Cases for Labor Standards

7/22/2019 Cases for Labor Standards

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1. AFP Mutual Benefit Assoc. vs. NLRCTHIRD DIVISION[G.R. No. 102199. January 28, 1997]

AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. NATIONALLABOR RELATIONS COMMISSION and EUTIQUIO BUSTAMANTE,

respondents.D E C I S I O NPANGANIBAN, J.:The determination of the proper forum is crucial because the filing of thepetition or complaint in the wrong court or tribunal is fatal, even for a patentlymeritorious claim. More specifically, labor arbiters and the National Labor Relations Commission have no jurisdiction to entertain and rule on moneyclaims where no employer-employee relations is involved. Thus, any suchaward rendered without jurisdiction is a nullity.This petition for certiorari under Rule 65, Rules of Court seeks to annul theResolution[1] of the National Labor Relations Commission, promulgatedSeptember 27, 1991, in NLRC-NCR Case No. 00-02-01196-90, entitled

"Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.," affirming thedecision of the labor arbiter which ordered payment of the amount of P319,796.00 as insurance commissions to private respondent.The Antecedent FactsThe facts are simple. Private respondent Eutiquio Bustamante had been aninsurance underwriter of petitioner AFP Mutual Benefit Association, Inc. since1975. The Sales Agent's Agreement between them provided:[2]"B. Duties and Obligations:1. During the lifetime of this Agreement, the SALES AGENT (privaterespondent) shall solicit exclusively for AFPMBAI (petitioner), and shall bebound by the latter's policies, memo circulars, rules and regulations which itmay from time to time, revise, modify or cancel to serve its businessinterests.2. The SALES AGENT shall confine his business activities for AFPMBAIwhile inside any military camp, installation or residence of military personnel.He is free to solicit in the area for which he/she is licensed and as authorized,provided however, that AFPMBAI may from time to time, assign him aspecific area of responsibility and a production quota on a case to casebasis.lexx x x x x x x x xC. Commission1. The SALES AGENT shall be entitled to the commission due for allpremiums actually due and received by AFPMBAI out of life insurance

policies solicited and obtained by the SALES AGENT at the rates set forth inthe applicant's commission schedules hereto attached.x x x x x x x x xD. General Provisions1. There shall be no employer-employee relationship between the

parties, the SALES AGENT being hereby deemed an independentcontractor." As compensation, he received commissions based on the followingpercentages of the premiums paid:[3]"30% of premium paid within the first year;10% of premium paid with the second year;5% of the premium paid during the third year;3% of the premium paid during the fourth year; and1% of the premium paid during the fifth year up-to the tenth year.”On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling insurance for another lifeinsurance company in violation of said agreement.

At the time of his dismissal, private respondent was entitled to accruedcommissions equivalent to twenty four (24) months per the Sales Agent Agreement and as stated in the account summary dated July 5, 1989,approved by Retired Brig. Gen. Rosalino Alquiza, president of petitioner-company. Said summary showed that private respondent had a totalcommission receivable of P438,835.00, of which only P78,039.89 had beenpaid to him.Private respondent wrote petitioner seeking the release of his commissionsfor said 24 months. Petitioner, through Marketing Manager Juan Concepcion,replied that he was entitled to only P75,000.00 to P100,000.00. Hence,believing Concepcion's computations, private respondent signed a quitclaimin favor of petitioner.Sometime in October 1989, private respondent was informed that his checkwas ready for release. In collecting his check, he discovered from adocument (account summary) attached to said check that his totalcommissions for the 24 months actually amounted to P354,796.09. Saiddocument stated:[4]"6. The total receivable for Mr. Bustamante out of the renewals and oldbusiness generated since 1983 grosses P438,835.00 less his outstandingobligation in the amount of P78,039.89 as of June 30, 1989, total expectedcommission would amount to P354,796.09. From that figure at a 15%compromise settlement this would mean P53,219.41 due him to settle hisclaim."

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Private respondent, however, was paid only the amount of P35,000.00.On November 23, 1989, private respondent filed a complaint with the Officeof the Insurance Commissioner praying for the payment of the correctamount of his commission. Atty. German C. Alejandria, Chief of the Public

Assistance and Information Division, Office of the Insurance Commissioner,

advised private respondent that it was the Department of Labor andEmployment that had jurisdiction over his complaint.On February 26, 1990, private respondent filed his complaint with theDepartment of Labor claiming: (1) commission for 2 years from terminationof employment equivalent to 30% of premiums remitted during employment;(2) P354,796.00 as commission earned from renewals and old businessgenerated since 1983; (3) P100,000.00 as moral damages; and (4)P100,000.00 as exemplary damages.

After submission of position papers, Labor Arbiter Jose G. de Vera renderedhis decision, dated August 24, 1990, the dispositive portion of which reads:[5]"WHEREFORE, all the foregoing premises being considered, judgment ishereby rendered declaring the dismissal of the complainant as just and valid,

and consequently, his claim for separation pay is denied. On his moneyclaim, the respondent company is hereby ordered to pay complainant thesum of P319,796.00 plus attorney's fees in the amount of P31,976.60.

All other claims of the complainant are dismissed for want of merit."The labor arbiter relied on the Sales Agent's Agreement proviso thatpetitioner could assign private respondent a specific area of responsibilityand a production quota, and read it as signaling the existence of employer-employee relationship between petitioner and private respondent.On appeal, the Second Division[6] of the respondent Commission affirmedthe decision of the Labor Arbiter. In the assailed Resolution, respondentCommission found no reason to disturb said ruling of the labor arbiter andruled:[7]"WHEREFORE, in view of the foregoing considerations, the subject appealshould be as it is hereby, denied and the decision appealed from affirmed.SO ORDERED."Hence, this petition.The IssuePetitioner contends that respondent Commission committed grave abuse of discretion in ruling that the labor arbiter had jurisdiction over this case. At theheart of the controversy is the issue of whether there existed an employer-employee relationship between petitioner and private respondent.Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's

Agreement, there is no employer-employee relationship between private

respondent and itself. Hence, respondent commission gravely abused itsdiscretion when it held that the labor arbiter had jurisdiction over the case.The Court's RulingThe petition is meritorious.First Issue: Not All That Glitters Is Control

Well-settled is the doctrine that the existence of an employer-employeerelationship is ultimately a question of fact and that the findings thereon bythe labor arbiter and the National Labor Relations Commission shall beaccorded not only respect but even finality when supported by substantialevidence.[8] The determinative factor in such finality is the presence of substantial evidence to support said finding, otherwise, such factual findingscannot bind this Court.Respondent Commission concurred with the labor arbiter's findings that:[9]"x x x The complainant's job as sales insurance agent is usually necessaryand desirable in the usual business of the respondent company. Under theSales Agents Agreement, the complainant was required to solicit exclusivelyfor the respondent company, 'and he was bound by the company policies,

memo circulars, rules and regulations which were issued from time to time.By such requirement to follow strictly management policies, orders, circulars,rules and regulations, it only shows that the respondent had control or reserved the right to control the complainant's work as solicitor. Complainantwas not an independent contractor as he did not carry on an independentbusiness other than that of the company's x x x."To this, respondent Commission added that the Sales Agent's Agreementspecifically provided that petitioner may assign private respondent a specificarea of responsibility and a production quota. From there, it concluded thatapparently there is that exercise of control by the employer which is the mostimportant element in determining employer-employee relationship.[10]We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the Court has applied the "four-fold" test indetermining the existence of employer-employee relationship. This testconsiders the following elements: (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control, the last beingthe most important element.[11]The difficulty lies in correctly assessing if certain factors or elements properlyindicate the presence of control. Anent the issue of exclusivity in the case atbar, the fact that private respondent was required to solicit businessexclusively for petitioner could hardly be considered as control in labor

jurisprudence. Under Memo Circulars No. 2-81[12] and 2-85, datedDecember 17, 1981 and August 7, 1985, respectively, issued by the

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Insurance Commissioner, insurance agents are barred from serving morethan one insurance company, in order to protect the public and to enableinsurance companies to exercise exclusive supervision over their agents intheir solicitation work. Thus, the exclusivity restriction clearly springs from aregulation issued by the Insurance Commission, and not from an intention by

petitioner to establish control over the method and manner by which privaterespondent shall accomplish his work. This feature is not meant to changethe nature of the relationship between the parties, nor does it necessarilyimbue such relationship with the quality of control envisioned by the law.So too, the fact that private respondent was bound by company policies,memo/circulars, rules and regulations issued from time to time is also notindicative of control. In its Reply to Complainant's Position Paper,[13]petitioner alleges that the policies, memo/circulars, and rules and regulationsreferred to in provision B(1) of the Sales Agent's Agreement are only thosepertaining to payment of agents' accountabilities, availment by sales agentsof cash advances for sorties, circulars on incentives and awards to be givenbased on production, and other matters concerning the selling of insurance,

in accordance with the rules promulgated by the Insurance Commission. According to the petitioner, insurance solicitors are never affected or coveredby the rules and regulations concerning employee conduct and penalties for violations thereof, work standards, performance appraisals, merit increases,promotions, absenteeism/attendance, leaves of absence, management-unionmatters, employee benefits and the like. Since private respondent failed torebut these allegations, the same are deemed admitted, or at least proven,thereby leaving nothing to support the respondent Commission's conclusionthat the foregoing elements signified an employment relationship betweenthe parties.In regard to the territorial assignments given to sales agents, this too cannotbe held as indicative of the exercise of control over an employee. First of all,the place of work in the business of soliciting insurance does not figureprominently in the equation. And more significantly, private respondent failedto rebut petitioner's allegation that it had never issued him any territorialassignment at all. Obviously, this Court cannot draw the same inferencefrom this feature as did the respondent Commission.To restate, the significant factor in determining the relationship of the partiesis the presence or absence of supervisory authority to control the methodand the details of performance of the service being rendered, and the degreeto which the principal may intervene to exercise such control. The presenceof such power of control is indicative of an employment relationship, whileabsence thereof is indicative of independent contractorship. In other words,

the test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the workaccording to his own methods and without being subject to the control of theemployer except only as to the result of the work.[14] Such is exactly thenature of the relationship between petitioner and private respondent.

Further, not every form of control that a party reserves to himself over theconduct of the other party in relation to the services being rendered may beaccorded the effect of establishing an employer-employee relationship. Thefacts of this case fall squarely with the case of Insular Life Assurance Co.,Ltd. vs. NLRC. In said case, we held that:"Logically, the line should be drawn between rules that merely serve asguidelines towards the achievement of the mutually desired result withoutdictating the means or methods to be employed in attaining it, and those thatcontrol or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create noemployer-employee relationship unlike the second, which address both theresult and the means used to achieve it. The distinction acquires particular

relevance in the case of an enterprise affected with public interest, as is thebusiness of insurance, and is on that account subject to regulation by theState with respect, not only to the relations between insurer and insured butalso to the internal affairs of the insurance company. Rules and regulationsgoverning the conduct of the business are provided for in the Insurance Codeand enforced by the Insurance Commissioner. It is, therefore, usual andexpected for an insurance company to promulgate a set of rules to guide itscommission agents in selling its policies that they may not run afoul of thelaw and what it requires or prohibits. xxxx None of these really invades theagent's contractual prerogative to adopt his own selling methods or to sellinsurance at his own time and convenience, hence cannot justifiably be saidto establish an employer-employee relationship between him and thecompany."[15]Private respondent's contention that he was petitioner's employee is beliedby the fact that he was free to sell insurance at any time as he was notsubject to definite hours or conditions of work and in turn was compensatedaccording to the result of his efforts. By the nature of the business of soliciting insurance, agents are normally left free to devise ways and meansof persuading people to take out insurance. There is no prohibition, ascontended by petitioner, for private respondent to work for as long as hedoes not violate the Insurance Code. As petitioner explains:"(Private respondent) was free to solicit life insurance anywhere he wantedand he had free and unfettered time to pursue his business. He did not have

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to punch in and punch out the bundy clock as he was not required to reportto the (petitioner's) office regularly. He was not covered by any employeepolicies or regulations and not subject to the disciplinary action of management on the basis of the Employee Code of Conduct. He could goout and sell insurance at his own chosen time. He was entirely left to his

own choices of areas or territories, with no definite, much less supervised,time schedule.(Private respondent) had complete control over his occupation and(petitioner) did not exercise any right of Control and Supervision over hisperformance except as to the payment of commission the amount of whichentirely depends on the sole efforts of (private respondent). He was free toengage in other occupation or practice other profession for as long as he didnot commit any violation of the ethical standards prescribed in the Sales

Agent's Agreement."[16] Although petitioner could have, theoretically, disapproved any of privaterespondent's transactions, what could be disapproved was only the result of the work, and not the means by which it was accomplished.

The "control" which the above factors indicate did not sum up to the power tocontrol private respondent's conduct in and mode of soliciting insurance. Onthe contrary, they clearly indicate that the juridical element of control hadbeen absent in this situation. Thus, the Court is constrained to rule that noemployment relationship had ever existed between the parties.Second Issue: Jurisdiction of Respondent Commission & Labor Arbiter Under the contract invoked, private respondent had never been petitioner'semployee, but only its commission agent. As an independent contractor, hisclaim for unpaid commission should have been litigated in an ordinary civilaction.[17]The jurisdiction of labor arbiters and respondent Commission is set forth in

Article 217 of the Labor Code.[18] The unifying element running throughparagraphs (1) - (6) of said provision is the consistent reference to cases or disputes arising out of or in connection with an employer-employeerelationship. Prior to its amendment by Batas Pambansa Blg. 227 on June 1,1982, this point was clear as the article included "all other cases arising fromemployer-employee relation unless expressly excluded by this Code."[19]Without this critical element of employment relationship, the labor arbiter andrespondent Commission can never acquire jurisdiction over a dispute. As inthe case at bar. It was serious error on the part of the labor arbiter to haveassumed jurisdiction and adjudicated the claim. Likewise, the respondentCommission's affirmance thereof.

Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The doctrine of estoppel cannot beproperly invoked by respondent Commission to cure this fatal defect as itcannot confer jurisdiction upon a tribunal that to begin with, was bereft of

jurisdiction over a cause of action.[20] Moreover, in the proceedings below,

petitioner consistently challenged the jurisdiction of the labor arbiter [21] andrespondent Commission.[22]It remains a basic fact in law that the choice of the proper forum is crucial asthe decision of a court or tribunal without jurisdiction is a total nullity.[23] Avoid judgment for want of jurisdiction is no judgment at all. It cannot be thesource of any right nor the creator of any obligation. All acts performedpursuant to it and all claims emanating from it have no legal effect. Hence, itcan never become final. "x x x (I)t may be said to be a lawless thing whichcan be treated as an outlaw and slain at sight, or ignored wherever andwhenever it exhibits its head."[24]The way things stand, it becomes unnecessary to consider the merits of private respondent's claim for unpaid commission. Be that as it may, this

ruling is without prejudice to private respondent's right to file a suit for collection of unpaid commissions against petitioner with the proper forum andwithin the proper period.WHEREFORE, the petition is hereby GRANTED, and the assailedResolution is hereby SET ASIDE.SO ORDERED.Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

2. North Davao Mining Corp vs. NLRCEN BANC[G.R. No. 112546. March 13, 1996]NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATIONTRUST, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,LABOR ARBITER ANTONIO M. VILLANUEVA and WILFREDO GUILLEMA,respondents.D E C I S I O NPANGANIBAN, J.:Is a company which is forced by huge business losses to close its business,legally required to pay separation benefits to its employees at the time of itsclosure in an amount equivalent to the separation pay paid to those whowere separated when the company was still a going concern? This is themain question brought before this Court in this petition for certiorari under

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Rule 65 of the Revised Rules of Court, which seeks to reverse and set asidethe Resolutions dated July 29, 1993[1] and September 27, 1993[2] of theNational Labor Relations Commision[3] (NLRC) in NLRC-CA No. M-001395-93.The Resolution dated July 29, 1993 affirmed in tow the decision of the Labor

Arbiter in RAB-1 1-08-00672-92 and RAB- 11-08-00713-92 orderingpetitioners to pay the complainants therein certain monetary claims.The Resolution dated September 27, 1993 denied the motion for reconsideration of the said July 29, 1993 Resolution.The FactsPetitioner North Davao Mining Corporation (North Davao) was incorporatedin 1974 as a 100% privately-owned company. Later, the Philippine NationalBank (PNB) became part owner thereof as a result of a conversion intoequity of a portion of loans obtained by North Davao from said bank. OnJune 30, 1986, PNB transferred all its loans to and equity in North Davao infavor of the national government which, by virtue of Proclamation No. 50dated December 8, 1986, later turned them over to petitioner Asset

Privatization Trust (APT). As of December 31, 1990 the national governmentheld 81.8% of the common stock and 100% of the preferred stock of saidcompany.[4]Respondent Wilfredo Guillema is one among several employees of NorthDavao who were separated by reason of the company’s closure on May 31,1992, and who were the complainants in the cases before the respondentlabor arbiter.On May 31, 1992, petitioner North Davao completely ceased operations dueto serious business reverses. From 1988 until its closure in 1992, NorthDavao suffered net losses averaging three billion pesos (P3,000,000,000.00)per year, for each of the five years prior to its closure. All told, as of December 31, 1991, or five months prior to its closure, its total liabilities hadexceeded its assets by 20.392 billion pesos, as shown by its financialstatements audited by the Commission on Audit. When it ceased operations,its remaining employees were separated and given the equivalent of 12.5days’ pay for every year of service, computed on their basic monthly pay, inaddition to the commutation to cash of their unused vacation and sickleaves. However, it appears that, during the life of the petitioner corporation,from the beginning of its operations in 1981 until its closure in 1992, it hadbeen giving separation pay equivalent to thirty (30) days’ pay for every year of service. Moreover, inasmuch as the region where North Davao operatedwas plagued by insurgency and other peace and order problems, theemployees had to collect their salaries at a bank in Tagum, Davao del Norte,

some 58 kilometers from their workplace and about 2 ½hours’ travel time bypublic transportation; this arrangement lasted from 1981 up to 1990.Subsequently, a complaint was filed with respondent labor arbiter byrespondent Wilfredo Guillema and 271 other seperated employees for: (1)additional separation pay of 17.5 days for every year of service; (2) back

wages equivalent to two days a month; (3) transportation allowance; (4)hazard pay; (5) housing allowance; (6) food allowance; (7) post-employmentmedical clearance; and (8) future medical allowance, all of which amountedto P58,022,878.31 as computed by private respondent.[5]On May 6, 1993, respondent Labor Arbiter rendered a decision orderingpetitioner North Davao to pay the complainants the following:“(a) Additional separation pay of 17.5 days for every year of service;(b) Backwages equivalent to two (2) days a month times the number of yearsof service but not to exceed three (3) years;(c) Transportation allowance at P80 a month times the number of years of service but not to exceed three (3) years.”The benefits awarded by respondent Labor Arbiter amounted to

P10,240,517.75. Attorney’s fees equivalent to ten percent (10%) thereof were also granted.[6]On appeal, respondent NLRC affirmed the decision in toto. Petitioner NorthDavao’s motion for reconsideration was likewise denied. Hence, this petition.The Parties’ Submissions and the IssuesIn affirming the Labor Arbiter’s decision, respondent NLRC ruled that “since(North Davao) has been paying its employees separation pay equivalent tothirty (30) days pay for every year of service,” knowing fully well that the lawprovides for a lesser separation pay, then such company policy “has ripenedinto an obligation,” and therefore, depriving now the herein privaterespondent and others similarly situated of the same benefits would bediscriminatory.[7] Quoting from Businessday Information Systems andServices. Inc. (BISSI) vs. NLRC.[8] it said that petitioners “may not payseparation benefits unequally for such discrimination breeds resentment andill-will among those who have been treated less generously than others.” Italso cited Abella vs. NLRC,[9] as authority for saying that Art. 283 of theLabor Code protects workers in case of the closure of the establishment.To justify the award of two days a month in backwages and P80 per month of transportation allowance, respondent Commission ruled:“As to the appellants’ claim that complainants-appeallees’ time spent incollecting their wages at Tagum, Davao is not compensable allegedlybecause it was on official time can not be given credence. No iota of evidence has been presented to back up said contention. The same is true

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with appellants’ assertion that the claim for transportation expenses iswithout basis since they were incurred by the complainants. Appellantsshould have submitted the payrolls to prove that complainants-appelleeswere not the ones who personally collected their wages and/or the bus/jeeptrip tickets or vouchers to show that the complainants-appellees were

provided with free transportation as claimed.”Petitioner, through the Government Corporate Counsel, raised the followinggrounds for the allowance of the petition:“1. The NLRC acted with grave abuse of discretion in affirming without legalbasis the award of additional separation pay to private respondents whowere separated due to serious business losses on the part of petitioner.2. The NLRC acted with grave abuse of discretion in affirming withoutsufficient factual basis the award of backwages and transportation expensesto private respondents.3. There is no appeal, nor any plain, speedy and adequate remedy in theordinary course of the law.”and the following issues:

“1. Whether or not an employer whose business operations ceased due toserious business losses or financial reverses is obliged to pay separation payto its employees separated by reason of such closure.2. Whether or not time spent in collecting wages in a place other than theplace of employment is compensable notwithstanding that the same is doneduring official time.3. Whether or not private respondents are entitled to transportation expensesin the absence of evidence that these expenses were incurred.”The First Issue: Separation PayTo resolve this issue, it is necessary to revisit the provision of law adverted toby the parties in their submissions, namely Art. 283 of the Labor Code, whichreads as follows:“Art. 283. Closure of establishment and reduction of personnel. - Theemployer may also terminate the employment of any employee due to theinstallation of labor saving devices, redundancy, retrenchment to preventlosses or the closing or cessation of operation of the establishment or under-taking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. Incase of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation payequivalent to at least his one (1) month pay or to at least one (1) month payfor every year of service, whichever is higher. In case of retrenchment to

prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financialreverses, the separation pay shall be equivalent to one (1) month pay or atleast one-half (½) 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.”

(italics supplied)The underscored portion of Art. 283 governs the grant of seperation benefits“in case of closures or cessation of operation” of business establishments“NOT due to serious business losses or financial reverses x x x”. Where,however, the closure was due to business losses - as in the instant case, inwhich the aggregate losses amounted to over P20 billion - the Labor Codedoes not impose any obligation upon the employer to pay separationbenefits, for obvious reasons. There is no need to belabor this point. Eventhe public respondents, in their Comment[10] filed by the Solicitor General,impliedly concede this point.However, respondents tenaciously insist on the award of separation pay,anchoring their claim solely on petitioner North Davao’s long-standing policy

of giving separation pay benefits equivalent to 30- days’ pay, which policyhad been in force in the years prior to its closure. Respondents contend that,by denying the same separation benefits to private respondent and theothers similarly situated, petitioners discriminated against them. They rely onthis Court’s ruling in Businessday Information Systems and Services, Inc.(BISSI) vs. NLRC, (supra). In said case, petitioner BISSI, after experiencingfinancial reverses, decided “as a retrenchment measure” to lay-off someemployees on May 16, 1988 and gave them separation pay equivalent toone-half (½) month pay for every year of service. BISSI retained someemployees in an attempt to rehabilitate its business as a trading company.However, barely two and a half months later, these remaining employeeswere likewise discharged because the company decided to cease businessoperations altogether. Unlike the earlier terminated employees, the secondbatch received separation pay equivalent to a full month’s salary for everyyear of service, plus a mid-year bonus. This Court ruled that “there wasimpermissible discrimination against the private respondents in the paymentof their separation benefits. The law requires an employer to extend equaltreatment to its employees. It may not, in the guise of exercisingmanagement prerogatives, grant greater benefits to some and less to others.x x x”In resolving the present case, it bears keeping in mind at the outset that thefactual circumstances of BISSI are quite different from the current case. TheCourt noted that BISSI continued to suffer losses even after the retrenchment

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of the first batch of employees; clearly, business did not improve despitesuch drastic measure. That notwithstanding, when BISSI finally shut down, itcould well afford to (and actually did) pay off its remaining employees withMORE separation benefits as compared with those earlier laid off; obviously,then, there was no reason for BISSI to skimp on separation pay for the first

batch of discharged employees. That it was able to pay one-monthseparation benefit for employees at the time of closure of its business meantthat it must have been also in a position to pay the same amount to thosewho were separated prior to closure. That it did not do so was a wrongfulexercise of management prerogatives. That is why the Court correctlyfaulted it with “impermissible discrimination.” Clearly, it exercised itsmanagement prerogatives contrary to “general principles of fair play and

justice.”In the instant case however, the company’s practice of giving one month’spay for every year of service could no longer be continued precisely becausethe company could not afford it anymore. It was forced to close down onaccount of accumulated losses of over P20 billion. This could not be said of

BISSI. In the case of North Davao, it gave 30-days’ separation pay to itsemployees when it was still a going concern even if it was already losingheavily. As a going concern, its cash flow could still have sustained thepayment of such separation benefits. But when a business enterprisecompletely ceases operations, i.e., upon its death as a going businessconcern, its vital lifeblood -its cashflow - literally dries up. Therefore, the factthat less separation benefits were granted when the company finally met itsbusiness death cannot be characterized as discrimination. Such action wasdictated not by a discriminatory management option but by its completeinability to continue its business life due to accumulated losses. Indeed, onecannot squeeze blood out of a dry stone. Nor water out of parched land.

As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses. In the casebefore us, the basis for the claim of the additional separation benefit of 17.5days is alleged discrimination, i.e., unequal treatment of employees, which isproscribed as an unfair labor practice by Art. 248 (e) of said Code. Under thefacts and circumstances of the present case, the grant of a lesser amount of separation pay to private respondent was done, not by reason of discrimination, but rather, out of sheer financial bankruptcy - a fact that is notcontrolled by management prerogatives. Stated differently, the totalcessation of operation due to mind-boggling losses was a supervening factthat prevented the company from continuing to grant the more generousamount of separation pay. The fact that North Davao at the point of its

forced closure voluntarily paid any separation benefits at all - although notrequired by law - and 12.5-days’ worth at that, should have elicitedadmiration instead of condemnation. But to require it to continue beinggenerous when it is no longer in a position to do so would certainly be undulyoppressive, unfair and most revolting to the conscience. As this Court held in

Manila Trading & Supply Co. vs. Zulueta,[11] and reiterated in San MiguelCorporation vs. NLRC[12] and later, in Allied Banking Corporation vs. Castro,[13] “(t)he law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer.”

At this juncture, we note that the Solicitor General in his Commentchallenges the petitioners assertion that North Davao, having closed down,no longer has the means to pay for the benefits. The Solicitor Generalstresses that North Davao was among the assets transferred by PNB to thenational government, and that by virtue of Proclamation No. 50 datedDecember 8, 1986, the APT was constituted trustee of this governmentasset. He then concludes that “(i)t would, therefore, be incongruous todeclare that the National Government, which should always be presumed to

be solvent, could not pay now private respondents’ money claims.” Suchargumentation is completely misplaced. Even if the national governmentowned or controlled 81.8% of the common stock and 100% of the preferredstock of North Davao, it remains only a stockholder thereof, and under existing laws and prevailing jurisprudence, a stockholder as a rule is notdirectly, individually and/or personally liable for the indebtedness of thecorporation. The obligation of North Davao cannot be considered theobligation of the national government, hence, whether the latter be solvent or not is not material to the instant case. The respondents have not shown thatthis case constitutes one of the instances where the corporate veil may bepierced.[14] From another angle, the national government is not theemployer of private respondent and his co-complainants, so there is noreason to expect any kind of bailout by the national government under existing law and jurisprudence.The Second and Third Issues:Back Wages and Transportation Allowance

Anent the award of back wages and transportation allowance, the issuesraised in connection therewith are factual, the determination of which is bestleft to the respondent NLRC. It is well settled that this Court is bound by thefindings of fact of the NLRC, so long as said findings are supported bysubstantial evidence.[15]

As the Solicitor General pointed out in his comment:

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“It is undisputed that because of security reasons, from the time of itsoperations, petitioner NDMC maintained its policy of paying its workers at abank in Tagum, Davao del Norte, which usually took the workers about twoand a half (2 1/2) hours of travel from the place of work and such travel timeis not official.

Records also show that on February 12,1992, when an inspection wasconducted by the Department of Labor and Employment at the premises of petitioner NDMC at Amacan, Maco, Davao del Norte, it was found out thatpetitioners had violated labor standards law, one of which is the place of payment of wages (p.109, Vol. 1, Record).Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides that:‘Section 4. Place of payment. - (a) As a general rule, the place of paymentshall be at or near the place of undertaking. Payment in a place other thanthe workplace shall be permissible only under the following circumstances:(1) When payment cannot be effected at or near the place of work byreason of the deterioration of peace and order conditions, or by reason of actual or impending emergencies caused by fire, flood, epidemic or other calamity rendering payment thereat impossible;(2) When the employer provides free transportation to the employees backand forth; and(3) Under any analogous circumstances; provided that the time spent bythe employees in collecting their wages shall be considered as compensablehours worked.(b) xxx xxx xxx.’(Italics supplied)

Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), theRegional Director, Regional Office No. XI, Department of Labor andEmployment, Davao City, ordered petitioner NDMC, among others, asfollows:‘WHEREFORE, x x x. Respondent is further ordered to pay its workerssalaries at the plantsite at Amacan, New Leyte, Maco, Davao del Norte or whenever not possible, through the bank in Tagum, Davao del Norte asalready been practiced subject, however to the provisions of Section 4 of Rule VIII, Book III of the rules implementing the Labor Code as amended.’Thus, public respondent Labor Arbiter Antonio M. Villanueva correctly heldthat:‘From the evidence on record, we find that the hours spent by complainantsin collecting salaries at a bank in Tagum, Davao del Norte shall beconsidered compensable hours worked. Considering further the distance

between Amacan, Maco to Tagum which is 2½ hours by travel and the risksin commuting all the time in collecting complainants’ salaries, would justifythe granting of backwages equivalent to two (2) days in a month as prayedfor.‘Corollary to the above findings, and for equitable reasons, we likewise hold

respondents liable for the transportation expenses incurred by complainantsat P40.00 round trip fare during pay days.’(p. 10, Decision; p. 207, Vol. 1, Record)On the contrary, it will be petitioners’ burden or duty to present evidence of compliance of the law on labor standards, rather than for private respondentsto prove that they were not paid/provided by petitioners of their backwagesand transportation expenses.”Other than the bare denials of petitioners, the above findings standsuncontradicted. Indeed we are not at liberty to set aside findings of facts of the NLRC, absent any capriciousness, arbitrariness, or abuse or completelack of basis. In Maya Farms Employees Organizations vs. NLRC,[16] weheld:“This Court has consistently ruled that findings of fact of administrativeagencies and quasi-judicial bodies which have acquired expertise becausetheir jurisdiction is confined to specific matters are generally accorded notonly respect but even finality and are binding upon this Court unless there isa showing of grave abuse of discretion, or where it is clearly shown that theywere arrived at arbitrarily or in disregard of the evidence on record.”WHEREFORE, judgment is hereby rendered MODIFYING the assailedResolution by SETTING ASIDE and deleting the award for “additionalseparation pay of 17.5 days for every year of service,” and AFFIRMING it inall other aspects. No costs.SO ORDERED.Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo,Puno, Vitug, Kapunan, Mendoza, Francisco, and Hermosisima, JJ., concur.

