Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. L-80680 January 26, 1989DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA, FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA,petitioners,vs.CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and HON. EMERSON C. TUMANON,respondents.V.E. Del Rosario & Associates for respondent CMC.The Solicitor General for public respondent.Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for petitioners.Mildred A. Ramos for respondent Lily Victoria A. Azarcon.SARMIENTO,J.:On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the National Labor Relations Commission for reinstatement and payment of various benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay, and emergency cost of living allowance pay, against the respondent, the California Manufacturing Company.1On October 7, 1986, after the cases had been consolidated, the California Manufacturing Company (California) filed a motion to dismiss as well as a position paper denying the existence of an employer-employee relation between the petitioners and the company and, consequently, any liability for payment of money claims.2On motion of the petitioners, Livi Manpower Services, Inc. was impleaded as a party-respondent.It appears that the petitioners were, prior to their stint with California, employees of Livi Manpower Services, Inc. (Livi), which subsequently assigned them to work as "promotional merchandisers"3for the former firm pursuant to a manpower supply agreement. Among other things, the agreement provided that California "has no control or supervisions whatsoever over [Livi's] workers with respect to how they accomplish their work or perform [Californias] obligation";4the Livi "is an independent contractor and nothing herein contained shall be construed as creating between [California] and [Livi] . . . the relationship of principal[-]agent or employer[-]employee';5that "it is hereby agreed that it is the sole responsibility of [Livi] to comply with all existing as well as future laws, rules and regulations pertinent to employment of labor"6and that "[California] is free and harmless from any liability arising from such laws or from any accident that may befall workers and employees of [Livi] while in the performance of their duties for [California].7It was further expressly stipulated that the assignment of workers to California shall be on a "seasonal and contractual basis"; that "[c]ost of living allowance and the 10 legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll for the preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises."8The petitioners were then made to sign employment contracts with durations of six months, upon the expiration of which they signed new agreements with the same period, and so on. Unlike regular California employees, who received not less than P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received P38.56 plus P15.00 in allowance daily.The petitioners now allege that they had become regular California employees and demand, as a consequence whereof, similar benefits. They likewise claim that pending further proceedings below, they were notified by California that they would not be rehired. As a result, they filed an amended complaint charging California with illegal dismissal.California admits having refused to accept the petitioners back to work but deny liability therefor for the reason that it is not, to begin with, the petitioners' employer and that the "retrenchment" had been forced by business losses as well as expiration of contracts.9It appears that thereafter, Livi re-absorbed them into its labor pool on a "wait-in or standby" status.10Amid these factual antecedents, the Court finds the single most important issue to be: Whether the petitioners are California's or Livi's employees.The labor arbiter's decision,11a decision affirmed on appeal,12ruled against the existence of any employer-employee relation between the petitioners and California ostensibly in the light of the manpower supply contract,supra, and consequently, against the latter's liability as and for the money claims demanded. In the same breath, however, the labor arbiter absolved Livi from any obligation because the "retrenchment" in question was allegedly "beyond its control ."13He assessed against the firm, nevertheless, separation pay and attorney's fees.We reverse.The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of agreement. Hence, the fact that the manpower supply agreement between Livi and California had specifically designated the former as the petitioners' employer and had absolved the latter from any liability as an employer, will not erase either party's obligations as an employer, if an employer-employee relation otherwise exists between the workers and either firm. At any rate, since the agreement was between Livi and California, they alone are bound by it, and the petitioners cannot be made to suffer from its adverse consequences.This Court has consistently ruled that the determination of whether or not there is an employer-employee relation depends upon four standards: (1) the manner of selection and engagement of the putative employee; (2) the mode of payment of wages; (3) the presence or absence of a power of dismissal; and (4) the presence or absence of a power to control the putative employee's conduct.14Of the four, the right-of-control test has been held to be the decisive factor.15On the other hand, we have likewise held, based on Article 106 of the Labor Code, hereinbelow reproduced:ART. 106.Contractor or sub-contractor. Whenever an employee enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's sub-contractor, if any, shall be paid in accordance with the provisions of this Code.In the event that the contractor or sub-contractor fails to pay wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or sub-contractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provisions of this Code.There is 'labor-only' contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.that notwithstanding the absence of a direct employer-employee relationship between the employer in whose favor work had been contracted out by a "labor-only" contractor, and the employees, the former has the responsibility, together with the "labor-only" contractor, for any valid labor claims,16by operation of law. The reason, so we held, is that the "labor-only" contractor is considered "merely an agent of the employer,"17and liability must be shouldered by either one or shared by both.18There is no doubt that in the case at bar, Livi performs "manpower services",19meaning to say, it contracts out labor in favor of clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an independent contractor."20The nature of one's business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute and prevailing case law.21The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with workers to pursue the latter's own business. In this connection, we do not agree that the petitioners had been made to perform activities 'which are not directly related to the general business of manufacturing,"22California's purported "principal operation activity. "23The petitioner's had been charged with "merchandizing [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and occational [sic] price tagging,"24an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its (California's) promotions or sales arm or agent, or otherwise, rendered a piece of work it (California) could not have itself done; Livi, as a placement agency, had simply supplied it with the manpower necessary to carry out its (California's) merchandising activities, using its (California's) premises and equipment.25Neither Livi nor California can therefore escape liability, that is, assuming one exists.The fact that the petitioners have allegedly admitted being Livi's "direct employees"26in their complaints is nothing conclusive. For one thing, the fact that the petitioners were (are), will not absolve California since liability has been imposed by legal operation. For another, and as we indicated, the relations of parties must be judged from case to case and the decree of law, and not by declarations of parties.The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no