

petitioners to self-organization which const itutes unfair labor practice

under Article 248 of the Labor Code. Petitioners have been employed with

FISI since the 1980s and have since been posted at the premises of FTC

(main factory plant, tobacco re-drying plant and warehouse). FISI, while

having its own corporate identity, was a mere instrumentality of FTC,

tasked to provide protection and security in the company premises. The

2 corporations had identical stockholders and the same business address.

FISI also had no other clients except FTC and other companies belonging to

the Lucio Tan group of companies. Moreover, the early payslips of

petitioners show that their salaries were initially paid by FTC. To enforce their

rightful benefits under the laws on Labor Standards, petitioners formed a

union which was later certified as bargaining agent o f all the security

guards. On February 1, 1991, the stockholders of FISI sold all their

participations in the corporation to a new set of stockholders which

renamed the corporation Magnum Integrated Services, Inc. On October 15,

1991, FTC, without any reason, pre-terminated its contract of security

services with MISI and contracted 2 other agencies to provide security

services for its premises. This resulted in the displacement of petitioners. As

MISI had no other cl ients, it failed to give new assignments to

petitioners. Petitioners have remained unemployed since then. All these

facts indicate a concerted effort on the part of respondents to remove

petitioners from the company and thus abate the growth of the union

and block its actions to enforce their demands in accordance with the

Labor Standards laws.

The test of whether an employer has interfered with and coerced

employees within the meaning of section (a) (1) is whether the

employer has engaged in conduct which it may reasonably be said

tends to interfere with the free exercise of employees’ rights under

section 3 of the Act, and it is not necessary that there be direct evidence that

any employee was in fact intimidated or coerced by statements of threats of

the employer if there is a reasonable inference that anti-union conduct

of the employer does have an adverse effect on self-organization and

collective bargaining.”

A corporation is an entity separate and distinct from its stockholders

and from other corporations to which it is connected. However, when the

concept of separate legal entity is used to defeat public convenience, justify

wrong, protect fraud or defend crime, the law will regard the corporation as

an association of persons, or in case of two corporations, merge them into

one. The separate juridical personality of a corporation may also be

disregarded when such corporation is a mere alter ego or business

conduit of another person. FISI was a mere adjunct of FTC. FISI, by virtue

of a contract for security services, provided FTC with security guards to

safeguard its premises. However, records show t hat FISI and FTC have

the same owners and business address, and FISI provided security



services only to FTC and other companies belonging to the Lucio Tan group

of companies. The purported sale of the shares of the former stockholders

to a new set of stockholders who changed the name of the corporation to

Magnum Integrated Services, Inc. appears to be part of a scheme to

terminate the services of FISI’s security guards posted at the premises

of FTC and bust their newly-organized union which was then beginning to

become active in demanding the company’s compliance with Labor

Standards laws. Under these circumstances, the Court cannot allow

FTC to use its separate corporate personality to shield itself from liability

for illegal acts committed against its employees.

IN VIEW WHEREOF, petition is GRANTED. The assailed resolutions of the

NLRC are SET ASIDE. Respondents are hereby ordered to pay petitioners

their full backwages, and to reinstate them to their former position without

loss of seniority rights and privileges, or to award them separation pay in

case reinstatement is no longer possible.



PHILIPPINE BANK OF COMMUNICATIONS vs. NLRC

G.R. No. L-66598 December 19, 1986

FACTS:

Petitioner Philippine Bank of Communications and the Corporate Executive

Search Inc. (CESI) entered into a letter agreement dated January 1976

under which CES) undertook to provide "Tempo[rary] Services" to petitioner

Consisting of the "temporary services" of eleven (11) messengers. The

contract period is described as being "from January 1976—." Attached to the

letter agreement was a "List of Messengers assigned at Philippine Bank of

Communications" which list included, as item No. 5 thereof, the name of

private respondent Ricardo Orpiada.

Ricardo Orpiada was thus assigned to work with the petitioner bank. As

such, he rendered services to the bank, within the premises of the bank and

alongside other people also rendering services to the bank. There was some

question as to when Ricardo Orpiada commenced rendering services to the

bank. As noted above, the letter agreement was dated January 1976.

However, the position paper submitted by CESI to the National LaborRelations Commission (NLRC) stated that CES) hired Ricardo Orpiada on 25

June 1975 as a Tempo Service employee, and assigned him to work with the

petitioner bank "as evidenced by the appointment memo issued to him on 25

June 1975.” Be that as it may, on or about October 1976, the petitioner

requested CESI to withdraw Orpiada's assignment because, in the allegation

of the bank, Orpiada's services "were no longer needed."

On 29 October 1976, Orpiada instituted a complaint in the Department of

Labor (now Ministry of Labor and Employment) against the petitioner for

illegal dismissal and failure to pay the 13th month pay provided for in

Presidential Decree No. 851. After investigation, the Office of the Regional

Director, Regional Office No. IV of the Department of Labor, issued an order

dismissing Orpiada's complaint for failure of Mr. Orpiada to show the

existence of an employer-employee relationship between the bank and

himself.

Despite the foregoing order, Orpiada succeeded in having his complaint

certified for compulsory arbitration. During the compulsory arbitration

proceedings, CESI was brought into the picture as an additional respondent

by the bank. Both the bank and CESI stoutly maintained that CESI (and not

the bank) was the employer of Orpiada.

On 12 September 1977, respondent Labor Arbiter Dogelio rendered a

decision reinstating complainant to the same or equivalent position with full

back wages and to pay the latter's 13th month pay for the year 1976.

On 26 October 1977, the bank appealed the decision of the Labor Arbiter to

the respondent NLRC. More than six years later —the NLRC promulgated its

decision affirming the award of the Labor Arbiter except for the modification

reducing the complainant's back wages to two (2) years without qualification.

Accordingly, on 2 April 1984, the bank filed the present petition for certiorari

with this Court seeking to annul and set aside the decision of respondent

Labor Arbiter Dogelio and the decision of the NLRC.

ISSUE: WON an employer-employee relationship existed between the

petitioner Phil. Bank of Communications and private respondent Ricardo

Orpiada.