3. Tabas, et al vs. California Manufacturing CorpRepublic 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

8



BONA, FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES,ELMER ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITAQUIAMBOA, 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 petitionedthe 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 therespondent, the California Manufacturing Company. 1On October 7, 1986, after the cases had been consolidated, the CaliforniaManufacturing Company (California) filed a motion to dismiss as well as aposition paper denying the existence of an employer-employee relationbetween the petitioners and the company and, consequently, any liability for payment of money claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded as a party-respondent.It appears that the petitioners were, prior to their stint with California,employees of Livi Manpower Services, Inc. (Livi), which subsequentlyassigned them to work as "promotional merchandisers" 3 for the former firmpursuant to a manpower supply agreement. Among other things, theagreement provided that California "has no control or supervisionswhatsoever over [Livi's] workers with respect to how they accomplish their work or perform [Californias] obligation"; 4 the Livi "is an independentcontractor and nothing herein contained shall be construed as creatingbetween [California] and [Livi] . . . the relationship of principal[-]agent or employer[-]employee'; 5 that "it is hereby agreed that it is the soleresponsibility of [Livi] to comply with all existing as well as future laws, rulesand regulations pertinent to employment of labor" 6 and that "[California] isfree and harmless from any liability arising from such laws or from any

accident that may befall workers and employees of [Livi] while in theperformance of their duties for [California]. 7It was further expressly stipulated that the assignment of workers toCalifornia shall be on a "seasonal and contractual basis"; that "[c]ost of livingallowance 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 durationsof six months, upon the expiration of which they signed new agreements withthe same period, and so on. Unlike regular California employees, whoreceived not less than P2,823.00 a month in addition to a host of fringebenefits and bonuses, they received P38.56 plus P15.00 in allowance daily.The petitioners now allege that they had become regular Californiaemployees and demand, as a consequence whereof, similar benefits. Theylikewise claim that pending further proceedings below, they were notified byCalifornia that they would not be rehired. As a result, they filed an amendedcomplaint charging California with illegal dismissal.California admits having refused to accept the petitioners back to work butdeny 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 aswell as expiration of contracts. 9 It appears that thereafter, Livi re-absorbedthem into its labor pool on a "wait-in or standby" status. 10

Amid these factual antecedents, the Court finds the single most importantissue to be: Whether the petitioners are California's or Livi's employees.The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruledagainst the existence of any employer-employee relation between thepetitioners and California ostensibly in the light of the manpower supplycontract, supra, and consequently, against the latter's liability as and for themoney claims demanded. In the same breath, however, the labor arbiter absolved Livi from any obligation because the "retrenchment" in questionwas allegedly "beyond its control ." 13 He assessed against the firm,nevertheless, separation pay and attorney's fees.We reverse.The existence of an employer-employees relation is a question of law andbeing such, it cannot be made the subject of agreement. Hence, the fact thatthe manpower supply agreement between Livi and California had specificallydesignated the former as the petitioners' employer and had absolved thelatter from any liability as an employer, will not erase either party's obligationsas an employer, if an employer-employee relation otherwise exists betweenthe workers and either firm. At any rate, since the agreement was between

9



Livi and California, they alone are bound by it, and the petitioners cannot bemade to suffer from its adverse consequences.This Court has consistently ruled that the determination of whether or notthere is an employer-employee relation depends upon four standards: (1) themanner 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 putativeemployee's conduct. 14 Of the four, the right-of-control test has been held tobe 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 entersinto 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, shallbe paid in accordance with the provisions of this Code.In the event that the contractor or sub-contractor fails to pay wages of hisemployees in accordance with this Code, the employer shall be jointly andseverally liable with his contractor or sub-contractor to such employees to theextent of the work performed under the contract, in the same manner andextent that he is liable to employees directly employed by him.The Secretary of Labor may, by appropriate regulations, restrict or prohibitthe contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriatedistinctions between labor-only contracting and job contracting as well asdifferentiations within these types of contracting and determine who amongthe parties involved shall be considered the employer for purposes of thisCode, to prevent any violation or circumvention of any provisions of thisCode.There is 'labor-only' contracting where the person supplying workers to anemployer does not have substantial capital or investment in the form of tools,equipment, machineries, work premises, among others, and the workersrecruited and placed by such person are performing activities which aredirectly related to the principal business of such employer. In such cases, theperson or intermediary shall be considered merely as an agent of theemployer who shall be responsible to the workers in the same manner andextent as if the latter were directly employed by him.that notwithstanding the absence of a direct employer-employee relationshipbetween the employer in whose favor work had been contracted out by a"labor-only" contractor, and the employees, the former has the responsibility,together with the "labor-only" contractor, for any valid labor claims, 16 by

operation of law. The reason, so we held, is that the " labor-only" contractor isconsidered "merely an agent of the employer," 17 and liability must beshouldered by either one or shared by both. 18There is no doubt that in the case at bar, Livi performs "manpower services",19 meaning to say, it contracts out labor in favor of clients. We hold that it is

one notwithstanding its vehement claims to the contrary, and notwithstandingthe provision of the contract that it is "an independent contractor." 20 Thenature of one's business is not determined by self-serving appellations oneattaches thereto but by the tests provided by statute and prevailing case law.21 The bare fact that Livi maintains a separate line of business does notextinguish the equal fact that it has provided California with workers topursue the latter's own business. In this connection, we do not agree that thepetitioners had been made to perform activities 'which are not directly relatedto the general business of manufacturing," 22 California's purported "principaloperation activity. " 23 The petitioner's had been charged with"merchandizing [sic] promotion or sale of the products of [California] in thedifferent sales outlets in Metro Manila including task and occational [sic] pricetagging," 24 an activity that is doubtless, an integral part of the manufacturingbusiness. It is not, then, as if Livi had served as its (California's) promotionsor 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 suppliedit with the manpower necessary to carry out its (California's) merchandisingactivities, using its (California's) premises and equipment. 25Neither Livi nor California can therefore escape liability, that is, assuming oneexists.The fact that the petitioners have allegedly admitted being Livi's "directemployees" 26 in their complaints is nothing conclusive. For one thing, thefact that the petitioners were (are), will not absolve California since liabilityhas been imposed by legal operation. For another, and as we indicated, therelations of parties must be judged from case to case and the decree of law,and not by declarations of parties.The fact that the petitioners have been hired on a "temporary or seasonal"basis merely is no argument either. As we held in Philippine Bank of Communications v. NLRC, 27 a temporary or casual employee, under Article218 of the Labor Code, becomes regular after service of one year, unless hehas been contracted for a specific project. And we cannot say thatmerchandising is a specific project for the obvious reason that it is an activityrelated to the day-to-day operations of California.It would have been different, we believe, had Livi been discretely apromotions firm, and that California had hired it to perform the latter's

10



merchandising activities. For then, Livi would have been truly the employer of its employees, and California, its client. The client, in that case, would havebeen a mere patron, and not an employer. The employees would not in thatevent be unlike waiters, who, although at the service of customers, are notthe latter's employees, but of the restaurant. As we pointed out in the

Philippine Bank of Communications case:xxx xxx xxx... The undertaking given by CESI in favor of the bank was not theperformance of a specific job for instance, the carriage and delivery of documents and parcels to the addresses thereof. There appear to be manycompanies today which perform this discrete service, companies with their own personnel who pick up documents and packages from the offices of aclient or customer, and who deliver such materials utilizing their own deliveryvans or motorcycles to the addressees. In the present case, the undertakingof CESI was to provide its client the bank with a certain number of personsable to carry out the work of messengers. Such undertaking of CESI wascomplied with when the requisite number of persons were assigned or seconded to the petitioner bank. Orpiada utilized the premises and officeequipment of the bank and not those of CESI. Messengerial work thedelivery of documents to designated persons whether within or without thebank 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 thatthe petitioner must be engaged in the delivery of items as a distinct andseparate 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, indifferent client companies for longer or shorter periods of time, ... 28In the case at bar, Livi is admittedly an "independent contractor providingtemporary services of manpower to its client. " 29 When it thus providedCalifornia with manpower, it supplied California with personnel, as if suchpersonnel had been directly hired by California. Hence, Article 106 of theCode applies.The Court need not therefore consider whether it is Livi or California whichexercises control over the petitioner vis-a-vis the four barometers referred toearlier, since by fiction of law, either or both shoulder responsibility.It is not that by dismissing the terms and conditions of the manpower supplyagreement, we have, hence, considered it illegal. Under the Labor Code,genuine job contracts are permissible, provided they are genuine jobcontracts. But, as we held in Philippine Bank of Communications, supra,when such arrangements are resorted to "in anticipation of, and for the very

purpose of making possible, the secondment" 30 of the employees from thetrue employer, the Court will be justified in expressing its concern. For thenthat would compromise the rights of the workers, especially their right tosecurity 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-monthcontract, renewed for another six months. Accordingly, under Article 281 of the Code, they had become regular employees-of-California-and hadacquired a secure tenure. Hence, they cannot be separated without dueprocess of law.California resists reinstatement on the ground, first, and as we Id, that thepetitioners are not its employees, and second, by reason of financial distressbrought about by "unfavorable political and economic atmosphere" 31"coupled by the February Revolution." 32 As to the first objection, wereiterate that the petitioners are its employees and who, by virtue of therequired one-year length-of-service, have acquired a regular status. As to thesecond, we are not convinced that California has shown enough evidence,other than its bare say so, that it had in fact suffered serious businessreverses as a result alone of the prevailing political and economic climate.We further find the attribution to the February Revolution as a cause for itsalleged losses to be gratuitous and without basis in fact.California should be warned that retrenchment of workers, unless clearlywarranted, has serious consequences not only on the State's initiatives tomaintain a stable employment record for the country, but more so, on theworkingman 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 CaliforniaManufacturing Company, to REINSTATE the petitioners with full status andrights of regular employees; and (3) ORDERING the respondent, theCalifornia Manufacturing Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria Azarcon, to PAY, jointly and severally, untothe petitioners: (a) backwages and differential pays effective as and from thetime 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) allsuch other and further benefits as may be provided by existing collectivebargaining agreement(s) or other relations, or by law, beginning such time;and (4) ORDERING the private respondents to PAY unto the petitioners

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attorney's fees equivalent to ten (10%) percent of all money claims herebyawarded, in addition to those money claims. The private respondents arelikewise ORDERED to PAY the costs of this suit.IT IS SO ORDERED.Melencio-Herrera, (Chairperson), Paras, Padilla and Regalado, JJ., concur.

4. PAL vs. PALEASUPREME COURT

EN BANCPHILIPPINE AIR LINES, INC.,Petitioner,-versus- G.R. No. L-21120February 28, 1967PHILIPPINE AIR LINES EMPLOYEES ASSOCIATION and COURT OFINDUSTRIAL RELATIONS,Respondents.x----------------------------------------------------xD E C I S I O NCONCEPCION, C.J.:

Appeal by Certiorari, taken by the Philippine Air Lines, Inc. — hereinafter referred to as the PAL — from an order of the Court of Industrial Relations —hereinafter referred to as the CIR — the dispositive part of which reads:chanroblespublishingcompany“WHEREFORE, the Philippine Air Lines is hereby ordered to pay the four claimants, Messrs. Fortunato Biangco, Hernando Guevarra, Bernardino

Abarrientos and Onofre Griño the Christmas bonus due them for the year 1950 to 1958; to credit in favor of Fortunato Biangco and Hernando Guevarra140 days each, sick leave which the two may use or enjoy according toexisting company rules and regulations regarding this privilege, and to allowthe four claimants the enjoyment of their earned and accumulated free trippasses both here and abroad subject to the above-mentioned plan thecompany may adopt. In order to effect early payment of the Christmasbonus, the Chief Examiner of the Court or his duly authorized representativesis hereby directed to examine pertinent records of the company, to computeand determine the Christmas bonus due each of the four claimants and tosubmit a report thereof immediately upon completion of the same.”chanroblespublishingcompanyIt appears that on May 4, 1950, PAL dismissed its above named four (4)employees, who are members of the Philippine Air Lines Employees

Association — hereinafter referred to as PALEA — and that on July 13,1954, the CIR en banc passed a resolution, in Case No. 465-V thereof,directing the reinstatement of said employees “to their former or equivalentpositions in the company, with back wages from the date of their dismissal tothe date of their reinstatement, and without prejudice to their seniority or

other rights and privileges.” This resolution was affirmed by the SupremeCourt, in G. R. No. L- 8197, on October 31, 1958.chanroblespublishingcompanyOn January 14, 1959, said employees were reinstated, and subsequentlytheir back wages, computed at the rate of their compensation at the time of the aforementioned dismissal, less the wages and salaries earned by themelsewhere during the lay-off period, were paid to them. The employeesobjected to this deduction and the CIR sustained them, in a Resolution datedMay 22, 1960, which was reversed by the Supreme Court, on July 26, 1960,in G. R. No. L- 15544. Soon later, or on November 10, 1960, the PALEAmoved for the execution of the CIR resolution of July 13, 1954, as regardsthe “other rights and privileges” therein mentioned, referring, morespecifically to: (1) Christmas bonus from 1950 to 1958; (2) accumulated sickleave; (3) transportation allowance during the layoff period; and (4)accumulated free trip passes, both domestic and international. By an order dated October 8, 1962, the CIR granted this motion, except as regards thesick leave of Onofre Griño and Bernardino Abarrientos, and thetransportation allowance, which were denied. Hence, this appeal.chanroblespublishingcompanyPAL maintains that the CIR has erred in acting as it did, because: (1) theaforementioned privileges were not specifically mentioned in the CIRresolution of July 13, 1954; (2) the order of the CIR dated October 31, 1962,had, allegedly, the effect of amending said resolution; and (3) the clausetherein “without prejudice to their seniority or other rights and privileges”should be construed prospectively, not retroactively.Insofar as the Christmas bonus, the accumulated sick leave privileges andthe transportation allowance during the lay-off period, the PAL’s contention isclearly devoid of merit. The aforementioned clause must be considered in thelight of the entire context of the resolution of July 13, 1954 and of itsdispositive part. In ordering therein the “reinstatement” of said employeeswith “back wages from the date of their dismissal to the date of their reinstatement, and without prejudice to their seniority or other rights andprivileges”, it is obvious that the resolution intended to restore the employeesto their status immediately prior to their dismissal.chanroblespublishingcompany

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Hence, it directed, not only their reinstatement, but, also, the payment of their back wages during the period of their lay-off — thus referring necessarily to aperiod of time preceding their reinstatement — and the retention of “their seniority or other rights and privileges”. Rights and privileges at what time?Certainly, not after their reinstatement, but at the time of their aforementioned

dismissal. In other words, the reinstatement was with back wages for the lay-off period, coupled with the “seniority or other rights and privileges”, attachedto the status of the employees when they were dismissed. To put itdifferently, the CIR treated said employees as if they had not been absentfrom work and had been uninterruptedly working during the lay-off period.chanroblespublishingcompanyThus, in Republic Steel Corporation vs. NLRB (114 F. 2d. 820), it was heldthat, under a decree of the Circuit Court of Appeals and Order of the NationalLabor Relations Board directing the employer to reinstate the strikingemployees without prejudice to their seniority or other rights or privileges, itwas the intention of the Board and Court to provide that, upon reinstatementthe employees were to be treated in matters involving seniority and continuityof employment as though they had not been absent from work, and hencethereinstated employees were entitled to the benefits of the employer’s vacationplan for the year in which they were reinstated and subsequent years uponthe basis of continuity of service computed as though they had been actuallyat work during the entire period from the date of strike to the date of reinstatement. chanroblespublishingcompany

As a consequence, the employees involved in the case at bar are entitled tothe Christmas bonus that PAL had given to all of its employees during saidperiod, for said bonus, having been paid regularly, has become part of thecompensation of the employees.[1] Said employees are, likewise, entitled totransportation allowance and the corresponding sick leave privileges. Thesesick leave privileges are subject, however, to the following qualifications,namely: (1) that the accumulated sick leave cannot exceed 140 days,pursuant to the collective bargaining agreement between the PAL and thePALEA, effective in 1959; and (2) that, pursuant to the same agreement,which denies sick leave privileges to retired employees, Onofre Griño andBernardino Abarrientos, who have retired, are not entitled to said privileges.The PAL’S appeal as regards the free trip passes is, however, well taken, for the employees had no absolute right thereto, even if they had actuallyrendered services during the lay-off period. The free trip passes were given,neither automatically, nor indiscriminately. The employees had to applytherefor and their applications were subject to PAL’S approval.

WHEREFORE, except as to the free trip passes for the layoff period, whichshould not be deemed included in the “rights and privileges” awarded in theresolution of July 13, 1954, and subject to the qualification that theaccumulated sick leave privileges cannot exceed 140 days, the appealedresolution of October 8, 1962, is hereby affirmed in all other respects, without

special pronouncement as to costs. It is so ordered.

5. Aurora Land Projects Corp vs. NLRCFIRST DIVISION[G.R. No. 114733. January 2, 1997]

AURORA LAND PROJECTS CORP. Doing business under the name"AURORA PLAZA" and TERESITA T. QUAZON, petitioners, vs. NATIONALLABOR RELATIONS COMMISSION and HONORIO DAGUI, respondents.D E C I S I O NHERMOSISIMA, JR., J.:The question as to whether an employer-employee relationship exists in acertain situation continues to bedevil the courts. Some businessmen try toavoid the bringing about of an employer-employee relationship in their enterprises because that judicial relation spawns obligations connected withworkmen's compensation, social security, medicare, minimum wage,termination pay, and unionism.[1] In light of this observation, it behooves thisCourt to be ever vigilant in checking the unscrupulous efforts of some of our entrepreneurs, primarily aimed at maximizing their return on investments atthe expense of the lowly workingman.This petition for certiorari seeks the reversal of the Resolution [2] of publicrespondent National Labor Relations Commission dated March 16, 1994affirming with modification the decision of the Labor Arbiter, dated May 25,1992, finding petitioners liable to pay private respondent the total amount of P195,624.00 as separation pay and attorney's fees.The relevant antecedents:Private respondent Honorio Dagui was hired by Doña Aurora SuntayTanjangco in 1953 to take charge of the maintenance and repair of theTanjangco apartments and residential buildings. He was to performcarpentry, plumbing, electrical and masonry work. Upon the death of Doña

Aurora Tanjangco in 1982, her daughter, petitioner Teresita TanjangcoQuazon, took over the administration of all the Tanjangco properties. OnJune 8, 1991, private respondent Dagui received the shock of his life whenMrs. Quazon suddenly told him: "Wala ka nang trabaho mula ngayon,"[3] onthe alleged ground that his work was unsatisfactory. On August 29, 1991,

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private respondent, who was then already sixty-two (62) years old, filed acomplaint for illegal dismissal with the Labor Arbiter.On May 25, 1992, Labor Arbiter Ricardo C. Nora rendered judgment, thedecretal portion of which reads:"IN VIEW OF ALL THE FOREGOING, respondents Aurora Plaza and/or Teresita Tanjangco Quazon are hereby ordered to pay the complainant thetotal amount of ONE HUNDRED NINETY FIVE THOUSAND SIX HUNDREDTWENTY FOUR PESOS (P195,624.00) representing complainant'sseparation pay and the ten (10%) percent attorney's fees within ten (10) daysfrom receipt of this Decision.

All other issues are dismissed for lack of merit."[4] Aggrieved, petitioners Aurora Land Projects Corporation and Teresita T.Quazon appealed to the National Labor Relations Commission. TheCommission affirmed, with modification, the Labor Arbiter's decision in aResolution promulgated on March 16, 1994, in the following manner:"WHEREFORE, in view of the above considerations, let the appealeddecision be as it is hereby AFFIRMED with (the) MODIFICATION thatcomplainant must be paid separation pay in the amount of P88,920.00instead of P177,840.00. The award of attorney's fees is hereby deleted."[5]

As a last recourse, petitioners filed the instant petition based on grounds nototherwise succinctly and distinctly ascribed, viz:I"RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AFFIRMINGTHE LABOR ARBITER'S DECISION SOLELY ON THE BASIS OF ITSSTATEMENT THAT WE FAIL TO FIND ANY REASON OR JUSTIFICATIONTO DISAGREE WITH THE LABOR ARBITER IN HIS FINDING THATHONORIO DAGUI WAS DISMISSED BY THE RESPONDENT' (p. 7,RESOLUTION), DESPITE — AND WITHOUT EVEN BOTHERING TOCONSIDER — THE GROUNDS STATED IN PETITIONERS' APPEALMEMORANDUM WHICH ARE PLAINLY MERITORIOUS.IIRESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN FINDINGTHAT COMPLAINANT WAS EMPLOYED BY THE RESPONDENTS MORESO 'FROM 1953 TO 1991' (p. 3, RESOLUTION).IIIRESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AWARDING

SEPARATION PAY IN FAVOR OF PRIVATE RESPONDENT MORE SOFOR THE EQUIVALENT OF 38 YEARS OF ALLEGED SERVICE.IVRESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDINGBOTH PETITIONERS LIABLE FOR SEPARATION PAY." [6]It is our impression that the crux of this petition rests on two elementalissues: (1) Whether or not private respondent Honorio Dagui was anemployee of petitioners; and (2) If he were, whether or not he was illegallydismissed.Petitioners insist that private respondent had never been their employee.Since the establishment of Aurora Plaza, Dagui served therein only as a jobcontractor. Dagui had control and supervision of whoever he would take toperform a contracted job. On occasion, Dagui was hired only as a "tubero" or plumber as the need arises in order to unclog sewerage pipes. Every time hisservices were needed, he was paid accordingly. It was understood that his

job was limited to the specific undertaking of unclogging the pipes. In effect,petitioners would like us to believe that private respondent Dagui was anindependent contractor, particularly a job contractor, and not an employee of

Aurora Plaza.We are not persuaded.Section 8, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code provides in part:"There is job contracting permissible under the Code if the followingconditions are met:xxx xxx xxx(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which arenecessary in the conduct of his business."Honorio Dagui earns a measly sum of P180.00 a day (latest salary).[7]Ostensibly, and by no stretch of the imagination can Dagui qualify as a jobcontractor. No proof was adduced by the petitioners to show that Dagui wasmerely a job contractor, and it is absurd to expect that private respondent,with such humble resources, would have substantial capital or investment inthe form of tools, equipment, and machineries, with which to conduct thebusiness of supplying Aurora Plaza with manpower and services for theexclusive purpose of maintaining the apartment houses owned by thepetitioners herein.The bare allegation of petitioners, without more, that private respondentDagui is a job contractor has been disbelieved by the Labor Arbiter and the

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public respondent NLRC. Dagui, by the findings of both tribunals, was anemployee of the petitioners. We are not inclined to set aside these findings.The issue whether or not an employer-employee relationship exists in agiven case is essentially a question of fact. [8] As a rule, repetitious though ithas become to state, this Court does not review supposed errors in thedecision of the NLRC which raise factual issues, because factual findings of agencies exercising quasi-judicial functions [like public respondent NLRC]are accorded not only respect but even finality, aside from the considerationthat this Court is essentially not a trier of facts.[9]However, we deem it wise to discuss this issue full-length if only to bolster the conclusions reached by the labor tribunals, to which we fully concur.Jurisprudence is firmly settled that whenever the existence of an employmentrelationship is in dispute, four elements constitute the reliable yardstick: (a)the selection and engagement of the employee; (b) the payment of wages;(c) the power of dismissal; and (d) the employer's power to control theemployee's conduct.[10] It is the so-called "control test," and that is, whether the employer controls or has reserved the right to control the employee notonly as to the result of the work to be done but also as to the means andmethods by which the same is to be accomplished, [11] which constitute themost important index of the existence of the employer-employee relationship.Stated otherwise, an employer-employee relationship exists where theperson for whom the services are performed reserves the right to control notonly the end to be achieved but also the means to be used in reaching suchend. [12]

All these elements are present in the case at bar. Private respondent washired in 1953 by Doña Aurora Suntay Tanjangco (mother of TeresitaTanjangco-Quazon), who was then the one in charge of the administration of the Tanjangco's various apartments and other properties. He was employedas a stay-in worker performing carpentry, plumbing, electrical and necessarywork (sic) needed in the repairs of Tanjangco's properties.[13] Upon thedemise of Doña Aurora in 1982 petitioner Teresita Tanjangco-Quazon tookover the administration of these properties and continued to employ theprivate respondent, until his unceremonious dismissal o0n June 8, 1991.[14]Dagui was not compensated in terms of profits for his labor or services likean independent contractor. Rather, he was paid on a daily wage basis at therate of P180.00. [15] Employees are those who are compensated for their labor or services by wages rather than by profits. [16] Clearly, Dagui fitsunder this classification.Doña Aurora and later her daughter petitioner Teresita Quazon evidently hadthe power of dismissal for cause over the private respondent.[17]

Finally, the records unmistakably show that the most important requisite of control is likewise extant in this case. It should be borne in mind that thepower of control refers merely to the existence of the power and not to theactual exercise thereof. It is not essential for the employer to actuallysupervise the performance of duties of the employee; it is enough that theformer has a right to wield the power.[18] The establishment of petitioners isengaged in the leasing of residential and apartment buildings. Naturally,private respondent's work therein as a maintenance man had to beperformed within the premises of herein petitioners. In fact, petitioners do notdispute the fact that Dagui reports for work from 7:00 o'clock in the morninguntil 4:00 o'clock in the afternoon. It is not far-fetched to expect, therefore,that Dagui had to observe the instructions and specifications given by thenDoña Aurora and later by Mrs. Teresita Quazon as to how his work had to beperformed. Parenthetically, since the job of a maintenance crew isnecessarily done within company premises, it can be inferred that both Doña

Aurora and Mrs. Quazon could easily exercise control on private respondentwhenever they please.The employment relationship established, the next question would have tobe: What kind of an employee is the private respondent — regular, casual or probationary?We find private respondent to be a regular employee, for Article 280 of theLabor Code provides:"Regular and Casual employment. — The provisions of written agreement tothe contrary notwithstanding and regardless of the oral agreement of theparties, an employment shall be deemed to be regular where the employeehas been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where theemployment has been fixed for a specific project or undertaking thecompletion or termination of which has been determined at the time of theengagement of the employee or where the work or services to be performedis 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 thepreceding paragraph: Provided, That, any employee who has rendered atleast one year of service, whether such service is continuous or broken, shallbe considered a regular employee with respect to the activity in which he isemployed and his employment shall continue while such actually exists."

As can be gleaned from this provision, there are two kinds of regular employees, namely: (1) those who are engaged to perform activities whichare usually necessary or desirable in the usual business or trade of theemployer; and (2) those who have rendered at least one year of service,

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whether continuous or broken, with respect to the activity in which they areemployed.[19]Whichever standard is applied, private respondent qualifies as a regular employee. As aptly ruled by the Labor Arbiter:"xxx As owner of many residential and apartment buildings in Metro Manila,the necessity of maintaining and employing a permanent stay-in worker toperform carpentry, plumbing, electrical and necessary work needed in therepairs of Tanjangco's properties is readily apparent and is in fact needed.So much so that upon the demise of Doña Aurora Tanjangco, respondent'sdaughter Teresita Tanjangco-Quazon apparently took over the administrationof the properties and continued to employ complainant until his outrightdismissal on June 8, 1991 xxx xxx.[20]The jobs assigned to private respondent as maintenance man, carpenter,plumber, electrician and mason were directly related to the business of petitioners as lessors of residential and apartment buildings. Moreover, sucha continuing need for his services by herein petitioners is sufficient evidenceof the necessity and indispensability of his services to petitioners' business or trade.Private respondent Dagui should likewise be considered a regular employeeby the mere fact that he rendered service for the Tanjangcos for more thanone year, that is, beginning 1953 until 1982, under Doña Aurora; and thenfrom 1982 up to June 8, 1991 under the petitioners, for a total of twenty-nine(29) and nine (9) years respectively. Owing to private respondent's length of service, he became a regular employee, by operation of law, one year after he was employed in 1953 and subsequently in 1982. In Baguio Country ClubCorp. v. NLRC,[21] we decided that it is more in consonance with the intentand spirit of the law to rule that the status of regular employment attaches tothe casual employee on the day immediately after the end of his first year of service. To rule otherwise is to impose a burden on the employee which isnot sanctioned by law. Thus, the law does not provide the qualification thatthe employee must first be issued a regular appointment or must first beformally declared as such before he can acquire a regular status.Petitioners argue, however, that even assuming arguendo that privaterespondent can be considered an employee, he cannot be classified as aregular employee. He was merely a project employee whose services werehired only with respect to a specific job and only while the same exists,[22]thus falling under the exception of Article 280, paragraph 1 of the Labor Code. Hence, it is claimed that he is not entitled to the benefits prayed for and subsequently awarded by the Labor Arbiter as modified by publicrespondent NLRC.

The circumstances of this case in light of settled case law do not, at all,support this averment. Consonant with a string of cases beginning withOchoco v. NLRC,[23] followed by Philippine National ConstructionCorporation v. NLRC,[24] Magante v. NLRC,[25] and Capitol IndustrialConstruction Corporation v. NLRC,[26] if truly, private respondent wasemployed as a "project employee, " petitioners should have submitted areport of termination to the nearest public employment office everytime hisemployment is terminated due to completion of each project, as required byPolicy Instruction No. 20, which provides:"Project employees are not entitled to termination pay if they are terminatedas a result of the completion of the project or any phase thereof in which theyare employed, regardless of the number of project in which they have beenemployed by a particular construction company. Moreover, the company isnot required to obtain a clearance from the Secretary of Labor in connectionwith such termination. What is required of the company is a report to thenearest Public Employment Office for statistical purposes."Throughout the duration of private respondent's employment as maintenanceman, there should have been filed as many reports of termination as therewere projects actually finished, if it were true that private respondent wasonly a project worker. Failure of the petitioners to comply with this simple, butnonetheless compulsory, requirement is proof that Dagui is not a projectemployee.[27]Coming now to the second issue as to whether or not private respondentDagui was illegally dismissed, we rule in the affirmative.Jurisprudence abound as to the rule that the twin requirements of dueprocess, substantive and procedural, must be complied with, before a validdismissal exists.[28] Without which the dismissal becomes void.[29]The twin requirements of notice and hearing constitute the essentialelements of due process. This simply means that the employer shall affordthe worker ample opportunity to be heard and to defend himself with theassistance of his representative, if he so desires.[30] As held in the case of Pepsi Cola Bottling Co. v. NLRC:[31]"The law requires that the employer must furnish the worker sought to bedismissed with two written notices before termination of employee can belegally effected: (1) notice which apprises the employee of the particular actsor omissions for which his dismissal is sought; and (2) the subsequent noticewhich informs the employee of the employer's decision to dismiss him(Section 13, BP 130; Sections 2-6, Rule XIV, Book V Rules and RegulationsImplementing the Labor Code as amended). Failure to comply with therequirements taints the dismissal with illegality. This procedure is mandatory;

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in the absence of which, any judgment reached by management is void andinexistent. (Tingson, Jr. v. NLRC, 185 SCRA 498 [1990]; National ServiceCorporation v. NLRC, 168 SCRA 122 [1988]; Ruffy v. NLRC, 182 SCRA 365[1990]."These mandatory requirements were undeniably absent in the case at bar.Petitioner Quazon dismissed private respondent on June 8, 1991, withoutgiving him any written notice informing the worker herein of the cause for histermination. Neither was there any hearing conducted in order to give Daguithe opportunity to be heard and defend himself. He was simply told: "Wala kanang trabaho mula ngayon," allegedly because of poor workmanship on aprevious job.[32] The undignified manner by which private respondent'sservices were terminated smacks of absolute denial of the employee's rightto due process and betrays petitioner Quazon's utter lack of respect for labor.Such an attitude indeed deserves condemnation.The Court, however, is bewildered why only an award for separation pay inlieu of reinstatement was made by both the Labor Arbiter and the NLRC. Nobackwages were awarded. It must be remembered that backwages andreinstatement are two reliefs that should be given to an illegally dismissedemployee. They are separate and distinct from each other. In the event thatreinstatement is no longer possible, as in this case,[33] separation pay isawarded to the employee. The award of separation pay is in lieu of reinstatement and not of backwages. In other words, an illegally dismissedemployee is entitled to (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and (2) backwages.[34] Payment of backwages is specifically designed to restore an employee's income that waslost because of his unjust dismissal.[35] On the other hand, payment of separation pay is intended to provide the employee money during the periodin which he will be looking for another employment. [36]Considering, however, that the termination of private respondent Dagui wasmade on June 8, 1991 or after the effectivity of the amendatory provision of

Republic Act No. 6715 on March 21, 1989, private respondent's backwagesshould be computed on the basis of said law.It is true that private respondent did not appeal the award of the Labor Arbiter awarding separation pay sans backwages. While as a general rule a partywho has not appealed is not entitled to affirmative relief other than the onesgranted in the decision of the court below,[37] law and jurisprudenceauthorize a tribunal to consider errors, although unassigned, if they involve(1) errors affecting the lower court's jurisdiction over the subject matter, (2)plain errors not specified, and (3) clerical errors.[38] In this case, the failureof the Labor Arbiter and the public respondent NLRC to award backwages to

the private respondent, who is legally entitled thereto having been illegallydismissed, amounts to a "plain error" which we may rectify in this petition,although private respondent Dagui did not bring any appeal regarding thematter, in the interest of substantial justice. The Supreme Court is clothedwith ample authority to review matters, even if they are not assigned aserrors on appeal, if it finds that their consideration is necessary in arriving ata just decision of the case.[39] Rules of procedure are mere tools designedto facilitate the attainment of justice. Their strict and rigid application, whichwould result in technicalities that tend to frustrate rather than promotesubstantial justice, must always be avoided.[40] Thus, substantive rights likethe award of backwages resulting from illegal dismissal must not beprejudiced by a rigid and technical application of the rules.[41]Petitioner Quazon argues that, granting the petitioner corporation should beheld liable for the claims of private respondent, she cannot be made jointlyand severally liable with the corporation, notwithstanding the fact that she isthe highest ranking officer of the company, since Aurora Plaza has aseparate juridical personality.We disagree.In the cases of Maglutac v. National Labor Relations Commission,[42] Chuav. National Labor Relations Commission,[43] and A.C Ransom Labor Union-CCLU v. National Labor Relations Commission[44] we were consistent inholding that the highest and most ranking officer of the corporation, which inthis case is petitioner Teresita Quazon as manager of Aurora Land ProjectsCorporation, can be held jointly and severally liable with the corporation for the payment of the unpaid money claims of its employees who were illegallydismissed. In this case, not only was Teresita Quazon the most rankingofficer of Aurora Plaza at the time of the termination of the privaterespondent, but worse, she had a direct hand in the private respondent'sillegal dismissal. A corporate officer is not personally liable for the moneyclaims of discharged corporate employees unless he acted with evident

malice and bad faith in terminating their employment.[45] Here, the failure of petitioner Quazon to observe the mandatory requirements of due process interminating the services of Dagui evinced malice and bad faith on her part,thus making her liable.Finally, we must address one last point. Petitioners aver that, assuming thatprivate respondent can be considered an employee of Aurora Plaza,petitioners cannot be held liable for separation pay for the duration of hisemployment with Doña Aurora Tanjangco from 1953 up to 1982. If petitionersshould be held liable as employers, their liability for separation pay should

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only be counted from the time Dagui was rehired by the petitioners in 1982as a maintenance man.We agree.Petitioners' liability for separation pay ought to be reckoned from 1982 whenpetitioner Teresita Quazon, as manager of Aurora Plaza, continued toemploy private respondent. From 1953 up to the death of Doña Aurorasometime in 1982, private respondent's claim for separation pay should havebeen filed in the testate or intestate proceedings of Doña Aurora. This isbecause the demand for separation pay covered by the years 1953-1982 isactually a money claim against the estate of Doña Aurora, which claim didnot survive the death of the old woman. Thus, it must be filed against her estate in accordance with Section 5, Rule 86 of the Revised Rules of Court,to wit:"Section 5. Claims which must be filed under the notice. If not ,filed barred;exceptions. — All claims for money against the decedent, arising fromcontract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses for the last sickness of thedecedent, and judgment for money against the decedent, must be filed withinthe time limited in the notice; otherwise they are barred forever, except thatthey may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants.xxx xxx."WHEREFORE, the instant petition is partly GRANTED and the Resolution of the public respondent National Labor Relations Commission dated March 16,1994 is hereby MODIFIED in that the award of separation pay against thepetitioners shall be reckoned from the date private respondent was re-employed by the petitioners in 1982, until June 8, 1991. In addition toseparation pay, full backwages are likewise awarded to private respondent,inclusive of allowances, and other benefits or their monetary equivalentpursuant to Article 279[46] of the Labor Code, as amended by Section 34 of Republic Act No. 6715, computed from the time he was dismissed on June 8,

1991 up to the finality of this decision, without deducting therefrom theearnings derived by private respondent elsewhere during the period of hisillegal dismissal, pursuant to our ruling in Osmalik Bustamante, et. al. v.National Labor Relations Commission.[47]No costs.SO ORDERED.Padilla, Bellosillo, Vitug, and Kapunan, JJ., concur.