argument either. As we held inPhilippine Bank of Communications v. NLRC,27a temporary or casual employee, under Article 218 of the Labor Code, becomes regular after service of one year, unless he has been contracted for a specific project. And we cannot say that merchandising is a specific project for the obvious reason that it is an activity related to the day-to-day operations of California.It would have been different, we believe, had Livi been discretely a promotions firm, and that California had hired it to perform the latter's merchandising activities. For then, Livi would have been truly the employer of its employees, and California, its client. The client, in that case, would have been a mere patron, and not an employer. The employees would not in that event be unlike waiters, who, although at the service of customers, are not the latter's employees, but of the restaurant. As we pointed out in thePhilippine Bank of Communicationscase:xxx xxx xxx... The undertaking given by CESI in favor of the bank was not the performance of a specific job for instance, the carriage and delivery of documents and parcels to the addresses thereof. There appear to be many companies today which perform this discrete service, companies with their own personnel who pick up documents and packages from the offices of a client or customer, and who deliver such materials utilizing their own delivery vans or motorcycles to the addressees. In the present case, the undertaking of CESI was to provide its client the bank with a certain number of persons able to carry out the work of messengers. Such undertaking of CESI was complied with when the requisite number of persons were assigned or seconded to the petitioner bank. Orpiada utilized the premises and office equipment of the bank and not those of CESI. Messengerial work the delivery of documents to designated persons whether within or without the bank premises-is of course directly related to the day-to-day operations of the bank. Section 9(2) quoted above does not require for its applicability that the petitioner must be engaged in the delivery of items as a distinct and separate line of business.Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and placement corporation placing bodies, as it were, in different client companies for longer or shorter periods of time, ...28In the case at bar, Livi is admittedly an "independent contractor providing temporary services of manpower to its client. "29When it thus provided California with manpower, it supplied California with personnel, as if such personnel had been directly hired by California. Hence, Article 106 of the Code applies.The Court need not therefore consider whether it is Livi or California which exercises control over the petitioner vis-a-vis the four barometers referred to earlier, since by fiction of law, either or both shoulder responsibility.It is not that by dismissing the terms and conditions of the manpower supply agreement, we have, hence, considered it illegal. Under the Labor Code, genuine job contracts are permissible, provided they are genuine job contracts. But, as we held inPhilippine Bank of Communications, supra, when such arrangements are resorted to "in anticipation of, and for the very purpose of making possible, the secondment"30of the employees from the true employer, the Court will be justified in expressing its concern. For then that would compromise the rights of the workers, especially their right to security of tenure.This brings us to the question: What is the liability of either Livi or California?The records show that the petitioners bad been given an initial six-month contract, renewed for another six months. Accordingly, under Article 281 of the Code, they had become regular employees-of-California-and had acquired a secure tenure. Hence, they cannot be separated without due process of law.California resists reinstatement on the ground, first, and as we Id, that the petitioners are not its employees, and second, by reason of financial distress brought about by "unfavorable political and economic atmosphere"31"coupled by the February Revolution."32As to the first objection, we reiterate that the petitioners are its employees and who, by virtue of the required one-year length-of-service, have acquired a regular status. As to the second, we are not convinced that California has shown enough evidence, other than its bare say so, that it had in fact suffered serious business reverses as a result alone of the prevailing political and economic climate. We further find the attribution to the February Revolution as a cause for its alleged losses to be gratuitous and without basis in fact.California should be warned that retrenchment of workers, unless clearly warranted, has serious consequences not only on the State's initiatives to maintain a stable employment record for the country, but more so, on the workingman himself, amid an environment that is desperately scarce in jobs. And, the National Labor Relations Commission should have known better than to fall for such unwarranted excuses and nebulous claims.WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1): SETTING ASIDE the decision, dated March 20, 1987, and the resolution, dated August 19, 1987; (2) ORDERING the respondent, the California Manufacturing Company, to REINSTATE the petitioners with full status and rights of regular employees; and (3) ORDERING the respondent, the California Manufacturing Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and differential pays effective as and from the time they had acquired a regular status under the second paragraph, of Section 281, of the Labor Code, but not to exceed three (3) years, and (b) all such other and further benefits as may be provided by existing collective bargaining agreement(s) or other relations, or by law, beginning such time; and (4) ORDERING the private respondents to PAY unto the petitioners attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded, in addition to those money claims. The private respondents are likewise ORDERED to PAY the costs of this suit.SECOND DIVISION[G.R. No. 111501.March5,1996]PHILIPPINE FUJI XEROX CORPORATION, JENNIFER A. BERNARDO, and ATTY. VICTORINO LUIS,petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION (First Division), PAMBANSANG KILUSAN NG PAGGAWA, (KILUSAN)-TUCP, PHILIPPINE XEROX EMPLOYEES UNION-KILUSAN and PEDRO GARADO,respondents.D E C I S I O NMENDOZA,J:This is a petition for certiorari to set aside the decision of the NLRC, finding petitioner Philippine Fuji Xerox Corporation (Fuji Xerox) guilty of illegally dismissing private respondent Pedro Garado and ordering him reinstated. The NLRC decision reverses on appeal a decision of the Labor Arbiter finding private respondent to be an employee of another firm, the Skillpower, Inc., and not of petitioner Fuji Xerox.The question raised in this case is whether private respondent is an employee of ,Fuji Xerox (as the NLRC found) or of Skillpower, Inc. (as the Labor Arbiter found). For reasons to be hereafter explained, we hold that private respondent is an employee of Fuji Xerox and accordingly dismiss the petition for certiorari of Fuji Xerox.The following are the facts.OnMay 6, 1977, petitioner Fuji Xerox entered into an agreement under which Skillpower, Inc. supplied workers to operate copier machines of Fuji Xerox as part of the latters Xerox Copier Project in its sales offices. Private respondent Pedro Garado was assigned as key operator at Fuji Xeroxs branch at Buendia,Makati, Metro Manila, in February of 1980.In February of 1983, Garado went on leave and his place was taken over by a substitute. Upon his return in March, he discovered that there was a spoilage of over 600 copies. Afraid that he might be blamed for the spoilage, he tried to talk to a service technician of Fuji Xerox into stopping the meter of the machine.The technician refused Garados request, but this incident came to the knowledge of Fuji Xerox which, onMay 31, 1983, reported the matter to Skillpower, Inc. The next day, Skillpower, Inc. wrote Garado, ordering him to explain. In the meantime, it suspended him from work. Garado filed a complaint for illegal dismissal.The Labor Arbiter found