HELD:

Yes, because CESI is a “labor -only” contractor.

It is in necessary in this case to confront the task of determining the

appropriate characterization of the relationship between the bank and CESI

was that relationship one of employer and job (independent) contractor or

one of employer and "labor-only" contractor to resolve the issue.

Under the general rule set out in the 1st and 2nd paragraphs of Article 106,

an employer who enters into a contract with a contractor for the performance

of work for the employer, does not thereby create an employer-employee

relationship between himself and the employees of the contractor. Thus, the

employees of the contractor remain the contractor's employees and his

alone. Nonetheless when a contractor fails to pay the wages of his

employees in accordance with the Labor Code, the employer who contracted

out the job to the contractor becomes jointly and severally liable with his

contractor to the employees of the latter "to the extent of the work performed

under the contract" as such employer were the employer of the contractor's

employees. The law itself, in other words, establishes an employer-employee

relationship between the employer and the job contractor's employees for a

limited purpose, i.e., in order to ensure that the latter get paid the wages due

to them.

TEODORICO DOGELIO RICARDO ORPIADA

DOLE: DISMISSED. NO ER-EE RELATIONSHI

LA: REINSTATEMEN

NLRC: REDUCING WAGES TO 2 YEARS

1. Subcontracting: ER-EE exists for limited purpose of paying wages

2 L b l ER EE i t t t i ti f l b d



A similar situation obtains where th ere is "labor only" contracting. The "l abor-

only" contractor-i.e "the person or intermediary" is considered "merely as an

agent of the employer. " The employer is made by the statute responsible to

the employees of the "labor only" contractor as if such employees had been

directly employed by the employer. Thus, where "labor only" contracting

exists in a given case, the statute itself implies or establishes an employer-

employee relationship between the employer (the owner of the project) and

the employees of the "labor only" contractor, this time for a comprehensive

purpose: "employer for purposes of this Code, to prevent any violation or

circumvention of any provision of this Code. " The law in effect holds both the

employer and the "labor-only" contractor responsible to the latter's

employees for the more effective safeguarding of the employees' rights

under the Labor Code.

The bank and CESI urge that CESI is NOT properly regarded as a "labor-

only" contractor upon the ground that CESI is possessed of substantial

capital or investment in the form of office equipment, tools and trained

service personnel.

We are unable to agree with the bank and CES) on this score. The definition

of "labor-only" contracting in Section 9 of Rule VIII of Book III entitled

"Conditions of Employment," of the Omnibus Rules Implementing the Labor

Code must be read in conjunction with the definition of job contracting given

in Section 8 of the same Rules. 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. 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.

Orpiada utilized the premises and office equipment of the bank and not those

of CESI’s. 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 c lient companies for longer or shorter periods of time.

2. Labor-only: ER-EE exists to prevent circumvention of labor code



San Miguel Corporation vs. NLRC

G.R. Nos. 146121-22, April 16, 2008

Facts:

Ibias (respondent) was employed by petitioner SMC on 24 December 1978

initially as a CRO operator in its Metal Closure and Lithography Plant.

Respondent continuously worked therein until he advanced as Zamatic

operator. He was also an active and militant member of a labor organization

called Ilaw Buklod Manggagawa (IBM)-SMC Chapter.

According to SMC’s Policy on Employee Conduct, absences without

permission or AWOPs, which are absences not covered either by a

certification of the plant doctor that the employee was absent due to sickness

or by a duly approved application for leave of absence filed at least 6 days

prior to the intended leave, are subject to disciplinary action characterized by

progressively increasing weight. The same Policy on Employee Conduct also

punishes falsification of company records or documents with discharge or

termination for the first offense if the offender himself or somebody else

benefits from falsification or would have benefited if falsification is not foundon time.

It appears that per company records, respondent was AWOP on the

following dates in 1997: 2, 4 and 11 January; 26, 28 and 29 April; and 5, 7, 8,

13, 21, 22, 28 and 29 May. For his absences on 2, 4 and 11 January and 28

and 29 April, he was given a written warning dated 9 May 1997 that he had

already incurred five (5) AWOPs and that further absences would be subject

to disciplinary action. For his absences on 28 and 29 April and 7 and 8 May,

respondent was alleged to have falsified his medical consultation card by

stating therein that he was granted sick leave by the plant clinic on said dates

when in truth he was not.

After the completion of the investigation, SMC concluded that respondent

committed the offenses of excessive AWOPs and falsification of company

records or documents, and accordingly dismissed him.

On 30 March 1998, respondent filed a complaint for illegal dismissal against

SMC. The labor arbiter believed that respondent had committed the

absences pointed out by SMC but found the imposition of termination of

employment based on his AWOPs to be disproportionate since SMC failed to

show by clear and convincing evidence that it had strictly implemented its

company policy on absences. It also noted that termination based on the

alleged falsification of company records was unwarranted in view of SMC’s

failure to establish respondent’s guilt.

The appellate court also held that respondent’s AWOPs did not warrant his

dismissal in view of SMC’s inconsistent implementation of its company

policies. It could not understand why respondent was given a mere warning

for his absences on 28 and 29 April which constituted his 5th and 6th

AWOPs, respectively, when these should have merited suspension under

SMC’s policy. According to the appellate court, since respondent was merely

warned, logically said absences were deemed committed for the first time;

thus, it follows that the subject AWOPs did not justify his dismissal because

under SMC’s policy, the 4th to 9th AWOPs are meted the corresponding

penalty only when committed for the second time.

Issue: WON the Court of Appeals erred in sustaining the findings of the labor

arbiter and the NLRC and in dismissing SMC’s claims that respondent was

terminated from service with just cause.

Held:

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. In the instant case, while there may be no denying that

respondent’s medical card had falsified entr ies in it, SMC was unable to

prove, by substantial evidence, that it was respondent who made the

unauthorized entries. Besides, SMC’s (Your) Guide on Employee Conduct

punishes the act of falsification of company records or documents; it does not

punish mere possession of a falsified document.