6. Tiu vs. NLRC

SECOND DIVISION[G.R. No. 95845. February 21, 1996]WILLIAM L. TIU, petitioner, vs. NATIONAL LABOR RELATIONSCOMMISSION and HERMES DELA CRUZ, respondents.SYLLABUS1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF LABOR

ARBITER, RESPECTED. - Whether an employer-employee relationshipexists is a question of fact. As long as the findings of the labor agencies onthis question are supported by substantial evidence, the findings will not bedisturbed on review in this Court. Review in this Court concerning factualfindings in labor cases is confined to determining allegations of lack of

jurisdiction or grave abuse of discretion. We agree with the finding that anemployer-employee relationship existed between petitioner and privaterespondent, such finding being supported by substantial evidence.2. LABOR LAW AND SOCIAL LEGISLATION; LABOR CODE;EMPLOYER-EMPLOYEE RELATIONSHIP, WHEN PRESENT; CASE ATBAR. - In determining whether there is an employer-employee relationshipbetween the parties the following questions must be considered: (a) who hasthe power of selection and engagement of the employee? (b) who pays thewages of employee? (c) who has the power of dismissal? and; (d) who hasthe power to control the employee’s conduct? Of these powers the power of control over the employees’ conduct is generally regarded as determinativeof the existence of the relationship. The “control test,” under which theperson for whom the services are rendered reserves the right to direct notonly the end to be achieved but also the means for reaching such end, isgenerally relied on by the courts. The “control test” only requires theexistence of the right to control the manner of doing the work in a person, notnecessarily the actual exercise of the power by him, which he can delegate.Consequently, in the case at bar, the power is exercised by Regino de laCruz but it is power which is only delegated to him so that in truth the power

inherently and primarily is possessed by petitioner. De la Cruz is a meresupervisor, while petitioner is the real employer.3. ID.; ID.; JOB-CONTRACTING; REQUISITES; IN THE ABSENCETHEREOF, WHAT EXISTS IS A “LABOR-ONLY” CONTRACT. – Jobcontracting is permissible only if the following conditions are met: (1) thecontractor carries on an independent business and undertakes the contractwork on his own account under his own responsibility according to his ownmanner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except asto the results thereof; and (2) the contractor has substantial capital or

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investment in the form of tools, equipment, machineries, work premises, andother materials which are necessary in the conduct of his business. In theabsence of these requisites, what exists is a “labor-only” contract under which the person acting as contractor is considered merely an agent or intermediary of the employer who is responsible to the workers in the samemanner and to the same extent as if they had been directly employed by him.

As held in Broadway Motors, Inc. v. NLRC, citing Philippine Bank of Communications v. NLRC, The “labor-only” contractor is a mere agent of theemployer who is responsible to the employees of the “labor-only” contractor as if such employees had been employed by him directly. In such a case thestatute establishes an employer-employee relationship between theemployer and the employees of the “labor-only” contractor to prevent anyviolation or circumvention of the provisions of the Labor Code, by holdingboth the employer and the “labor-only” contractor responsible to theemployees.

APPEARANCES OF COUNSELNapoleon O. Carin for petitioner.The Solicitor General for public respondent.Vito J. Nitoria for private respondent.D E C I S I O NMENDOZA, J.:On February 18, 1986, private respondent filed a complaint, for illegaldismissal, violation of the Minimum Wage Law and non-payment of the costof living allowances, legal holiday pay, service incentive pay and separationpay, against petitioner. Petitioner denied that private respondent was hisemployee. But after consideration of the parties’ evidence, the Labor Arbiter found that private respondent was an employee of petitioner and that he hadbeen illegally dismissed. The Labor Arbiter ordered petitioner to pay privaterespondent the sum of P25,076.96, corresponding to the latter’s differentials,13th month pay and separation pay. On appeal, the Labor Arbiter’s decision

was affirmed in toto by the NLRC. Hence this petition for certiorari. Petitioner alleges that the NLRC’s decision was made in “reckless disregard” of theapplicable facts and law and that it amounts to a grave abuse of discretion of the NLRC.1Petitioner, as operator of the D’Rough Riders Transportation, is engaged inthe transportation of passengers from Cebu City to the northern towns of Cebu. Private respondent worked in petitioner’s bus terminals as a“dispatcher,” assisting and guiding passengers and carrying their bags. TheLabor Arbiter and the NLRC found, and petitioner had admitted in his position

paper below, that private respondent was paid a regular daily wage of P20.00.Petitioner denies that private respondent was his employee. He alleges thathe did not have the power of selection and dismissal nor the power of controlover private respondent. According to petitioner, private respondent, together with so-called “standbys,” hung around his bus terminals, assistingpassengers with their baggages as “dispatchers.” Petitioner claims that, inleague with “bad elements” in the locality who threatened to cause damageto his passenger buses and scare passengers away if petitioner and other bus operators did not let them, private respondent and other “standbys”forced passengers to hire them as baggage boys. Petitioner alleges that hehad no choice but to allow private respondent and other “standbys” to carryon their activities within the premises of his bus terminals.2 He also claims heallowed them to do so even if their services as so-called “dispatchers” werenot needed in his business. Petitioner insists that as “dispatcher,” privaterespondent worked in his own way, without supervision by him.The Labor Arbiter and the NLRC found private respondent to be anemployee of petitioner, applying the Four-fold test, namely (a) who has thepower of selection and engagement of the employees; (b) who pays thewages; (c) who has the power of dismissal, and (d) and who has the power to control the employees’ conduct. The Labor Arbiter stated in his decision:Respondents would want this office to believe that the sum of P20.00 thatthey pay complainant is ex gratia; hence, not compensation for servicesrendered. This is however belied by respondents’ own allegation in their position paper that, “for purposes of preservation of his transportationbusiness, agreed to give each “standby” a fixed daily rate; and in exchange,they would canvass, assist and help passengers of respondents’ passenger trucks. This privilege or arrangement was made possible due to the effortsand representation of complainant’s father, Mr. Regino dela Cruz, who isclose and known to the standbys and/or dispatchers.” The impression that

this office gets from said allegation is that the P20.00 received bycomplainant represents the value that respondents attach to complainant’sservices; hence, it is remuneration for services rendered. Respondent’sadmission of regular payment of such an amount, already establishes theexistence of one of the factors that indicate employment relationship.The right to hire and fire, on the other hand, has been indubitably establishedby complainant’s Exhibit “A” (rebuttal) which remains untraversed andunrefuted, a translation of its contents of which are hereunder quoted for quick and easy reference:

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Since there was an agreement for your return that When you are caught thatyou are inside the terminal you are to be dismissed outright and you agreedto this condition so that last Tuesday you were caught taking a bath insidethe terminal so that from now on you are no longer with the company “youare dismissed” because you broke the agreement.Evident therefrom is management’s unequivocal language as regards itsexercise of the prerogative to dismiss.Complainant’s Exhibit “D” rebuttal, respondent’s official document, reflectingthe designation of respondent’s witness, (Regino) dela Cruz as Chief Dispatcher, likewise buttresses complainant’s claim of employment, for thereason that the office of Chief (Dispatcher) presupposes the existence of subordinates over whom said chief exercises supervisory control. If a chief dispatcher works with the company, uses and signs official documents as isreflected in Exhibit “D”, it follows that his employment as such was inconsideration of a chief dispatcher’s exercise of his duties to supervise andcontrol subordinate dispatchers. Along this line, Regino dela Cruz’stestimony that D’Rough Riders does not exercise control over thecomplainant cannot preponderate over Exhibit “D”.In fine, this Office finds that complainant was an employee of respondent.

Affirming the Labor Arbiter decision, the NLRC held:We perused at length the record of the instant case, analyzing in theprocess, the grounds and supporting arguments advanced in the appeal andthe reply thereto and we found no merit in the appeal.x x x A reading of the affidavit of Regino dela Cruz, a witness for therespondent who is the Chief Dispatcher and father of the complainant wouldreveal that it was he who included the complainant as one of the dispatchersof the respondents. Considering that Regino dela Cruz is the Chief Dispatcher, the selection and engagement of the complainant as adispatcher of the respondents was made thru him and with the acquiescenceof the management.

Also, it is admitted by the respondents, as borne out by the records, includingthe affidavit of Regino dela Cruz, that complainant was receiving a fixed dailyrate from the respondent. The Labor Arbiter is therefore correct when sheruled that what complainant received from the respondents is a remunerationfor services rendered.The power of dismissal which respondents exercised over the person of thecomplainant is clearly established by complainants’ Exhibit “A” (rebuttal).This exhibit refers to a disciplinary memorandum to the complainant writtenin Visayan dialect. This exhibit was not refuted by the respondents.

Also, we agree with the observation of the Labor Arbiter that respondent’sChief Dispatcher is exercising his supervision and control over thecomplainant who is a dispatcher as clearly manifested in Exhibit “D” (rebuttal)for the complainant.

A close scrutiny of the same exhibit would reveal that complainant wasindeed signing a daily time record of their hours of work.The evidences [sic] submitted by the complainant have proven thatcomplainant is really an employee of the respondents.The question whether an employer-employee relationship exists is a questionof fact. As long as the findings of the labor agencies on this question aresupported by substantial evidence, the findings will not be disturbed onreview in this Court. Review in this Court concerning factual findings in labor cases is confined to determining allegations of lack of jurisdiction or graveabuse of discretion.3We agree with the finding that an employer-employee relationship existedbetween petitioner and private respondent, such finding being supported bysubstantial evidence. Petitioner has failed to refute the evidence presentedby private respondent. He points to his Chief Dispatcher, Regino dela Cruz,as the one who exercised the powers of an employer over the “dispatchers.”Petitioner argues that under an agreement with Regino de la Cruz, it is thelatter who selects and engages the “dispatchers,” dictates their time,supervises the performance of their work, and pays their wages. He further argues that the “disciplinary memorandum” issued by him was not addressedto private respondent but to Regino dela Cruz, as employer of privaterespondent, to remind him regarding the discipline of the “dispatchers.”Petitioner’s contention is without merit. In determining whether there is anemployer-employee relationship between the parties the following questionsmust be considered: (a) who has the power of selection and engagement of the employee? (b) who pays the wages of employee? (c) who has the power of dismissal? and; (d) who has the power to control the employee’s conduct?

4 Of these powers the power of control over the employees’ conduct isgenerally regarded as determinative of the existence of the relationship.5The “control test,” under which the person for whom the services arerendered reserves the right to direct not only the end to be achieved but alsothe means for reaching such end, is generally relied on by the courts.6Petitioner would have us believe that Chief Dispatcher Regino dela Cruzexercised these powers on his own and independently of petitioner. This isuntenable. Petitioner admits that Regino dela Cruz was merely assigned todo dispatch work. While Regino dela Cruz took charge of the hiring of menand paid their wages, he did so as he was told by petitioner. The payment of

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salaries and wages came from petitioner. Regino dela Cruz filled up andsigned daily time records for dispatchers and took disciplinary action againsterring employees in accordance with instructions given to him by petitioner.In sum, it cannot be said that Regino dela Cruz was the employer of the“dispatchers” or that he was an independent contractor. He was himself onlyan employee of petitioner.Indeed the “control test” only requires the existence of the right to control themanner of doing the work in a person, not necessarily the actual exercise of the power by him, which he can delegate.7 Consequently, in the case at bar,the power is exercised by Regino dela Cruz but it is power which is onlydelegated to him so that in truth the power inherently and primarily ispossessed by petitioner. De la Cruz is a mere supervisor, while petitioner isthe real employer.Petitioner does not claim that Regino dela Cruz and his dispatchers wereindependent contractors. Even if this be his contention, however, theargument would still be without merit. Job contracting is permissible only if the following conditions are met: (1) the contractor carries on an independentbusiness and undertakes the contract work on his own account under hisown responsibility according to his own manner and method, free from thecontrol and direction of his employer or principal in all matters connected withthe performance of the work except as to the results thereof; and (2) thecontractor has substantial capital or investment in the form of tools,equipment, machineries, work premises, and other materials which arenecessary in the conduct of his business.8 In the absence of theserequisites, what exists is a “labor-only” contract under which the personacting as contractor is considered merely an agent or intermediary of theemployer who is responsible to the workers in the same manner and to thesame extent as if they had been directly employed by him.9 As held inBroadway Motors, Inc. v. NLRC,10 citing Philippine Bank of Communicationsv. NLRC,11 the “labor-only” contractor is a mere agent of the employer who

is responsible to the employees of the “labor-only” contractor as if suchemployees had been employed by him directly. In such a case the statuteestablishes an employer-employee relationship between the employer andthe employees of the “labor-only” contractor to prevent any violation or circumvention of the provisions of the Labor Code, by holding both theemployer and the “labor-only” contractor responsible to the employees.For this reason, we hold that Regino dela Cruz can, at most, be considered a“labor-only” contractor and, therefore, a mere agent of petitioner. As he isacting in behalf of petitioner, private respondent Hermes dela Cruz is actuallythe employee of petitioner.

WHEREFORE, the petition is DENIED for lack of merit.SO ORDERED.Regalado (Chairman), Romero, and Puno, JJ., concur.

7. Air Material Wing Savings and Loan Assoc vs. NLRC

G.R. No. 111870 June 30, 1994 AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC.,petitioner,vs.NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.Jerry D. Banares for petitioner.Perdrelito Q. Aquino for private respondent. CRUZ, J.:Private respondent Luis S. Salas was appointed "notarial and legal counsel"for petitioner Air Material Wings Savings and Loan Association (AMWSLAI)in 1980. The appointment was renewed for three years in an implementingorder dated January 23, 1987, reading as follows:SUBJECT: Implementing Order on the Reappointment of the Legal Officer TO: ATTY. LUIS S. SALASPer approval of the Board en banc in a regular meeting held on January 21,1987, you are hereby reappointed as Notarial and Legal Counsel of thisassociation for a term of three (3) years effective March 1, 1987, unlesssooner terminated from office for cause or as may be deemed necessary bythe Board for the interest and protection of the association.

Aside from notarization of loan & other legal documents, your duties andresponsibilities are hereby enumerated in the attached sheet, per Articles IX,Section 1-d of the by-laws and those approved by the Board en banc.Your monthly compensation/retainer's fee remains the same.

This shall form part of your 201 file.BY AUTHORITY OF THE BOARD:LUVIN S. MANAYPresident & Chief of the BoardOn January 9, 1990, the petitioner issued another order reminding Salas of the approaching termination of his legal services under their contract. Thisprompted Salas to lodge a complaint against AMWSLAI for separation pay,vacation and sick leave benefits, cost of living allowances, refund of SSSpremiums, moral and exemplary damages, payment of notarial servicesrendered from February 1, 1980 to March 2, 1990, and attorney's fees.

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Instead of filing an answer, AMWSLAI moved to dismiss for lack of jurisdiction. It averred that there was no employer-employee relationshipbetween it and Salas and that his monetary claims properly fell within the

jurisdiction of the regular courts. Salas opposed the motion and presenteddocumentary evidence to show that he was indeed an employee of

AMWSLAI.The motion was denied and both parties were required to submit their position papers. AMWSLAI filed a motion for reconsideration ad cautelam,which was also denied. The parties were again ordered to submit their position papers but AMWSLAI did not comply. Nevertheless, most of Salas'claims were dismissed by the labor arbiter in his decision dated November 21, 1991. 1It was there held that Salas was not illegally dismissed and so not entitled tocollect separation benefits. His claims for vacation leave, sick leave, medicaland dental allowances and refund of SSS premiums were rejected on theground that he was a managerial employee. He was also denied moral andexemplary damages for lack of evidence of bad faith on the part of

AMWSLAI. Neither was he allowed to collect his notarial fees from 1980 upto 1986 because the claim therefor had already prescribed. However, thepetitioner was ordered to pay Salas his notarial fees from 1987 up to March2, 1990, and attorney's fee equivalent to 10% of the judgment award.On appeal, the decision was affirmed in toto by the respondent Commission,prompting the petitioner to seek relief in this Court. 2The threshold issue in this case is whether or not Salas can be consideredan employee of the petitioner company.We have held in a long line of decisions that the elements of an employer-employee relationship are: (1) selection and engagement of the employee;(2) payment of wages; (3) power of dismissal; and (4) employer's own power to control employee's conduct. 3The existence of such a relationship is essentially a factual question. The

findings of the NLRC on this matter are accorded great respect and evenfinality when the same are supported by substantial evidence. 4The terms and conditions set out in the letter-contract entered into by theparties on January 23, 1987, clearly show that Salas was an employee of thepetitioner. His selection as the company counsel was done by the board of directors in one of its regular meetings. The petitioner paid him a monthlycompensation/retainer's fee for his services. Though his appointment was for a fixed term of three years, the petitioner reserved its power of dismissal for cause or as it might deem necessary for its interest and protection. No less

importantly, AMWSLAI also exercised its power of control over Salas bydefining his duties and functions as its legal counsel, to wit:1. To act on all legal matters pertinent to his Office.2. To seek remedies to effect collection of overdue accounts of memberswithout prejudice to initiating court action to protect the interest of theassociation.3. To defend by all means all suit against the interest of the Association. 5In the earlier case of Hydro Resources Contractors Corp. v.Pagalilauan, 6 this Court observed that:

A lawyer, like any other professional, may very well be an employee of aprivate corporation or even of the government. It is not unusual for a bigcorporation to hire a staff of lawyers as its in-house counsel, pay themregular salaries, rank them in its table of organization, and otherwise treatthem like its other officers and employees. At the same time, it may alsocontract with a law firm to act as outside counsel on a retainer basis. The twoclasses of lawyers often work closely together but one group is made up of employees while the other is not. A similar arrangement may exist as todoctors, nurses, dentists, public relations practitioners and other professionals.We hold, therefore, that the public respondent committed no grave abuse of discretion in ruling that an employer-employee relationship existed betweenthe petitioner and the private respondent.We must disagree with the NLRC, however, on Salas' claims for notarialfees.The petitioner contends that the public respondents are not empowered toadjudicate claims for notarial fees. On the other hand, the Solicitor Generalbelieves that the NLRC acted correctly when it took cognizance of the claimbecause it arose out of Salas' employment contract with the petitioner whichassigned him the duty to notarize loan agreements and other legaldocuments. Moreover, Section 9 of Rule 141 of the Rules of Court does not

restrict or prevent the labor arbiter and the NLRC from determining claims for notarial fees.Labor arbiters have the original and exclusive jurisdiction over money claimsof workers when such claims have some reasonable connection with theemployer-employee relationship. The money claims of workers referred to inparagraph 3 of Article 217 of the Labor Code are those arising out of or inconnection with the employer-employee relationship or some aspect or incident of such relationship.Salas' claim for notarial fees is based on his employment as a notarial officer of the petitioner and thus comes under the jurisdiction of the labor arbiter.

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The public respondents agreed that Salas was entitled to collect notarial feesfrom 1987 to 1990 by virtue of his having been assigned as notarial officer.We feel, however, that there is no substantial evidence to support thisfinding.The letter-contract of January 23, 1987, does not contain any stipulation for the separate payment of notarial fees to Salas in addition to his basic salary.On the contrary, it would appear that his notarial services were part of hisregular functions and were thus already covered by his monthlycompensation. It is true that the notarial fees were paid by members-borrowers of the petitioner for its own account and not of Salas. However,this is not a sufficient basis for his claim to such fees in the absence of anyagreement to that effect.

ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, withthe modification that the award of notarial fees and attorney's fees isdisallowed. It is so ordered.Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.

8. Villuga vs. NLRCELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD,BENJAMIN BRIZUELA, NORLITO LADIA, MARCELO AGUILAN, DAVIDORO, NELIA BRIZUELA, FLORA ESCOBIDO, JUSTILITA CABANIG, andDOMINGO SAGUIT,Petitioners,-versus- G.R. No. 75038

August 23, 1993NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) andBROAD STREET TAILORING and/or RODOLFO ZAPANTA,Respondents.x---------------------------------------------------x

D E C I S I O NNOCON, J.:

A basic factor underlying the exercise of rights and the filing of claims for benefits under the Labor Code and other presidential issuances or labor legislations is the status and nature of one’s employment. Whether anemployer-employee relationship exists and whether such employment ismanagerial in character or that of a rank and file employee are primordialconsiderations before extending labor benefits. Thus, the petitioners in thiscase seek a definitive ruling on the status and nature of their employmentwith Broad Street Tailoring and pray for the nullification of the resolution

dated May 12, 1986 of the National Labor Relations Commission in NLRCCase No. RB-IV-21558-78-T affirming the decision of Labor Arbiter Ernilo V.Peñalosa dated May 28, 1979, which held eleven of them as independentcontractors and the remaining one as an employee but of managerial rank.chanroblespublishingcompanyThe facts of the case show that petitioner Elias Villuga was employed ascutter in the tailoring shop owned by private respondent Rodolfo Zapanta andknown as Broad Street Tailoring located at Shaw Boulevard, Mandaluyong,Metro Manila. As cutter, he was paid a fixed monthly salary of P840.00 and amonthly transportation allowance of P40.00. In addition to his work as cutter,Villuga was assigned the chore of distributing work to the shop’s tailors or sewers when both the shop’s manager and assistant manager would beabsent. He saw to it that their work conformed with the pattern he hadprepared and if not, he had them redone, repaired or resewn.The other petitioners were either ironers, repairmen and sewers. They werepaid a fixed amount for every item ironed, repaired or sewn, regardless of thetime consumed in accomplishing the task. Petitioners did not fill up any timerecord since they did not observe regular or fixed hours of work. They wereallowed to perform their work at home especially when the volume of work,which depended on the number of job orders, could no longer be coped upwith.From February 17 to 22, 1978, petitioner Villuga failed to report for workallegedly due to illness. For not properly notifying his employer, he wasconsidered to have abandoned his work.In a complaint dated March 27, 1978, filed with the Regional Office of theDepartment of Labor, Villuga claimed that he was refused admittance whenhe reported for work after his absence, allegedly due to his activeparticipation in the union organized by private respondent’s tailors. He further claimed that he was not paid overtime pay, holiday pay, premium pay for work done on rest days and holidays, service incentive leave pay and 13th

month pay. chanroblespublishingcompanyPetitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oroalso claimed that they were dismissed from their employment because they

joined the Philippine Social Security Labor Union (PSSLU). Petitioners Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora Escobido,Justilita Cabaneg and Domingo Saguit claimed that they stopped workingbecause private respondents gave them few pieces of work to do after learning of their membership with PSSLU. All the petitioners laid claimsunder the different labor standard laws which private respondent allegedlyviolated.

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On May 28, 1979, Labor Arbiter Ernilo V. Peñalosa rendered a decisionordering the dismissal of the complaint for unfair labor practices, illegaldismissal and other money claims except petitioner Villuga’s claim for 13thmonth pay for the years 1976, 1977 and 1980. The dispositive portion of thedecision states as follows: chanroblespublishingcompany“WHEREFORE, premises considered, the respondent Broad Street Tailoringand/or Rodolfo Zapanta are hereby ordered to pay complainant Elias Villugathe sum of ONE THOUSAND TWO HUNDRED FORTY-EIGHT PESOS ANDSIXTY-SIX CENTAVOS (P1,248.66) representing his 13th month pay for theyears 1976, 1977 and 1978. His other claims in this case are hereby deniedfor lack of merit.“The complaint insofar as the other eleven (11) complainants are concernedshould be, as it is hereby dismissed for want of jurisdiction.”[1]On appeal, the National Labor Relations Commission affirmed thequestioned decision in a resolution dated May 12, 1986, the dispositiveportion of which states as follows: chanroblespublishingcompany“WHEREFORE, premises considered, the decision appealed from is, as it ishereby AFFIRMED, and the appeal dismissed.”[2]

chanroblespublishingcompanyPresiding Commissioner Guillermo C. Medina merely concurred in the resultwhile Commissioner Gabriel M. Gatchalian rendered a dissenting opinionwhich states as follows:“I am for upholding employer-employee relationship as argued by thecomplainants before the Labor Arbiter and on appeal. The further fact thatthe proposed decision recognizes complainants’ status as piece-rate worker all the more crystallizes employer-employee relationship the benefits prayedfor must therefore be granted.”[3] chanroblespublishingcompanyHence, petitioners filed this instant certiorari case on the following grounds:“1. That the respondent National Labor Relations Commission abused itsdiscretion when it ruled that petitioner/complainant, Elias Villuga falls within

the category of a managerial employee; chanroblespublishingcompany“2. When it ruled that the herein petitioners were not dismissed by reason of their union activities;“3. When it ruled that petitioners Andres Abad, Benjamin Brizuela, NorlitoLadia, Marcelo Aguilan, David Oro, Nelia Brizuela, Flora Escobido, JustilitaCabaneg and Domingo Saguit were not employees of private respondentsbut were contractors. chanroblespublishingcompany“4. When it ruled that petitioner Elias Villuga is not entitled to overtime payand services for Sundays and Legal Holidays; and

“5. When it failed to grant petitioners their respective claims under theprovisions of P.D. Nos. 925, 1123 and 851.”[4]chanroblespublishingcompanyUnder Rule I, Section 2(c), Book III of the Implementing Rules of the Labor Code, to be a member of a managerial staff, the following elements mustconcur or co-exist, to wit: (1) that his primary duty consists of theperformance of work directly related to management policies; (2) that hecustomarily and regularly exercises discretion and independent judgment inthe performance of his functions; (3) that he regularly and directly assists inthe management of the establishment; and (4) that he does not devotetwenty per cent of his time to work other than those described above.chanroblespublishingcompany

Applying the above criteria to petitioner Elias Villuga’s case, it is undisputedthat his primary work or duty is to cut or prepare patterns for items to besewn, not to lay down or implement any of the management policies, asthere is a manager and an assistant manager who perform said functions. Itis true that in the absence of the manager and assistant manager, hedistributes and assigns work to employees but such duty, though involving

discretion, is occasional and not regular or customary. He had also theauthority to order the repair or resewing of defective items but such authorityis part and parcel of his function as cutter to see to it that the items cut aresewn correctly lest the defective nature of the workmanship be attributed tohis “poor cutting.” Elias Villuga does not participate in policy-making. Rather,the functions of his position involve execution of approved and establishedpolicies. In Franklin Baker Company of the Philippines vs. Trajano,[5] it washeld that employees who do not participate in policy-making but are givenready policies to execute and standard practices to observe are notmanagerial employees. The test of “supervisory or managerial status”depends on whether a person possesses authority that is not merelyroutinary or clerical in nature but one that requires use of independent

judgment. In other words, the functions of the position are not managerial innature if they only execute approved and established policies leaving little or no discretion at all whether to implement said policies or not.[6]chanroblespublishingcompanyConsequently, the exclusion of Villuga from the benefits claimed under

Article 87 (overtime pay and premium pay for holiday and rest day work), Article 94, (holiday pay), and Article 95 (service incentive leave pay) of theLabor Code, on the ground that he is a managerial employee is unwarranted.He is definitely a rank and file employee hired to perform the work of a cutter and not hired to perform

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supervisory or managerial functions. The fact that he is uniformly paid by themonth does not exclude him from the benefits of holiday pay as held in thecase of Insular Bank of America Employees Union vs. Inciong.[7] He shouldtherefore be paid in addition to the 13th month pay, his overtime pay, holidaypay, premium pay for holiday and rest day, and service incentive leave pay.chanroblespublishingcompany

As to the dismissal of the charge for unfair labor practices of privaterespondent consisting of termination of employment of petitioners and acts of discrimination against members of the labor union, the respondentCommission correctly held the absence of evidence that Mr. Zapanta wasaware of petitioner’s alleged union membership on February 22, 1978 as thenotice of union existence in the establishment with proposal for recognitionand collective bargaining negotiation was received by management only onMarch 3, 1978. Indeed, self-serving allegations without concrete proof thatthe private respondent knew of their membership in the union andaccordingly reacted against their membership do not suffice.Nor is private respondent’s claim that petitioner Villuga abandoned his workacceptable. For abandonment to constitute a valid cause for dismissal, there

must be a deliberate and unjustified refusal of the employee to resume hisemployment. Mere absence is not sufficient; it must be accompanied by overtacts unerringly pointing to the fact that the employee simply does not want towork anymore.[8] At any rate, dismissal of an employee due to his prolongedabsence without leave by reason of illness duly established by thepresentation of a medical certificate is not justified.[9] In the case at bar,however, considering that petitioner Villuga absented himself for four (4)days without leave and without submitting a medical certificate to support hisclaim of illness, the imposition of a sanction is justified, but surely, notdismissal, in the light of the fact that this is petitioner’s first offense. In lieu of reinstatement, petitioner Villuga should be paid separation pay wherereinstatement can no longer be effected in view of the long passage of time

or because of the realities of the situation.[10] But petitioner should not begranted backwages in addition to reinstatement as the same is not just andequitable under the circumstances considering that he was not entirely freefrom blame.[11] chanroblespublishingcompany

As to the other eleven petitioners, there is no clear showing that they weredismissed because the circumstances surrounding their dismissal were noteven alleged. However, we disagree with the finding of respondentCommission that the eleven petitioners are independent contractors.chanroblespublishingcompany

For an employer-employee relationship to exist, the following elements aregenerally considered: “(1) the selection and engagement of the employee; (2)the payment of wages; (3) the power of dismissal; and (4) the power tocontrol the employee’s conduct.”[12]Noting that the herein petitioners were oftentimes allowed to perform their work at home and were paid wages on a piece-rate basis, the respondentCommission apparently found the second and fourth elements lacking andruled that “there is no employer-employee relationship, for it is clear thatrespondents are interested only in the result and not in the means andmanner and how the result is obtained.” chanroblespublishingcompanyRespondent Commission is in error. The mere fact that petitioners were paidon a piece-rate basis is no argument that herein petitioners were notemployees. The term “wage” has been broadly defined in Article 97 of theLabor Code as remuneration or earnings, capable of being expressed interms of money whether fixed or ascertained on a time, task, piece or commission basis.” The facts of this case indicate that payment by the pieceis just a method of compensation and does not define the essence of therelations.[13] That petitioners were allowed to perform their work at home

does not likewise imply absence of control and supervision. The control testcalls merely for the existence of a right to control the manner of doing thework, not the actual exercise of the right.[14]In determining whether the relationship is that of employer and employee or one of an independent contractor, “each case must be determined on its ownfacts and all the features of the relationship are to be considered.”[15]Considering that petitioners who are either sewers, repairmen or ironer, havebeen in the employ of private respondent as early as 1972 or at the latest in1976, faithfully rendering services which are desirable or necessary for thebusiness of private respondent, and observing management’s approvedstandards set for their respective lines of work as well as the customers’specifications, petitioners should be considered employees, not independent

contractors. chanroblespublishingcompanyIndependent contractors are those who exercise independent employment,contracting to do a piece of work according to their own methods and withoutbeing subjected to control of their employer except as to the result of their work. By the nature of the different phases of work in a tailoring shop wherethe customers’ specifications must be followed to the letter, it isinconceivable that the workers therein would not be subjected to control.In Rosario Brothers, Inc. vs. Ople,[16] this Court ruled that tailors and similar workers hired in the tailoring department, although paid weekly wages onpiece-work basis, are employees not independent contractors. Accordingly,

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as regular employees, paid on a piece-rate basis, petitioners are not entitledto overtime pay, holiday pay, premium pay for holiday/rest day and serviceincentive leave pay. Their claim for separation pay should also be denied for lack of evidence that they were in fact dismissed by private respondent. Theyshould be paid, however, their 13th month pay under P.D. 851, since theyare employees not independent contractors. chanroblespublishingcompanyWHEREFORE, in view of the foregoing reasons, the assailed decision of respondent National Labor Relations Commission is hereby MODIFIED byawarding —(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave pay and separation pay, inaddition to his 13th month pay; and chanroblespublishingcompany(b) in favor of the rest of the petitioners, their respective 13th month pay.The case is hereby REMANDED to the National Labor RelationsCommission for the computation of the claims herein-above mentioned.chanroblespublishingcompanySO ORDERED.