that Garado applied for work to Skillpower, Inc.; that in 1980 he was employed and made to sign a contract; that although he received his salaries regularly from Fuji Xerox, it was Skillpower, Inc. which exercised control and supervision over his work; that Skillpower, Inc. had substantial capital and investments in machinery, equipment, and service vehicles, and assets totalling P5,008,812.43. On the basis of these findings the Labor Arbiter held in a decision rendered onOctober 30, 1986that Garado was an employee of Skillpower, Inc., and that he had merely been assigned by Skillpower, Inc. to Fuji Xerox. Hence, the Labor Arbiter dismissed Garados complaint.On the other hand, the NLRC found Garado to be in fact an employee of petitioner Fuji Xerox and by it to have been illegally dismissed. The NLRC found that although Garados request was wrongful, dismissal would be a disproportionate penalty. The NLRC held that although Skillpower, Inc. had substantial capital assets, the fact was that the copier machines, which Garado operated, belonged to petitioner Fuji Xerox, and that although it was Skillpower, Inc. which had suspended Garado, the latter merely acted at the behest of Fuji Xerox. The NLRC found that Garado worked under the control and supervision of Fuji Xerox, which paid his salaries, and that Skilipower, Inc. merely acted as paymaster-agent of Fuji Xerox. The NLRC held that Skilipower, Inc. was a labor-only contractor and Garado should be deemed to have been directly employed by Fuji Xerox, regardless of the agreement between it and Skillpower, Inc. Accordingly, the NLRC ordered:WHEREFORE, premises considered, the respondents are hereby ordered to immediately reinstate complainant Pedro Garado to his former position as key operator with three (3) years backwages, without qualification or reduction whatsoever x x x. Except as herein above MODIFIED, the appealed decision is hereby Affirmed.Hence the present petition. Fuji Xerox argues that Skillpower, Inc. is an independent contractor and that Garado is its employee for the following reasons:(1)Garado was recruited by Skillpower, Inc.;(2)The work done by Garado was not necessary to the conduct of the business of Fuji Xerox;(3)Garados salaries and benefits were paid directly by Skillpower, Inc.;(4)Garado worked under the control of Skillpower, Inc.; and(5)Skillpower, Inc. is a highly-capitalized business venture.The contentions are without merit.Fuji Xerox contends that Garado was actually recruited by Skillpower, Inc. as part of its personnel pool and later merely assigned to it (petitioner). It is undisputed, however, that since 1980,[1]when Garado was first assigned to work at Fuji Xerox, he had never been assigned to any other company so much so that by 1984, he was already a member of the union which petitioned the company for his regularization.[2]From 1980 to 1984 he worked exclusively for petitioner. Indeed, he was recruited by Skillpower, Inc. solely for assignment to Fuji Xerox to work in the latters Xerox Copier Project.[3]Petitioners claim that Skillpower, Inc. has other clients to whom it provided temporary services. That, however, is irrelevant. What is important is that once employed, Garado was never assigned to any other client of Skillpower, Inc. In fact, although under the agreement Skillpower, Inc. was supposed to provide only temporary services, Skilipower, Inc. actually supplied Fuji Xerox the labor which the latter needed for its Xerox Copier Project for seven (7) years, from 1977 to 1984.OnJanuary 1, 1983, private respondent signed a contract entitled Appointment as Contract Worker, in which it was stated that private respondents status was that of a contract worker for a definite period fromJanuary 1, 1983toJune 30, 1983. As such, private respondents employment was considered temporary, to terminate automatically six (6) months afterwards, without necessity of any notice and without entitling private respondent to separation or termination pay. Private respondent was made to understand that he was an employee of Skillpower, Inc., and not of the client to which he was assigned. Therefore, the termination of the contract or any renewal or extension thereof did not entitle him to become an employee of the client and the latter was not under any obligation to appoint him as such, notwithstanding the total duration of the contract or any extension or renewal thereof.This is nothing but a crude attempt to circumvent the law and undermine the security of tenure of private respondent by employing workers under six-month contracts which are later extended indefinitely through renewals. As this Court held in thePhilippine Bank of Communications v. NLRC:[4]It is not difficult to see that to uphold the contractual arrangement between the bank and CESI would in effect be to permit employers to avoid the necessity of hiring regular or permanent employees and to enable them to keep their employees indefinitely on a temporary or casual status, thus to deny them security of tenure in their jobs. Article 106 of the Labor Code is precisely designed to prevent such a result.Second.Petitioner contends that the service provided by Skillpower, Inc., namely, operating petitioners xerox machine, is not directly related nor necessary to the business of selling and leasing copier machines of petitioner. Petitioners claim that their Xerox Copier Project is just for public service and is purely incidental to its business. What petitioners earn from the project is not even sufficient to defray their expenses, let alone bring profits to them. As such, the project is no different from other services which can legally be contracted out, such as security and janitorial services. Petitioners contend that the copier service can be considered as part of their housekeeping tasks which can be let to independent contractors.[5]We disagree. As correctly held by the NLRC, at the very least, the Xerox Copier Project of petitioners promotes goodwill for the company. It may not generate income for the company but there are activities which a company may find necessary to engage in because they ultimately redound to its benefit. Operating the companys copiers at its branches advertises the quality of their products and promotes the companys reputation and public image. It also advertises the utility and convenience of having a copier machine. It is noteworthy that while not operated for profit the copying service is not intended either to be promotional, as, indeed, petitioner charged a fee for the copies made.It is wrong to say that if a task is not directly related to the employers business, or it falls under what may be considered housekeeping activities, the one performing the task is a job contractor. The determination of the existence of an employer-employee relationship is defined by law according to the facts of each case, regardless of the nature of the activities involved.Third.Petitioners contend that it never exercised control over the conduct of private respondent. Petitioners allege that the salaries paid to Garado, as well as his employment records, vouchers and loan checks from the SSS were coursed through Skillpower, Inc. In addition private respondent applied for vacation leaves to Skilipower, Inc.It is also contended that it was Skillpower, Inc. which twice required private respondent to explain why he should not be dismissed for the spoilage in Fuji Xeroxs Buendia branch and suspended him pending the result of the investigation. According to petitioners, although they conducted an administrative investigation, the purpose was only to determine the complicity of their own employees in the incident, if any, and any criminal liability of private respondent.This claim is belied by two letters written by Atty. Victorino H. Luis, Legal and Industrial Relations Officer of the company, to the union president, Nick Macaraig. The first letter, datedJuly 6, 1983, stated:This has reference to your various letters dated today on administrative case concerning Messrs. Crisostomo Cruz, Pedro Garado and Ms. Evelyn Abenes. In connection with the above and in the case likewise of Mr. Dionisio Guyala,please be advised that the proceedings against them are being carried out