Respondent cannot feign surprise nor ignorance of the earlier AWOPs he

had incurred. He was given a warning for his 2, 4, and 11 January and 26,

28, and 29 April 1997 AWOPs. In the same warning, he was informed that he

already had six AWOPs for 1997. He admitted that he was absent on 7 and 8

May 1997. He was also given notices to explain his AWOPs for the period 26

May to 2 June 1997, which he received but refused to acknowledge. It does

not take a genius to figure out that as early as June 1997, he had more than

nine AWOPs.



In any case, when SMC imposed the penalty of dismissal for the 12th and

13th AWOPs, it was acting well within its rights as an employer. An employer

has the prerogative to prescribe reasonable rules and regulations necessary

for the proper conduct of its business, to provide certain disciplinary

measures in order to implement said rules and to assure that the same would

be complied with. An employer enjoys a wide latitude of discretion in the

promulgation of policies, rules and regulations on work-related activities of

the employees.

It is axiomatic that appropriate disciplinary sanction is within the purview of

management imposition. Thus, in the implementation of its rules and policies,

the employer has the choice to do so strictly or not, since this is inherent in

its right to control and manage its business effectively. Consequently,

management has the prerogative to impose sanctions lighter than those

specifically prescribed by its rules, or to condone completely the violations of

its erring employees. Of course, this prerogative must be exercised free of

grave abuse of discretion, bearing in mind the requirements of justice and fair

play.

All told, we find that SMC acted well within its rights when it dismissed

respondent for his numerous absences. Respondent was afforded due

process and was validly dismissed for cause.

Petition granted



Aliviado v. Procter & Gamble Philippines, Inc.

G.R. No. 160506, 614 SCRA 563, March 9, 2010

FACTS:

Petitioners worked as merchandisers of respondent Procter & Gamble

Philippines, Inc. (hereafter, P&G) from various dates, allegedly starting

as early as 1982 or as late as June 1991, to either May 5, 1992 or March

11, 1993.

Petitioners signed employment contracts with respondent Promm-Gem,

Inc. (Promm-Gem) and Sales and Promotions Services (SAPS). They

were employed for five months at time, assigned to different stations in

supermarkets.

SAPS and Promm-Gem paid petitioners’ wages and imposed disciplinary

measures on petitioners when warranted.

P&G entered into contracts with SAPS and Promm-Gem for the

promotion of its products. It appears that petitioners were assigned topromote P&G’s products.

In December 1991, petitioners filed a complaint for regularization and

other money claims against P&G. The complaint was later amended to

include charges of illegal dismissal.

Labor Arbiter: Dismissed the complaint; there was no employer -

employee relationship (EER) between petitioners and P&G, as the

former were employed by Promm-Gem and SAPS.

! Applied the four-fold test for EER:

Select ion and engagement;

Payment of wages;

Power of dismissal;

Power of control.

! Declared Promm-Gem and SAPS legitimate job contractors.

Petit ioners appealed to the NLRC.

NLRC: Dismissed the appeal, affirmed the Labor Arbiter’s Decision.

Motion for reconsiderat ion denied.

Petitioners sought recourse with the Court of Appeals via a petition for

certiorari under Rule 65 of the Rules of Court.

CA: Denied the petition and affirmed the NLRC’s Decision with

modification.

! P&G ordered to pay service incent ive leave pay to peti tioners.

! Petit ioners’ motion for reconsiderat ion was denied.

• Hence, this petition for review by certiorari under Rule 45 of the Rules of

Court.

ISSUES + RATIO:

Whether or not contracting out of a company’s core activities is allowed

under the Labor Code and its Implementing Rules. YES.

To be sure, the Labor Code and its Implementing Rules do not prohibit

job contracting. The law allows contracting arrangements for the

performance of speci fic jobs, works or services.

Indeed, it is management prerogati ve to farm out any of its activities,regardless of whether such activity is peripheral or core in nature.

However, in order for such outsourcing to be valid, it must be made to an

independent contractor because the current labor rules expressly prohibit

labor-only contracting.

Labor-only contracting exists where the “contractor” merely recruits,

supplies or places workers to perform a job, work or service for a

principal. Moreover, any of the following elements must concur:

• The contractor or subcontractor does not have substantial capital or

investment which relates to the job, work or service to be performed

and the employees recruited, supplied or placed by such contractor

or subcontractor are performing activities which are directly related to

the main business of the principal; or

• The contractor does not exercise the right to control over the

performance of the work of the contractual employee.

Whether or not Promm-Gem is engaged in labor-only contracting. NO; it is a

legitimate job contractor.

It has substantial capital, as shown by its financial statements.

• Authorized capital stock – P1 million.

• Paid-in capital – P500,000.



It has substantial investments in the form of warehouses, office spaces,

and vehicles.

Promm-Gem has other clients aside from P&G.

Promm-Gem provided its workers with uniforms and materials. The latter

were considered regular employees.

Whether or not SAPS is engaged in labor-only contracting. YES.

It does not have substant ial capital—its paid-in capital is only P31,250.

• Monthly payroll already totaled P44,561. Its contracts with P&G were

for six-month periods. Its capital is not even sufficient for one

month’s payroll.

• SAPS failed to show that its paid-in capital of P31,250.00 is sufficient

for the period required for it to generate its needed revenue to

sustain its operations independently.

Neither is there a showing of substantial investment in tools, equipment

or other assets.

Furthermore, petitioners’ activities which consisted of merchandising and

promotion of P&G products are directly related to the manufacturing

business. Considering that SAPS has no substantial capital or investment and the

workers it recruited are performing activities which are directly related to

the principal business of P&G, the Court found that SAPS is engaged in

“labor -only contracting.”

Whether or not an employer-employee relationship exists between P&G and

petitioners. YES.

Where labor-only contracting exits, the law establishes an EER between

the employer and the employees of the “contractor.”

Rationale: to prevent circumvention of labor laws. The petitioners recruited by SAPS are considered P&G employees. The

petitioners who worked under Promm-Gem are not, since the latter is a

legitimate job contractor.

Whether or not petitioners (Promm-Gem employees) were illegally

dismissed. YES.

Promm-Gem dismissed petitioners for “grave misconduct and breach of

trust” after they sought regularization from P&G. Promm-Gem claimed

that this “assailed the integrity of the company as a legitimate and

independent promotion firm.”