9. Great Pacific Life Assurance Corp vs. Judico and NLRCG.R. No. 73887 December 21, 1989GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,vs.HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION,respondents.G.A. Fortun and Associates for petitioner.Corsino B. Soco for private respondent. PARAS J.:Before us is a Petition for certiorari to review the decision of the National

Labor Relations Commission (NLRC, for brevity) dated September 9, 1985reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983,by 1) ordering petitioner insurance company, Great Pacific Life AssuranceCorporation (Grepalife, for brevity) to recognize private respondent HonoratoJudico, as its regular employee as defined under Art. 281 of the Labor Codeand 2) remanding the case to its origin for the determination of privaterespondent Judico's money claims.The records of the case show that Honorato Judico filed a complaint for illegal dismissal against Grepalife, a duly organized insurance firm, beforethe NLRC Regional Arbitration Branch No. VII, Cebu City on August 27,

1982. Said complaint prayed for award of money claims consisting of separation pay, unpaid salary and 13th month pay, refund of cash bond,moral and exemplary damages and attorney's fees.Both parties appealed to the NLRC when a decision was rendered by theLabor Arbiter dismissing the complaint on the ground that the employer-employee relations did not exist between the parties but ordered Grepalife topay complainant the sum of Pl,000.00 by reason of Christian Charity.On appeal, said decision was reversed by the NLRC ruling that complainantis a regular employee as defined under Art. 281 of the Labor Code anddeclaring the appeal of Grepalife questioning the legality of the payment of Pl,000.00 to complainant moot and academic. Nevertheless, for the purposeof revoking the supersedeas bond of said company it ruled that the Labor

Arbiter erred in awarding Pl,000.00 to complainant in the absence of anylegal or factual basis to support its payment.Petitioner company moved to reconsider, which was denied, hence thispetition for review raising four legal issues to wit:I. Whether the relationship between insurance agents and their principal, theinsurance company, is that of agent and principal to be governed by the

Insurance Code and the Civil Code provisions on agency, or one of employer-employee, to be governed by the Labor Code.II. Whether insurance agents are entitled to the employee benefits prescribedby the Labor Code.III. Whether the public respondent NLRC has jurisdiction to take cognizanceof a controversy between insurance agent and the insurance company,arising from their agency relations.IV. Whether the public respondent acted correctly in setting aside thedecision of Labor Arbiter Vito J. Minoria and in ordering the case remandedto said Labor Arbiter for further proceedings.(p. 159, Rollo)The crux of these issues boil down to the question of whether or notemployer-employee relationship existed between petitioner and private

respondent.Petitioner admits that on June 9, 1976, private respondent Judico enteredinto an agreement of agency with petitioner Grepalife to become a debitagent attached to the industrial life agency in Cebu City. Petitioner defines adebit agent as "an insurance agent selling/servicing industrial life plans andpolicy holders. Industrial life plans are those whose premiums are payableeither daily, weekly or monthly and which are collectible by the debit agentsat the home or any place designated by the policy holder" (p. 156, Rollo).Such admission is in line with the findings of public respondent that as suchdebit agent, private respondent Judico had definite work assignments

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including but not limited to collection of premiums from policy holders andselling insurance to prospective clients. Public respondent NLRC also foundout that complainant was initially paid P 200. 00 as allowance for thirteen(13) weeks regardless of production and later a certain percentagedenominated as sales reserve of his total collections but not lesser than P200.00. Sometime in September 1981, complainant was promoted to theposition of Zone Supervisor and was given additional (supervisor's)allowance fixed at P110.00 per week. During the third week of November 1981, he was reverted to his former position as debit agent but, for unknownreasons, not paid so-called weekly sales reserve of at least P 200.00. Finallyon June 28, 1982, complainant was dismissed by way of termination of hisagency contract.Petitioner assails the findings of the NLRC that private respondent is anemployee of the former. Petitioner argues that Judico's compensation wasnot based on any fixed number of hours he was required to devote to theservice of petitioner company but rather it was the production or result of hisefforts or his work that was being compensated and that the so-calledallowance for the first thirteen weeks that Judico worked as debit agent,

cannot be construed as salary but as a subsidy or a way of assistance for transportation and meal expenses of a new debit agent during the initialperiod of his training which was fixed for thirteen (13) weeks. Statedotherwise, petitioner contends that Judico's compensation, in the form of commissions and bonuses, was based on actual production, (insuranceplans sold and premium collections).Said contentions of petitioner are strongly rejected by private respondent. Hemaintains that he received a definite amount as his Wage known as "salesreserve" the failure to maintain the same would bring him back to abeginner's employment with a fixed weekly wage of P 200.00 regardless of production. He was assigned a definite place in the office to work on when heis not in the field; and in addition to canvassing and making regular reports,

he was burdened with the job of collection and to make regular weekly reportthereto for which an anemic performance would mean dismissal. He earnedout of his faithful and productive service, a promotion to Zone Supervisor withadditional supervisor's allowance, (a definite or fixed amount of P110.00) thathe was dismissed primarily because of anemic performance and not becauseof the termination of the contract of agency substantiate the fact that he wasindeed an employee of the petitioner and not an insurance agent in theordinary meaning of the term.That private respondent Judico was an agent of the petitioner isunquestionable. But, as We have held in Investment Planning Corp. vs. SSS,

21 SCRA 294, an insurance company may have two classes of agents whosell its insurance policies: (1) salaried employees who keep definite hoursand work under the control and supervision of the company; and (2)registered representatives who work on commission basis. The agents whobelong to the second category are not required to report for work at anytime,they do not have to devote their time exclusively to or work solely for thecompany since the time and the effort they spend in their work dependentirely upon their own will and initiative; they are not required to account for their time nor submit a report of their activities; they shoulder their ownselling expenses as well as transportation; and they are paid their commission based on a certain percentage of their sales. One salient point inthe determination of employer-employee relationship which cannot be easilyignored is the fact that the compensation that these agents on commissionreceived is not paid by the insurance company but by the investor (or theperson insured). After determining the commission earned by an agent on hissales the agent directly deducts it from the amount he received from theinvestor or the person insured and turns over to the insurance company theamount invested after such deduction is made. The test therefore is whether

the "employer" controls or has reserved the right to control the "employee"not only as to the result of the work to be done but also as to the means andmethods by which the same is to be accomplished.

Applying the aforementioned test to the case at bar, We can readily see thatthe element of control by the petitioner on Judico was very much present.The record shows that petitioner Judico received a definite minimum amountper week as his wage known as "sales reserve" wherein the failure tomaintain the same would bring him back to a beginner's employment with afixed weekly wage of P 200.00 for thirteen weeks regardless of production.He was assigned a definite place in the office to work on when he is not inthe field; and in addition to his canvassing work he was burdened with the jobof collection. In both cases he was required to make regular report to the

company regarding these duties, and for which an anemic performancewould mean a dismissal. Conversely faithful and productive service earnedhim a promotion to Zone Supervisor with additional supervisor's allowance, adefinite amount of P110.00 aside from the regular P 200.00 weekly"allowance". Furthermore, his contract of services with petitioner is not for apiece of work nor for a definite period.On the other hand, an ordinary commission insurance agent works at hisown volition or at his own leisure without fear of dismissal from the companyand short of committing acts detrimental to the business interest of thecompany or against the latter, whether he produces or not is of no moment

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as his salary is based on his production, his anemic performance or evendead result does not become a ground for dismissal. Whereas, in privaterespondent's case, the undisputed facts show that he was controlled bypetitioner insurance company not only as to the kind of work; the amount of results, the kind of performance but also the power of dismissal.Undoubtedly, private respondent, by nature of his position and work, hadbeen a regular employee of petitioner and is therefore entitled to theprotection of the law and could not just be terminated without valid and

justifiable cause.Premises considered, the appealed decision is hereby AFFIRMED in toto.SO ORDERED.Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ .,concur.

10. Insular Life Assurance vs. NLRCINSULAR LIFE ASSURANCE CO., LTD., petitioner,vs.

NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO,respondents.Tirol & Tirol for petitioner.Enojas, Defensor & Teodosio Cabado Law Offices for private respondent. NARVASA, J.:On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply calledthe Company) and Melecio T. Basiao entered into a contract 1 by which:1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules andregulations" of the Company;2. he would receive "compensation, in the form of commissions ... as

provided in the Schedule of Commissions" of the contract to "constitute apart of the consideration of ... (said) agreement;" and3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as wellas all its circulars ... and those which may from time to time be promulgatedby it, ..." were made part of said contract.The contract also contained, among others, provisions governing therelations of the parties, the duties of the Agent, the acts prohibited to him,and the modes of termination of the agreement, viz.:RELATION WITH THE COMPANY. The Agent shall be free to exercise hisown judgment as to time, place and means of soliciting insurance. Nothing

herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the

Agent shall observe and conform to all rules and regulations which theCompany may from time to time prescribe.ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited fromgiving, directly or indirectly, rebates in any form, or from making anymisrepresentation or over-selling, and, in general, from doing or committingacts prohibited in the Agent's Manual and in circulars of the Office of theInsurance Commissioner.TERMINATION. The Company may terminate the contract at will, withoutany previous notice to the Agent, for or on account of ... (explicitly specifiedcauses). ...Either party may terminate this contract by giving to the other notice in writingto that effect. It shall become ipso facto cancelled if the InsuranceCommissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon itsexpiration. The Agent shall not have any right to any commission on renewalof premiums that may be paid after the termination of this agreement for any

cause whatsoever, except when the termination is due to disability or deathin line of service. As to commission corresponding to any balance of the firstyear's premiums remaining unpaid at the termination of this agreement, the

Agent shall be entitled to it if the balance of the first year premium is paid,less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust.

ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consentin writing of the Company. ...Some four years later, in April 1972, the parties entered into another contract— an Agency Manager's Contract — and to implement his end of it Basiaoorganized an agency or office to which he gave the name M. Basiao and

Associates, while concurrently fulfilling his commitments under the firstcontract with the Company. 2In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil actionand this, he was later to claim, prompted the latter to terminate also hisengagement under the first contract and to stop payment of his commissionsstarting April 1, 1980. 3Basiao thereafter filed with the then Ministry of Labor a complaint 4 againstthe Company and its president. Without contesting the termination of the firstcontract, the complaint sought to recover commissions allegedly unpaid

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thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company'semployee, but an independent contractor and that the Company had noobligation to him for unpaid commissions under the terms and conditions of his contract. 5The Labor Arbiter to whom the case was assigned found for Basiao. He ruledthat the underwriting agreement had established an employer-employeerelationship between him and the Company, and this conferred jurisdiction onthe Ministry of Labor to adjudicate his claim. Said official's decision directedpayment of his unpaid commissions "... equivalent to the balance of the firstyear's premium remaining unpaid, at the time of his termination, of all theinsurance policies solicited by ... (him) in favor of the respondentcompany ..." plus 10% attorney's fees. 6This decision was, on appeal by the Company, affirmed by the NationalLabor Relations Commission. 7 Hence, the present petition for certiorari andprohibition.The chief issue here is one of jurisdiction: whether, as Basiao asserts, hehad become the Company's employee by virtue of the contract invoked by

him, thereby placing his claim for unpaid commissions within the original andexclusive jurisdiction of the Labor Arbiter under the provisions of Section 217of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent contractor whoseclaim was thus cognizable, not by the Labor Arbiter in a labor case, but bythe regular courts in an ordinary civil action.The Company's thesis, that no employer-employee relation in the legal andgenerally accepted sense existed between it and Basiao, is drawn from theterms of the contract they had entered into, which, either expressly or bynecessary implication, made Basiao the master of his own time and sellingmethods, left to his judgment the time, place and means of solicitinginsurance, set no accomplishment quotas and compensated him on the basis

of results obtained. He was not bound to observe any schedule of workinghours or report to any regular station; he could seek and work on hisprospects anywhere and at anytime he chose to, and was free to adopt theselling methods he deemed most effective.Without denying that the above were indeed the expressed implicit conditionsof Basiao's contract with the Company, the respondents contend that they donot constitute the decisive determinant of the nature of his engagement,invoking precedents to the effect that the critical feature distinguishing thestatus of an employee from that of an independent contractor is control, thatis, whether or not the party who engages the services of another has the

power to control the latter's conduct in rendering such services. Pursuing theargument, the respondents draw attention to the provisions of Basiao'scontract obliging him to "... observe and conform to all rules and regulationswhich the Company may from time to time prescribe ...," as well as to the factthat the Company prescribed the qualifications of applicants for insurance,processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legalcontemplation, an employee of the Company. 9It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan 10... In determining the existence of employer-employee relationship, thefollowing elements are generally considered, namely: (1) the selection andengagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct — althoughthe latter is the most important element (35 Am. Jur. 445). ...has been followed and applied in later cases, some fairly recent. 11 Indeed, itis without question a valid test of the character of a contract or agreement torender service. It should, however, be obvious that not every form of control

that the hiring party reserves to himself over the conduct of the party hired inrelation to the services rendered may be accorded the effect of establishingan employer-employee relationship between them in the legal or technicalsense of the term. A line must be drawn somewhere, if the recognizeddistinction between an employee and an individual contractor is not to vanishaltogether. Realistically, it would be a rare contract of service that givesuntrammelled freedom to the party hired and eschews any interventionwhatsoever in his performance of the engagement.Logically, the line should be drawn between rules that merely serve asguidelines towards the achievement of the mutually desired result withoutdictating the means or methods to be employed in attaining it, and those thatcontrol or fix the methodology and bind or restrict the party hired to the use of

such means. The first, which aim only to promote the result, create noemployer-employee relationship unlike the second, which address both theresult and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is thebusiness of insurance, and is on that account subject to regulation by theState with respect, not only to the relations between insurer and insured butalso to the internal affairs of the insurance company. 12 Rules andregulations governing the conduct of the business are provided for in theInsurance Code and enforced by the Insurance Commissioner. It is,therefore, usual and expected for an insurance company to promulgate a set

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of rules to guide its commission agents in selling its policies that they maynot run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may beinsured, subject insurance applications to processing and approval by theCompany, and also reserve to the Company the determination of thepremiums to be paid and the schedules of payment. None of these really

invades the agent's contractual prerogative to adopt his own selling methodsor to sell insurance at his own time and convenience, hence cannot justifiablybe said to establish an employer-employee relationship between him and thecompany.There is no dearth of authority holding persons similarly placed asrespondent Basiao to be independent contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople,13 the Court ruled that a person engaged to sell soft drinks for another, usinga truck supplied by the latter, but with the right to employ his own workers,sell according to his own methods subject only to prearranged routes,observing no working hours fixed by the other party and obliged to secure hisown licenses and defray his own selling expenses, all in consideration of a

peddler's discount given by the other party for at least 250 cases of softdrinks sold daily, was not an employee but an independent contractor.In Investment Planning Corporation of the Philippines us. Social SecuritySystem 14 a case almost on all fours with the present one, this Court heldthat there was no employer-employee relationship between a commissionagent and an investment company, but that the former was an independentcontractor where said agent and others similarly placed were: (a) paidcompensation in the form of commissions based on percentages of their sales, any balance of commissions earned being payable to their legalrepresentatives in the event of death or registration; (b) required to put upperformance bonds; (c) subject to a set of rules and regulations governingthe performance of their duties under the agreement with the company and

termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for thecompany nor to submit a record of their activities, and who, finally,shouldered their own selling and transportation expenses.More recently, in Sara vs. NLRC, 15 it was held that one who had beenengaged by a rice miller to buy and sell rice and palay without compensationexcept a certain percentage of what he was able to buy or sell, did work athis own pleasure without any supervision or control on the part of hisprincipal and relied on his own resources in the performance of his work, wasa plain commission agent, an independent contractor and not an employee.

The respondents limit themselves to pointing out that Basiao's contract withthe Company bound him to observe and conform to such rules andregulations as the latter might from time to time prescribe. No showing hasbeen made that any such rules or regulations were in fact promulgated,much less that any rules existed or were issued which effectively controlledor restricted his choice of methods — or the methods themselves — of

selling insurance. Absent such showing, the Court will not speculate that anyexceptions or qualifications were imposed on the express provision of thecontract leaving Basiao "... free to exercise his own judgment as to the time,place and means of soliciting insurance."The Labor Arbiter's decision makes reference to Basiao's claim of havingbeen connected with the Company for twenty-five years. Whatever this ismeant to imply, the obvious reply would be that what is germane here isBasiao's status under the contract of July 2, 1968, not the length of hisrelationship with the Company.The Court, therefore, rules that under the contract invoked by him, Basiaowas not an employee of the petitioner, but a commission agent, anindependent contractor whose claim for unpaid commissions should have

been litigated in an ordinary civil action. The Labor Arbiter erred in takingcognizance of, and adjudicating, said claim, being without jurisdiction to doso, as did the respondent NLRC in affirming the Arbiter's decision. Thisconclusion renders it unnecessary and premature to consider Basiao's claimfor commissions on its merits.WHEREFORE, the appealed Resolution of the National Labor RelationsCommission is set aside, and that complaint of private respondent Melecio T.Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as tocosts.SO ORDERED.Cruz, Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

11. Makati Haberdashery vs. NLRCG.R. Nos. 83380-81 November 15, 1989MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G.INOCENCIO, petitioners,vs.

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NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA(Labor Arbiter, Department of Labor and Employment, National CapitalRegion), SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCPand its members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIOY. LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA,

ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA,

GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS,MERILYN A. VIRAY, LILY OPINA, JANET SANGDANG, JOSEFINA

ALCOCEBA and MARIA ANGELES, respondents.Ledesma, Saludo & Associates for petitioners.Pablo S. Bernardo for private respondents. FERNAN, C.J.:This petition for certiorari involving two separate cases filed by privaterespondents against herein petitioners assails the decision of respondentNational Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v.Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-

428-85 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCPetc., et al. v. Toppers Makati, et al.", affirming the decision of the Labor

Arbiter who jointly heard and decided aforesaid cases, finding: (a) petitionersguilty of illegal dismissal and ordering them to reinstate the dismissedworkers and (b) the existence of employer-employee relationship andgranting respondent workers by reason thereof their various monetaryclaims.The undisputed facts are as follows:Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery, Inc. as tailors, seamstress, sewers, basters(manlililip) and "plantsadoras". They are paid on a piece-rate basis exceptMaria Angeles and Leonila Serafina who are paid on a monthly basis. In

addition to their piece-rate, they are given a daily allowance of three (P 3.00)pesos provided they report for work before 9:30 a.m. everyday.Private respondents are required to work from or before 9:30 a.m. up to 6:00or 7:00 p.m. from Monday to Saturday and during peak periods even onSundays and holidays.On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers, filed a complaint docketed as NLRCNCR Case No. 7-2603-84 for (a) underpayment of the basic wage; (b)underpayment of living allowance; (c) non-payment of overtime work; (d)non-payment of holiday pay; (e) non-payment of service incentive pay; (f)

13th month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2,3, 4 and 5. 1During the pendency of NLRC NCR Case No. 7-2603-84, private respondentDioscoro Pelobello left with Salvador Rivera, a salesman of petitioner Haberdashery, an open package which was discovered to contain a "jusi"barong tagalog. When confronted, Pelobello replied that the same was

ordered by respondent Casimiro Zapata for his customer. Zapata allegedlyadmitted that he copied the design of petitioner Haberdashery. But in theafternoon, when again questioned about said barong, Pelobello and Zapatadenied ownership of the same. Consequently a memorandum was issued toeach of them to explain on or before February 4, 1985 why no action shouldbe taken against them for accepting a job order which is prejudicial and indirect competition with the business of the company. 2 Both respondentsallegedly did not submit their explanation and did not report for work. 3Hence, they were dismissed by petitioners on February 4, 1985. Theycountered by filing a complaint for illegal dismissal docketed as NLRC NCRCase No. 2-428-85 on February 5, 1985. 4On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the

dispositive portion of which reads:WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents guilty of illegal dismissal and ordering them toreinstate Dioscoro Pelobello and Casimiro Zapata to their respective or similar positions without loss of seniority rights, with full backwages from July4, 1985 up to actual reinstatement. The charge of unfair labor practice isdismissed for lack of merit.In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment re violation of the minimum wage law is hereby ordereddismissed for lack of merit.Respondents are hereby found to have violated the decrees on the cost of living allowance, service incentive leave pay and the 13th Month Pay. In view

thereof, the economic analyst of the Commission is directed to compute themonetary awards due each complainant based on the available records of the respondents retroactive as of three years prior to the filing of the instantcase.SO ORDERED. 5From the foregoing decision, petitioners appealed to the NLRC. The latter onMarch 30, 1988 affirmed said decision but limited the backwages awardedthe Dioscoro Pelobello and Casimiro Zapata to only one (1) year. 6

After their motion for reconsideration was denied, petitioners filed the instantpetition raising the following issues:

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ITHE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT ANEMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEENPETITIONER HABERDASHERY AND RESPONDENTS WORKERS.IITHE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT

RESPONDENTS WORKERS ARE ENTITLED TO MONETARY CLAIMSDESPITE THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUMWAGE.IIITHE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THATRESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLYDISMISSED. 7The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We have repeatedly held in countless decisions that thetest of employer-employee relationship is four-fold: (1) the selection andengagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct. It is the so

called "control test" that is the most important element. 8 This simply meansthe determination of whether the employer controls or has reserved the rightto control the employee not only as to the result of the work but also as to themeans and method by which the same is to be accomplished. 9The facts at bar indubitably reveal that the most important requisite of controlis present. As gleaned from the operations of petitioner, when a customer enters into a contract with the haberdashery or its proprietor, the latter directsan employee who may be a tailor, pattern maker, sewer or "plantsadora" totake the customer's measurements, and to sew the pants, coat or shirt asspecified by the customer. Supervision is actively manifested in all theseaspects — the manner and quality of cutting, sewing and ironing.Furthermore, the presence of control is immediately evident in this

memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr. datedMay 30, 1981 addressed to Topper's Makati Tailors which reads in part:4. Effective immediately, new procedures shall be followed:

A. To follow instruction and orders from the undersigned Roger Valderama,Ruben Delos Reyes and Ofel Bautista. Other than this person (sic) must askpermission to the above mentioned before giving orders or instructions to thetailors.B. Before accepting the job orders tailors must check the materials, joborders, due dates and other things to maximize the efficiency of our

production. The materials should be checked (sic) if it is matched (sic) withthe sample, together with the number of the job order.C. Effective immediately all job orders must be finished one day before thedue date. This can be done by proper scheduling of job order and if you willcooperate with your supervisors. If you have many due dates for certain day,advise Ruben or Ofel at once so that they can make necessary adjustment

on due dates.D. Alteration-Before accepting alteration person attending on customs (sic)must ask first or must advise the tailors regarding the due dates so that wecan eliminate what we call 'Bitin'.E. If there is any problem regarding supervisors or co-tailor inside our shop,consult with me at once settle the problem. Fighting inside the shop is strictlyprohibited. Any tailor violating this memorandum will be subject to disciplinaryaction.For strict compliance. 10From this memorandum alone, it is evident that petitioner has reserved theright to control its employees not only as to the result but also the means andmethods by which the same are to be accomplished. That private

respondents are regular employees is further proven by the fact that theyhave to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and arepaid an additional allowance of P 3.00 daily if they report for work before 9:30a.m. and which is forfeited when they arrive at or after 9:30 a.m. 11Since private respondents are regular employees, necessarily the argumentthat they are independent contractors must fail. As established in thepreceding paragraphs, private respondents did not exercise independence intheir own methods, but on the contrary were subject to the control of petitioners from the beginning of their tasks to their completion. Unlikeindependent contractors who generally rely on their own resources, theequipment, tools, accessories, and paraphernalia used by privaterespondents are supplied and owned by petitioners. Private respondents are

totally dependent on petitioners in all these aspects.Coming now to the second issue, there is no dispute that private respondentsare entitled to the Minimum Wage as mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing Presidential Decree No. 1614 andreiterated in Section 3(f), Rules Implementing Presidential Decree 1713which explicitly states that, "All employees paid by the result shall receive notless than the applicable new minimum wage rates for eight (8) hours work aday, except where a payment by result rate has been established by theSecretary of Labor. ..." 12 No such rate has been established in this case.

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But all these notwithstanding, the question as to whether or not there is infact an underpayment of minimum wages to private respondents has alreadybeen resolved in the decision of the Labor Arbiter where he stated: "Hence,for lack of sufficient evidence to support the claims of the complainants for alleged violation of the minimum wage, their claims for underpayment reviolation of the Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4, and

5 must perforce fall." 13The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the NLRC; neither did they file any petition raising thatissue in the Supreme Court. Accordingly, insofar as this case is concerned,that issue has been laid to rest. As to private respondents, the judgment maybe said to have attained finality. For it is a well-settled rule in this jurisdictionthat "an appellee who has not himself appealed cannot obtain from theappellate court-, any affirmative relief other than the ones granted in thedecision of the court below. " 14

As a consequence of their status as regular employees of the petitioners,they can claim cost of living allowance. This is apparent from the provisiondefining the employees entitled to said allowance, thus: "... All workers in the

private sector, regardless of their position, designation or status, andirrespective of the method by which their wages are paid. " 15Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 whichprovides:Section 3. Employers covered. — The Decree shall apply to all employersexcept to:xxx xxx xxx(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specificwork, irrespective of the time consumed in the performance thereof, exceptwhere the workers are paid on piece-rate basis in which case the employer

shall be covered by this issuance insofar as such workers are concerned.(Emphasis supplied.)On the other hand, while private respondents are entitled to Minimum Wage,COLA and 13th Month Pay, they are not entitled to service incentive leavepay because as piece-rate workers being paid at a fixed amount for performing work irrespective of time consumed in the performance thereof,they fall under one of the exceptions stated in Section 1(d), Rule V,Implementing Regulations, Book III, Labor Code. For the same reasonprivate respondents cannot also claim holiday pay (Section 1(e), Rule IV,Implementing Regulations, Book III, Labor Code).

With respect to the last issue, it is apparent that public respondents havemisread the evidence, for it does show that a violation of the employer's ruleshas been committed and the evidence of such transgression, the copiedbarong tagalog, was in the possession of Pelobello who pointed to Zapata asthe owner. When required by their employer to explain in a memorandumissued to each of them, they not only failed to do so but instead went on

AWOL (absence without official leave), waited for the period to explain toexpire and for petitioner to dismiss them. They thereafter filed an action for illegal dismissal on the far-fetched ground that they were dismissed becauseof union activities. Assuming that such acts do not constitute abandonment of their jobs as insisted by private respondents, their blatant disregard of their employer's memorandum is undoubtedly an open defiance to the lawfulorders of the latter, a justifiable ground for termination of employment by theemployer expressly provided for in Article 283(a) of the Labor Code as wellas a clear indication of guilt for the commission of acts inimical to theinterests of the employer, another justifiable ground for dismissal under thesame Article of the Labor Code, paragraph (c). Well established in our

jurisprudence is the right of an employer to dismiss an employee whose

continuance in the service is inimical to the employer's interest. 16In fact the Labor Arbiter himself to whom the explanation of privaterespondents was submitted gave no credence to their version and found their excuses that said barong tagalog was the one they got from the embroiderer for the Assistant Manager who was investigating them, unbelievable.Under the circumstances, it is evident that there is no illegal dismissal of saidemployees. Thus, We have ruled that:No employer may rationally be expected to continue in employment a personwhose lack of morals, respect and loyalty to his employer, regard for hisemployer's rules, and appreciation of the dignity and responsibility of hisoffice, has so plainly and completely been bared.That there should be concern, sympathy, and solicitude for the rights and

welfare of the working class, is meet and proper. That in controversiesbetween a laborer and his master, doubts reasonably arising from theevidence, or in the interpretation of agreements and writings should beresolved in the former's favor, is not an unreasonable or unfair rule. But thatdisregard of the employer's own rights and interests can be justified by thatconcern and solicitude is unjust and unacceptable. (Stanford Microsystems,Inc. v. NLRC, 157 SCRA 414-415 [1988] ).The law is protecting the rights of the laborer authorizes neither oppressionnor self-destruction of the employer. 17 More importantly, while theConstitution is committed to the policy of social justice and the protection of

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3. All the evidence adduced by the parties are hereby admitted, subject torebuttal and/or controvertion by either party during the hearing and thehearings hereafter.4. The Attorney's fee in favor of complainant's counsel is hereby fixed at two(2%) percent, assessable over whatever final money award complainant maybe entitled on the aggregate sums thereof, after proper hearing on the same.

All other claims and counter-claims are hereby dismissed for lack of merit,except those specified above.Finally, this case is remanded to the Regional Arbitration Branch of origin for further proceedings in accordance with the above judgment. No findings asto costs. (At pp. 66-67, Rollo)The petitioner's motion for reconsideration was denied, hence, this petitionfor review before this Court.The issues raised in this petition are:I. Whether or not the NLRC erred in ruling that an employment relationshipexisted between the parties; andII. Whether or not there was equitable basis for the award of 1/2 monthseparation pay for every year of service.

IIn determining whether a person who performs work for another is the latter'semployee or an independent contractor, the prevailing test is the "right of control" test. Under this test, an employer-employee relationship exists wherethe person for whom the services are performed reserves the right to controlnot only the end to be achieved, but also the manner and means to be usedin reaching that end.The petitioner argues that Maalat was never its employee for he was only acommission agent whose work was not subject to its control. CitingInvestment Planning Corporation of the Philippines v. Social Security System(21 SCRA 924 [1967]), the petitioner states that the work of its agentsapproximates that of an independent contractor since the agent is not under

control by the latter with respect to the means and methods employed in theperformance of the work, but only as to the results.The NLRC, after its perusal of the facts and evidence on record, stated thatthere exists an employment relationship between the parties. The petitioner has failed to overcome this factual finding.The fact that the petitioner imposed and applied its rule prohibiting superiorsfrom engaging in other funeral business which it considered inimical tocompany interests proves that it had the right of control and actuallyexercised its control over the private respondent. In other words, Maalatworked exclusively for the petitioner.

Moreover, the private respondent was prohibited from engaging in part-timeembalming business outside of the company and a violation thereof wascause for dismissal. Incurring absences without leave was likewise subject todisciplinary action: a reprimand for the first offense, one week suspension for the second offense, and dismissal for the third offense.The petitioner admits that these prohibitive rules bound the private

respondent but states that these rules have no bearing on the means andmethods ordinarily required of a supervisor. The overall picture is one of employment. The petitioner failed to prove that the contract with privaterespondent was but a mere agency, which indicates that a "supervisor" isfree to accomplish his work on his own terms and may engage in other means of livelihood.In Investment Planning Corporation, supra, cited by the petitioner, themajority of the "commission agents" are regularly employed elsewhere. Sucha circumstance is absent in Maalat's case. Moreover, the privaterespondent's job description states that ". . . he attends to the needs of theclientele and arranges the kind of casket and funeral services the customerswould like to avail themselves of" and indicates that he must always be on

the job or at least most of time.Likewise, the private respondent was not allowed to issue his own receipts,nor was he allowed to directly deduct his commission as truly independentsalesmen practice.Worthy of note too are two other company rules which provide that"negotiation and making of contract with customers shall be done inside theoffice" and "signing of contract should be made immediately before thecadaver or deceased is place in the casket." (Annex 10-B, Petitioner'sPosition Paper, Records) Said rules belie the petitioner's stand that it doesnot have control over the means and methods by which the work isaccomplished. The control test has been satisfied. (Social Security System v.Court of Appeals, 156 SCRA 383 [1987])

The finding by the public respondent that the petitioner has reported privaterespondent to the Social Security System as a covered employee addsstrength to the conclusion that Maalat is an employee.There is no reversible error in the findings of facts by the NLRC which aresupported by substantial evidence and which we, therefore, do not disturb onappeal.The payment of compensation by way of commission does not militateagainst the conclusion that private respondent was an employee. Under

Article 97 of the Labor Code, "wage" shall mean "the renumeration of earnings, however designated, capable of being expressed in terms of

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money, whether fixed or ascertained on a time, task, pace or commissionbasis . . .".The non-observance of regular office hours does not sufficiently show thatMaalat is a "supervisor on commission basis" nor does the same indicatethat he is an independent salesman. As a supervisor, although compensatedon commission basis, he is exempt from the observance of normal hours of

work for his compensation is measured by the number of sales he makes. Hemay not have had the usual fixed time for starting and ending his work as inother types of employment but he had to spend most of his working hours athis job. People die at all times of the day or night.

All considered, we rule that private respondent is an employee of petitioner corporation.IIThe petitioner impugns the award of separation pay equivalent to one-half (1/2) month average income for every year of service to private respondent.The NLRC ruled that:However, mindful of the fact the complainant Noli Maalat has servedrespondent company for the last twenty four (24) years, more or less, it is but

proper to afford him some equitable relief, consistent with the recent rulingsof the Supreme Court, due to his past services with no known previousrecord, and the ends of social and compassionate justice will thus be servedif he is paid a portion of his separation pay, equivalent to one-half (1/2)month every year of his service to said company. (See Soco v. MercantileCorporation, G.R. No. 53364-65, March 16, 1987; and Firestone, et al, v.Lariosa et al., G.R. No. 70479, February 27, 1987). We are not inclined togrant complainant his full month termination pay for every year of his servicebecause, unlike in the former Soco case, the misconduct of the employeemerely involves infraction of company rules while in the latter Firestone caseit involves misconduct of a rank-and-file employee, although similarlyinvolving acts of dishonesty. (At pp. 65-66, Rollo)

This Court will not disturb the finding by the NLRC that private respondentMaalat was dishonest in the discharge of his functions. The finding issufficiently supported by the evidence on record.

Additionally, the private respondent did not appeal from the NLRC decision,thereby impliedly accepting the validity of his dismissal.We take exception, therefore, to the grant of separation pay to privaterespondent.In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164SCRA 671 [1988]), this Court re-examined, the doctrine in the aforecitedFirestone and Soco cases and other previous cases that employees

dismissed for cause are nevertheless entitled to separation pay on theground of social and compassionate justice. In abandoning this doctrine, theCourt held, and we quote:. . . We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissedfor causes other than serious misconduct or those reflecting on his moral

character. Where the reason for the valid dismissal is, for example, habitualintoxication or an offense involving moral turpitude, like theft or illicit sexualrelations with a fellow worker, the employer may not be required to give thedismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect of rewarding rather than punishing the erring employee for his offense. . . .The policy of social justice is not intended to countenance wrongdoing simplybecause it is committed by the underprivileged. At best it may mitigate thepenalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not arascal claiming an undeserved privilege. . . .

Subsequent decisions have abided by this pronouncement. (See PhilippineNational Construction Corporation v. National Labor Relations Commission,170 SCRA 207 [1989]; Eastern Paper Mills, Inc. v. National Labor RelationsCommission, 170 SCRA 597 [1989]; Osias Academy v. National Labor Relations Commission, G.R. No. 83234, April 18, 1989; and Nasipit Lumber Co., Inc. v. National Labor Relations Commission, G.R. No. 54424, August31, 1989.)Conformably with the above cited PLDT ruling, this Court pronounces thatthe grant of separation pay to private respondent Maalat, who was validlyterminated for dishonesty, is not justified.Parenthetically, it may be mentioned that the Labor Arbiter, apparentlyunaware of the petition for review pending before this Court, conducted

further proceedings to compute private respondent's separation pay,unclaimed commission and 2% attorney's fees, in compliance with the NLRCdecision of May 31, 1988. After hearing, the Labor Arbiter rendered adecision on May 10, 1989, the pertinent portion of which reads:In sum, the sustainable claims of complainant are as follows:(1) Separation Pay : P 76,064.40(2) Unpaid Commissions : 39,344.80——————Sub-total : P 115,409.20(3) 2% Attorney's Fees : 2,308.18

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——————P 117, 717.38WHEREFORE, judgment is hereby rendered ordering respondentCosmopolitan Funeral Homes, Inc., to pay complainant Noli Maalat hisclaims above set forth in the total amount of P117,717.38 only.Neither party appealed from said decision.