under the terms, and in accordance with the provisions of our Policy and Procedure on Employment Termination as well as Policy on Disciplinary Actions dated October 1, 1982,and not under the Grievance Machinery under our CBA.Your action apparently is premised on the assumption that we are now in the Grievance Stage, which is premature. If we have allowed theUnionto participate in our Investigation and Administrative panels, it is only a concession on managements part in accordance with No. IV, Section B, Paragraph 3 of the abovecited policy on the investigation, the Personnel/Administrative Department may consult theUnionwhenever necessary.We shall entertain grievances under our CBA Machinery only after decisions have been made on the foregoing cases and should you find the penalties imposed, if any, as unjust, unduly harsh, discriminating otherwise fit subject for grievance by theUnionitself under the terms of our CBA.Accordingly,we are proceeding with our investigations on the administrative chargeswith or without your presence or that of the respondents if it is the latters preference, as in the case of Crisostomo Cruz, to ignore the same. (Italics ours)The second letter, datedJuly 13, 1983,[6]read:You obviously persist in pursuing the misconception that our allowing your presence in the administrative proceedings against Messrs. Guyala, Cruz, et al. has set the Grievance Machinery under our CBA into play.We can only reiterate our statement in our letter of July 6 that we were implementing Policy and Procedures on Termination dated October 1, 1982and that your presence in helping bolster the defense for the respondents was only with our forbearance in the spirit of cooperation in order to better ferret out the truth.The power or authority to impose discipline and disciplinary measures upon employees is a basic prerogative of Management,something that cannot be abdicated, much less ceded to a CBA Grievance Committee which is limited to settling disputes and misunderstanding as to interpretation, application, or violation of any provisions of the CBA agreement x x x. As likewise pointed out in our letter of July 6recourse to Grievance may possibly be resorted to if in the Unions opinion a penalty imposed upon a respondent Union member is discriminating to the member or otherwise illegal, unduly harsh, and the like.Ultimately, the remedy lies in appeal to the NLRC, as in similar cases in the past. (Italics ours)These letters reveal the role which Fuji Xerox played in the dismissal of the private respondent. They dispel any doubt that Fuji Xerox exercised disciplinary authority over Garado and that Skillpower, Inc. issued the order of dismissal merely in obedience to the decision of petitioner.Fourth.Petitioner avers that Skillpower, Inc. is a highly-capitalized business venture, registered as an independent employer with the Securities and Exchange Commission as well as the Department of Labor and Employment. Skillpower, Inc. is a member of the Social Security System. In 1984 it had assets exceeding P5 million pesos and at least 20 typewriters, office equipment and service vehicles. It had employees of its own and a pool of 25 clerks assigned to clients on a temporary basis.Petitioners cite the case ofNeri v. NLRC,[7]in which it was held that the Building Care Corporation (BCC) was an independent contractor on the basis of finding that it had substantial capital, although there was no evidence that it had investments in the form of tools, equipment, machineries and work premises. But the Court in that case considered not only the capitalization of the BCC but also the fact that BCC was providing specific special services (radio/telex operator and janitor) to the employer; that in another case[8]the Court had already found that the BCC was an independent contractor; that BCC retained control over the employees and the employer was actually just concerned with the end-result; that BCC had the power to reassign the employees and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered. These features of that case make it distinguishable from the present one.Here, the service being rendered by private respondent was not a specific or special skill that Skillpower, Inc. was in the business of providing. Although in the Neri case the telex machine operated by the employee belonged to the employer, the service was deemed permissible because it was specific and technical. This cannot be said of the service rendered by private respondent Garado.The Rules to Implement of the Labor Code, Book III, Rule VIII, 8, provide that there is job contracting when the following conditions are fulfilled:(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business.Otherwise, according to Art. 106 of the Labor Code,There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of 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.Petitioner Fuji Xerox argues that Skillpower, Inc. had typewriters and service vehicles for the conduct of its business independently of the petitioner. But typewriters and vehicles bear no direct relationship to the job for which Skillpower, Inc. contracted its service of operating copier machines and offering copying services to the public. The fact is that Skillpower, Inc. did not have copying machines of its own. What it did was simply to supply manpower to Fuji Xerox. The phrase substantial capital and investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business, in the Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the service it is being contracted to render. One who does not have an independent business for undertaking the job contracted for is just an agent of the employer.Fifth.The Agreement between petitioner Fuji Xerox and Skillpower, Inc. provides that Skillpower, Inc. is an independent contractor and that the workers hired by it shall not, in any manner and under any circumstances, be considered employees of [the] Company, and that the Company has no control or supervision whatsoever over the conduct of the Contractor or any of its workers in respect to how they accomplish their work or perform the Contractors obligations under this AGREEMENT.InTabas v. California Manufacturing Company, Inc.,[9]this Court held on facts similar to those in the case at bar:There is no doubt that in the case at bar, Livi performs manpower services, meaning to say, it contracts out labor in favor of clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is an independent contractor. The nature of ones business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute and prevailing case law. The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has providedCaliforniawith workers to pursue the latters own business. In this connection, we do not agree that the petitioners had been made to perform activities which are not directly related to the general business of manufacturing,Californias purported principal operation activity. The petitioners had been charged with merchandising [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and occasional [sic] price tagging, an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its (Californias) promotions or sales arm or agents, or otherwise, rendered a piece of work it (California) could not have itself done; Livi as a placement agency, had simply supplied it with the manpower necessary to carry out its (Californias) merchandising activities, using its (Californias) premises and equipment.xxxxxxxxxThe fact that the petitioners have allegedly admitted being Livis direct employees in their complaints is nothing conclusive. For one thing, the fact that the petitioners were (are), will not absolveCaliforniasince liability has been imposed by legal operation. For another, and as we indicated, the relations of parties must be judged from case to case and the decree of law, and not by declaration of parties.Skilipower, Inc. is, therefore, a labor-only contractor and Garado is not its employee. No grave abuse of discretion can thus be imputed to the NLRC for declaring petitioner Fuji Xerox guilty of illegal dismissal of private respondent.ACCORDINGLY, the petition for certiorari is DISMISSED for lack of merit.SO ORDERED.Regalado, J. (Chairman), Romero,andPuno, JJ.,concur