To be a just cause for dismissal, misconduct (a) must be serious; (b)

must relate to the performance of the employee’s duties; and (c) must

show that the employee has become unfit to continue working for the

employer.

• In the instant case, petitioners-employees of Promm-Gem may have

committed an error of judgment in claiming to be employees of P&G,

but it cannot be said that they were motivated by any wrongful intent

in doing so.

• Thus, petitioners are guilty only of simple misconduct.

Meanwhile, loss of trust and confidence, as a ground for dismissal, must

be based on the willful breach of the trust reposed in the employee by his

employer.

• The erring employee must hold a position of responsibility or of trust

and confidence. And, in order to constitute a just cause for dismissal,

the act complained of must be work -related and must show that the

employee is unfit to continue to work for the employer.

• Here, the petitioners-employees of Promm-Gem have not been

shown to be occupying positions of responsibility or of trust and

confidence. Neither is there any evidence to show that they are unfitto continue to work as merchandisers for Promm-Gem.

Whether or not petitioners (SAPS-P&G employees) were illegally dismissed.

YES.

They were not afforded procedural due process (two notice rule). They

were merely verbally informed of the termination of their services.

Petitioners were dismissed upon the initiation of P&G. When the latter

did not renew its contract with SAPS, petitioners’ services were

automatically terminated evidently because SAPS had no other clients.

Whether or not petitioners are entitled to the payment of damages, costs,

and attorney’s fees. YES.

With regard to the employees of Promm-Gem, their dismissals were not

attended with bad faith so as to warrant the award of moral and

exemplary damages.

As for P&G, the records show that it dismissed its employees through

SAPS in a manner oppressive to labor. The sudden and peremptory

barring of the concerned petitioners from work, and from admission to

the work place, after just a one-day verbal notice, and for no valid cause

bellows oppression and utter disregard of the right to due process of the

concerned petitioners. Hence, an award of moral damages is called for.



P&G is also liable for attorney’s fees.

Finally, all petitioners having been illegally dismissed, they are entitled to

reinstatement with backwages.

DISPOSITION: Petition granted. Case remanded to Labor Arbiter for

computation of backwages and other benefits.

Aliviado v. Procter & Gamble Philippines, Inc.

(Motion to refer the case to the Supreme Court en banc)

G.R. No. 160506, 650 SCRA 400, June 6, 2011

ISSUE + RATIO:

Whether or not the Court erred in ruling that SAPS is a labor-only contracto r.

NO.

P&G claims that the Court should have applied the four-fold test,

specifically the “control test,” in determining whether SAPS is a legitimate

job contractor or a labor-only contractor.

This is incorrect. The “control test” is only one of the ways to determinethe existence of labor-only contracting.

Pertinently, Department Order No. 18-02 provides:

Section 5. Prohibition against labor-only contracting. — Labor only

contracting is hereby declared prohibited. For this purpose, labor-

only contracting shall refer to an arrangement where the contractor

or subcontractor merely recruits, supplies or places workers to

perform a job, work or service for a principal, and ANY of the

following elements are present:

(i) The contractor or subcontractor does not have substantial

capital or investment which relates to the job, work or service to be

performed and the employees recruited, supplied or placed by such

contractor or subcontractor are performing activities which are

directly related to the main business of the principal; OR

(ii) [T]he contractor does not exercise the right to control over

the performance of the work of the contractual employee. (Emphasis

supplied)

In the case at bar, the Court already concluded that (1) SAPS merely

recruited workers for P&G, (2) it did not have substantial capital or

investment, and (3) the workers performed activities directly related to

the business of the principal.

Hence, SAPS may be considered a labor-only contractor under D.O. 18-

02, Sec. 5 (i).

In Coca-Cola Bott lers Phils. , Inc. v. Agito, the Court ruled:

“The law clearly establishes an employer -employee relationship

between the principal employer and the contractor’s employee upon

a finding that the contractor is engaged in ‘labor -only’ contracting.

Article 106 of the Labor Code categorically states: ‘There is labor -

only contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools,

equipment, machineries, work premises, among others, and the

workers recruited and placed by such persons are performing

activities which are directly related to the principal business of such

employer.’ Thus, performing activities directly related to the principal

business of the employer is only one of the two indicators that labor-only contracting exists; the other is lack of substantial capital or

investment. The Court finds that both indicators exist in the case at

bar.” (Emphasis supplied)

DISPOSITION: Judgment affirmed.



EPARWA SECURITY AND JANITORIAL SERVICES VS LICEO DE

CAGAYAN UNIVERSITY

G.R. No. 150402. November 28, 2006.

CARPIO, J.:

FACTS:

On 1 December 1997, Eparwa and LDCU, through their representatives,

entered into a Contract for Security Services which states that LCDU

undertakes to pay P5,000 per guard, in consideration of their services.

On 21 December 1998, 11 security guards whom Eparwa assigned to

LDCU filed a complaint before the NLRC against both Eparwa and LDCU

for underpayment of salary, legal holiday pay, 13th month pay, rest day,

service incentive leave, night shift differential, overtime pay, and

payment for attorney’s fees.

LDCU made a cross-claim and prayed that Eparwa should reimburse

LDCU for any payment to the security guards.

LA found that the security guards are entitled to wage differentials and

premium for holiday and rest day work. The Labor Arbiter also held

Eparwa and LDCU solidarily liable pursuant to Article 109 of the Labor

Code.

The NLRC held Eparwa and LDCU solidarily liable for the wage

differentials and premium for holiday and rest day work but did not

require Eparwa to reimburse LDCU for its payments to the security

guards. Upon an MR, the NLRC declared that although Eparwa and

LDCU are solidarily liable to the security guards for the monetary award,

LDCU alone is ultimately liable.

The CA reinstated the Labor Arbiter’s decision. The appellate court also

allowed LDCU to claim reimbursement from Eparwa.