For being in conflict with our holding that the private respondent is notentitled to separation pay, this Court sets aside the Labor Arbiter'scomputation of separation pay. However, we uphold his computation of unclaimed commissions amounting to P39,344.80. The amount of attorney'sfee should consequently be recomputed at 2% of P39,344.80 or P786.89.WHEREFORE, the judgment of the National Labor Relations Commission is

AFFIRMED except for the grant of separation pay which is herebydisallowed. Private respondent Maalat is entitled to unclaimed commissionsof P39,344.80 and 2% attorney's fees of P786.89, said amounts beingconsidered final.SO ORDERED.Feliciano, Bidin and Cortes, JJ., concur.

Fernan, C.J., is on leave.

13. Sara vs. AgarradoDR. RENATO SARA and/or ROMEO ARAÑA,Petitioners,-versus- G.R. No. L-73199October 26, 1988CERILA AGARRADO and the NATIONAL LABOR RELATIONSCOMMISSION,Respondents.x---------------------------------------------------x

D E C I S I O NFERNAN, C.J.:Challenged in this petition for certiorari is the jurisdiction of the Labor Tribunal over Case No. LRD-ROXII-006-82, a claim for unpaid commissionsand reimbursement of certain sums of money filed by herein privaterespondent Cerila Agarrado against herein petitioners Dr. Renato Sara andRomeo Araña. chanroblespublishingcompanyPrivate respondent Cerila Agarrado was an attendant in the clinic of petitioner Dr. Renato Sara. She quit her job in 1973.chanroblespublishingcompany

Four years later, petitioners Dr. Sara and Romeo Araña, being owners of arice mill and having begun to engage in the buy and sell of palayand rice, entered into a verbal agreement with private respondent Agarradowhereby it was agreed that the latter would be paid P2.00 commission per sack of milled rice sold as well as a commission of 10% per kilo of palaypurchased. It was further agreed that private respondent would spend her

own money for the undertaking, but to enable her to carry out the agreementmore effectively, she was authorized to borrow money from other persons, asin fact she did, subject to reimbursement by petitioners.[1]In 1982, private respondent filed with the National Labor RelationsCommission (NLRC) Regional Arbitration Branch No. XI, Cotabato City, acomplaint against petitioner for unpaid commission of P4,598.00 on milledrice sold, P2,982.80 on palay sold, reimbursement of P17,500.00 which shehad borrowed from various persons and P1,749.00 of her own money whichpetitioners allegedly had not reimbursed (LRD-ROXII-006-82).By way of defense, petitioners raised the issue of lack of jurisdiction on thepart of the Labor Arbiter to take cognizance of the case, there being noemployer-employee relationship between the parties. They averred that the

claim for alleged unpaid commission and certain sums of money is governedby the law on agency under the Civil Code and hence a purely civil obligationcognizable by the regular courts.On January 17, 1973, Labor Arbiter Magno C. Cruz rendered a decision infavor of private respondent ordering petitioners to pay all the claimsamounting to P26,397.80.[2]Petitioner appealed the decision to the NLRC, which in a resolution datedJune 25, 1986 affirmed the Labor Arbiter’s decision and dismissed theappeal.[3]Their motion for reconsideration having been denied, petitioners took thepresent recourse, maintaining lack of jurisdiction on the part of the Labor Tribunal as well as grave abuse of discretion on its part in finding them liable

to private respondent. chanroblespublishingcompanyIn his comment, the Solicitor General agreed with petitioners that there wasno employer-employee relationship between the parties and that by reasonthereof the Labor Arbiter had no jurisdiction over the case. The Solicitor General’s comment was accompanied by amanifestation and motion stating that he was filing the comment on his ownbehalf and that the public respondent NLRC had been informed about hiscontrary stand.[4]The primordial issue in this case is whether an employer-employeerelationship exists between petitioners and private respondent as to warrant

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cognizance by the Labor Arbiter of LRD-ROXII-006-82.chanroblespublishingcompanyTo determine the existence of an employer-employee relationship, this Courtin a long line of decisions[5] has invariably applied the following four-fold test:[1] the selection and engagement of the employee; [2] the payment of wages;[3] the power of dismissal; and [4] the power to control and employee’s

conduct.In the case at bar, we find that although there was a selection andengagement of private respondent in 1977, the verbal agreement betweenthe parties negated the existence of the other requisites.chanroblespublishingcompany

As to the payment of wages, the verbal agreement entered into by the partiesstipulated that parties respondent would be paid a commission of P2.00 per sack of milled rice sold as well as a 10% commission on palay purchase. Thearrangement thus was explicitly on a commission basis dependent on thevolume of sale or purchase. Private respondent was not guaranteed anyminimum compensation nor was she allowed any drawing account or advance of any kind against unearned commissions. Her right to

compensation depended upon and was measured by the tangible results sheproduced — the quantity of rice sold and the quantity of palay purchased.chanroblespublishingcompanyThe power to terminate the relationship was mutually vested upon theparties. Either may terminate the business arrangement at will, with or without cause.Finally, noticeably absent from the agreement between the parties is theelement of control. Among the four (4) requisites, control is deemed the mostimportant that the other requisites may even be disregarded.[6] Under thecontrol test, an employer-employee relationship exists if the “employer” hasreserved the right to control the “employee” not only as to the result of thework done but also as

to the means and methods by which the same is to be accomplished.[7]Otherwise, no such relationship exists. chanroblespublishingcompanyWe observe that the means and methods of purchasing and selling rice or palay by private respondent were totally independent of petitioners’ control.

As established by the NLRC:Sometime in June 1977, respondent re-engaged the services of hereincomplainant to sell milled rice to the customers of the former, as well as tobuy palay for and in behalf of Dr. Renato Sara, with the verbal agreementthat to carry out effectively the said task, complainant was duly authorized byrespondent, Dr. Sara to spend her own money, if necessary but subject to

reimbursement, and if that would not be sufficient, to borrow money fromother sources with further understanding that Dr. Sara will repay them thruthe complainant; ([Emphasis supplied], p. 21, Rollo)chanroblespublishingcompanyNote that private respondent was never given capital by his supposedemployer but relied on her own resources and if insufficient, she borrowed

money from others. Petitioner did not supply private respondent with toolsand appliances needed to enable her to carry her undertaking, except toauthorize her to borrow money from others, subject to reimbursement.The absence of control is made more evident by the fact that privaterespondent was not even obliged to sell the palay she purchased topetitioners. She was at liberty to sell the palay to any trader offering higher buying rates. She was thus free to sell it to anybody whom she pleased.Moreover, private respondent worked for petitioners at her own pleasure andwas not subject to definite hours or conditions to work. She could evendelegate the task of buying and selling to others, if she so desired, sosimultaneously engaged in other means of livelihood while selling andpurchasing rice or palay. chanroblespublishingcompany

Under the conditions set forth in their agreement, private respondent was anindependent contractor, who exercising independent employment, contractedto do a price of work according to her ownmethod and without being subject to the control of her employer except as tothe result of her work. She was paid for the result of her labor, unlike anemployee who is paid for the labor he performs.[8]The verbal agreement devoid as it was of any stipulations indicative of control leaves no doubt that private respondent was not an employee of petitioners but was rather an independent contractor.chanroblespublishingcompanyThe Labor Tribunal’s jurisdiction being primarily predicated upon theexistence of an employer-employee relationship between the parties, the

absence of such element, as in the case at bar, removes the controversyfrom the scope of its limited jurisdiction.WHEREFORE, the instant petition for certiorari is granted. Case No. LRD-ROXII-006-82 of the National Labor Relations Commission is hereby orderedDISMISSED for lack of jurisdiction. chanroblespublishingcompanySO ORDERED.Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

14. Investment Planning Corp of the Phils. vs. SSSG.R. No. L-19124 November 18, 1967

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INVESTMENT PLANNING CORPORATION OF THE PHILIPPINES,petitioner-appellant,vs.SOCIAL SECURITY SYSTEM, respondent-appellee.MAKALINTAL, J.:Petitioner is a domestic corporation engaged in business management and

the sale of securities. It has two classes of agents who sell its investmentplans: (1) salaried employees who keep definite hours and work under thecontrol and supervision of the company; and (2) registered representativeswho work on commission basis.On August 27, 1960 petitioner, through counsel, applied to respondent SocialSecurity Commission for exemption of its so-called registeredrepresentatives from the compulsory coverage of the Social Security Act.The application was denied in a letter signed by the Secretary to theCommission on January 16, 1961. A motion to reconsider was filed and alsodenied, after hearing, by the Commission itself in its resolution datedSeptember 8, 1961. The matter was thereafter elevated to this Court for review.

The issue submitted for decision here is whether petitioner's registeredrepresentatives are employees within the meaning of the Social Security Act(R.A. No. 1161 as amended). Section 8 (d) thereof defines the term"employee" — for purposes of the Act — as "any person who performsservices for an 'employer' in which either or both mental and physical effortsare used and who receives compensation for such services, where there is,employer-employee relationship." (As amended by Sec.4, R.A. No. 2658).These representatives are in reality commission agents. The uncontradictedtestimony of petitioner's lone witness, who was its assistant sales director, isthat these agents are recruited and trained by him particularly for the job of selling "'Filipinos Mutual Fund" shares, made to undergo a test after suchtraining and, if successful, are given license to practice by the Securities and

Exchange Commission. They then execute an agreement with petitioner withrespect to the sale of FMF shares to the general public. Among the featuresof said agreement which respondent Commission considered pertinent to theissue are: (a) an agent is paid compensation for services in the form of commission; (b) in the event of death or resignation he or his legalrepresentative shall be paid the balance of the commission corresponding tohim; (c) he is subject to a set of rules and regulations governing theperformance of his duties under the agreement; (d) he is required to put up aperformance bond; and (e) his services may be terminated for certaincauses. At the same time the Commission found from the evidence and so

stated in its resolution that the agents "are not required to report (for work) atany time; they do not have to devote their time exclusively to or work solelyfor petitioner; the time and the effort they spend in their work depend entirelyupon their own will and initiative; they are not required to account for their time nor submit a record of their activities; they shoulder their own sellingexpenses as well as transportation; and they are paid their commission

based on a certain percentage of their sales." The record also reveals thatthe commission earned by an agent on his sales is directly deducted by himfrom the amount he receives from the investor and turns over to the companythe amount invested after such deduction is made. The majority of the agentsare regularly employed elsewhere — either in the government or in privateenterprises.Of the three requirements under Section 8 (d) of the Social Security Act it isadmitted that the first is present in respect of the agents whose status is inquestion. They exert both mental and physical efforts in the performance of their services. The compensation they receive, however, is not necessarilyfor those efforts but rather for the results thereof, that is, for actual sales thatthey make. This point is relevant in the determination of whether or not the

third requisite is also present, namely, the existence of employer-employeerelationship. Petitioner points out that in effect such compensation is paid notby it but by the investor, as shown by the basis on which the amount of thecommission is fixed and the manner in which it is collected.Petitioner submits that its commission agents, engaged under the terms andconditions already enumerated, are not employees but independentcontractors, as defined in Article 1713 of the Civil Code, which provides:

Art. 1713. By the contract for a piece of work the contractor binds himself toexecute a piece of work for the employer, in consideration of a certain priceor compensation. The contractor may either employ only his labor or skill, or also furnish the material.We are convinced from the facts that the work of petitioner's agents or

registered representatives more nearly approximates that of an independentcontractor than that of an employee. The latter is paid for the labor heperforms, that is, for the acts of which such labor consists; the former is paidfor the result thereof. This Court has recognized the distinction in CharteredBank, et al. vs. Constantino, 56 Phil. 717, where it said:On this point, the distinguished commentator Manresa in referring to Article1588 of the (Spanish) Civil Code has the following to say. . . .The code does not begin by giving a general idea of the subject matter, butby fixing its two distinguishing characteristics.

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vs.PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIALRELATIONS, respondents-appellees.x---------------------------------------------------------xG.R. No. L-12598 January 28, 1961SAMPAGUITA PICTURES, INC., petitioner-appellant,

vs.PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIALRELATIONS, respondents-appellees.Nicanor S. Sison for petitioner-appellant.Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.CONCEPCION, J.:Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek areview by certiorari of an order of the Court of Industrial Relations in CaseNo. 306-MC thereof, certifying the Philippine Musicians Guild (FFW),petitioner therein and respondent herein, as the sole and exclusivebargaining agency of all musicians working with said companies, as well as

with the Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R.No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they dothe same order, the two cases have been jointly heard in this Court, and willsimilarly be disposed of.In its petition in the lower court, the Philippine Musicians Guild (FFW),hereafter referred to as the Guild, averred that it is a duly registeredlegitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures,Inc., and Premiere Productions, Inc. are corporations, duly organized under the Philippine laws, engaged in the making of motion pictures and in theprocessing and distribution thereof; that said companies employ musiciansfor the purpose of making music recordings for title music, background

music, musical numbers, finale music and other incidental music, withoutwhich a motion picture is incomplete; that ninety-five (95%) percent of all themusicians playing for the musical recordings of said companies are membersof the Guild; and that the same has no knowledge of the existence of anyother legitimate labor organization representing musicians in said companies.Premised upon these allegations, the Guild prayed that it be certified as thesole and exclusive bargaining agency for all musicians working in theaforementioned companies. In their respective answers, the latter denied thatthey have any musicians as employees, and alleged that the musicalnumbers in the filing of the companies are furnished by independent

contractors. The lower court, however, rejected this pretense and sustainedthe theory of the Guild, with the result already adverted to. A reconsiderationof the order complained of having been denied by the Court en banc, LVNPictures, inc., and Sampaguita Pictures, Inc., filed these petitions for reviewfor certiorari.

Apart from impugning the conclusion of the lower court on the status of the

Guild members as alleged employees of the film companies, the LVNPictures, Inc., maintains that a petition for certification cannot be entertainedwhen the existence of employer-employee relationship between the parties iscontested. However, this claim is neither borne out by any legal provision nor supported by any authority. So long as, after due hearing, the parties arefound to bear said relationship, as in the case at bar, it is proper to pass uponthe merits of the petition for certification.It is next urged that a certification is improper in the present case, because,"(a) the petition does not allege and no evidence was presented that thealleged musicians-employees of the respondents constitute a proper bargaining unit, and (b) said alleged musicians-employees represent amajority of the other numerous employees of the film companies constituting

a proper bargaining unit under section 12 (a) of Republic Act No. 875."The absence of an express allegation that the members of the Guildconstitute a proper bargaining unit is fatal proceeding, for the same is not a"litigation" in the sense in which this term is commonly understood, but amere investigation of a non-adversary, fact finding character, in which theinvestigating agency plays the part of a disinterested investigator seekingmerely to ascertain the desires of employees as to the matter of their representation. In connection therewith, the court enjoys a wide discretion indetermining the procedure necessary to insure the fair and free choice of bargaining representatives by employees.1 Moreover, it is alleged in thepetition that the Guild it a duly registered legitimate labor organization andthat ninety-five (95%) percent of the musicians playing for all the musical

recordings of the film companies involved in these cases are members of theGuild. Although, in its answer, the LVN Pictures, Inc. denied both allegations,it appears that, at the hearing in the lower court it was merely the status of the musicians as its employees that the film companies really contested.Besides, the substantial difference between the work performed by saidmusicians and that of other persons who participate in the production of afilm, and the peculiar circumstances under which the services of that former are engaged and rendered, suffice to show that they constitute a proper bargaining unit. At this juncture, it should be noted that the action of the lower court in deciding upon an appropriate unit for collective bargaining purposes

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'employers'. In this light, the language of the Act's definition of 'employee' or 'employer' should be determined broadly in doubtful situations, by underlyingeconomic facts rather than technically and exclusively established legalclassifications. (NLRB vs. Blount, 131 F [2d] 585.)In other words, the scope of the term 'employee' must be understood withreference to the purposes of the Act and the facts involved in the economic

relationship. Where all the conditions of relation require protection, protectionought to be given .By declaring a worker an employee of the person for whom he works and byrecognizing and protecting his rights as such, we eliminate the cause of industrial unrest and consequently we promote industrial peace, because weenable him to negotiate an agreement which will settle disputes regardingconditions of employment, through the process of collective bargaining.The statutory definition of the word 'employee' is of wide scope. As used inthe Act, the term embraces 'any employee' that is all employees in theconventional as well in the legal sense expect those excluded by expressprovision. (Connor Lumber Co., 11 NLRB 776.).It is the purpose of the policy of Republic Act 875; (a) To eliminate the

causes of industrial unrest by protecting the exercise of their right to self-organization for the purpose of collective bargaining. (b) To promote soundstable industrial peace and the advancement of the general welfare, and thebest interests of employers and employees by the settlement of issuesrespecting terms and conditions of employment through the process of collective bargaining between employers and representatives of their employees.The primary consideration is whether the declared policy and purpose of the

Act can be effectuated by securing for the individual worker the rights andprotection guaranteed by the Act. The matter is not conclusively determinedby a contract which purports to establish the status of the worker, not as anemployee.

The work of the musical director and musicians is a functional and integralpart of the enterprise performed at the same studio substantially under thedirection and control of the company.In other words, to determine whether a person who performs work for another is the latter's employee or an independent contractor, the NationalLabor Relations relies on 'the right to control' test. Under this test anemployer-employee relationship exist where the person for whom theservices are performed reserves the right to control not only the end to beachieved, but also the manner and means to be used in reaching the end.(United Insurance Company, 108, NLRB No. 115.).

Thus, in said similar case of Connor Lumber Company, the Supreme Courtsaid:.'We find that the independent contractors and persons working under themare employees' within the meaning of Section 2 (3) of its Act. However, weare of the opinion that the independent contractors have sufficient authorityover the persons working under their immediate supervision to warrant their

exclusion from the unit. We shall include in the unit the employees workingunder the supervision of the independent contractors, but exclude thecontractors.''Notwithstanding that the employees are called independent contractors', theBoard will hold them to be employees under the Act where the extent of theemployer's control over them indicates that the relationship is in reality one of employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.).The right of control of the film company over the musicians is shown (1) bycalling the musicians through 'call slips' in 'the name of the company; (2) byarranging schedules in its studio for recording sessions; (3) by furnishingtransportation and meals to musicians; and (4) by supervising and directing

in detail, through the motion picture director, the performance of themusicians before the camera, in order to suit the music they are playing tothe picture which is being flashed on the screen.Thus, in the application of Philippine statutes and pertinent decisions of theUnited States Courts on the matter to the facts established in this case, wecannot but conclude that to effectuate the policies of the Act and by virtue of the 'right of control' test, the members of the Philippine Musicians Guild areemployees of the three film companies and, therefore, entitled to right of collective bargaining under Republic Act No. 875.In view of the fact that the three (3) film companies did not question theunion's majority, the Philippine Musicians Guild is hereby declared as thesole collective bargaining representative for all the musicians employed by

the film companies."We are fully in agreement with the foregoing conclusion and the reasonsgiven in support thereof. Both are substantially in line with the spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen andSecurity Union, L-12214-17 (May 28, 1958). In fact, the contention of theemployers in the Maligaya cases, to the effect that they had dealt withindependent contractors, was stronger than that of the film companies inthese cases. The third parties with whom the management and the workerscontracted in the Maligaya cases were agencies registered with the Bureauof Commerce and duly licensed by the City of Manila to engage in the

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by petitioner MAM Realty Development Corporation. No specialpronouncement on costs.SO ORDERED.Feliciano, Romero, Melo and Francisco, JJ., concur

17. Zanotte Shoes vs. NLRCG.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 andCARMELITA DE DIOS, respondents. VITUG, J.:This petition for certiorari assails the 24th April 1991 resolution of respondentNational Labor Relations Commission ("NLRC"), as well as its resolution of

30 May 1991 denying a motion for reconsideration, which has dismissedherein 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 variousmonetary claims, including the recovery of damages and attorney's fees,against petitioners. In their supplemental position paper, the complainantssubsequently confined themselves to the illegal dismissal charge andabandoned the monetary claims. One of the original eight complainants,Virgilio Alcunaba, decided to resume his work with petitioners, thus leavingthe rest to pursue the case. Private respondents averred that they started towork for petitioners on, respectively, the following dates:

NAMEDATE1Joseph LluzMarch, 19852Noel AdarayanFeb. 17, 19803

Rogelio SiraJanuary, 19824Lolito LluzMarch, 19825

Virginia HeresanoMay, 19876Genelito Heresano20-Oct-877Carmelita de DiosJanuary, 1975 1

that they worked for a minimum of twelve hours daily, including Sundays andholidays 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 anincrease 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 onlyseasonal, 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 topetitioners, were engaged on purely contractual basis and paid the ratesconformably 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 andthat the former were regular employees of the latter. Accordingly,respondents are hereby directed to pay all complainants their respectiveseparation 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 thefollowing amounts:1Joseph LluzP 7,488.00(3 yrs. & 7 mos.)

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2Noel Adarayan12,636.00(8 yrs. & 8 mos.)3Rogelio Sira

8,828.00(6 yrs. & 9 mos.)4Lolito Lluz8,828.00(6 yrs. & 7 mos.)5Genelito Heresano1,404.00(1 year)6Virginia Heresano

665.00(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 asattorney's fees.SO ORDERED. 3

An appeal was interposed by petitioners. The NLRC, on 24 April 1991,sustained the findings of the Labor Arbiter and dismissed the appeal. On 30May 1991, the NLRC denied petitioners' motion for reconsideration.Hence, the instant petition.In his comment, dated 14 October 1991, the Solicitor General moved for themodification of NLRC's resolution of 24 April 1991. While conceding that anemployer-employee relationship existed between petitioners and private

respondents, the Solicitor General, nevertheless, expressed strongreservations on the award of separation pay in view of the findings by boththe Labor Arbiter and the NLRC that there was neither dismissal nor abandonment in the case at bench. The NLRC submitted its own commenton 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 notfinality, and will not be disturbed absent any showing that substantialevidence which might otherwise affect the result of the case has beendiscarded. We see no reason, in this case at bench, for disturbing thefindings of the Labor Arbiter and the NLRC on the existence of an employer-employee relationship between herein private parties. The work of privaterespondents is clearly related to, and in the pursuit of, the principal businessactivity of petitioners. The indicia used for determining the existence of anemployer-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 theemployee 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 methodsby which the work is to be accomplished. The requirement, so herein posedas an issue, refers to the existence of the right to control and not necessarilyto the actual exercise of the right. In Dy Keh Beng v. International Labor andMarine Union of the Philippines, et al., 4 the Court has held:While this Court up holds the control test under which an employer-employeerelationship exists "where the person for whom the services are performedreserves a right to control not only the end to be achieved but also the meansto be used in reaching such end," it finds no merit with petitioner's argumentsas stated above. It should be borne in mind that the control test calls merelyfor the existence of the right to control the manner of doing the work, not theactual 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 Dywould have to observe, among others, Dy's requirements of size and qualityof the kaing. Some control would necessarily be exercised by Dy'sspecifications. Parenthetically, since the work on the baskets is done at Dy'sestablishments, it can be inferred that the proprietor Dy could easily exercisecontrol on the men he employed.We share the opinion of the Solicitor General that the award of separationpay to private respondents appears, nonetheless, to be unwarranted.

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preliminary injunction. Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered thedismissal 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 hereinappellees 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 thefollowing assignment of errors:I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATUREOF 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 WORLDSERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE

RELATION AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENTWAS ONE OF JOINT BUSINESS VENTURE.III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-

APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYINGTHAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEETOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEESHAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROMTHE 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 GUARANTORFOR RENTALS.On the foregoing facts and in the light of the errors asigned the issues to beresolved are:1. Whether the appellee Tourist World Service unilaterally disco thetelephone line at the branch office on Ermita;2. Whether or not the padlocking of the office by the Tourist World Servicewas actionable or not; and

3. Whether or not the lessee to the office premises belonging to the appelleeNoguera was appellees TWS or TWS and the appellant.In this appeal, appealant Lina Sevilla claims that a joint bussiness venturewas entered into by and between her and appellee TWS with offices at theErmita branch office and that she was not an employee of the TWS to theend 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 eminenteye, ear and nose specialist as well as a imediately columnist had been inthe travel business prior to the establishment of the joint business venturewith appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of one of his children, with her ownclientele, coming mostly from her own social circle (pp. 3-6 tsn. February16,1965).2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19October 1960 (Exh. 'A') covering the premises at A. Mabini St., she expresslywarranting and holding [sic] herself 'solidarily' liable with appellee TouristWorld 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 TouristWorld Service, Inc., which had its own, separate office located at the Trade &Commerce Building; nor was she an employee thereof, having noparticipation in nor connection with said business at the Trade & CommerceBuilding (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 appelleeTourist World Service, Inc.) obtained from the airline companies. She sharedthe 7% commissions given by the airline companies giving appellee TouristWorld 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 andsupplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appelleeTourist World Service, Inc. shouldering the rental and other expenses inconsideration 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 wouldbe 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

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61965-testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants'Reply Brief)Upon the other hand, appellee TWS contend that the appellant was anemployee of the appellee Tourist World Service, Inc. and as such wasdesignated manager. 1xxx xxx xxx

The trial court 2 held for the private respondent on the premise that theprivate respondent, Tourist World Service, Inc., being the true lessee, it waswithin its prerogative to terminate the lease and padlock the premises. 3 Itlikewise found the petitioner, Lina Sevilla, to be a mere employee of saidTourist World Service, Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of Appeal 5 rendered an affirmance.The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state:ITHE COURT OF APPEALS ERRED ON A QUESTION OF LAW ANDGRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THEPADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC.

WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINASEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OFHER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE

APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKINGINCIDENT, WAS IN CONFERENCE WITH THE CORPORATESECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THEPERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP

AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT(SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLETHE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND

ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERESTO THE RULE OF LAW.

IITHE COURT OF APPEALS ERRED ON A QUESTION OF LAW ANDGRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLARELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMPPROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BYBOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)IIITHE COURT OF APPEALS ERRED ON A QUESTION OF LAW ANDGRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOTPASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION

FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ONRELATIONS.IVTHE COURT OF APPEALS ERRED ON A QUESTION OF LAW ANDGRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANTSEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN

JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEASTITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BETERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLDSERVICE INC. 6

As a preliminary inquiry, the Court is asked to declare the true nature of therelation between Lina Sevilla and Tourist World Service, Inc. The respondentCourt 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 entitledthe latter to the relief of damages prayed for and whether or not the evidencefor the said appellant supports the contention that the appellee Tourist WorldService, Inc. unilaterally and without the consent of the appellant

disconnected the telephone lines of the Ermita branch office of the appelleeTourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the leaseexecuted with the private respondent, Segundina Noguera. The petitionerscontend, however, that relation between the between parties was one of jointventure, but concede that "whatever might have been the true relationshipbetween Sevilla and Tourist World Service," the Rule of Law enjoined TouristWorld Service and Canilao from taking the law into their own hands, 8 inreference to the padlocking now questioned.The Court finds the resolution of the issue material, for if, as the privaterespondent, Tourist World Service, Inc., maintains, that the relation between

the parties was in the character of employer and employee, the courts wouldhave been without jurisdiction to try the case, labor disputes being theexclusive 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 evidenceof an employer-employee relation. In general, we have relied on the so-calledright of control test, "where the person for whom the services are performedreserves a right to control not only the end to be achieved but also the meansto be used in reaching such end." 10 Subsequently, however, we haveconsidered, in addition to the standard of right-of control, the existing

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economic conditions prevailing between the parties, like the inclusion of theemployee in the payrolls, in determining the existence of an employer-employee relationship. 11The records will show that the petitioner, Lina Sevilla, was not subject tocontrol by the private respondent Tourist World Service, Inc., either as to theresult 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 Ermitaoffice, she had bound herself in solidum as and for rental payments, anarrangement that would be like claims of a master-servant relationship. Truethe respondent Court would later minimize her participation in the lease asone of mere guaranty, 12 that does not make her an employee of TouristWorld, since in any case, a true employee cannot be made to part with hisown money in pursuance of his employer's business, or otherwise, assumeany 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 branchoffice was opened, the same was run by the herein appellant Lina O. Sevillapayable to Tourist World Service, Inc. by any airline for any fare brought in

on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot besaid that Sevilla was under the control of Tourist World Service, Inc. "as tothe 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 remaining3% going to Tourist World. Unlike an employee then, who earns a fixedsalary usually, she earned compensation in fluctuating amounts dependingon her booking successes.The fact that Sevilla had been designated 'branch manager" does not makeher, ergo, Tourist World's employee. As we said, employment is determinedby 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, asa consequence, accepting Lina Sevilla's own, that is, that the parties hadembarked on a joint venture or otherwise, a partnership. And apparently,Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service,Inc.'s] right to stop the operation of your branch office 14 in effect, acceptingTourist World Service, Inc.'s control over the manner in which the businesswas run. A joint venture, including a partnership, presupposes generally a of standing between the joint co-venturers or partners, in which each party has

an equal proprietary interest in the capital or property contributed 15 andwhere each party exercises equal rights in the conduct of the business. 16furthermore, the parties did not hold themselves out as partners, and thebuilding 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.'sErmita office, she must have done so pursuant to a contract of agency. It isthe essence of this contract that the agent renders services "inrepresentation or on behalf of another. 18 In the case at bar, Sevilla solicitedairline fares, but she did so for and on behalf of her principal, Tourist WorldService, Inc. As compensation, she received 4% of the proceeds in theconcept 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 thebusiness undertaking. We are convinced, considering the circumstances andfrom the respondent Court's recital of facts, that the ties had contemplated aprincipal 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 atwill. The reason is that it is one coupled with an interest, the agency havingbeen created for mutual interest, of the agent and the principal. 19 It appearsthat Lina Sevilla is a bona fide travel agent herself, and as such, she hadacquired an interest in the business entrusted to her. Moreover, she hadassumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, usingher 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 thepower 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, todamages. As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent thedisconnection issue, it is the holding of the Court of Appeals that there is 'noevidence showing that the Tourist World Service, Inc. disconnected thetelephone lines at the branch office. 20 Yet, what cannot be denied is the factthat Tourist World Service, Inc. did not take pains to have them reconnected.

Assuming, therefore, that it had no hand in the disconnection now

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complained of, it had clearly condoned it, and as owner of the telephonelines, it must shoulder responsibility therefor.The Court of Appeals must likewise be held to be in error with respect to thepadlocking incident. For the fact that Tourist World Service, Inc. was thelessee named in the lease con-tract did not accord it any authority toterminate that contract without notice to its actual occupant, and to padlock

the premises in such fashion. As this Court has ruled, the petitioner, LinaSevilla, 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 incharge of rental payments (solidarily with Tourist World, Inc.). She could notbe ousted from possession as summarily as one would eject an interloper.The Court is satisfied that from the chronicle of events, there was indeedsome malevolent design to put the petitioner, Lina Sevilla, in a bad lightfollowing disclosures that she had worked for a rival firm. To be sure, therespondent court speaks of alleged business losses to justify the closure '21but there is no clear showing that Tourist World Ermita Branch had in factsustained such reverses, let alone, the fact that Sevilla had moonlit for

another company. What the evidence discloses, on the other hand, is thatfollowing such an information (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutionsabolishing the office of 'manager" and authorizing the corporate secretary,the respondent Eliseo Canilao, to effect the takeover of its branch officeproperties. On January 3, 1962, the private respondents ended the leaseover the branch office premises, incidentally, without notice to her.It was only on June 4, 1962, and after office hours significantly, that theErmita office was padlocked, personally by the respondent Canilao, on thepretext that it was necessary to Protect the interests of the Tourist WorldService. " 22 It is strange indeed that Tourist World Service, Inc. did not findsuch 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 informher of the closure, but surely, it was aware that after office hours, she couldnot have been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely itsbusiness 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 isoffensive, 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 beawarded 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 tothe 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 amanner that is contrary to morals, good customs or public policy shallcompensate the latter for the damage. 24

ART. 2219. Moral damages 25 may be recovered in the following andanalogous cases:xxx xxx xxx(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and35.The respondent, Eliseo Canilao, as a joint tortfeasor is likewise herebyordered 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 TouristWorld Service, Inc. in the disconnection and padlocking incidents. Shecannot therefore be held liable as a cotortfeasor.The Court considers the sums of P25,000.00 as and for moral damages,24P10,000.00 as exemplary damages, 25 and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable under thecircumstances.WHEREFORE, the Decision promulgated on January 23, 1975 as well as theResolution issued on July 31, 1975, by the respondent Court of Appeals ishereby REVERSED and SET ASIDE. The private respondent, Tourist WorldService, Inc., and Eliseo Canilao, are ORDERED jointly and severally toindemnify 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 thesum of P5,000.00, as and for nominal and/or temperate damages.Costs against said private respondents.SO ORDERED.Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur

19. Cabalan Pastulan Negrito Labor Assoc vs. NLRCG.R. No. 106108 February 23, 1995

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CAPANELA even had to write to the Resident Officer-in-Charge of theFacility Support Contracts at Subic Bay recommending the reinstatement of private respondent to his former position. 28Under their arrangement, CAPANELA, through its officers, could only imposedisciplinary sanctions upon its members for infractions of its own rules andregulations, to the extent of ousting a member from the association when

called for under the circumstances. Nonetheless, such called termination of membership in the association, which could result in curtailment of theprivilege of working at the Base inasmuch as employment therein wasconditioned upon membership in CAPANELA, is not equivalent to the illegaldismissal from employment contemplated in our labor laws. Petitioners, notbeing the employer, obviously could not arrogate unto themselves anemployer's prerogatives of hiring and firing workers.

As succinctly pointed out by the Solicitor General:True, there was a stipulation to the effect that Fernando Sanchez wasemployed by petitioner CAPANELA, but the real employer was the UnitedStates government and petitioner was just a "labor-only contractor." Annexes"G" and "H" of CAPANELA's Memorandum on Appeal show that the award or

contract of work was between CAPANELA and the United Statesgovernment through the U.S. Navy. The same contract likewise clearlystipulated that CAPANELA was "to provide labor and material to performtrash sorting services in the Base period for all work specified in Section C."