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. L-41182-3 April 16, 1988DR. CARLOS L. SEVILLA and LINA O. SEVILLA,petitioners-appellants,vs.THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA,respondents-appellees.SARMIENTO ,J.:The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are beyond dispute:xxx xxx xxxOn the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for the former-s use as a branch office. In the said contract the party of the third part held herself solidarily liable with the party of the part for the prompt payment of the monthly rental agreed on. When the branch office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc.On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service considered closing down its office. This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch, and the second,authorizing the corporate secretary to receive the properties of the Tourist World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint wall filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case without prejudice.The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the court a quo, in an order dated June 8, 1963, granted permitting her to present evidence in support of her counterclaim.On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were joined, the reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly heard following which the court a quo ordered both cases dismiss for lack of merit, on the basis of which was elevated the instant appeal on the following assignment of errors:I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.On the foregoing facts and in the light of the errors asigned the issues to be resolved are:1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on Ermita;2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or TWS and the appellant.In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her and appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to the end that her relationship with TWS was one of a joint business venture appellant made declarations showing:1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose specialist as well as a imediately columnist had been in the travel business prior to the establishment of the joint business venture with appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of one of his children, with her own clientele, coming mostly from her own social circle (pp. 3-6 tsn. February 16,1965).2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering the premises at A. Mabini St., she expressly warranting and holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for the prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had its own, separate office located at the Trade & Commerce Building; nor was she an employee thereof, having no participation in nor connection with said business at the Trade & Commerce Building (pp. 16-18 tsn Id.).4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own business (and not for any of the business of appellee Tourist World Service, Inc.) obtained from the airline companies. She shared the 7% commissions given by the airline companies giving appellee Tourist World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn.Id.)5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office, paying for the salary of an office secretary, Miss Obieta, and other sundry expenses, aside from desicion the office furniture and supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc. shouldering the rental and other expenses in consideration for the 3% split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch manager for appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief)Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World Service, Inc. and as such was designated manager.1xxx xxx xxxThe trial court2held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the premises.3It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her employer.4The respondent Court of Appeal5rendered an affirmance.The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state:ITHE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.IITHE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)IIITHE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.IVTHE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC.6As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch office of the appellee Tourist World Service, Inc.7Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera. The petitioners contend, however, that relation between the between parties was one of joint venture, but concede that"whatever might have been the true relationship between Sevilla and Tourist World Service,"the Rule of Law enjoined Tourist World Service and Canilao from taking the law into their own hands,8in reference to the padlocking now questioned.The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that the relation between the parties was in the character of employer and employee, the courts would have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force.9In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In general, we have relied on the so-called right of control test, "where the person for whom the services are performed reserves a right to control notonly the endto be achievedbut also the meansto be used in reaching such end."10Subsequently, however, we have considered, in addition to the standard of right-of control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, in determining the existence of an employer-employee relationship.11The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita office, she had bound herself insolidumas and for rental payments, an arrangement that would be like claims of a master-servant relationship. True the respondent Court would later minimize her participation in the lease as one of mere guaranty,12that does not make her an employee of Tourist World, since in any case, a true employee cannot be made to part with his own money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the parties must be bound by some other relation, but certainly not employment.In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina Sevilla.13Under these circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities.It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her booking successes.The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee. As we said, employment is determined by the right-of-control test and certain economic parameters. But titles are weak indicators.In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch office14in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was run. A joint venture, including a partnership, presupposes generally a of standing between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital or property contributed15and where each party exercises equal rights in the conduct of the business.16furthermore, the parties did not hold themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc.17in lieu of a distinct partnership name.It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract that the agent renders services "in representation or on behalf of another.18In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a joint managament or a partnership..But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for