ISSUE:

Is LDCU alone ultimately liable to the security guards for the wage

differentials and premium for holiday and rest day pay? - YES

HELD:

This Court’s ruling in Eagle Security Agency, Inc. v. NLRC squarely applies

to the present case. In Eagle, we ruled that:

This joint and several liability of the contractor and the principal is mandated

by the Labor Code to assure compliance of the provisions therein including

the statutory minimum wage. The contractor is made liable by virtue of his

status as direct employer. The principal, on the other hand, is made the

indirect employer of the contractor’s employees for purposes of paying the

employees their wages should the contractor be unable to pay them.

In the case at bar, it is beyond dispute that the security guards are the

employees of EAGLE. That they were assigned to guard the premises of

PTSI pursuant to the latter’s contract with EAGLE and that neither of

these two entities paid their wage and allowance increases under the

subject wage orders are also admitted.

The solidary liability of PTSI and EAGLE, however, does not preclude

the right of reimbursement from his co-debtor by the one who paid. It is

with respect to this right of reimbursement that petitioners can findsupport in the aforecited contractual stipulation and Wage Order

provision.

The Wage Orders are explicit that payment of the increases are “to be

borne” by the principal or client. “To be borne”, however, does not mean

that the principal, PTSI in this case, would directly pay the security

guards the wage and allowance increases because there is no privity of

contract between them. The security guards’ contractual relationship is

with their immediate employer, EAGLE. As an employer, EAGLE is

tasked, among others, with the payment of their wages.

On the other hand, there existed a contractual agreement between PTSI

and EAGLE wherein the former availed of the security services provided

by the latter. In return, the security agency collects from its client

payment for its security services. This payment covers the wages for the

security guards and also expenses for their supervision and training, the

guards’ bonds, firearms with ammunitions, uniforms and other

equipments, accessories, tools, materials and supplies necessary for the

maintenance of a security force.



Premises considered, the security guards’ immediate recourse for the

payment of the increases is with their direct employer, EAGLE. However,

in order for the security agency to comply with the new wage and

allowance rates it has to pay the security guards, the Wage Orders made

specific provision to amend existing contracts for security services by

allowing the adjustment of the consideration paid by the principal to the

security agency concerned. What the Wage Orders require, therefore, is

the amendment of the contract as to the consideration to cover the

service contractor’s payment of the increases mandated. In the end,

therefore, ultimate liability for the payment of the increases rests with the

principal.

In view of the foregoing, the security guards should claim the amount of

the increases from EAGLE. Under the Labor Code, in case the agency

fails to pay them the amounts claimed, PTSI should be held solidarily

liable with EAGLE. Should EAGLE pay, it can claim an adjustment from

PTSI for an increase in consideration to cover the increases payable to

the security guards.

However, in the instant case, the contract for security services had

already expired without being amended consonant with the Wage

Orders. It is also apparent from a reading of a record that EAGLE does

not now demand from PTSI any adjustment in the contract price and its

main concern is freeing itself from liability. Given these peculiar

circumstances, if PTSI pays the security guards, it cannot claim

reimbursement from EAGLE. But in case it is EAGLE that pays them, the

latter can claim reimbursement from PTSI in lieu of an adjustment,

considering that the contract had expired and had not been renewed.

For the security guards, the actual source of the payment of their wage

differentials and premium for holiday and rest day work does not matter

as long as they are paid. This is the import of Eparwa and LDCU’s

solidary liability. Creditors, such as the security guards, may collect from

anyone of the solidary debtors. Solidary liability does not mean that, as

between themselves, two solidary debtors are liable for only half of the

payment.

LDCU’s ultimate liability comes into play because of the expiration of t he

Contract for Security Services. There is no privity of contract between

the security guards and LDCU, but LDCU’s liability to the security guards

remains because of Articles 106, 107 and 109 of the Labor Code.

Eparwa is already precluded from asking LDCU for an adjustment in the

contract price because of the expiration of the contract, but Eparwa’s

liability to the security guards remains because of their employer-

employee relationship. In lieu of an adjustment in the contract price,

Eparwa may claim reimbursement from LDCU for any payment it may

make to the security guards. However, LDCU cannot claim any

reimbursement from Eparwa for any payment it may make to the security

guards.



GOYA, INC. v. GOYA, INC. EMPLOYEES UNION-FFW

PERALTA, J., G.R. No. 170054 : January 21, 2013

FACTS:

Petitioner Goya Inc. (Goya) hired contractual employees from PESO

Resources Development Corporation (PESO). This prompted Goya, Inc.

Employees Union-FFW (Union) to request for a grievance conference on the

ground that the contractual workers do not belong to the categories of

employees stipulated in their CBA. The Union also argued that hiringcontractual employees is contrary to the union security clause embodied in

the CBA. When the matter remained unresolved, the grievance was referred

to the NCMB for voluntary arbitration. The Union argued that Goya is guilty of

ULP for gross violation of the CBA. The voluntary arbitrator dismissed the

Unions charge of ULP but Goya was directed to observe and comply with the

CBA. While the Union moved for partial consideration of the VA decision,

Goya immediately filed a petition for review before the Court of Appeals to

set aside the VAs directive to observe and comply with the CBA commitment

pertaining to the hiring of casual employees. Goya argued that hiring

contractual employees is a valid management prerogative. The Court of

Appeals dismissed the petition

ISSUE:

Whether the act of hiring contractual employees is a valid exercise of

management prerogative?

HELD:

The petition must fail. LABOR LAW: management prerogative; ULP;

collective bargaining agreement The CA did not commit serious error when it

sustained the ruling that the hiring of contractual employees from PESO was

not in keeping with the intent and spirit of the CBA. In this case, a completeand final adjudication of the dispute between the parties necessarily called

for the resolution of the related and incidental issue of whether the Company

still violated the CBA but without being guilty of ULP as, needless to state,

ULP is committed only if there is gross violation of the agreement. Goya kept

on harping that both the VA and the CA conceded that its engagement of

contractual workers from PESO was a valid exercise of management

prerogative. It is confused. To emphasize, declaring that a particular act falls

within the concept of management prerogative is significantly different from

acknowledging that such act is a valid exercise thereof. What the VA and the

CA correctly ruled was that the Companys act of contracting out/outsourcing

is within the purview of management prerogative. Both did not say, however,

that such act is a valid exercise thereof. Obviously, this is due to the

recognition that the CBA provisions agreed upon by Goya and the Union

delimit the free exercise of management prerogative pertaining to the hiring

of contractual employees. A collective bargaining agreement is the law

between the parties. A collective bargaining agreement or CBA refers to the

negotiated contract between a legitimate labor organization and the employer

concerning wages, hours of work and all other terms and conditions of

employment in a bargaining unit. As in all contracts, the parties in a CBA mayestablish such stipulations, clauses, terms and conditions as they may deem

convenient provided these are not contrary to law, morals, good customs,

public order or public policy. Thus, where the CBA is clear and unambiguous,

it becomes the law between the parties and compliance therewith is

mandated by the express policy of the law. As repeatedly held, the exercise

of management prerogative is not unlimited; it is subject to the limitations

found in law, collective bargaining agreement or the general principles of fair

play and just ice. Petition is DENIED.



AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG,

EUTIQUIO GINDANG, ALLAN SUNGAHID, MAXIMO LEE, JOSE G. MORA

TO, REX GABILAN, AND EUGEMA L. LAURENTE v. PETRON

CORPORATION

A contractor is presumed to be a labor -only contractor, unless it proves that it

has the substantial capital, investment, tools and the like. However, where

the principal is the one claiming that the contractor is a legitimate contractor,

the burden of proving the supposed status of the contractor rests on theprincipal.

FACTS:

In 1968, Romualdo D. Gindang Contractor, started recruiting laborers for

fielding to Petron’s Mandaue Bulk Plant. When Romualdo died in1989, his

son Romeo D. Gindang (Romeo), through Romeo D. Gindang Services

(RDG), took over the business and continued to provide manpower services

to Petron. Petitioners were among those recruited by Romualdo D. Gindang

Contractor and RDG to work in the premises of the said bulk plant.

On June 1, 2000, Petron and RDG entered into a Contract for Services9 for

the period from June 1, 2000 to May 31, 2002, whereby RDG undertook to

provide Petron with janitorial, maintenance, tanker receiving, packaging and

other utility services in its Mandaue Bulk Plant. This contract was extended

on July 31, 2002 and further extended until September 30, 2002. Upon

expiration thereof, no further renewal of the service contract was done.

Proceedings before the Labor Arbiter

Alleging that they were barred from continuing their services on October 16,

2002, petitioners filed a Complaint for illegal dismissal, unde rpayment of

wages, damages and attorney’s fees against Petron and RDG on November12, 2002.

Petitioners did not deny that RDG hired them and paid their salaries. They

claimed that the latter is a labor-only contractor, which merely acted as an

agent of Petron, their true employer. They asseverated that their jobs, which

are directly related to Petron’s business, entailed them to work inside the

premises using the required equipment and tools furnished by it and that they

were subject to Petron’s supervision. Claiming to be regular employees, they

asserted that their dismissal allegedly in view of the expiration of the service

contract between Petron and RDG is illegal.

RDG corroborated petitioners’ claim that they are regular employees of

Petron. It alleged that Petron directly supervised their activities; they

performed jobs necessary and desirable to Petron’s business; Petron

provided petitioners with supplies, tools and equipment used in their jobs;

and that petitioners’ workplace since the start of their employment was at

Petron’s bulk plant in Mandaue City. RDG denied liability over petitioners’

claim of illegal dismissal and further argued that Petron cannot capitalize on

the service contract to escape liability.

Petron, on the other hand, maintained that RDG is an independent contractor

and the real employer of the petitioners. It was RDG which hired and

selected petitioners, paid their salaries and wages, and directly supervised

their work. Attesting to these were two former employees of RDG and

Petron’s Mandaue Terminal Superintendent whose affidavits were submitted

by Petron, Petron presented the following documents: (1) RDG’s Certificate

of Registration issued by DOLE (2) RDG’s Certificate of Registration of

Business Name issued by DTI (3) Contractor’s Pre -Qualification

Statement;16 (4) Conflict of Interest Statement signed by Romeo Gindang as

manager of RDG; (5) RDG’s Audited Financial Statements (6) RDG’s

Mayor’s Permit (7) RDG’s Certificate of Accreditation issued by DTI (8)

performance bond and insurance policy posted to insure against liabilities;

(9) SSS Online Inquiry System Employee Contributions and Employee Static

Information and, (10) Romeo’s affidavit stating that he had paid the salaries

of his employees assigned to Petron. Petron argued that with the expiration

of the service contract it entered with RDG, petitioners’ term of employment

has concomitantly ended. And not being the employer, Petron cannot be held

liable for petitioners’ claim of illegal dismissal.

Labor Arbiter ruled that petitioners are regular employees of Petron. It foundthat their jobs were directly related to Petron’s business operations; they

worked under the supervision of Petron’s foreman and supervisor; and they

were using Petron’s tools and equipment in the performance of their works.

Petron merely utilized RDG in its attempt to hide the existence of employee-

employer relationship between it and petitioners and avoid liability under

labor laws. And there being no showing that petitioners’ dismissal was for

just or authorized cause, the Labor Arbiter declared them to have been

illegally dismissed. Petron was thus held solidarily liable with Romeo for the

payment of petitioners’ separation pay (in lieu of reinstatement due to

strained relations with Petron) fixed at one month pay for every year of



service and backwages computed on the basis of the last salary rate at the

time of dismissal.

NLRC ruled that petitioners are Petron’s regular employees because they are

performing job assignments which are germane to its main business. Petron

Corporation appeal was DISMISSED for lack of merit. Petron filed a Petition

for Certiorari with prayer for the issuance of a temporary restraining order or

writ of injunction before the CA. CA resolved to grant the injunction. A Writ of

Preliminary Injunction to restrain the implementation of the Decision andResolution of the NLRC was issued.