Annex "A" of complainant Fernando Sanchez' Answer to petitioner'sMemorandum on Appeal itself proves that the negotiation was betweenCAPANELA and the U.S. Navy, with the former supplying the labor and theU.S. government paying the wages. Since CAPANELA merely provided thelabor force, it cannot be deduced therefrom that CAPANELA should alsocompensate the laborers; it is a case of non sequitur. In other words, theactual mechanical act of making payments was done by CAPANELA, but themonies therefor were provided and disbursements made by the disbursing

officer of the U.S. Naval Supply Depot, Subic Bay (see Annexes "G" and"H").Moreover, ingress and egress in the work premises were controlled not byCAPANELA but by the U.S. Base authorities who could even reject entry of CAPANELA members then duly employed as part of the project, and imposedisciplinary sanctions against them. Annex "1" of petitioners' Position Paper as respondent in the NLRC Case No. RAB-III-01-193 1-91, which was theletter of Lt. M.E. Kistner of the U.S. Navy, clearly proves this. 29 (Emphasisin the original text.)

Prevailing case law enumerates the essential elements of an employer-employee relationship as: (a) the selection and engagement of the employee;(b) the payment of wages; (c) the power of dismissal; and (d) the power of control with regard to the means and methods by which the work is to beaccomplished, with the power of control being the most determinative factor.30

The Solicitor General pertinently illustrates the glaring absence of theseelements in the present case:. . . , as aforeshown, CAPANELA had no control of the premises as it was theU.S. naval authorities who had the power to issue passes or deny their issuance. In fact, CAPANELA did not have absolute control on thedisciplinary measures to be imposed on its members employed in the Base.

Annex "1" of CAPANELA's Position Paper submitted before the NLRCRegional Arbitration Branch established the U.S. Navy's right to imposedisciplinary measures for violations or infractions of its rules and regulationsas well as the right to recommend suspensions or dismissals of the workers.Moreover, it was not shown that CAPANELA had control of the means andmethods or manner by which the workers were to go about their work. These

are indeed strong indicia of the U.S. Navy's right of control over the workersas direct employer.Third, there is evidence to prove that payment of wages was merely donethrough CAPANELA, but the source of payment was actually the U.S.government paying workers according to the volume of work accomplishedon rates agreed upon between CAPANELA and the U.S. government. . . . 31It would, therefore, be inutile to discuss the matter of the legality or illegalityof the dismissal of private respondent. Considering that petitioners cannotlegally be considered as the employer of herein private respondent, it followsthat it cannot be made liable as such nor be required to bear theresponsibility for the legal consequences of the charge of illegal dismissal.Granting arguendo that private respondent was illegally dismissed, the action

should properly be directed against the U.S. government which, through theBase authorities, was the true employer in this case.Neither can petitioners be deemed to have been engaged in permissible jobcontracting under the law, for failure to satisfy the following prescribedconditions:1. The contractor carries on an independent business and undertakes thecontract work on his own account under his own responsibility according tohis own manner and method, free from the control and direction of hisemployer or principal in all matters connected with performance of the workexcept as to the results thereof; and

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2. The contractor has substantial capital or investment in the form of tools,equipment, machineries, work premises and other materials which arenecessary in the conduct of his business. 32In the present case, the setup was such that CAPANELA was merely taskedwith organizing the Negritos to facilitate the orderly administration of workmade available to them at the base facilities, that is, sorting scraps for

recycling. CAPANELA recorded the attendance of its members andsubmitted the same to the Base authorities for the determination of wagesdue them and the preparation of the payroll. Payment of wages was coursedthrough CAPANELA but the funds therefor came from the coffers of theBase. Once inside the Base, control over the means and methods of workwas exercised by the Base authorities. Accordingly, CAPANELA functionedas just an administrator of its Negrito members employed at the Base.From the legal standpoint, CAPANELA's activities may at most beconsidered akin to that of labor-only contracting, albeit of a special or peculiar type, wherein CAPANELA, operating like a contractor, merely actedas an agent or intermediary of the employer. 33The Solicitor General ramifies this aspect:

. . . , petitioner CAPANELA could not be classified as an "independentcontractor" because it was not shown that it has substantial capital or investments to qualify as such under the law. On the other hand, it wasapparent that the premises, tools, equipment, and other paraphernalia usedby the workers were all supplied by the U.S. government through the U.S.Navy. What CAPANELA supplied was only the local labor force, complainantFernando Sanchez among them. It is therefore clear that CAPANELA had nocapital outlay involved in the business or in the maintenance thereof. 34While it is not denied that an association or a labor organization or union canat times be an employer insofar as people hired by it to dispose of itsbusiness are concerned, 35 the situation in this case is altogether different. Aproper and necessary distinction should be made between the employees of

CAPANELA who actually attended to its myriad functions as an associationand its members who were employed in the jobsite inside the Base vis-a-visCAPANELA's relative position as the employer of the former and a mereadministrator with respect to the latter.On the matter of the perfection of an appeal from the decision of the NLRC,petitioners plead for a more considerate and humane application of the lawas would allow their appeal to prosper despite non-posting of a supersedeasbond on account of their insolvency. To dismiss the appeal for failure to postsaid bond, petitioners aver, is tantamount to denial of the constitutionallyguaranteed right of access to courts by reason of poverty. 36 Private

respondent, on the other hand, argues that perfection of an appeal within thereglementary period and in compliance with all requirements of the lawtherefor is jurisdictional. That petitioners do not have the funds for thepremiums for posting a supersedeas bond or for a cash deposit, disdainfullysays private respondent, "is not in the least our problem." 37We have no quarrel with the provision of Article 223 of the Labor Code

which, in part and among others, requires that in case of a judgmentinvolving a monetary award, an appeal by the employer may be perfectedonly upon posting of a cash or surety bond issued by a reputable bondingcompany duly accredited by the commission in the amount equivalent to themonetary award in the judgment appealed from. Perfection of an appealwithin the period and in the manner prescribed by law is jurisdictional 38 andnon-compliance with such legal requirements is fatal and has the effect of rendering the judgment final and executory. 39However, in a number of recent cases, 40 the Court has eased therequirement of posting a bond, as a condition for perfection of appeals inlabor cases, when to do so would bring about the immediate and appropriateresolution of controversies on the merits without over-indulgence in

technicalities, 41 ever mindful of the underlying spirit and intention of theLabor Code to ascertain the facts of each case speedily and objectivelywithout regard to technical rules of law and procedure, all in the interest of due process. 42 Punctilious adherence to stringent technical rules may berelaxed in the interest of the working man, 43 and should not defeat thecomplete and equitable resolution of the rights and obligations of the parties.44 Moreover, it is the duty of labor officials to consider their decisions andinquire into the correctness of execution, as supervening events may affectsuch execution. 45The Solicitor General realistically assesses the situation, thus:. . . As aforestated, above the technical consideration on whether failure topost a supersedeas bond was fatal to petitioners' appeal is the importance of

first resolving whether there was indeed an employer-employee relationshipin this case so as not to render the execution of the NLRC's resolutionunenforceable or impossible to implement. . . . Besides, it is of public noticethat the U.S. Navy had withdrawn from the Subic Base in view of thetermination of the Bases Treaty. Even if CAPANELA were ordered toreinstate complainant Fernando Sanchez, this is obviously an impossiblething to perform as there is no longer any work to be done inside the Base.Nor is petitioner CAPANELA in a position to pay Sanchez's back wagesconsidering that it was the U.S. Navy that paid his wages. . . . 46

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In light of the circumstances in this case, the Solicitor General further suggests two ways of writing finis to this dispute, i.e., to reconsider publicrespondent's resolution of February 28, 1992 and April 30, 1992 andreinstate petitioner's appeal to give the latter a chance to prove CAPANELA'sinsolvency or poverty, or to reverse the decision of the labor arbiter on theground that there was no employer-employee relationship between petitioner

CAPANELA and private respondent Sanchez. Harmonizing our evaluation of the facts of this case with the greater interests of social justice, andconsidering that the parties involved are those upon whose socio-economicstatus we prefaced this opinion, we opt for the latter.While this Court, when it finds that a lower court or quasi-judicial body is inerror, may simply and conveniently nullify the challenged decision, resolutionor order and remand the case thereto for further appropriate action, it is wellwithin the conscientious exercise of its broad review powers to refrain fromdoing so and instead choose to render judgment on the merits when allmaterial facts have been duly laid before it as would buttress its ultimateconclusion, in the public interest and for the expeditious administration of

justice, such as where the ends of justice would not be subserved by the

remand of the case. 47IN VIEW OF ALL THE FOREGOING PREMISES, the resolutions of February28, 1992 and April 30, 1992 of respondent National Labor RelationsCommission are accordingly ANNULLED, and the adjudgment of Labor

Arbiter Dominador B. Saludares in NLRC Case No. RAB III 01-1931-91 ishereby REVERSED and SET ASIDE.SO ORDERED.Narvasa, C.J., Bidin, Puno and Mendoza, JJ., concur.20. Continental Marble Corp vs. NLRCCONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner,vs.NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR

JOSE T. COLLADO and RODITO NASAYAO, respondents.Benito P. Fabie for petitioners.Narciso C. Parayno, Jr. for respondents. PADILLA, J.:In this petition for mandamus, prohibition and certiorari with preliminaryinjunction, petitioners seek to annul and set aside the decision rendered bythe respondent Arbitrator Jose T. Collado, dated 29 December 1975, inNLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versusContinental Marble Corp. and Felipe David, respondents," and the resolution

issued by the respondent Commission, dated 7 May 1976, which dismissedherein petitioners' appeal from said decision.In his complaint before the NLRC, herein private respondent Rodito Nasayaoclaimed that sometime in May 1974, he was appointed plant manager of thepetitioner corporation, with an alleged compensation of P3,000.00, a month,or 25% of the monthly net income of the company, whichever is greater, and

when the company failed to pay his salary for the months of May, June, andJuly 1974, Rodito Nasayao filed a complaint with the National Labor Relations Commission, Branch IV, for the recovery of said unpaid varies. Thecase was docketed therein as NLRC Case No. LR-6151.

Answering, the herein petitioners denied that Rodito Nasayao was employedin the company as plant manager with a fixed monthly salary of P3,000.00.They claimed that the undertaking agreed upon by the parties was a jointventure, a sort of partnership, wherein Rodito Nasayao was to keep themachinery in good working condition and, in return, he would get thecontracts from end-users for the installation of marble products, in which thecompany would not interfere. In addition, private respondent Nasayao was toreceive an amount equivalent to 25% of the net profits that the petitioner

corporation would realize, should there be any. Petitioners alleged that sincethere had been no profits during said period, private respondent was notentitled to any amount.The case was submitted for voluntary arbitration and the parties selected theherein respondent Jose T. Collado as voluntary arbitrator. In the course of the proceedings, however, the herein petitioners challenged the arbitrator'scapacity to try and decide the case fairly and judiciously and asked him todesist from further hearing the case. But, the respondent arbitrator refused.In due time, or on 29 December 1975, he rendered judgment in favor of thecomplainant, ordering the herein petitioners to pay Rodito Nasayao theamount of P9,000.00, within 10 days from notice. 1Upon receipt of the decision, the herein petitioners appealed to the National

Labor Relations Commission on grounds that the labor arbiter gravelyabused his discretion in persisting to hear and decide the casenotwithstanding petitioners' request for him to desist therefrom: and that theappealed decision is not supported by evidence. 2On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal onthe ground that the decision of the voluntary arbitrator is final, unappealable,and immediately executory; 3 and, on 23 March 1976, he filed a motion for the issuance of a writ of execution. 4

Acting on the motions, the respondent Commission, in a resolution dated 7May 1976, dismissed the appeal on the ground that the decision appealed

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from is final, unappealable and immediately executory, and ordered theherein petitioners to comply with the decision of the voluntary arbitrator within10 days from receipt of the resolution. 5The petitioners are before the Court in the present recourse. As prayed for,the Court issued a temporary restraining order, restraining hereinrespondents from enforcing and/or carrying out the questioned decision and

resolution. 6The issue for resolution is whether or not the private respondent RoditoNasayao was employed as plant manager of petitioner Continental MarbleCorporation with a monthly salary of P3,000.00 or 25% of its monthly income,whichever is greater, as claimed by said respondent, or entitled to receiveonly an amount equivalent to 25% of net profits, if any, that the companywould realize, as contended by the petitioners.The respondent arbitrator found that the agreement between the parties wasfor the petitioner company to pay the private respondent, Rodito Nasayao, amonthly salary of P3,000.00, and, consequently, ordered the company to payRodito Nasayao the amount of P9,000.00 covering a period of three (3)months, that is, May, June and July 1974.

The respondent Rodito Nasayao now contends that the judgment or award of the voluntary arbitrator is final, unappealable and immediately executory, andmay not be reviewed by the Court. His contention is based upon theprovisions of Art. 262 of the Labor Code, as amended.The petitioners, upon the other hand, maintain that "where there is patentand manifest abuse of discretion, the rule on unappealability of awards of avoluntary arbitrator becomes flexible and it is the inherent power of theCourts to maintain the people's faith in the administration of justice." Thequestion of the finality and unappealability of a decision and/or award of avoluntary arbitrator had been laid to rest in Oceanic Bic Division (FFW) vs.Romero, 7 and reiterated in Mantrade FMMC Division Employees andWorkers Union vs. Bacungan. 8 The Court therein ruled that it can review the

decisions of voluntary arbitrators, thus-We agree with the petitioner that the decisions of voluntary arbitrators mustbe given the highest respect and as a general rule must be accorded acertain measure of finality. This is especially true where the arbitrator chosenby the parties enjoys the first rate credentials of Professor Flerida RuthPineda Romero, Director of the U.P. Law Center and an academician of unquestioned expertise in the field of Labor Law. It is not correct, however,that this respect precludes the exercise of judicial review over their decisions.

Article 262 of the Labor Code making voluntary arbitration awards final,inappealable, and executory except where the money claims exceed P l

00,000.00 or 40% of paid-up capital of the employer or where there is abuseof discretion or gross incompetence refers to appeals to the National Labor Relations Commission and not to judicial review.Inspite of statutory provisions making 'final' the decisions of certainadministrative agencies, we have taken cognizance of petitions questioningthese decisions where want of jurisdiction, grave abuse of discretion,

violation of due process, denial of substantial justice, or erroneousinterpretation of the law were brought to our attention. There is no provisionfor appeal in the statute creating the Sandiganbayan but this has notprecluded us from examining decisions of this special court brought to us inproper petitions. ...The Court further said:

A voluntary arbitrator by the nature of her fucntions acts in quasi-judicialcapacity. There is no reason why herdecisions involving interpretation of lawshould be beyond this Court's review. Administrative officials are presumedto act in accordance with law and yet we do hesitate to pass upon their workwhere a question of law is involved or where a showing of abuse of authorityor discretion in their official acts is properly raised in petitions for certiorari.

The foregoing pronouncements find support in Section 29 of Republic ActNo. 876, otherwise known as the Arbitration Law, which provides:Sec. 29. Appeals — An appeal may be taken from an order made in aproceeding under this Act, or from a judgment entered upon an awardthrough certiorari proceedings, but such appeals shall be limited to questionsof law. The proceedings upon such an appeal, including the judgmentthereon shall be governed by the Rules of Court in so far as they areapplicable.The private respondent, Rodito Nasayao, in his Answer to the petition, 9 alsoclaims that the case is premature for non-exhaustion of administrativeremedies. He contends that the decision of the respondent Commissionshould have been first appealed by petitioners to the Secretary of Labor, and,

if they are not satisfied with his decision, to appeal to the President of thePhilippines, before resort is made to the Court.The contention is without merit. The doctrine of exhaustion of administrativeremedies cannot be invoked in this case, as contended. In the recent case of John Clement Consultants, Inc. versus National Labor RelationsCommission, 10 the Court said:

As is well known, no law provides for an appeal from decisions of theNational Labor Relations Commission; hence, there can be no review andreversal on appeal by higher authority of its factual or legal conclusions.When, however, it decides a case without or in excess of its jurisdiction, or

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with grave abuse of discretion, the party thereby adversely affected mayobtain a review and nullification of that decision by this Court through theextraordinary writ of certiorari. Since, in this case, it appears that theCommission has indeed acted without jurisdiction and with grave abuse of discretion in taking cognizance of a belated appeal sought to be taken from adecision of Labor Arbiter and thereafter reversing it, the writ of certiorari will

issue to undo those acts, and do justice to the aggrieved party.We also find no merit in the contention of Rodito Nasayao that only questionsof law, and not findings of fact of a voluntary arbitrator may be reviewed bythe Court, since the findings of fact of the voluntary arbitrator are conclusiveupon the Court.While the Court has accorded great respect for, and finality to, findings of factof a voluntary arbitrator 11 and administrative agencies which have acquiredexpertise in their respective fields, like the Labor Department and theNational Labor Relations Commission, 12 their findings of fact and theconclusions drawn therefrom have to be supported by substantial evidence.ln that instant case, the finding of the voluntary arbitrator that RoditoNasayao was an employee of the petitioner corporation is not supported by

the evidence or by the law.On the other hand, we find the version of the petitioners to be more plausibleand in accord with human nature and the ordinary course of things. Aspointed out by the petitioners, it was illogical for them to hire the privaterespondent Rodito Nasayao as plant manager with a monthly salary of P3,000.00, an amount which they could ill-afford to pay, considering that thebusiness was losing, at the time he was hired, and that they were about toclose shop in a few months' time.Besides, there is nothing in the record which would support the claim of Rodito Nasayao that he was an employee of the petitioner corporation. Hewas not included in the company payroll, nor in the list of companyemployees furnished the Social Security System.

Most of all, the element of control is lacking. In Brotherhood Labor UnityMovement in the Philippines vs. Zamora, 13 the Court enumerated thefactors in determining whether or not an employer-employee relationshipexists, to wit:In determining the existence of an employer-employee relationship, theelements that are generally considered are the following: (a) the selectionand engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee withrespect to the means and methods by which the work is to be accomplished.It is the so-called "control test" that is the most important element

(Investment Planning Corp. of the Phils. vs. The Social Security System, 21SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc.v. Ople, 131 SCRA 72).<äre||anº•1àw>In the instant case, it appears that the petitioners had no control over theconduct of Rodito Nasayao in the performance of his work. He decided for himself on what was to be done and worked at his own pleasure. He was not

subject to definite hours or conditions of work and, in turn, was compensatedaccording to the results of his own effort. He had a free hand in running thecompany and its business, so much so, that the petitioner Felipe David didnot know, until very much later, that Rodito Nasayao had collected oldaccounts receivables, not covered by their agreement, which he converted tohis own personal use. It was only after Rodito Nasayao had abandoned theplant following discovery of his wrong- doings, that Felipe David assumedmanagement of the plant.

Absent the power to control the employee with respect to the means andmethods by which his work was to be accomplished, there was no employer-employee relationship between the parties. Hence, there is no basis for anaward of unpaid salaries or wages to Rodito Nasayao.

WHEREFORE, the decision rendered by the respondent Jose T. Collado inNLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versusContinental Marble Corp. and Felipe David, respondents," on 29 December 1975, and the resolution issued by the respondent National Labor RelationsCommission in said case on 7 May 1976, are REVERSED and SET ASIDEand another one entered DISMISSING private respondent's complaints. Thetemporary restraning order heretofore isued by the Court is made permanent.Without costs.21. Iloilo Chinese Commercial School vs. Fabrigar ILOILO CHINESE COMMERCIAL SCHOOL, Petitioner, vs. LEONORAFABRIGAR and THE WORKMEN'S COMPENSATION COMMISSION,Respondents.

PAREDES, J.: chanrobles virtual law library As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs inthe person of Leonora Fabrigar (common-law wife) and their children, filed aclaim for compensation with the Workmen's Compensation Commission,Case No. 1085, W.C.C., entitled "Leonora Fabrigar, et al., Claimants, vs.Iloilo Chinese Commercial School, Respondent." In this claim, it was allegedthat the cause of death was " pulmonary tuberculosis contracted during andas a result of his employment as janitor." The Hearing Officer of the WCCdenied the claim and dismissed the case, finding that the claimant failed toprove the casual effect of employment and death; nothing was shown that

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the disease was contracted in line of duty; that whatever evidence claimantpresented about the cause of death was only a mere suggestion thatprogressively developed from tuberculosis with heart trouble to a suddenfatal turn, ending up for the cause of "beriberi adult" at the time of death, asper certification of Sanitary Inspector Dr. P. E. Labitoria, of Dao, Capiz(Exhibits C & 4).chanroblesvirtualawlibrary chanrobles virtual law library

The heirs of Santiago Fabrigar appealed the decision with the Workmen'sCompensation Commission which, on November 12, 1959, rendered judgment reversing the decision of its Hearing Officer, making the followingfindings of facts: chanrobles virtual law libraryThat Santiago Fabrigar had been employed from 1947 to March 12, 1956, asa janitor-messenger of the respondent Iloilo Chinese Commercial School, hiswork consisting of sweeping and scrubbing the floors, cleaning theclassrooms and the school premises, and other janitorial chores; on March11, 1956, preparatory to graduation day, he carried desks and chairs fromthe classrooms to the auditorium, set the curtains and worked harder andfaster than usual; that although he felt shortness of breath and did not feelvery well that day, he continued working at the request of the overseer of

respondent, that on the following day he reported for work, but on March 13,he spat blood and stopped working; that from April 29, 1956 to May 15, 1956,he was under treatment by Dr. Quirico Villareal "for far advanced pulmonarytuberculosis and for heart disease"; and that previous to said treatment, hewas attended by Dr. Jaranilla for pulmonary tuberculosis. The Commissionconcluded that the short period of intervention between his last day of work(March 13, 1956) when he spat blood and his death on June 28, 1956, due topulmonary tuberculosis, indicated that he had been suffering from suchdisease even during the time he was employed by the respondent andconsidering the strenuous work he performed, his employment as janitor aggravated his pre-existing illness; that although here is a discrepancybetween the cause of death "beriberi adult," as appearing in the death

Certificate and the testimony of Dr. Villareal, the latter deserves morecredence, because the information (cause of death) was given by thesanitary inspector who did not, in any way, examine the deceased before or after his death. The Commission, therefore, ordered the respondent ChineseCommercial School, Inc., in said case -1. To pay to the claimant, for and in behalf of her minor children by thedeceased, namely, Carlito, Gloria, Rosita and Ernesto, all surnamedFabrigar, the amount of TWO THOUSAND FOUR HUNDRED NINETY SIXand 00/00 Pesos (P2,496.00) as Death benefits; and chanrobles virtual lawlibrary

2. To pay to the Commission the amount of P25.00 as fees pursuant toSection 55 of Act 3428, as amended.The above decision is now before Us for Review on a Writ of Certiorari, after the motion for reconsideration had been denied, petitioner alleging that theCommission erred:1. In disregarding completely the evidentiary value of the death certificate of

the attending physician which was presented as evidence by both claimantsand respondent (Exhibits C & 4) to prove the cause of death; chanroblesvirtual law library2. In finding that the cause of death of said Santiago Fabrigar wastuberculosis and was contracted during and as a result of the nature of hisemployment; chanrobles virtual law library3. In holding that the herein petitioner was the employer of the deceasedSantiago Fabrigar; and chanrobles virtual law library4. In not holding that the herein petitioner is exempt from the scope of theWorkmen's Compensation Law.Petitioner contends that the preponderance of evidence on the mattersinvolved in this case, militates in its favor. Considering the doctrine that the

Commission, like the Court of Industrial Relations, is bound not by the rule of preponderance of evidence as in ordinary civil cases, but by the rule of substantial evidence (Ang Tibay vs. CIR, 69 Phil. 635; Phil. Newspaper Guildvs. Evening News, 47 Off. Gaz. No. 12, p. 6188; Secs. 43 & 46 Rep. Act No.772, W.C. Act), petitioner's pretension is without merit. Substantial evidencesupports the decision of the Commission. While seemingly there exists aninconsistency in the cause of death, as appearing in the death certificate byDr. Labitoria and in Dr. Villareal's diagnosis, it is a fact found by theCommission, that the Sanitary Inspector did not examine the deceasedbefore and after his death. "Undoubtedly," says the Commission, "theinformation that he died of beriberi adult, as appearing in the death certificatewas given because it appears that the deceased had also edema of the

extremities (swollen legs)." The evidence of record sustains the followingfindings of the Commission, is Fabrigar's cause of death to wit -The short period of time intervening between his last day of work (March 13,1956) when he spat blood and his death June 28, 1956 due to pulmonarytuberculosis indicates that he had been suffering from the disease evenduring the time that he was employed by the respondent. Considering thestrenuous work that he performed while in the service of the respondents andthe unusually long hours of work he rendered (6:00 p.m. to 1:30 p.m. andfrom 2:00 p.m. to 6:00 p.m. or 7:00 p.m.) beyond the normal and legalworking hours, we find that his employment aggravated his pre-existing

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illness and brought about his death. Moreover, our conclusion finds supportin the fact that immediately preceding his last day of work with therespondent, he had an unusually hard day lifting desks and other furnituresand assisting in the preparations for the graduation exercises of the school.Considering also his complaints during that day (March 11), among whichwas "shortness of breath", we may also say that his work affected an already

existing heart ailment.We find no plausible reason for altering or disturbing the above factualfindings of the Commission, in the present appeal bycertiorari.chanroblesvirtualawlibrary chanrobles virtual law libraryIt is claimed that actually the deceased was not an employee of thepetitioner, but by the Iloilo Chinese Chamber of Commerce which was theone that furnished the janitor service in the premises of its buildings,including the part thereof occupied by the petitioner; that the Chamber of Commerce paid the salaries of janitors, including the deceased; that thepetitioner could not afford to pay rentals of its premises and janitor due tolimited finances depended largely on funds raised among its Board of Directors, the Chinese Chamber of Commerce and Chinese nationals who

helped the school. In other words, it is pretended that the deceased was notan employee of the school but of the Chinese Chamber of Commerce whichshould be the one responsible for the compensation of the deceased. On onehand, according to the Commission, there is substantial proof to the effectthat Fabrigar was employed by and rendered service for the petitioner andwas an employee within the purview of the Workmen's Compensation Law.On the other hand, the most important test of employer-employee relation isthe power to control the employee's conduct. The records disclose that theperson in charge (encargado) of the respondent school supervised thedeceased in his work and had control over the manner he performed thesame.chanroblesvirtualawlibrary chanrobles virtual law libraryIt is finally contended that petitioner is an institution devoted solely for

learning and is not an industry within the meaning of the Workmen'sCompensation Law. Consequently, it is argued, it is exempt from the scopeof the same law. Considering that this factual question has not been properlyput in issue before the Commission, it may not now be entertained in thisappeal for the first time (Atlantic Gulf, etc. vs. CIR, et al., L-16992, Dec. 23,1961, citing International Oil Factory Union v. Hon. Martinez, et al., L-15560,Dec. 31, 1960). The decision of the Commission does not show that thematter was taken up. We are at a loss to state whether the issue was raisedin the motion for reconsideration filed with the Commission, because the saidmotion is not found in the record before us. And the resolution to the motion

for reconsideration does not touch this question.chanroblesvirtualawlibrarychanrobles virtual law libraryIN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, andthe decision appealed from is affirmed, with costs against the hereinpetitioner.chanroblesvirtualawlibrary chanrobles virtual law libraryBengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,

Barrera, Dizon and De Leon, JJ., concur.Padilla, J., took no part.

22. Filamer Christian Institure vs. IACG.R. No. 75112 August 17, 1992FILAMER CHRISTIAN INSTITUTE, petitioner,vs.HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO,in his capacity as Judge of the Regional Trial Court, Branch XIV, Roxas Cityand POTENCIANO KAPUNAN, SR., respondents.Bedona & Bedona Law Office for petitioner.

Rhodora G. Kapunan for private respondents. GUTIERREZ, JR., J.:The private respondents, heirs of the late Potenciano Kapunan, seekreconsideration of the decision rendered by this Court on October 16, 1990(Filamer Christian Institute v. Court of Appeals, 190 SCRA 477) reviewing theappellate court's conclusion that there exists an employer-employeerelationship between the petitioner and its co-defendant Funtecha. The Courtruled that the petitioner is not liable for the injuries caused by Funtecha onthe grounds that the latter was not an authorized driver for whose acts thepetitioner shall be directly and primarily answerable, and that Funtecha wasmerely a working scholar who, under Section 14, Rule X, Book III of the

Rules and Regulations Implementing the Labor Code is not considered anemployee of the petitioner.The private respondents assert that the circumstances obtaining in thepresent case call for the application of Article 2180 of the Civil Code sinceFuntecha is no doubt an employee of the petitioner. The private respondentsmaintain that under Article 2180 an injured party shall have recourse againstthe servant as well as the petitioner for whom, at the time of the incident, theservant was performing an act in furtherance of the interest and for thebenefit of the petitioner. Funtecha allegedly did not steal the school jeep nor use it for a joy ride without the knowledge of the school authorities.

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The present case does not deal with a labor dispute on conditions of employment between an alleged employee and an alleged employer. Itinvokes a claim brought by one for damages for injury caused by the patentlynegligent acts of a person, against both doer-employee and his employer.Hence, the reliance on the implementing rule on labor to disregard theprimary liability of an employer under Article 2180 of the Civil Code is

misplaced. An implementing rule on labor cannot be used by an employer asa shield to avoid liability under the substantive provisions of the Civil Code.There is evidence to show that there exists in the present case an extra-contractual obligation arising from the negligence or reckless imprudence of a person "whose acts or omissions are imputable, by a legal fiction, toother(s) who are in a position to exercise an absolute or limited control over (him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915])Funtecha is an employee of petitioner Filamer. He need not have an officialappointment for a driver's position in order that the petitioner may be heldresponsible for his grossly negligent act, it being sufficient that the act of driving at the time of the incident was for the benefit of the petitioner. Hence,the fact that Funtecha was not the school driver or was not acting within the

scope of his janitorial duties does not relieve the petitioner of the burden of rebutting the presumption juris tantum that there was negligence on its parteither in the selection of a servant or employee, or in the supervision over him. The petitioner has failed to show proof of its having exercised therequired diligence of a good father of a family over its employees Funtechaand Allan.The Court reiterates that supervision includes the formulation of suitablerules and regulations for the guidance of its employees and the issuance of proper instructions intended for the protection of the public and persons withwhom the employer has relations through his employees. (Bahia v. Litonjuaand Leynes, supra, at p. 628; Phoenix Construction, v. Intermediate

Appellate Court, 148 SCRA 353 [1987])

An employer is expected to impose upon its employees the necessarydiscipline called for in the performance of any act indispensable to thebusiness and beneficial to their employer.In the present case, the petitioner has not shown that it has set forth suchrules and guidelines as would prohibit any one of its employees from takingcontrol over its vehicles if one is not the official driver or prohibiting the driver and son of the Filamer president from authorizing another employee to drivethe school vehicle. Furthermore, the petitioner has failed to prove that it hadimposed sanctions or warned its employees against the use of its vehicles bypersons other than the driver.

The petitioner, thus, has an obligation to pay damages for injury arising fromthe unskilled manner by which Funtecha drove the vehicle. (Cangco v.Manila Railroad Co., 38 Phil. 768, 772 [1918]). In the absence of evidencethat the petitioner had exercised the diligence of a good father of a family inthe supervision of its employees, the law imposes upon it the vicariousliability for acts or omissions of its employees. (Umali v. Bacani, 69 SCRA

263 [1976]; Poblete v. Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v.Coronado, 176 SCRA 792 [1989]; Franco v. Intermediate Appellate Court,178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA384 [1989]) The liability of the employer is, under Article 2180, primary andsolidary. However, the employer shall have recourse against the negligentemployee for whatever damages are paid to the heirs of the plaintiff.It is an admitted fact that the actual driver of the school jeep, Allan Masa,was not made a party defendant in the civil case for damages. This is quiteunderstandable considering that as far as the injured pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha who was the onedriving the vehicle and presumably was one authorized by the school todrive. The plaintiff and his heirs should not now be left to suffer without

simultaneous recourse against the petitioner for the consequent injurycaused by a janitor doing a driving chore for the petitioner even for a shortwhile. For the purpose of recovering damages under the prevailingcircumstances, it is enough that the plaintiff and the private respondent heirswere able to establish the existence of employer-employee relationshipbetween Funtecha and petitioner Filamer and the fact that Funtecha wasengaged in an act not for an independent purpose of his own but infurtherance of the business of his employer. A position of responsibility onthe part of the petitioner has thus been satisfactorily demonstrated.WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby GRANTED. The decision of the respondent appellatecourt affirming the trial court decision is REINSTATED.