mutual interest, of the agent and the principal.19It appears that Lina Sevilla is abona fidetravel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch office.20Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor.The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any authority to terminate that contract without notice to its actual occupant, and to padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from possession as summarily as one would eject an interloper.The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the respondent court speaks of alleged business losses to justify the closure'21but there is no clear showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that following such an information (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the private respondents ended the lease over the branch office premises, incidentally, without notice to her.It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the Tourist World Service. "22It is strange indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but surely,it was aware that after office hours, she could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its business operations, and in the process, depriving Sevilla articipation therein.This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play.We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be awarded for "breaches of contract where the defendant acted ... in bad faith.23We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.24ART. 2219. Moral damages25may be recovered in the following and analogous cases:xxx xxx xxx(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages in a solidary capacity.Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot therefore be held liable as a cotortfeasor.The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages,25and P5,000.00 as nominal26and/or temperate27damages, to be just, fair, and reasonable under the circumstances.WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or temperate damages.Costs against said private respondents.SO ORDERED.SECOND DIVISION[G.R. No. 87098.November 4, 1996]ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC.,petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER TEODORICO L. DOGELIO and BENJAMIN LIMJOCO,respondents.D E C I S I O NTORRES, JR.,J.:Encyclopaedia Britannica (Philippines), Inc. filed this petition forcertiorarito annul and set aside the resolution of the National Labor Relations Commission, Third Division, in NLRC Case No. RB IV-5158-76, dated December 28, 1988, the dispositive portion of which reads:WHEREFORE, in view of all the foregoing, the decision dated December 7, 1982 of then Labor Arbiter Teodorico L. Dogelio is hereby AFFIRMED, and the instant appeal is hereby DISMISSED for lack of merit.SO ORDERED.[1]Private respondent Benjamin Limjoco was a Sales Division Manager of petitioner Encyclopaedia Britannica and was in charge of selling petitioners products through some sales representatives.As compensation, private respondent received commissions from the products sold by his agents.He was also allowed to use petitioners name, goodwill and logo. It was, however, agreed upon that office expenses would be deducted from private respondents commissions.Petitioner would also be informed about appointments, promotions, and transfers of employees in private respondents district.On June 14, 1974, private respondent Limjoco resigned from office to pursue his private business. Then on October 30, 1975, he filed a complaint against petitioner Encyclopaedia Britannica with the Department of Labor and Employment, claiming for non-payment of separation pay and other benefits, and also illegal deduction from his sales commissions.Petitioner Encyclopaedia Britannica alleged that complainant Benjamin Limjoco (Limjoco, for brevity) was not its employee but an independent dealer authorized to promote and sell its products and in return, received commissions therefrom. Limjoco did not have any salary and his income from the petitioner company was dependent on the volume of sales accomplished.He also had his own separate office, financed the business expenses, and maintained his own workforce.The salaries of his secretary, utility man, and sales representatives were chargeable to his commissions.Thus, petitioner argued that it had no control and supervision over the complainant as to the manner and means he conducted his business operations.The latter did not even report to the office of the petitioner and did not observe fixed office hours. Consequently, there was no employer-employee relationship.Limjoco maintained otherwise. He alleged that he was hired by the petitioner in July 1970, was assigned in the sales department, and was earning an average ofP4,000.00 monthly as his sales commission.He was under the supervision of the petitioners officials who issued to him and his other personnel, memoranda, guidelines on company policies, instructions and other orders.He was, however, dismissed by the petitioner when the Laurel-Langley Agreement expired.As a result thereof, Limjoco asserts that in accordance with the established company practice and the provisions of the collective bargaining agreement, he was entitled to termination pay equivalent to one month salary, the unpaid benefits (Christmas bonus, midyear bonus, clothing allowance, vacation leave, and sick leave), and the amounts illegally deducted from his commissions which were then used for the payments of office supplies, office space, and overhead expenses.On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a decision ruled that Limjoco was an employee of the petitioner company.Petitioner had control over Limjoco since the latter was required to make periodic reports of his sales activities to the company.All transactions were subject to the final approval of the petitioner, an evidence that petitioner company had active control on the sales activities.There was therefore, an employer-employee relationship and necessarily, Limjoco was entitled to his claims.The decision also ordered petitioner company to pay the following:1.To pay complainant his separation pay in the total amount ofP16,000.00;2.To pay complainant his unpaid Christmas bonus for three years or the amount ofP12,000.00;3.To pay complainant his unpaid mid-year bonus equivalent to one-half month pay or the total amount ofP6,000.00;4.To pay complainant his accrued vacation leave equivalent to 15 days per year of service, or the total amount ofP6,000.00;5.To pay complainant his unpaid clothing allowance in the total amount ofP600.00; and6.To pay complainant his accrued sick leave equivalent to 15 days per year of service or the total amount ofP6,000.00.