The CA found no employer-employee relationship between the parties. The

records of the case do not show that petitioners were directly hired, selected

or employed by Petron; that their wages and other wage related benefits

were paid by the said company; and that Petron controlled the manner by

which they carried out their tasks. On the other hand, RDG was shown to be

responsible for paying petitioners’ wages. In fact, SSS records show that

RDG is their employer and actually the one remitting their contributions

thereto. Also, two former employees of RDG who were likewise assigned in

the Mandaue Bulk Plant confirmed by way of a joint affidavit that it was

Romeo and his brother Alejandre Gindang who supervised their work, not

Petron’s foreman or supervisor. This was even corroborated by the Terminal

Superintendent of the Mandaue Bulk Plant.The CA also found RDG to be an

independent labor contractor with sufficient capitalization and investment as

shown by its financial statement for year-end 2000. In addition, the works for

which RDG was contracted to provide were menial which were neither

directly related nor sensitive and critical to Petron’s principal business.

CA: WHEREFORE, the Petition is GRANTED. The February 18, 2005

Decision and the August 24, 2005 Resolution of the Fourth Division of theNational Labor Relations Commission in NLRC Case No. V-000481-2003,

entitled "Teodoro Calesa et al. vs. Petron Corporation and R.D. Gindang

Services", having been rendered with grave abuse of discretion amounting to

excess of jurisdiction, are hereby REVERSED and SET ASIDE and a NEW

ONE is entered DISMISSING private respondents’ complaint against

petitioner.

Petitioners filed a Motion for Reconsideration insisting that Petron illegally

dismissed them; that RDG is a labor-only contractor; and that they performed

jobs which a re sensitive to Petron’s business operations. To support these,

they attached to their Supplemental Motion for Reconsideration38

Affidavits39 of former employees of Petron attesting to t he fact that thei r jobs

were critical to Petron’s business operations and that they were carried out

under the control of a Petron employee. Pet itioners’ motions were, however,

denied by the CA in a Resolution40 dated March 30, 2007. Hence, this

Petition.

ISSUE: The primary issue to be resolved in this case is whether RDG is a

legitimate job contractor. Upon such finding hinges the determination ofwhether an employer-employee relationship exists between the parties as to

make Petron liable for petitioners’ dismissal.

HELD:

The Petition is impressed with merit.

While it is true that the determination of whether an employer-employee

relationship existed between the parties basically involves a question of fact,

the conflicting findings of the Labor Arbiter and the NLRC on one hand, and

of the CA on the other, constrains the Court to review and reevaluate such

factual findings.

Labor-only contracting, distinguished from permissible job contracting

The prevailing rule on labor-only contracting at the time Petron and RDG

entered into the Contract for Services in June 2000 is DOLE Department

Order No. 10, series of 1997 the pertinent provision of which reads:

Section 4. x x x

x x x x

(f) "Labor-only contracting" prohibited under this Rule is an arrangement

where the contractor or subcontractor merely recruits, supplies or places

workers to perform a job, work or service for a principal and the followingelements are present:

(i) The contractor or subcontractor does not have substantial capital or

investment to actually perform the job, work or service under its own

account and responsibility; and

(ii) The employees recruited, supplied or placed by such contractor or

subcontractor are performing activities which are directly related to the

main business of the principal.

x x x x

Section 6. Permissible contracting or subcontracting. - Subject to the

conditions set forth in Section 3 (d) and (e) and Section 5 hereof, the



principal may engage the services of a contractor or subcontractor for the

performance of any of the following:

(a) Works or services temporarily or occasionally needed to meet abnormal

increase in the demand of products or services, provided that the normal

production capacity or regular workforce of the principal cannot reasonably

cope with such demands;

(b) Works or services temporarily or occasionally needed by the principalfor undertakings requiring expert or highly technical personnel to improve

the management or operations of an enterprise;

(c) Services temporarily needed for the introduction or promotion of new

products, only for the duration of the introductory or promotional period;

(d) Works or services not directly related or not integral to the main

business or operation of the principal, including casual work, janitorial,

security, landscaping, and messengerial services, and work not related to

manufacturing processes in manufacturing establishments;

(e) Services involving the public display of manufacturers’ products which

do not involve the act of selling or issuance of receipts or invoices;

(f) Specialized works involving the use of some particular, unusual or

peculiar skills, expertise, tools or equipment the performance of which is

beyond the competence of the regular work force or production capacity of

the principal; and

(g) Unless a reliever system is in place among the regular workforce,

substitute services for absent regular employees, provided that the periodof service shall be coextensive with the period of absence and the same is

made clear to the substitute employee at the time of engagement. The

phrase "absent regular employees" includes those who are serving

suspensions or other disciplinary measures not amounting to termination of

employment meted out by the principal, but excludes those on strike where

all the formal requisites for the legality of the strike have been prima facie

complied with based on the records filed with the National Conciliation and

Mediation Board.

“Permissible job contracting or subcontracting refers to an arrangement

whereby a principal agrees to farm out with a contractor or subcontractor

the performance of a specific job, work, or service within a definite or

predetermined period, regardless of whether such job, work or, service is

to be performed or completed within or outside the premises of the

principal. Under this arrangement, the following conditions must be met: (a)

the contractor carries on a distinct and independent business and

undertakes the contract work on his account under his own responsibility

according to his own manner and method, free from the control anddirection of his employer or principal in all matters connected with the

performance of his work except as to the results thereof; (b) the contractor

has substantial capital or investment; and (c) the agreement between the

principal and contractor or subcontractor assures the contractual

employees’ entitlement to all labor and occupational safety and health

standards, free exercise of the right to self-organization, security of tenure,

and social welfare benefits."44 Labor-only contracting, on the other hand,

is a prohibited act, defined as "supplying workers to an employer who 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."45 "[I]n distinguishing between

prohibited labor-only contracting and permissible job contracting, the

totality of the facts and the surrounding circumstances of the case shall be

considered.”

Generally, the contractor is presumed to be a labor-only contractor, unless

such contractor overcomes the burden of proving that it has the substantial

capital, investment, tools and the like. However, where the principal is the

one claiming that the contractor is a legitimate contractor, as in the present

case, said principal has the burden of proving that supposed status.47 It isthus incumbent upon Petron, and not upon petitioners as Petron insists,48 to

prove that RDG is an independent contractor.

Petron failed to discharge the burden of proving that RDG is a legitimate

contractor.