SO ORDERED.Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

23. FEATI University vs. BautistaFEATI UNIVERSITY, petitioner,vs.HON. JOSE S. BAUTISTA, Presiding Judge of the Court of IndustrialRelations and FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondents.----------------------------------------G.R. No. L-21462 December 27, 1966

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case, because (1) the Industrial Peace Act is not applicable to the University,it being an educational institution, nor to the members of the Faculty Club,they being independent contractors; and (2) the presidential certification isviolative of Section 10 of the Industrial Peace Act, as the University is not anindustrial establishment and there was no industrial dispute which could becertified to the CIR. On March 30, 1963 the respondent Judge issued an

order denying the motion to dismiss and declaring that the Industrial Peace Act is applicable to both parties in the case and that the CIR had acquired jurisdiction over the case by virtue of the presidential certification. In thesame order, the respondent Judge, believing that the dispute could not bedecided promptly, ordered the strikers to return immediately to work and theUniversity to take them back under the last terms and conditions existingbefore the dispute arose, as per agreement had during the hearing on March23, 1963; and likewise enjoined the University, pending adjudication of thecase, from dismissing any employee or laborer without previous authorizationfrom the CIR. The University filed on April 1, 1963 a motion for reconsideration of the order of March 30, 1963 by the CIR en banc, and atthe same time asking that the motion for reconsideration be first heard by the

CIR en banc. Without the motion for reconsideration having been acted uponby the CIR en banc, respondent Judge set the case for hearing on the meritsfor May 8, 1963. The University moved for the cancellation of said hearingupon the ground that the court en banc should first hear the motion for reconsideration and resolve the issues raised therein before the case isheard on the merits. This motion for cancellation of the hearing was denied.The respondent Judge, however, cancelled the scheduled hearing whencounsel for the University manifested that he would take up before theSupreme Court, by a petition for certiorari, the matter regarding theactuations of the respondent Judge and the issues raised in the motion for reconsideration, specially the issue relating to the jurisdiction of the CIR. Theorder of March 30, 1963 in Case 41-IPA is one of the orders sought to beannulled in the case, G.R. No. L-21278.Before the above-mentioned order of March 30, 1963 was issued byrespondent Judge, the University had employed professors and/or instructorsto take the places of those professors and/or instructors who had struck. On

April 1, 1963, the Faculty Club filed with the CIR in Case 41-IPA a petition todeclare in contempt of court certain parties, alleging that the Universityrefused to accept back to work the returning strikers, in violation of thereturn-to-work order of March 30, 1963. The University filed, on April 5,1963,its opposition to the petition for contempt, denying the allegations of theFaculty Club and alleging by way of special defense that there was still the

motion for reconsideration of the order of March 30, 1963 which had not yetbeen acted upon by the CIR en banc. On April 6, 1963, the respondentJudge issued an order stating that "said replacements are hereby warnedand cautioned, for the time being, not to disturb nor in any manner commitany act tending to disrupt the effectivity of the order of March 30,1963,pending the final resolution of the same."2 On April 8, 1963, there placing

professors and/or instructors concerned filed, thru counsel, a motion for reconsideration by the CIR en banc of the order of respondent Judge of April6, 1963. This order of April 6, 1963 is one of the orders that are sought to beannulled in case G.R. No. L-21278.CIR Case No. 1183-MC relates to a petition for certification election filed bythe Faculty Club on March 8, 1963 before the CIR, praying that it be certifiedas the sole and exclusive bargaining representative of all the employees of the University. The University filed an opposition to the petition for certification election and at the same time a motion to dismiss said petition,raising the very same issues raised in Case No. 41-IPA, claiming that thepetition did not comply with the rules promulgated by the CIR; that theFaculty Club is not a legitimate labor union; that the members of the Faculty

Club cannot unionize for collective bargaining purposes; that the terms of theindividual contracts of the professors, instructors, and teachers, who aremembers of the Faculty Club, would expire on March 25 or 31, 1963; andthat the CIR has no jurisdiction to take cognizance of the petition becausethe Industrial Peace Act is not applicable to the members of the Faculty Clubnor to the University. This case was assigned to Judge Baltazar Villanueva of the CIR. Before Judge Villanueva could act on the motion to dismiss,however, the Faculty Club filed on April 3, 1963 a motion to withdraw thepetition on the ground that the labor dispute (Case No. 41-IPA) had alreadybeen certified by the President to the CIR and the issues raised in Case No.1183-MC were absorbed by Case No. 41-IPA. The University opposed thewithdrawal, alleging that the issues raised in Case No. 1183-MC wereseparate and distinct from the issues raised in Case No. 41-IPA; that thequestions of recognition and majority status in Case No. 1183-MC were notabsorbed by Case No. 41-IPA; and that the CIR could not exercise its power of compulsory arbitration unless the legal issue regarding the existence of employer-employee relationship was first resolved. The University prayedthat the motion of the Faculty Club to withdraw the petition for certificationelection be denied, and that its motion to dismiss the petition be heard.Judge Baltazar Villanueva, finding that the reasons stated by the FacultyClub in the motion to withdraw were well taken, on April 6, 1963, issued anorder granting the withdrawal. The University filed, on April 24, 1963, a

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Brushing aside certain technical questions raised by the parties in their pleadings, We proceed to decide these three cases on the merits of theissues raised.The University has raised several issues in the present cases, the pivotal onebeing its claim that the Court of Industrial Relations has no jurisdiction over the parties and the subject matter in CIR Cases 41-IPA, 1183-MC and V-30,

brought before it, upon the ground that Republic Act No. 875 is not applicableto the University because it is an educational institution and not an industrialestablishment and hence not an "employer" in contemplation of said Act; andneither is Republic Act No. 875 applicable to the members of the FacultyClub because the latter are independent contractors and, therefore, notemployees within the purview of the said Act.In support of the contention that being an educational institution it is beyondthe scope of Republic Act No. 875, the University cites cases decided by thisCourt: Boy Scouts of the Philippines vs. Juliana Araos, L-10091, Jan. 29,1958; University of San Agustin vs. CIR, et al., L-12222, May 28, 1958; CebuChinese High School vs. Philippine Land-Air-Sea Labor Union, PLASLU, L-12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et al., L-13282,

April 22, 1960; University of the Philippines, et al. vs. CIR, et al., L-15416, April 8, 1960; Far Eastern University vs. CIR, L-17620, August 31, 1962. Wehave reviewed these cases, and also related cases subsequent thereto, andWe find that they do not sustain the contention of the University. It is true thatthis Court has ruled that certain educational institutions, like the University of Santo Tomas, University of San Agustin, La Consolacion College, and other

juridical entities, like the Boy Scouts of the Philippines and ManilaSanitarium, are beyond the purview of Republic Act No. 875 in the sense thatthe Court of Industrial Relations has no jurisdiction to take cognizance of charges of unfair labor practice filed against them, but it is nonetheless truethat the principal reason of this Court in ruling in those cases that thoseinstitutions are excluded from the operation of Republic Act 875 is that thoseentities are not organized, maintained and operated for profit and do notdeclare dividends to stockholders. The decision in the case of University of San Agustin vs. Court of Industrial Relations, G.R. No. L-12222, May 28,1958, is very pertinent. We quote a portion of the decision:It appears that the University of San Agustin, petitioner herein, is aneducational institution conducted and managed by a "religious non-stockcorporation duly organized and existing under the laws of the Philippines." Itwas organized not for profit or gain or division of the dividends among itsstockholders, but solely for religious and educational purposes. It likewiseappears that the Philippine Association of College and University Professors,

respondent herein, is a non-stock association composed of professors andteachers in different colleges and universities and that since its organizationtwo years ago, the university has adopted a hostile attitude to its formationand has tried to discriminate, harass and intimidate its members for whichreason the association and the members affected filed the unfair labor practice complaint which initiated this proceeding. To the complaint of unfair

labor practice, petitioner filed an answer wherein it disputed the jurisdiction of the Court of Industrial Relations over the controversy on the followinggrounds:"(a) That complainants therein being college and/or university professorswere not "industrial" laborers or employees, and the Philippine Association of College and University Professors being composed of persons engaged inthe teaching profession, is not and cannot be a legitimate labor organizationwithin the meaning of the laws creating the Court of Industrial Relations anddefining its powers and functions;"(b) That the University of San Agustin, respondent therein, is not aninstitution established for the purpose of gain or division of profits, andconsequently, it is not an " industrial" enterprise and the members of its

teaching staff are not engaged in "industrial" employment (U.S.T. HospitalEmployees Association vs. Sto. Tomas University Hospital, G.R. No. L-6988,24 May 1954; and San Beda College vs. Court of Industrial Relations andNational Labor Union, G.R. No. L-7649, 29 October 1955; 51 O.G. (Nov.1955) 5636-5640);"(c) That, as a necessary consequence, alleged controversy between thereincomplainants and respondent is not an "industrial" dispute, and the Court of Industrial Relations has no jurisdiction, not only on the parties but also over the subject matter of the complaint."The issue now before us is: Since the University of San Agustin is not aninstitution established for profit or gain, nor an industrial enterprise, but oneestablished exclusively for educational purposes, can it be said that itsrelation with its professors is one of employer and employee that comesunder the jurisdiction of the Court of Industrial Relations? In other words, dothe provisions of the Magna Carta on unfair labor practice apply to therelation between petitioner and members of respondent association?The issue is not new. Thus, in the case of Boy Scouts of the Philippines v.Juliana V. Araos, G.R. No. L-10091, promulgated on January 29, 1958, thisCourt, speaking thru Mr. Justice Montemayor, answered the query in thenegative in the following wise:"The main issue involved in the present case is whether or not a charitableinstitution or one organized not for profit but for more elevated purposes,

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Where, under Employers' Liability Act, A was instructed when and where towork . . . he is an employee, and not a contractor, though paid specified sumper square. (Heine v. Hill, Harris & Co., 2 La. App. 384, 390, in Words andPhrases, loc, cit.) .Employees are those who are compensated for their labor or services bywages rather than by profits. (People vs. Distributors Division, Smoked Fish

Workers Union Local No. 20377, Sup. 7 N. Y. S. 2d 185, 187 in Words andPhrases, loc, cit.)Services of employee or servant, as distinguished from those of a contractor,are usually characterized by regularity and continuity of work for a fixedperiod or one of indefinite duration, as contrasted with employment to do asingle act or a series of isolated acts; by compensation on a fixed salaryrather than one regulated by value or amount of work; . . . (Underwood v.Commissioner of Internal Revenue, C.C.A., 56 F. 2d 67, 71 in Words andPhrases, op. cit., p. 579.)Independent contractors can employ others to work and accomplishcontemplated result without consent of contractee, while "employee" cannotsubstitute another in his place without consent of his employer. (Luker Sand& Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82 Utah, 188, in Wordsand Phrases, Vol. 14, p. 576).Moreover, even if university professors are considered independentcontractors, still they would be covered by Rep. Act No. 875. In the case of the Boy Scouts of the Philippines v. Juliana Araos, supra, this Courtobserved that Republic Act No. 875 was modelled after the Wagner Act, or the National Labor Relations Act, of the United States, and this Act did notexclude "independent contractors" from the orbit of "employees". It was in thesubsequent legislation — the Labor Management Relation Act (Taft-Harley

Act) — that "independent contractors" together with agricultural laborers,individuals in domestic service of the home, supervisors, and others wereexcluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331).It having been shown that the members of the Faculty Club are employees, itfollows that they have a right to unionize in accordance with the provisions of Section 3 of the Magna Carta of Labor (Republic Act No. 875) which providesas follows:Sec. 3. Employees' right to self-organization.—Employees shall have theright to self-organization and to form, join or assist labor organizations of their own choosing for the purpose of collective bargaining throughrepresentatives of their own choosing and to engage in concerted activitiesfor the purpose of collective bargaining and other mutual aid or protection. . . .

We agree with the statement of the lower court, in its order of March 30,1963 which is sought to be set aside in the instant case, that the right of employees to self-organization is guaranteed by the Constitution, that saidright would exist even if Republic Act No. 875 is repealed, and thatregardless of whether their employers are engaged in commerce or not.Indeed, it is Our considered view that the members of the faculty or teaching

staff of private universities, colleges, and schools in the Philippines,regardless of whether the university, college or school is run for profit or not,are included in the term "employees" as contemplated in Republic Act No.875 and as such they may organize themselves pursuant to the above-quoted provision of Section 3 of said Act. Certainly, professors, instructors or teachers of private educational institutions who teach to earn a living areentitled to the protection of our labor laws — and one such law is Republic

Act No. 875.The contention of the University in the instant case that the members of theFaculty Club can not unionize and the Faculty Club can not exist as a validlabor organization is, therefore, without merit. The record shows that theFaculty Club is a duly registered labor organization and this fact is admittedby counsel for the University.5aThe other issue raised by the University is the validity of the Presidentialcertification. The University contends that under Section 10 of Republic ActNo. 875 the power of the President of the Philippines to certify is subject tothe following conditions, namely: (1) that here is a labor dispute, and (2) thatsaid labor dispute exists in an industry that is vital to the national interest.The University maintains that those conditions do not obtain in the instantcase. This contention has also no merit.We have previously stated that the University is an establishment or enterprise that is included in the term "industry" and is covered by theprovisions of Republic Act No. 875. Now, was there a labor dispute betweenthe University and the Faculty Club?Republic Act No. 875 defines a labor dispute as follows:The term "labor dispute" includes any controversy concerning terms, tenureor conditions of employment, or concerning the association or representationof persons in negotiating, fixing, maintaining, changing, or seeking to arrangeterms or conditions of employment regardless of whether the disputantsstand in proximate relation of employer and employees.The test of whether a controversy comes within the definition of "labor dispute" depends on whether the controversy involves or concerns "terms,tenure or condition of employment" or "representation." It is admitted by theUniversity, in the instant case, that on January 14, 1963 the President of the

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Faculty Club wrote to the President of the University a letter informing thelatter of the organization of the Faculty Club as a labor union, duly registeredwith the Bureau of Labor Relations; that again on January 22, 1963 another letter was sent, to which was attached a list of demands consisting of 26items, and asking the President of the University to answer within ten daysfrom date of receipt thereof; that the University questioned the right of the

Faculty Club to be the exclusive representative of the majority of theemployees and asked proof that the Faculty Club had been designated or selected as exclusive representative by the vote of the majority of saidemployees; that on February 1, 1963 the Faculty Club filed with the Bureauof Labor Relations a notice of strike alleging as reason therefor the refusal of the University to bargain collectively with the representative of the facultymembers; that on February 18, 1963 the members of the Faculty Club wenton strike and established picket lines in the premises of the University,thereby disrupting the schedule of classes; that on March 1, 1963 the FacultyClub filed Case No. 3666-ULP for unfair labor practice against the University,but which was later dismissed (on April 2, 1963 after Case 41-IPA wascertified to the CIR); and that on March 7, 1963 a petition for certificationelection, Case No. 1183-MC, was filed by the Faculty Club in the CIR.6 Allthese admitted facts show that the controversy between the University andthe Faculty Club involved terms and conditions of employment, and thequestion of representation. Hence, there was a labor dispute between theUniversity and the Faculty Club, as contemplated by Republic Act No. 875. Ithaving been shown that the University is an institution operated for profit, thatis an employer, and that there is an employer-employee relationship,between the University and the members of the Faculty Club, and it havingbeen shown that a labor dispute existed between the University and theFaculty Club, the contention of the University, that the certification made bythe President is not only not authorized by Section 10 of Republic Act 875but is violative thereof, is groundless.Section 10 of Republic Act No. 875 provides:When in the opinion of the President of the Philippines there exists a labor dispute in an industry indispensable to the national interest and when suchlabor dispute is certified by the President to the Court of Industrial Relations,said Court may cause to be issued a restraining order forbidding theemployees to strike or the employer to lockout the employees, and if no other solution to the dispute is found, the Court may issue an order fixing the termsand conditions of employment.This Court had occasion to rule on the application of the above-quotedprovision of Section 10 of Republic Act No. 875. In the case of Pampanga

Sugar Development Co. v. CIR, et al., G.R. No. L-13178, March 24, 1961, itwas held:It thus appears that when in the opinion of the President a labor disputeexists in an industry indispensable to national interest and he certifies it tothe Court of Industrial Relations the latter acquires jurisdiction to act thereonin the manner provided by law. Thus the court may take either of the

following courses: it may issue an order forbidding the employees to strike or the employer to lockout its employees, or, failing in this, it may issue an order fixing the terms and conditions of employment. It has no other alternative. Itcan not throw the case out in the assumption that the certification waserroneous.xxx xxx xxx. . . The fact, however, is that because of the strike declared by the membersof the minority union which threatens a major industry the President deemedit wise to certify the controversy to the Court of Industrial Relations for adjudication. This is the power that the law gives to the President thepropriety of its exercise being a matter that only devolves upon him. Thesame is not the concern of the industrial court. What matters is that by virtueof the certification made by the President the case was placed under the

jurisdiction of said court. (Emphasis supplied)To certify a labor dispute to the CIR is the prerogative of the President under the law, and this Court will not interfere in, much less curtail, the exercise of that prerogative. The jurisdiction of the CIR in a certified case is exclusive(Rizal Cement Co., Inc. v. Rizal Cement Workers Union (FFW), et al., G.R.No. L-12747, July 30, 1960). Once the jurisdiction is acquired pursuant to thepresidential certification, the CIR may exercise its broad powers as providedin Commonwealth Act 103. All phases of the labor dispute and the employer-employee relationship may be threshed out before the CIR, and the CIR mayissue such order or orders as may be necessary to make effective theexercise of its jurisdiction. The parties involved in the case may appeal to theSupreme Court from the order or orders thus issued by the CIR.

And so, in the instant case, when the President took into consideration thatthe University "has some 18,000 students and employed approximately 500faculty members", that ̀ the continued disruption in the operation of theUniversity will necessarily prejudice the thousand of students", and that "thedispute affects the national interest",7 and certified the dispute to the CIR, itis not for the CIR nor this Court to pass upon the correctness of the reasonsof the President in certifying the labor dispute to the CIR.The third issue raised by the University refers to the question of the legality of the return-to-work order (of March 30, 1963 in Case 41-IPA) and the order

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implementing the same (of April 6, 1963). It alleges that the orders are illegalupon the grounds: (1) that Republic Act No. 875, supplementingCommonwealth Act No. 103, has withdrawn from the CIR the power to issuea return-to-work order; (2) that the only power granted by Section 10 of Republic Act No. 875 to the CIR is to issue an order forbidding theemployees to strike or forbidding the employer to lockout the employees, as

the case may be, before either contingency had become a fait accompli; (3)that the taking in by the University of replacement professors was valid, andthe return-to-work order of March 30, 1963 constituted impairment of theobligation of contracts; and (4) the CIR could not issue said order withouthaving previously determined the legality or illegality of the strike.The contention of the University that Republic Act No. 875 has withdrawn thepower of the Court of Industrial Relations to issue a return-to-work order exercised by it under Commonwealth Act No. 103 can not be sustained.When a case is certified by the President to the Court of Industrial Relations,the case thereby comes under the operation of Commonwealth Act No. 103,and the Court may exercise the broad powers and jurisdiction granted to it bysaid Act. Section 10 of Republic Act No. 875 empowers the Court of Industrial Relations to issue an order "fixing the terms of employment." Thisclause is broad enough to authorize the Court to order the strikers to returnto work and the employer to readmit them. This Court, in the cases of thePhilippine Marine Officers Association vs. The Court of Industrial Relations,Compania Maritima, et al.; and Compañia Martima, et al. vs. PhilippineMarine Radio Officers Association and CIR, et al., G.R. Nos. L-10095 and L-10115, October 31, 1957, declared:We cannot subscribe to the above contention. We agree with counsel for thePhilippine Radio Officers' Association that upon certification by the Presidentunder Section 10 of Republic Act 875, the case comes under the operation of Commonwealth Act 103, which enforces compulsory arbitration in cases of labor disputes in industries indispensable to the national interest when thePresident certifies the case to the Court of Industrial Relations. The evidentintention of the law is to empower the Court of Industrial Relations to act insuch cases, not only in the manner prescribed under Commonwealth Act103, but with the same broad powers and jurisdiction granted by that act. If the Court of Industrial Relations is granted authority to find a solution to anindustrial dispute and such solution consists in the ordering of employees toreturn back to work, it cannot be contended that the Court of IndustrialRelations does not have the power or jurisdiction to carry that solution intoeffect. And of what use is its power of conciliation and arbitration if it does nothave the power and jurisdiction to carry into effect the solution it has

adopted? Lastly, if the said court has the power to fix the terms andconditions of employment, it certainly can order the return of the workers withor without backpay as a term or condition of employment.The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, et al., G.R. No. L-13364, July 26, 1960.When a case is certified to the CIR by the President of the Philippines

pursuant to Section 10 of Republic Act No. 875, the CIR is granted authorityto find a solution to the industrial dispute; and the solution which the CIR hasfound under the authority of the presidential certification and conformablethereto cannot be questioned (Radio Operators Association of the Philippinesvs. Philippine Marine Radio Officers Association, et al., L-10112, Nov. 29,1957, 54 O.G. 3218).Untenable also is the claim of the University that the CIR cannot issue areturn-to-work order after strike has been declared, it being contended thatunder Section 10 of Republic Act No. 875 the CIR can only prevent a strikeor a lockout — when either of this situation had not yet occurred. But in thecase of Bisaya Land Transportation Co., Inc. vs. Court of Industrial Relations,et al., No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:There is no reason or ground for the contention that Presidential certificationof labor dispute to the CIR is limited to the prevention of strikes and lockouts.Even after a strike has been declared where the President believes thatpublic interest demands arbitration and conciliation, the President may certifythe ease for that purpose. The practice has been for the Court of IndustrialRelations to order the strikers to work, pending the determination of the uniondemands that impelled the strike. There is nothing in the law to indicate thatthis practice is abolished." (Emphasis supplied)Likewise untenable is the contention of the University that the taking in by itof replacements was valid and the return-to-work order would be animpairment of its contract with the replacements. As stated by the CIR in itsorder of March 30, 1963, it was agreed before the hearing of Case 41-IPA onMarch 23, 1963 that the strikers would return to work under the status quoarrangement and the University would readmit them, and the return-to-workorder was a confirmation of that agreement. This is a declaration of fact bythe CIR which we cannot disregard. The faculty members, by striking, havenot abandoned their employment but, rather, they have only ceased fromtheir labor (Keith Theatre v. Vachon et al., 187 A. 692). The striking facultymembers have not lost their right to go back to their positions, because thedeclaration of a strike is not a renunciation of their employment and their employee relationship with the University (Rex Taxicab Co. vs. CIR, et al., 40O.G., No. 13, 138). The employment of replacements was not authorized by

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unfair labor practice and sentencing said institution to pay to Aguirre thesalary differential due him from December 1, 1953 to May 31, 1954, basedon Aguirre’s salary of P450.00 a month, as well as back wages at the samerate, from June 1, 1954, to November 17, 1955, after deducting therefrom thecompensation paid to him by the Philippine College of Commerce from June1, 1955 to November 17, 1955, as well as to cease and desist from further committing unfair labor practices. However, said Judge did not order thereinstatement of Aguirre in the University, upon the ground that hisemployment in the Central Bank of the Philippines is, within the purview of the Industrial Peace Act, a substantial equivalent of his position as full timeinstructor in said University.On motion for reconsideration filed by the complainant, a majority of the

judges of said Court sitting en banc, affirmed the decision of Judge Martinez,insofar as the commission of unfair labor practice charged and the paymentof the salary differential and back wages are concerned, but held that

Aguirre’s employment in the Central Bank and the Philippine College of Commerce are not the substantial equivalent of his aforementioned positionas full time instructor in the University, and, accordingly, modified saiddecision by, likewise, sentencing the University to reinstate Tomas N.

Aguirre, in addition to paying him the aforementioned wage differential andback wages, plus “other emoluments”. Hence, this appeal by certiorari takenby the University. The Court of Industrial Relations, as one of the appelleesherein, has filed a motion, which we consider as its answer, to dismiss theappeal for lack of merit, upon the ground that appellant raises no question of law. chanroblespublishingcompany

Appellant’s contention is that the employment of Aguirre in the Central Bankand his teaching load in the Philippine College of Commerce aresubstantially equivalent to his former position in the University. Upon theother hand, the resolution appealed reached the opposite conclusion for thefollowing reasons:“(a) Aguirre’s work in the respondent university is that of a professor, while

his work in the Central Bank is clerical in nature;“(b) As professor, Aguirre’s maximum teaching period is five (5) hours daily,while in the bank, he works eight (8) hours a day;“(c) Although his work in the bank allows him to teach part time in thePhilippine College of Commerce for one hour, he could also do the samework even if he were employed in the university; and“(d) Aguirre was receiving from the respondent university P5,400.00 a year,while he receives from the Central Bank P3,000.00 a year only. This one factdecides the issue, namely, that Aguirre’s position in the Central Bank is not

substantially equivalent to his position in the Far Eastern University. ‘Anyemployment at lower wage rate is not substantially equivalent employment’[Willard, Inc. (1937 2 NLRB 1094, Moorseville Cotton Mills vs. NLRB (CCA-4,1940), 2, Labor Cases, 18,576; 110 fed. (2d) 79; Puleski Veneer Corp.(1938) 10 NLRB 136; Quidnick Dye Works, Inc. (1937) 2 NLRB 963].”

Although Mr. Aguirre was, not a professor, but a full time instructor in theUniversity, we agree with the opinion of the lower court, siting en banc. Inaddition to the circumstances relied upon by the latter, one important factor,not mentioned in the resolution appealed from, is decisively in favor of theconclusion therein reached, and that is that Mr. Aguirre is an instructor inTagalog, and that, as such, his position as researcher in the Central Bankhas no future for him. The situation would perhaps have been different hadhis line been economics. Inasmuch, however, as Mr. Aguirre has specializedin the Tagalog dialect, his work as a researcher in the Central Bank is inferior to his job as full time instructor in the University, not so much because hissalary in the latter is substantially bigger, even if we add thereto hisemoluments in the Philippine College of Commerce, but, specially, becauseof the future his position as instructor in the University offers him as a career,which is non-existent in the Central Bank. chanroblespublishingcompanyWHEREFORE, the resolution appealed from is hereby affirmed, with costsagainst petitioner. It is so ordered. chanroblespublishingcompanyBengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, Barrera, Paredes,Dizon, Regala and Makalintal, JJ., concur.25. Dy Keh Beng vs. International Labor and Marine Union of the Phils.DY KEH BENG, petitioner,vs.INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET

AL., respondents. A. M Sikat for petitioner.D. A. Hernandez for respondents.

DE CASTRO, J.:Petitioner Dy Keh Beng seeks a review by certiorari of the decision of theCourt of Industrial Relations dated March 23, 1970 in Case No. 3019-ULPand the Court's Resolution en banc of June 10, 1970 affirming said decision.The Court of Industrial Relations in that case found Dy Keh Beng guilty of theunfair labor practice acts alleged and order him toreinstate Carlos Solano and Ricardo Tudla to their former jobs withbackwages from their respective dates of dismissal until fully reinstated

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without loss to their right of seniority and of such other rights alreadyacquired by them and/or allowed by law. 1Now, Dy Keh Beng assigns the following errors 2 as having been committedby the Court of Industrial Relations:IRESPONDENT COURT ERRED IN FINDING THAT RESPONDENTSSOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS.IIRESPONDENT COURT ERRED IN FINDING THAT RESPONDENTSSOLANO AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENTBY PETITIONER.IIIRESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES

ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.IVRESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OFUNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED INTHE COMPLAINT.VRESPONDENT COURT ERRED IN PETITIONER TO REINSTATERESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROMTHEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLYREINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OFSUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR

ALLOWED BY LAW.The facts as found by the Hearing Examiner are as follows:

A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory acts within the meaning of Section 4(a),sub-paragraph (1) and (4). Republic Act No. 875, 3 by dismissing onSeptember 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo

Tudla for their union activities. After preliminary investigation was conducted,a case was filed in the Court of Industrial Relations for in behalf of theInternational Labor and Marine Union of the Philippines and two of itsmembers, Solano and Tudla In his answer, Dy Keh Beng contended that hedid 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 pakiawbasis, each piece of work being done under a separate contract. Moreover,Dy Keh Beng countered with a special defense of simple extortion committedby the head of the labor union, Bienvenido Onayan.

After trial, the Hearing Examiner prepared a report which was subsequentlyadopted in toto by the Court of Industrial Relations. An employee-employer relationship was found to have existed between Dy Keh Beng andcomplainants Tudla and Solano, although Solano was admitted to haveworked on piece basis. 4 The issue therefore centered on whether thereexisted an employee employer relation between petitioner Dy Keh Beng andthe respondents Solano and Tudla .

According to the Hearing Examiner, the evidence for the complainant Uniontended to show that Solano and Tudla became employees of Dy Keh Bengfrom May 2, 1953 and July 15, 1955, 5 respectively, and that except in theevent of illness, their work with the establishment was continuous althoughtheir services were compensated on piece basis. Evidence likewise showedthat at times the establishment had eight (8) workers and never less than five(5); including the complainants, and that complainants used to receive ?5.00a day. sometimes less. 6

According to Dy Keh Beng, however, Solano was not his employee for thefollowing reasons:(1) Solano never stayed long enought at Dy's establishment;(2) Solano had to leave as soon as he was through with the(3) order given him by Dy;(4) When there were no orders needing his services there was nothing for him to do;(5) When orders came to the shop that his regular workers could not fill itwas then that Dy went to his address in Caloocan and fetched him for theseorders; and(6) Solano's work with Dy's establishment was not continuous. , 7

According to petitioner, these facts show that respondents Solano and Tudlaare only piece workers, not employees under Republic Act 875, where anemployee 8 is referred to asshall include any employee and shag not be limited to the employee of aparticular employer unless the Act explicitly states otherwise and shall

include any individual whose work has ceased as a consequence of, or inconnection with any current labor dispute or because of any unfair labor practice and who has not obtained any other substantially equivalent andregular employment.while an employer 9includes any person acting in the interest of an employer, directly or indirectlybut shall not include any labor organization (otherwise than when acting asan employer) or anyone acting in the capacity of officer or agent of suchlabor organization.

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t d ddli t t h b R t d t "b d ll" 4 MAFINCO h ll f i h th li d il t th id t k i



executed a peddling contract whereby Repomanta agreed to "buy and sell"Cosmos soft drinks. Rey Moralde entered into a similar contract. Thecontracts were to remain in force for one year unless sooner terminated byeither party upon five days notice to the other. 1 The contract withRepomanta reads as follows:PEDDLING CONTRACTKNOW ALL MEN BY THESE PRESENTS:

This CONTRACT, entered into by and between:The MAFINCO TRADING CORPORATION, a domestic corporation dulyorganized and existing under the laws of the Philippines, doing business atRm. 715 Equitable Bank Bldg., Juan Luna St., Manila, under the styleMAFINCO represented in this act by its General Manager, SALVADOR C.PICA, duly authorized for the purpose and hereinafter referred to asMAFINCO, and RODRIGO REPOMANTA, married/single, of legal age, and aresident of 70-D Bo. Potrero, MacArthur Highway, Malabon, Rizal hereinafter referred to as PEDDLER, WITNESSETH:WHEREAS, MAFINCO has been appointed as the exclusive distributor of 'COSMOS' Soft Drink Products for and within the City of Manila;WHEREAS, the PEDDLER is desirous of buying and selling in Manila the

'COSMOS' Soft Drink Products handled by MAFINCO;NOW THEREFORE, for and in consideration of the foregoing premises andthe covenants and conditions hereinafter set forth, the parties hereto hasagreed as follows:1. That in consideration of the competence of the PEDDLER and his ability topromote mutual benefits for the parties hereto, MAFINCO shall provide thePEDDLER with a delivery truck with which the latter shall exclusively peddlethe soft drinks of the former, under the terms set forth herein;2. The PEDDLER himself shall, carefully and in strict observance to trafficregulations, drive the truck furnished him by MAFINCO or should he employa driver or helpers such driver or helpers shall be his employees under hisdirection and responsibility and not that of MAFINCO, and their

compensation including salaries, wages, overtime pay, separation pay,bonus or other remuneration and privileges shall be for the PEDDLER'S ownaccount; The PEDDLER shall likewise bind himself to comply with theprovisions of the Social Security Act and all the applicable labor laws inrelation to his employees;3. The PEDDLER shall be responsible for any damage to property, death or injuries to persons or damage to the truck used by him caused by his ownacts or omission or that of his driver and helpers;

4. MAFINCO shall furnish the gasoline and oil to run the said truck inbusiness trips, bear the cost of maintenance and repairs of the said truckarising from ordinary wear and tear;5. The PEDDLER shall secure at his own expense all necessary licensesand permits required by law or ordinance and shall bear any and allexpenses which may be incurred by him in the sales of the soft drinkproducts covered by the contract;

6. All purchases by the PEDDLER shall be charged to him at a price of P2.52per case of 24 bottles, ex-warehouse; PROVIDED, However, that if thePEDDLER purchases a total of not less than 250 cases a day, he shall beentitled further to a Peddler's Discount of P11.00;7. Upon the execution of this contract, the PEDDLER shall give a cash bondin the amount of P1,500.00 against which MAFINCO shall charge thePEDDLER with any unpaid account at the end of each day or with anydamage to the truck of other account which is properly chargeable to thePEDDLER; within 30 days after the termination of this contract, the cashbond, after deducting proper charges, shall be returned to the PEDDLER;8. The PEDDLER shall liquidate and pay all his accounts to MAFINCO'Sauthorized representative at the end of each day, and his failure to do so

shall subject his cash bond at once to answer for any unliquidated accounts;9. This contract shall be effective up to May 31, 1973 and supersedes any or all other previous contracts, if any, that may have been entered into betweenthe parties; However, either of the parties may terminate the same upon five(5) days prior notice to the other;10. Upon the. termination of this contract, unless the same is renewed, thedelivery truck and such other equipment furnished by MAFINCO to thePEDDLER shall be returned by the latter in good order and workablecondition, ordinary wear and tear excepted, und shall promptly settle hisoutstanding account if any, with MAFINCO;11. To assure performance by the PEDDLER of his obligation to hisemployees under the Social Security Act, the applicable labor laws and for

damages suffered by third persons, PEDDLER shall furnish a performancebond of P1,000.00 in favor of MAFINCO from a SURETY COMPANYacceptable to MAFINCO.IN WITNESS WHEREOF, the parties hereto have signed this instrument atthe City of Manila, Philippines, this May 31, 1972.MAFINCO TRADING CORPORATIONBy:(Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR C. PICAPeddler General Manager

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l i l ti t th H l bt i t hi ll li C l i t ' l d th L b S t ' d i i th t th



employer in relation to them. He also obtains at his own expense all licensesand permits required by law of salesmen.The peddler clears his accounts with the distributor at the end of each day,and unpaid accounts are charged against the cash deposit or bond which hegives the distributor upon the execution of the peddling contract. He answersfor damages caused by him or his employees to third persons.Ruling upon this type of contracts, and the practices and relationships that

attended its implementation, the Court of Appeals, in CA-G.R. No. 19477-R,said that it did not create a relationship of employer and employee; that thepeddlers under such contract were not employees of the manufacturer or distributor, and accordingly dismissed the complaints in the said case. (Thepeddler-complainants in that case were claiming overtime pay and damages,among others.) Elevated to the Supreme Court on review (G.R. Nos.L-14072 to L-14074, 2 August 1958), the decision of the Court of Appealswas in effect affirmed, for the petition for review was dismissed by theSupreme Court 'for being factual and for lack of merit!The Court of Industrial Relations is of the same persuasion. After inquiringextensively into substantially the same terms and conditions of peddlingcontracts and the practices and relationships that went into their

implementation, the Court said in Case No. 4399ULP that the peddlers of theManila-Cosmos Aerated Water Factory were not employees of the latter.These precedents apply squarely to the case at hand. The complainantshere have not shown that their peddling contracts with the respondent differ in any substantial degree from those that were at issue in the Court of Industrial Relations, the Court of Appeals and the Supreme Court in thecases cited above. Indeed, a comparison between the contracts involved inthose cases and those in the instant litigation do not show any difference thatwould warrant a different conclusion than that reached by those courts. If atall, the additional stipulations in the present contracts strengthen the positionthat the complainant peddlers are independent contractors or businessman,not employees of the respondent.