[2]On appeal, the Third Division of the National Labor Relations Commission affirmed the assailed decision.The Commission opined that there was no evidence supporting the allegation that Limjoco was an independent contractor or dealer.The petitioner still exercised control over Limjoco through its memoranda and guidelines and even prohibitions on the sale of products other than those authorized by it.In short, the petitioner company dictated how and where to sell its products. Aside from that fact, Limjoco passed the costs to the petitioner chargeable against his future commissions.Such practice proved that he was not an independent dealer or contractor for it is required by law that an independent contractor should have substantial capital or investment.Dissatisfied with the outcome of the case, petitioner Encyclopaedia Britannica now comes to us in this petition forcertiorariand injunction with prayer for preliminary injunction.On April 3, 1989, this Court issued a temporary restraining order enjoining the enforcement of the decision dated December 7, 1982.The following are the arguments raised by the petitioner:IThe respondent NLRC gravely abused its discretion in holding that appellants contention that appellee was an independent contractor is not supported by evidence on record.IIRespondent NLRC committed grave abuse of discretion in not passing upon the validity of the pronouncement of the respondent Labor Arbiter granting private respondents claim for payment of Christmas bonus, Mid-year bonus, clothing allowance and the money equivalent of accrued and unused vacation and sick leave.The NLRC ruled that there existed an employer-employee relationship and petitioner failed to disprove this finding. We do not agree.In determining the existence of an employer-employee relationship the following elements must be present: 1) selection and engagement of the employee; 2) payment of wages; 3) power of dismissal; and 4) the power to control the employees conduct.Of the above, control of employees conduct is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship.[3]Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end.[4]The fact that petitioner issued memoranda to private respondents and to other division sales managers did not prove that petitioner had actual control over them.The different memoranda were merely guidelines on company policies which the sales managers follow and impose on their respective agents.It should be noted that in petitioners business of selling encyclopedias and books, the marketing of these products was done through dealership agreements.The sales operations were primarily conducted by independent authorized agents who did not receive regular compensations but only commissions based on the sales of the products.These independent agents hired their own sales representatives, financed their own office expenses, and maintained their own staff.Thus, there was a need for the petitioner to issue memoranda to private respondent so that the latter would be apprised of the company policies and procedures. Nevertheless, private respondent Limjoco and the other agents were free to conduct and promote their sales operations.The periodic reports to the petitioner by the agents were but necessary to update the company of the latters performance and business income.Private respondent was not an employee of the petitioner company.While it was true that the petitioner had fixed the prices of the products for reason of uniformity and private respondent could not alter them, the latter, nevertheless, had free rein in the means and methods for conducting the marketing operations.He selected his own personnel and the only reason why he had to notify the petitioner about such appointments was for purpose of deducting the employees salaries from his commissions.This he admitted in his testimonies, thus:Q.Yes, in other words you were on what is known as P&L basis or profit and loss basis?A.That is right.Q.If for an instance, just example your sales representative in any period did not produce any sales, you would not get any money from Britannica, would you?A.No, sir.Q.In fact, Britannica by doing the accounting for you as division manager was merely making it easy for you to concentrate all your effort in selling and you dont worry about accounting, isnt that so?A.Yes, sir.Q.In fact whenever you hire a secretary or trainer you merely hire that person and notify Britannica so that Encyclopaedia Britannica will give the salaries and deduct it from your earnings, isnt that so?A.In certain cases I just hired people previously employed by Encyclopaedia Britannica.xxxQ.In this Exhibit 2 you were informing Encyclopaedia Britannica that you have hired a certain person and you were telling Britannica how her salary was going to be taken cared of, is it not?A.Yes, sir.Q.You said here, please be informed that we have appointed Miss Luz Villan as division trainer effective May 1, 1971 atP550.00 per month her salary will be chargeable to the Katipunan and Bayanihan Districts, signed by yourself. What is the Katipunan and Bayanihan District?A.Those were districts under my division.Q.In effect you were telling Britannica that you have hired this person and you should charge her salary to me, is that right?A.Yes, sir.[5]Private respondent was merely an agent or an independent dealer of the petitioner. He was free to conduct his work and he was free to engage in other means of livelihood.At the time he was connected with the petitioner company, private respondent was also a director and later the president of the Farmers Rural Bank.Had he been an employee of the company, he could not be employed elsewhere and he would be required to devote full time for petitioner. If private respondent was indeed an employee, it was rather unusual for him to wait for more than a year from his separation from work before he decided to file his claims. Significantly, when Limjoco tendered his resignation to petitioner on June 14, 1974, he stated, thus:"Re: ResignationI am resigning as manager of the EB Capitol Division effective 16 June 1974.This decision was brought about by conflict with other interests which lately have increasingly required my personal attention. I feel that in fairness to the company and to the people under my supervision I should relinquish the position to someone who can devote full-time to the Division.I wish to thank you for all the encouragement and assistance you have extended to me and to my group during my long association with Britannica.Evidently, Limjoco was aware of conflict with other interests which xxx have increasingly required my personal attention (p. 118, Records).At the very least, it would indicate that petitioner has no effective control over the personal activities of Limjoco, who as admitted by the latter had other conflict of interest requiring his personal attention.In ascertaining whether the relationship is that of employer-employee or one of independent contractor, each case must be determined by its own facts and all features of the relationship are to be considered.[6]The records of the case at bar showed that there was no such employer-employee relationship.As stated earlier, the element of control is absent; where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated according to the result of his efforts and not the amount thereof, we should not find that the relationship of employer and employee exists.[7]In fine, there is nothing in the records to show or would indicate that complainant was under the control of the petitioner in respect of the means and methods[8]in the performance of complainants work.Consequently, private respondent is not entitled to the benefits prayed for.In view of the foregoing premises, the petition is hereby GRANTED, and the decision of the NLRC is hereby REVERSED AND SET ASIDE.SO ORDERED.Regalado (Chairman), Romero, Puno,andMendoza, JJ.,concur

Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 100665 February 13, 1995ZANOTTE SHOES/LEONARDO LORENZO,petitioners,vs.NATIONAL LABOR RELATIONS COMMISSION, HON. BENIGNO C. VILLARENTE, JR., JOSEPH LLUZ, LOLITO LLUZ, NOEL ADARAYAN, ROGELIO SIRA, VIRGINIA HERESANO, GENELITO HERESANO and CARMELITA DE DIOS,respondents.VITUG,J.:This petition forcertiorariassails the 24th April 1991 resolution of respondent National Labor Relations Commission ("NLRC"), as well as its resolution of 30 May 1991 denying a motion for reconsideration, which has dismissed herein petitioners' appeal of the 16th October 1989 decision of Labor Arbiter Benigno C. Villarente, Jr.Private respondents filed a complaint for illegal dismissal and for various monetary claims, including the recovery of damages and attorney's fees, against petitioners. In their supplemental position paper, the complainants subsequently confined themselves to the illegal dismissal charge and abandoned the monetary claims. One of the original eight complainants, Virgilio Alcunaba, decided to resume his work with petitioners, thus leaving the rest to pursue the case. Private respondents averred that they started to work for petitioners on, respectively, the following dates:NAMEDATE

1Joseph LluzMarch, 1985

2Noel AdarayanFeb. 17, 1980

3Rogelio SiraJanuary, 1982

4Lolito LluzMarch, 1982

5Virginia HeresanoMay, 1987

6Genelito Heresano20-Oct-87

7Carmelita de DiosJanuary, 1975 1

that they worked for a minimum of twelve hours daily, including Sundays and holidays when needed; that they were paid on piece-work basis; that it "angered" petitioner Lorenzo when they requested to be made members of the Social Security System ("SSS"); and that, when they demanded an increase in their pay rates, they were prevented (starting 24 October 1988) from entering the work premises.Petitioners, in turn, claimed that their business operations were only seasonal, normally twice a year, one in June (coinciding with the opening of school classes) and another in December (during the Christmas holidays), when heavy job orders would come in. Private respondents, according to petitioners, were engaged on purely contractual basis and paid the rates conformably with their respective agreements.On 16 October 1989, Labor Arbiter Benigno C. Villarente, Jr., rendered judgment in favor of the complainants, thus:WHEREFORE, judgment is hereby rendered declaring that there was an employer-employee relationship between complainants and respondents and that the former were regular employees of the latter. Accordingly, respondents are hereby directed to pay all complainants their respective separation pay based on their one-half month's earnings per year of service, a fraction of at least six months to be considered one whole year, or the following amounts:1Joseph LluzP 7,488.00(3 yrs. & 7 mos.)

2Noel Adarayan12,636.00(8 yrs. & 8 mos.)

3Rogelio Sira8,828.00(6 yrs. & 9 mos.)

4Lolito Lluz8,828.00(6 yrs. & 7 mos.)

5Genelito Heresano1,404.00(1 year)

6Virginia Heresano665.00(1 yr. & 5 mos.)

7Carmelita de Dios19,656.00(13 yrs. & 9 mos.)

TotalP 59,515.002

Respondents are also hereby directed to pay complainants' counsel the amount of P5,950.00 which is equivalent to 10% of the above total awards as attorney's fees.SO ORDERED.3An appeal was interposed by petitioners. The NLRC, on 24 April 1991, sustained the findings of the Labor Arbiter and dismissed the appeal. On 30 May 1991, the NLRC denied petitioners' motion for reconsideration.Hence, the instant petition.In his comment, dated 14 October 1991, the Solicitor General moved for the modification of NLRC's resolution of 24 April 1991. While conceding that an employer-employee relationship existed between petitioners and private respondents, the Solicitor General, nevertheless, expressed strong reservations on the award of separation pay in view of the findings by both the Labor Arbiter and the NLRC that there was neither dismissal nor abandonment in the case at bench. The NLRC submitted its own comment on 11 February 1992.Well-settled is the rule that factual findings of the NLRC, particularly when they coincide with that of the Labor Arbiter, are accorded respect, if not finality, and will not be disturbed absent any showing that substantial evidence which might otherwise affect the result of the case has been discarded. We see no reason, in this case at bench, for disturbing the findings of the Labor Arbiter and the NLRC on the existence of an employer-employee relationship between herein private parties. The work of private respondents is clearly related to, and in the pursuit of, the principal business activity of petitioners. Theindiciaused for determining the existence of an employer-employee relationship, all extant in the case at bench, include (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the result of the work to be done and to the means and methods by which the work to be done and to the means and methods by which the work is to be accomplished. The requirement, so herein posed as an issue, refers to the existence of the right to control and not necessarily to the actual exercise of the right. InDy Keh Beng v.International Labor and Marine Union of the Philippines, et al.,4the Court has held:While this Court up holds the control test under which an employer-employee relationship exists "where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end," it finds no merit with petitioner's arguments as stated above. It should be borne in mind that the control test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right. Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of basket known as kaing," it is natural to expect that those working under Dy would have to observe, among others, Dy's requirements of size and quality of the kaing. Some control would necessarily be exercised by Dy's specifications. Parenthetically, since the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he employed.We share the opinion of the Solicitor General that the award of separation pay to private respondents appears, nonetheless, to be unwarranted.The Labor Arbiter, sustained by the NLRC, concluded that there was neither dismissal nor abandonment. The Labor Arbiter said . . . At any rate, records show that even during the conciliation stage, respondents had repeatedly indicated that they were willing to accept back all complainants aside from denying complainants allegation. Hence, it is clear that there was no dismissal to talk about in the first place which would have to be determined whether legal or not. We also take particular note of complainants' desire to be given separation pay instead of being ordered back to work. Considering all these factors we hereby rule that there was neither dismissal nor abandonment but complainants are simply out of job for reasons not attributable to either party. (Rollo, pp. 30-31.)The NLRC, in nonetheless agreeing with the Labor Arbiter on the latter's award of separation pay, ventured to say:. . . It is not difficult to see the rationale behind the Labor Arbiter's disposition he saw in respondents' offer of reinstatement the commanding advantage it had to later force (by whatever unlawful means they may resort to) the complainants out of job, just as the Labor Arbiter saw that fear on the part of complainants to enter into a trap being laid before them for indeed, it is peculiar for an employer who wants to get rid of its employees, to insist on reinstatement rather than a separation pay scheme which the law allows them so they may be able to better manage their business. (Rollo, p. 39.)We find the above disquisition of the NLRC too peculative and conjectural to be sustained. The fact of the matter is that petitioners have repeatedly indicated their willingness to accept private respondents but the latter have steadfastly refused the offer. For being without any clear legal basis, the award of separation pay must thus be set aside.5There is nothing, however, that prevents petitioners from voluntarily giving private respondents some amounts onex gratiabasis.WHEREFORE, the questioned findings and resolutions of respondents Labor Arbiter and NLRC are MODIFIED by deleting the award of separation pay and the corresponding attorney's fees. No costs.SO ORDERED.Feliciano, Romero, Melo and Francisco, JJ., concur.Footnotes1 Rollo, p. 27.2 The total amount should be P59,505.00.3 Rollo, p. 31.4 90 SCRA 161.5 Art. 279. Security of Tenure. In cases of regular employment, the employer shall to terminate the services of an employee except for a just cause or 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 his other benefits of their monetary equivalent computed from the time his compensation was withheld from him up to the time of actual reinstatement. (Labor Code)