The presumption that RDG is a labor-only contractor stands. The audited

financial statements and other financial documents of RDG establish that it

does have sufficient working capital to meet the requirements of its service

contract. In fact, the financial evaluation conducted by Petron of RDG’s

financial showed RDG to have a maximum financial capability. Petron was



able to establish RDG’s sufficient capitalization when it entered into the

service contract in 2000. The Court stresses though that this determination of

RDG’s status as an independent contractor is only with respect to its financial

capability for the period covered by the financial and other documents

presented. In other words, the evidence adduced merely proves that RDG

was financially qualified as a legitimate contractor but only with respect to its

last service contract with Petron.

Petitioners have rendered work for Petron for a long period of time evenbefore the service contract was executed in 2000. The respective dates on

which petitioners claim to have started working for Petron, as well as the fact

that they have rendered continuous service to it until October 16, 2002, when

they were prevented from entering the premises of Petron’s Mandaue Bulk

Plant, were not at all disputed by Petron. In fact, Petron even recognized that

some of the petitioners were initially fielded by Romualdo Gindang, the father

of Romeo, through RDG’s precursor, Romualdo D.Gindang Contractor, while

the others were provided by Romeo himself when he took over the business

of his father in 1989. Hence, while Petron was able to establish that RDG

was financially capable as a legitimate contractor at the time of the execution

of the service contract in 2000, it nevertheless failed to establish the financial

capability of RDG at the time when petitioners actually started to work for

Petron in 1968, 1979, 1981, 1987, 1990, 1992 and 1993.

Sections 8 and 9,Rule VIII, Book III51 of the implementing rules of the Labor

Code, in force since 1976 and prior to DOLE Department Order No. 10,

series of 1997,52 provide that for job contracting to be permissible, one of

the conditions that has to be met is that the contractor must have substantial

capital or investment. Petron having failed to show that this condition was

met by RDG, it can be concluded, on this score alone, that RDG is a mere

labor-only contractor. Otherwise stated, the presumption that RDG is a labor-only contractor stands due to the failure of Petron to discharge the burden of

proving the contrary.

The Court also finds, as will be discussed below, that the works performed by

petitioners were directly related to Petron’s business, another factor which

negates Petron’s claim that RDG is an independent contractor.

Petron’s power of control over petitioners exists in this case.

"[A] finding that a contractor is a ‘labor -only’ contractor is equivalent to

declaring that there is an employer-employee relationship between the

principal and the employees of the supposed contractor."53 In this case, the

employer employee relationship between Petron and petitioners becomes all

the more apparent due to the presence of the power of control on the part of

the former over the latter.

It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:

This Court has constantly adhered to the "four-fold test" to determinewhether there exists an employer-employee relationship between the parties.

The four elements of an employment relationship are: (a) the selection and

engagement of the employee; (b) the payment of wages; (c) the power of

dismissal; and (d) the power to control the employee’s conduct.

Of these four elements, it is the power to control which is the most crucial

and most determinative factor, so important, in fact, that, the other elements

may even be disregarded." (Emphasis supplied)

Hence, the facts that petitioners were hired by Romeo or his father and that

their salaries were paid by them do not detract from the conclusion that there

exists an employer-employee relationship between the parties due to

Petron’s power of control over the petitioners. One manifestation of the

power of control is the power to transfer employees from one work

assignment to another.55 Here, Petron could order petitioners to do work

outside of their regular "maintenance/utility" job. Also, petitioners were

required to report for work everyday at the bulk plant, observe an 8:00 a.m.

to 5:00 p.m. daily work schedule, and wear proper uniform and safety

helmets as prescribed by the safety and security measures being

implemented within the bulk plant. All these imply control. In an industry

where safety is of paramount concern, control and supervision over sensitiveoperations, such as those performed by the petitioners, are inevitable if not at

all necessary. Indeed, Petron deals with commodities that are highly volatile

and flammable which, if mishandled or not properly attended to, may cause

serious injuries and damage to property and the environment. Naturally,

supervision by Petron is essential in every aspect of its product handling in

order not to compromise the integrity, quality and safety of the products that

it distributes to the consuming public.

Petitioners already attained regular status as employees of Petron.



Petitioners were given various work assignments such as tanker receiving,

barge loading, sounding, gauging, warehousing, mixing, painting, carpentry,

driving, gasul filling and other utility works. Petron refers to these work

assignments as menial works which could be performed by any able-bodied

individual. The Court finds, however, that while the jobs performed by

petitioners may be menial and mechanical, they are nevertheless necessary

and related to Petron’s business operations. If not for these tasks, Petron’s

products will not reach the consumers in their proper state. Indeed,

petitioners’ roles were vital inasmuch as they involve the preparation of theproducts that Petron will distribute to its consumers.

Furthermore, while it may be true that any able-bodied individual can perform

the tasks assigned to petitioners, the Court notes the undisputed fact that for

many years, it was the same able-bodied individuals (petitioners) who

performed the tasks for Petron. The engagement of petitioners for the same

works for a long period of time is a strong indication that such works were

indeed necessary to Petron’s business. In view of these, and considering

further that petitioners’ length of service entitles them to become regular

employees under the Labor Code, petitioners are deemed by law to have

already attained the status as Petron’s regular employees. As such, Petron

could not terminate their services on the pretext that the service contract it

entered with RDG has already lapsed. For one, and as previously discussed,

such regular status had already attached to them even before the execution

of the service contract in 2000. For another, the same does not constitute a

just or authorized cause for a valid dismissal of regular employees.

In sum, the Court finds that RDG is a labor-only contractor. As such, it is

considered merely as an agent of Petron. Consequently, the employer-

employee relationship which the Court finds to exist in this case is between

petitioners as employees and Petron as their employer. Petron therefore,being the principal employer and RDG, being the labor-only contractor, are

solidarily liable for petitioners' illegal dismissal and monetary claims.

WHEREFORE, the Petition is GRANTED. The May 10, 2006 Decision and

March 30, 2007 Resolution of the Court of Appeals in CA-G.R. SP No. 01291

are REVERSED and SET ASIDE. The February 18, 2005 Decision and

August 24, 2005 Resolution of the National Labor Relations Commission in

NLRC Case No. V-000481-2003 are hereby REINSTATED and AFFIRMED.

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