Nor has there been shown any substantial change in the old practices of peddlers vis-a-vis the distributor or manufacturer. The points raised by thecomplainants in their pleadings regarding these practices were extensivelydiscussed by the CIR in the ULP case above referred to.We are not prepared to depart from this rule of long standing. It is the law of the case.We therefore hold that the complainants in this case were not employees of MAFINCO and Presidential Decree No. 21 does not I apply to them.

Complainants' appeal and the Labor Secretary's decision that they wereemployees of Mafinco. — Complainants Repomanta and Moralde appealedto the Secretary of Labor. They argued that the NLRC erred (1) in holdingthat they were independent contractors and not employees; (2) in relying onthe peddler's contract to determine the existence of employer-employeerelationship; (3) in anchoring its decisions on precedents which have onlypersuasive force and which did not rule squarely on the issue of employer-

employee relationship, and (4) in dismissing their complaint. As stated at the outset, the Secretary in his decision reversed al the NLRCorder. He ruled that Repomanta and Moralde were employees of Mafincoand that, consequently, the NLRC had jurisdiction over their complaint. TheSecretary directed the NLRC to hear the case on the merits.The Secretary found that the complainants "were driver-salesmen of thecompany, driving the trucks and distributing the products of the company"and that they were not independent contractors because they had no capitalof their own. That finding was based on the following considerations:(1) That the contracts are Identical; (2) that the complainants were originallyplant drivers' of the company; (3) that the complainants had no capital of their own; (4) that their delivery trucks were provided by the company; (5) that the

use of the trucks were 'exclusively' for peddling the products of the company;(6) that they were required to observe regulations; (7) that they were requiredto drive the trucks; (8) that the company furnished the gasoline and oil to runthe said trucks in business trips; (9) that the company shouldered the cost of maintenance and repair of the said trucks arising from an ordinary wear andtear; (10) that the company required them to secure the necessary licensesand permits; (11) that the company prohibited them from selling thecompany's products higher than the fixed price of the company; and (12) thatthey and their helpers were paid on commission basis.The Secretary relied on this Court's ruling that a person who possesses nocapital or money of his own to pay his obligations to his workers but relies-entirely upon the contract price to be paid by the company, falls short of the

requisites or conditions necessary for an independent contractor (Mansal vs.Gocheco Lumber Co., 96 Phil. 941).He observed that "behind the peddling cloak there was in fact employee-employer relationship". He said:While, generally, written employment contracts are held sufficient indetermining the nature of employment, such contracts, however, cannot bealways held conclusive where the actual circumstances of employmentindicate otherwise. For example, some employers, in order to avoid or evadecoverage of the Workmen's Compensation Act, enter into pseudo contracts

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of the day's accounts We do not see any evidence of control on the part of products according to their own methods subject to the pre-arranged routes



of the day s accounts. We do not see any evidence of control on the part of Cosmos or Mafinco over the activities, including the sales, of the Cosmosproducts by the Peddlers themselves who are, apparently, left to their ownchoices of routes, areas or zones as pre-arranged, with no definite, muchless supervised, time schedule.(e) That in the matter of reprimand or discipline which the peddlers attempt toproject when they failed to report for work, your Committee found no

substantial evidence on this point. The evidence shows that the peddlers arefree to choose their time. Obviously, any absence that they may incur meansso much reduction from their earnings. Thus, if their attention is incidentallycalled on this matter it is for the observance of their agreements which ispresent in any contractual relations.

As to the aspect of employer-employee relation, therefore, between Cosmosor Mafinco and the Peddlers, your Committee does not have sufficient basisto reasonably sustain the stand of the Peddlers that there is suchrelationship.(c) Attributes of an independent contractor. — As a countercheck, as it were,to the issue of employer-employee relationship your committee has taken thetask of testing such relationship against the attributes of an independent

contractor which, from the interviews and documents submitted by theparties, appear to exists on the part of the Peddlers. The earlier case of

Andoyo vs. Manila Railroad Co., G.R. No. 34722, promulgated on March 28,1932, furnishes us the definition of an 'independent contractor.' Our SupremeCourt of pre-war composition, ruled:

An independent contractor is one who exercises independent employmentand contracts to do a piece of work according to his own methods andwithout being subject to control of his employer except as to the resuIt of thework. A person who has no capital or money of his own to pay hislaborers or to comply with his obligations to them, who files no bond toanswer for the fulfillment of his contract with his employer, falls short of therequisites or conditions necessary to classify him as independent contractor.

These requisites and conditions were reiterated in the postwar cases of Philippine Manufacturing Co., Inc. vs. Geronimo, G. R. No. L-6968,promulgated on November 29, 1954, and Koppel (Phil.), Inc. vs. Darlucio et,al., G.R. No. L-14903, promulgated on August. 29, 1960. Analyzing thedefinition of 'independent contractor', the following may be gathered from therelationship between the Peddlers, on the one hand, and Cosmos or Mafinco, on the other:(1) Peddlers contract to sell and buy Cosmos products from Cosmos or Mafinco, the latter furnishing the delivery truck, but the former sell Cosmos

products according to their own methods, subject to the pre-arranged routes,areas and zones, and go back to the Company compound to return thedelivery truck and to make accounting of the day's sales collection at anytime in the morning or in the afternoon. Essentially, control, if at all, extendsonly as to observance of traffic regulations which is inherent in ownership of the delivery truck by Cosmos or Mafinco and the end result which is theliquidation of the sales collection. Control over the details of the Peddlers'

sales activities seems to be farfetched in this case.(2) Capital or money of the Peddlers to pay their own helpers is evidentlywithin their prerogative, although it appears that the wages of helpers areuniform at P6.00 per trip. But can we safely say that the cash bond of Pl,500.00 by the Peddlers constitute their capital? For big-time businessmen,this small amount may not be considered capital, but when it is taken as a'deposit on consignment' since the same answers for any deficiencies thatthe Peddlers may incur during the day's sales collection, then it can be takento mean 'capital' within its signification that it allocates to every day businessdealing. The amount of capital, to us, is immaterial; it is the purpose for whichthe same is deposited that is most significant.(3) The Peddlers are required under the Agreement to Peddler Soft Drinks

and Peddling Contract to put up not only the cash bond of P1,500.00, butalso a performance bond of P1,000.00 as embodied in said Agreement toPeddler Soft Drinks as follows:(4) To assure performance by the PEDDLER of his obligation to hisemployees under the Social Security Act, the applicable labor laws, and for damages suffered by third persons PEDDLER shall furnish a performancebond of P1,000.00 in favor of the MANUFACTURER from a surety Companyacceptable to the MANUFACTURER. And, in case Performance Bond within30 days from the date of signing of this Contract, such failure shall besufficient ground for the MANUFACTURER to suspend the businessrelationship with the Peddler until the Peddler complies with this provision.

Again, to the mind of your Committee, the amount of the Performance Bond

is not so relevant and material as to the purpose for which the same isexecuted- which is to assure performance of the Peddlers' obligations asemployer of his helpers. This is an attribute of an independent contractor towhich the Peddlers are bound under the Agreement or Contract.(4) Peddlers are doing business for themselves since they took out licensesin the City of Manila, and have paid their corresponding professional or occupation tax to the Bureau of Internal Avenue. This fact strengthens theCommittee findings that the peddlers are carrying on a business asindependent merchants.

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availment of benefits under the Social Security Act as amended, "PTCCEA" Raymundo Jomok. The Commission dismissed the petition for lack of merit,



y ,beingthe acronym of a labor organization, the "Philippine Technical, Clerical,Commercial Employees Association," with which the petitioners claimed tobe affiliated. The petition, docketed as SSC Case No. 5443, alleged inessence that although the petitioners were employees of the Manila Golf andCountry Club, a domestic corporation, the latter had not registered them as

such with the SSS. At about the same time, two other proceedings bearing on the same questionwere filed or were pending; these were:(1) a certification election case filed with the Labor Relations Division of theMinistry of Labor by the PTCCEA on behalf of the same caddies of theManila Golf and Country Club, the case being titled "Philippine Technical,Clerical, Commercial Association vs. Manila Golf and Country Club" anddocketed as Case No. R4-LRDX-M-10-504-78; it appears to have beenresolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojowho was thereafter upheld by Director Carmelo S. Noriel, denying the Club'smotion for reconsideration; 1(2) a compulsory arbitration case initiated before the Arbitration Branch of the

Ministry of Labor by the same labor organization, titled "Philippine Technical,Clerical, Commercial Employees Association (PTCCEA), Fermin Lamar andRaymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel Celdran,Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit by Labor

Arbiter Cornelio T. Linsangan, a decision later affirmed on appeal by theNational Labor Relations Commission on the ground that there was noemployer-employee relationship between the petitioning caddies and therespondent Club. 2In the case before the SSC, the respondent Club filed answer praying for thedismissal of the petition, alleging in substance that the petitioners, caddies byoccupation, were allowed into the Club premises to render services as suchto the individual members and guests playing the Club's golf course and who

themselves paid for such services; that as such caddies, the petitioners werenot subject to the direction and control of the Club as regards the manner inwhich they performed their work; and hence, they were not the Club'semployees.Subsequently, all but two of the seventeen petitioners of their own accordwithdrew their claim for social security coverage, avowedly coming to realizethat indeed there was no employment relationship between them and theClub. The case continued, and was eventually adjudicated by the SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and

y p ,3 ruling:. . . that the caddy's fees were paid by the golf players themselves and not byrespondent club. For instance, petitioner Raymundo Jomok averred that for their services as caddies a caddy's Claim Stub (Exh. "1-A") is issued by aplayer who will in turn hand over to management the other portion of the stubknown as Caddy Ticket (Exh. "1") so that by this arrangement management

will know how much a caddy will be paid (TSN, p. 80, July 23, 1980).Likewise, petitioner Fermin Llamar admitted that caddy works on his own inaccordance with the rules and regulations (TSN, p. 24, February 26, 1980)but petitioner Jomok could not state any policy of respondent that directs themanner of caddying (TSN, pp. 76-77, July 23, 1980). While respondent clubpromulgates rules and regulations on the assignment, deportment andconduct of caddies (Exh. "C") the same are designed to impose personaldiscipline among the caddies but not to direct or conduct their actual work. Infact, a golf player is at liberty to choose a caddy of his preference regardlessof the respondent club's group rotation system and has the discretion onwhether or not to pay a caddy. As testified to by petitioner Llamar that their income depends on the number of players engaging their services and

liberality of the latter (TSN, pp. 10-11, Feb. 26, 1980). This lends credence torespondent's assertion that the caddies are never their employees in theabsence of two elements, namely, (1) payment of wages and (2) control or supervision over them. In this connection, our Supreme Court ruled that inthe determination of the existence of an employer-employee relationship, the"control test" shall be considered decisive (Philippine Manufacturing Co. vs.Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco Lumber Co., 96Phil. 941; Viana vs.

Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co.,101 Phil. 358, LVN Pictures Inc. vs. Phil. Musicians Guild, et al.,L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also toInvestment Planning Corporation Phil. vs. SSS 21 SCRA 925).

Records show the respondent club had reported for SS coverage Graciano Awit and Daniel Quijano, as bat unloader and helper, respectively, includingtheir ground men, house and administrative personnel, a situation indicativeof the latter's concern with the rights and welfare of its employees under theSS law, as amended. The unrebutted testimony of Col. Generoso A. Alejo(Ret.) that the ID cards issued to the caddies merely intended to identify theholders as accredited caddies of the club and privilege(d) to ply their trade or occupation within its premises which could be withdrawn anytime for loss of confidence. This gives us a reasonable ground to state that the defense

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posture of respondent that petitioners were never its employees is well taken. (c) the club's "suggesting" the rate of fees payable to the caddies.



p p p p y4From this Resolution appeal was taken to the Intermediate appellate Courtby the union representing Llamar and Jomok. After the appeal was docketed5 and some months before decision thereon was reached and promulgated,Raymundo Jomok's appeal was dismissed at his instance, leaving FerminLlamar the lone appellant. 6

The appeal ascribed two errors to the SSC:(1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of National Capital Regional Office in the certificationelection case (R-4-LRD-M-10-504-78) supra, on the precise issue of theexistence of employer-employee relationship between the respondent cluband the appellants, it being contended that said issue was "a function of theproper labor office"; and(2) adjudicating that self same issue a manner contrary to the ruling of theDirector of the Bureau of Labor Relations, which "has not only become finalbut (has been) executed or (become) res adjudicata." 7The Intermediate Appellate Court gave short shirt to the first assigned error,dismissing it as of the least importance. Nor, it would appear, did it find any

greater merit in the second alleged error. Although said Court reserved theappealed SSC decision and declared Fermin Llamar an employee of theManila Gold and Country Club, ordering that he be reported as such for social security coverage and paid any corresponding benefits, 8 itconspicuously ignored the issue of res adjudicata raised in said secondassignment. Instead, it drew basis for the reversal from this Court's ruling inInvestment Planning Corporation of the Philippines vs. Social SecuritySystem, supra 9 and declared that upon the evidence, the questionedemployer-employee relationship between the Club and Fermin Llamar passed the so-called "control test," establishment in the case — i.e.,"whether the employer controls or has reserved the right to control theemployee not only as to the result of the work to be done but also as to the

means and methods by which the same is to be accomplished," — the Club'scontrol over the caddies encompassing:(a) the promulgation of no less than twenty-four (24) rules and regulations

just about every aspect of the conduct that the caddy must observe, or avoid,when serving as such, any violation of any which could subject him todisciplinary action, which may include suspending or cutting off his access tothe club premises;(b) the devising and enforcement of a group rotation system whereby acaddy is assigned a number which designates his turn to serve a player;

( ) gg g p yDeemed of title or no moment by the Appellate Court was the fact that thecaddies were paid by the players, not by the Club, that they observed nodefinite working hours and earned no fixed income. It quoted with approvalfrom an American decision 10 to the effect that: "whether the club paid thecaddies and afterward collected in the first instance, the caddies were stillemployees of the club." This, no matter that the case which produced this

ruling had a slightly different factual cast, apparently having involved a claimfor workmen's compensation made by a caddy who, about to leave thepremises of the club where he worked, was hit and injured by an automobilethen negotiating the club's private driveway.That same issue of res adjudicata, ignored by the IAC beyond bare mentionthereof, as already pointed out, is now among the mainways of the privaterespondent's defenses to the petition for review. Considered in theperspective of the incidents just recounted, it illustrates as well as anythingcan, why the practice of forum-shopping justly merits censure and punitivesanction. Because the same question of employer-employee relationship hasbeen dragged into three different fora, willy-nilly and in quick succession, ithas birthed controversy as to which of the resulting adjudications must now

be recognized as decisive. On the one hand, there is the certification case[R4-LRDX-M-10-504-78), where the decision of the Med-Arbiter found for theexistence of employer-employee relationship between the parties, wasaffirmed by Director Carmelo S. Noriel, who ordered a certification electionheld, a disposition never thereafter appealed according to the privaterespondent; on the other, the compulsory arbitration case (NCR Case No.

AB-4-1771-79), instituted by or for the same respondent at about the sametime, which was dismissed for lack of merit by the Labor Arbiter, which wasafterwards affirmed by the NLRC itself on the ground that there existed nosuch relationship between the Club and the private respondent. And, as if matters were not already complicated enough, the same respondent, with thesupport and assistance of the PTCCEA, saw fit, also contemporaneously, to

initiate still a third proceeding for compulsory social security coverage withthe Social Security Commission (SSC Case No. 5443), with the resultalready mentioned.Before this Court, the petitioner Club now contends that the decision of theMed-Arbiter in the certification case had never become final, being in fact thesubject of three pending and unresolved motions for reconsideration, as wellas of a later motion for early resolution. 11 Unfortunately, none of thesemotions is incorporated or reproduced in the record before the Court. And,for his part, the private respondent contends, not only that said decision had

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been appealed to and been affirmed by the Director of the BLR, but that a not exist, and which ruling was thereafter affirmed by the National Labor



certification election had in fact been held, which resulted in the PTCCEAbeing recognized as the sole bargaining agent of the caddies of the ManilaGolf and Country Club with respect to wages, hours of work, terms of employment, etc. 12 Whatever the truth about these opposing contentions,which the record before the Court does not adequately disclose, the morecontrolling consideration would seem to be that, however, final it may

become, the decision in a certification case, by thevery nature of that proceedings, is not such as to foreclose all further disputebetween the parties as to the existence, or non-existence, of employer-employee relationship between them.It is well settled that for res adjudicata, or the principle of bar by prior

judgment, to apply, the following essential requisites must concur: (1) theremust be a final judgment or order; (2) said judgment or order must be on themerits; (3) the court rendering the same must have jurisdiction over thesubject matter and the parties; and (4) there must be between the two casesidentity of parties, identity of subject matter and identity of cause of action. 13Clearly implicit in these requisites is that the action or proceedings in which isissued the "prior Judgment" that would operate in bar of a subsequent action

between the same parties for the same cause, be adversarial, or contentious,"one having opposing parties; (is) contested, as distinguished from an exparte hearing or proceeding. . . . of which the party seeking relief has givenlegal notice to the other party and afforded the latter an opportunity to contestit" 14 and a certification case is not such a proceeding, as this Court alreadyruled:

A certification proceedings is not a "litigation" in the sense in which the termis commonly understood, but mere investigation of a non-adversary, fact-finding character, in which the investigating agency plays the part of adisinterested investigator seeking merely to ascertain the desires of theemployees as to the matter of their representation. The court enjoys a widediscretion in determining the procedure necessary to insure the fair and free

choice of bargaining representatives by the employees. 15Indeed, if any ruling or judgment can be said to operate as res adjudicata onthe contested issue of employer-employee relationship between presentpetitioner and the private respondent, it would logically be that rendered inthe compulsory arbitration case (NCR Case No. AB-4-771-79, supra),petitioner having asserted, without dispute from the private respondent, thatsaid issue was there squarely raised and litigated, resulting in a ruling of the

Arbitration Branch (of the same Ministry of Labor) that such relationship did

Relations Commission in an appeal taken by said respondent. 16In any case, this Court is not inclined to allow private respondent the benefitof any doubt as to which of the conflicting ruling just adverted to should beaccorded primacy, given the fact that it was he who actively sought themsimultaneously, as it were, from separate fora, and even if the graver sanctions more lately imposed by the Court for forum-shopping may not be

applied to him retroactively. Accordingly, the IAC is not to be faulted for ignoring private respondent'sinvocation of res adjudicata; on contrary, it acted correctly in doing so.Said Court’s holding that upon the facts, there exists (or existed) arelationship of employer and employee between petitioner and privaterespondent is, however, another matter. The Court does not agree that saidfacts necessarily or logically point to such a relationship, and to the exclusionof any form of arrangements, other than of employment, that would make therespondent's services available to the members and guest of the petitioner.

As long as it is, the list made in the appealed decision detailing the variousmatters of conduct, dress, language, etc. covered by the petitioner'sregulations, does not, in the mind of the Court, so circumscribe the actions or

judgment of the caddies concerned as to leave them little or no freedom of choice whatsoever in the manner of carrying out their services. In the verynature of things, caddies must submit to some supervision of their conductwhile enjoying the privilege of pursuing their occupation within the premisesand grounds of whatever club they do their work in. For all that is made toappear, they work for the club to which they attach themselves on sufferencebut, on the other hand, also without having to observe any working hours,free to leave anytime they please, to stay away for as long they like. It is notpretended that if found remiss in the observance of said rules, any disciplinemay be meted them beyond barring them from the premises which, it may besupposed, the Club may do in any case even absent any breach of the rules,and without violating any right to work on their part. All these considerations

clash frontally with the concept of employment.The IAC would point to the fact that the Club suggests the rate of feespayable by the players to the caddies as still another indication of the latter'sstatus as employees. It seems to the Court, however, that the intendment of such fact is to the contrary, showing that the Club has not the measure of control over the incidents of the caddies' work and compensation that anemployer would possess.The Court agrees with petitioner that the group rotation system so-called, isless a measure of employer control than an assurance that the work is fairly

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distributed, a caddy who is absent when his turn number is called simply This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify



losing his turn to serve and being assigned instead the last number for theday. 17By and large, there appears nothing in the record to refute the petitioner'sclaim that:(Petitioner) has no means of compelling the presence of a caddy. A caddy isnot required to exercise his occupation in the premises of petitioner. He may

work with any other golf club or he may seek employment a caddy or otherwise with any entity or individual without restriction by petitioner. . . .. . . In the final analysis, petitioner has no was of compelling the presence of the caddies as they are not required to render a definite number of hours of work on a single day. Even the group rotation of caddies is not absolutebecause a player is at liberty to choose a caddy of his preference regardlessof the caddy's order in the rotation.It can happen that a caddy who has rendered services to a player on one daymay still find sufficient time to work elsewhere. Under such circumstances,he may then leave the premises of petitioner and go to such other place of work that he wishes (sic). Or a caddy who is on call for a particular day maydeliberately absent himself if he has more profitable caddying, or another,

engagement in some other place. These are things beyond petitioner'scontrol and for which it imposes no direct sanctions on the caddies. . . . 18WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed and set aside, it being hereby declared that theprivate respondent, Fermin Llamar, is not an employee of petitioner ManilaGolf and Country Club and that petitioner is under no obligation to report himfor compulsory coverage to the Social Security System. No pronouncementas to costs.SO ORDERED.Regalado and Mendoza, JJ., concur.Padilla, J., is on leave.Puno, J., took no part.

33. Domasig vs. NLRCEDDIE DOMASIG, petitioner, vs. NATIONAL LABOR RELATIONSCOMMISSION (SECOND DIVISION), CATA GARMENTS CORPORATIONand/or OTTO ONG and CATALINA CO, respondents.D E C I S I O NPADILLA, J.:

and set aside the Resolution[1] of respondent National Labor RelationsCommission (NLRC) rendered on 20 September 1994 remanding the recordsof the case to the arbitration branch of origin for further proceedings.The antecedent facts as narrated by public respondent in the assailedresolution are as follows:“The complaint was instituted by Eddie Domasig against respondents Cata

Garments Corporation, a company engaged in garments business and itsowner/manager Otto Ong and Catalina Co for illegal dismissal, unpaidcommission and other monetary claim[s]. Complainant alleged that hestarted working with the respondent on July 6, 1986 as Salesman when thecompany was still named Cato Garments Corporation; that three (3) yearsago, because of a complaint against respondent by its workers, it changed itsname to Cata Garments Corporation; and that on August 29, 1992, he wasdismissed when respondent learned that he was being pirated by a rivalcorporation which offer he refused. Prior to his dismissal, complainantalleged that he was receiving a salary of P1,500.00 a month pluscommission. On September 3, 1992 he filed the instant complaint.Respondent denied complainant’s claim that he is a regular employee

contending that he is a mere commission agent who receives a commissionof P5.00 per piece of article sold at regular price and P2.50 per piece sold in[sic] bargain price; that in addition to commission, complainant received afixed allowance of P1,500.00 a month; that he had no regular time schedule;and that the company come [sic] into existence only on September 17, 1991.In support of its claim that complainant is a commission agent, respondentsubmitted as Annexes ‘B’ and ‘B-1’ the List of Sales Collections,Computation of Commission due, expenses incurred, cash advancesreceived for the month of January and March 1992 (Rollo pp. 22-27).Respondent further contends that complainant failed to turn over to therespondent his collection from two (2) buyers as per affidavit executed bythese buyers (Rollo pp. 28-29) and for which, according to respondent it

initiated criminal proceedings against the complainant.The Labor Arbiter held that complainant was illegally dismissed and entitledto reinstatement and backwages as well as underpayment of salary; 13thmonth pay; service incentive leave and legal holiday. The Arbiter alsoawarded complainant his claim for unpaid commission in the amount of P143,955.00.”[2]Private respondents appealed the decision of the labor arbiter to publicrespondent. As aforesaid, the NLRC resolved to remand the case to thelabor arbiter for further proceeding. It declared as follows:

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“We find the decision of the Labor Arbiter not supported by evidence on The only issue to be resolved in this petition is whether or not the NLRC



record. The issue of whether or not complainant was a commission agentwas not fully resolved in the assailed decision. It appears that the Labor

Arbiter failed to appreciate the evidences submitted by respondent as Annexes “B” and “B-1” (Rollo pp. 22-27) in support of its allegation asregard[s] the nature of complainant’s employment. Neither is there ashowing that the parties were required to adduce further evidence to support

their respective claim. The resolution of the nature of complainant’semployment is vital to the case at bar considering that it would bedeterminative to his entitlement of monetary benefits. The same is similarlytrue as regard the claim [sic] for unpaid commission. The amount beingclaim [sic] for unpaid commission as big as it is requires substantial proof toestablish the entitlement of the complainant to the same. We take note of the respondent’s claim that ‘while they admit that complainant has an unpaidcommission due him, the same is only for his additional sale of 4,027 piecesat regular price and 1,047 pieces at bargain price for a total sum of (P20,135.00 + 2,655.00) or P22,820.00 as appearing in the list of Sales andunpaid commission’ (Annex ‘C’ and ‘C-1' Appeal, Rollo pp. 100-102). Saidamount according to respondent is being withheld by them pending the

accounting of money collected by complainant from his two (2) buyers whichwas not remitted to them. Considering the conflicting version of the partiesregarding the issues on hand, it was incumbent on the Labor Arbiter toconduct further proceedings thereon. The ends of justice would better beserved if both parties are given the opportunity to ventilate further their positions.”[3]In their comment on the petition at bar, private respondents agree with thefinding of the NLRC that the nature of petitioner’s employment with privaterespondents is vital to the case as it will determine the monetary benefits towhich he is entitled. They further aver that the evidence presented uponwhich the labor arbiter based her decision is insufficient, so that the NLRCdid not commit grave abuse of discretion in remanding the case to the

arbitration branch of origin for further proceedings.The comment of the Solicitor General is substantially the same as that of private respondents, i.e., there is no sufficient evidence to prove employer-employee relationship between the parties. Furthermore, he avers that theorder of the NLRC to the labor arbiter for further proceedings does notautomatically translate to a protracted trial on the merits for such can befaithfully complied with through the submission of additional documents or pleadings only.

gravely abused its discretion in vacating and setting aside the decision of thelabor arbiter and remanding the case to the arbitration branch of origin for further proceedings.In essence, respondent NLRC was not convinced that the evidencepresented by the petitioner, consisting of the identification card issued to himby private respondent corporation and the cash vouchers reflecting his

monthly salaries covering the months stated therein, settled the issue of employer-employee relationship between private respondents and petitioner.It has long been established that in administrative and quasi-judicialproceedings, substantial evidence is sufficient as a basis for judgment on theexistence of employer-employee relationship. No particular form of evidenceis required to prove the existence of such employer-employee relationship.

Any competent and relevant evidence to prove the relationship may beadmitted.[4]Substantial evidence has been defined to be such relevant evidence as areasonable mind might accept as adequate to support a conclusion, and itsabsence is not shown by stressing that there is contrary evidence on record,direct or circumstantial, for the appellate court cannot substitute its own

judgment or criterion for that of the trial court in determining wherein lies theweight of evidence or what evidence is entitled to belief.[5]In a business establishment, an identification card is usually provided notonly as a security measure but mainly to identify the holder thereof as a bonafide employee of the firm that issues it. Together with the cash voucherscovering petitioner’s salaries for the months stated therein, we agree with thelabor arbiter that these matters constitute substantial evidence adequate tosupport a conclusion that petitioner was indeed an employee of privaterespondent.Section 4, Rule V of the Rules of Procedure of the National Labor RelationsCommission provides thus:“Section 4. Determination of Necessity of Hearing. — Immediately after the

submission of the parties of their position papers/memoranda, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevantdocumentary evidence, if any, from any party or witness.”“It is clear from the law that it is the arbiters who are authorized to determinewhether or not there is a necessity for conducting formal hearings in cases

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brought before them for adjudication. Such determination is entitled to greatt i th b f bit i ”[6]

papers and documents submitted without resorting to the technical rules of id [9]



respect in the absence of arbitrariness.”[6]In the case at bar, we do not believe that the labor arbiter acted arbitrarily.Contrary to the finding of the NLRC, her decision at least on the existence of an employer-employee relationship between private respondents andpetitioner, is supported by substantial evidence on record.The list of sales collection including computation of commissions due,

expenses incurred and cash advances received (Exhibits “B” and “B-1”)which, according to public respondent, the labor arbiter failed to appreciate insupport of private respondents’ allegation as regards the nature of petitioner’s employment as a commission agent, cannot overcome theevidence of the ID card and salary vouchers presented by petitioner whichprivate respondents have not denied. The list presented by privaterespondents would even support petitioner’s allegation that, aside from amonthly salary of P1,500.00, he also received commissions for his work as asalesman of private respondents.Having been in the employ of private respondents continuously for more thanone year, under the law, petitioner is considered a regular employee. Proof beyond reasonable doubt is not required as a basis for judgment on the

legality of an employer’s dismissal of an employee, nor even preponderanceof evidence for that matter, substantial evidence being sufficient.[7]Petitioner’s contention that private respondents terminated his employmentdue to their suspicion that he was being enticed by another firm to work for itwas not refuted by private respondents. The labor arbiter’s conclusion thatpetitioner’s dismissal is therefore illegal, is not necessarily arbitrary or erroneous. It is entitled to great weight and respect.It was error and grave abuse of discretion for the NLRC to remand the casefor further proceedings to determine whether or not petitioner was privaterespondents’ employee. This would only prolong the final disposition of thecomplaint. It is stressed that, in labor cases, simplification of procedures,without regard to technicalities and without sacrificing the fundamental

requisites of due process, is mandated to ensure the speedy administrationof justice.[8] After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad powers, including issuance of subpoena, requiring theattendance and testimony of witnesses or the production of suchdocumentary evidence as may be material to a just determination of thematter under investigation.

Additionally, the National Labor Relations Commission and the labor arbiter have authority under the Labor Code to decide a case based on the position

evidence.[9]However, in view of the need for further and correct computation of thepetitioner’s commissions in the light of the exhibits presented and thedismissal of the criminal cases filed against petitioner, the labor arbiter isrequired to undertake a new computation of the commissions to whichpetitioner may be entitled, within thirty (30) days from submission by the

parties of all necessary documents.WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9 November 1994 are SET ASIDE. The decision of the labor arbiter dated 19 May 1993 is REINSTATED and AFFIRMED subject to themodification above-stated as regards a re-computation by the labor arbiter of the commissions to which petitioner maybe actually entitled.SO ORDERED.Bellosillo, Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.

34. Cebu Metal Corp vs. SalilingCEBU METAL CORPORATION, Petitioner, v. GREGORIO ROBERT

SALILING, ELIAS BOLIDO, MANUEL ALQUIZA, and BENJIE AMPARADO,Respondents.D E C I S I O NCHICO-NAZARIO, J.:The CaseThis is a petition for review on certiorari under Rule 45 of the Rules of Courtseeking the reversal of the Decision1 dated 18 February 2002, and theResolution2 dated 27 June 2002, rendered by the Court of Appeals in CA-G.R. SP No. 66480, which annulled and set aside the decision3 dated 9October 2000, and resolution4 dated 2 July 2001, of the National Labor Relations Commission (NLRC) in NLRC Case No.V-000840-99. In itsdecision, the NLRC reversed and set aside the decision5 dated 27 May 1999

of Labor Arbiter Jesus N. Rodriguez, Jr. in favor of complainant employees,herein respondents Gregorio Saliling, Elias Bolido, Manuel Alquiza andBenjie Amparado, RAB Case No. 06-01-10019-97.The FactsParties herein are somewhat at variance with respect to the basic facts of thecase at bar.The facts of the case as recounted6 by petitioner Cebu Metal Corporationare as follows:

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Respondent (Cebu Metal Corporation) is a corporation engage (sic) in buyingd lli f i I th B l d B h it h th l (3)

hires the services of people for the purpose of unloading the scrap metalf th t k



and selling of scrap iron x x x. In the Bacolod Branch, it has three regular (3)employees holding such positions as Officer-in-Charge, a scaler and ayardman, x x x whose salaries are paid directly by its main office in Cebuwhile others are undertaking pakiao work in the unloading of scrap iron for stockpiling.

Among those workers who presented for work in the unloading of scrap iron

in the area are the unemployed persons or trisicad drivers standing by in thevicinity some of whom are the herein complainants x x x Gregorio RobertSaliling, Elias Bolido, Manuel Alquiza, Benjie Amparado and non-complainants Arnel Allera, Eliseo Torralba or any other persons who wantedto augment their income aside from their regular jobs. Robert GregorioSaliling started working in 1996, Elias Bolido on (sic) October 1995 whileManuel Alquiza and Benjie Amparado, on (sic) February 1996.

As compensation for their services, these workers including the hereincomplainants are paid at the rate of P15.00 per ton for which each personcan unload at least two (2) to three (3) tons per hour or can earn at leastP240.00 to P360.00 in eight (8) hours if work is only available which paymentnecessarily includes cost of living allowance (COLA) and 13th-month pay.

x x xPetitioner company further elaborated7 on the nature of its business and thecircumstances surrounding the employment of respondent complainants, towit:The Bacolod buying station is mainly a stockyard where scrap metaldelivered by its suppliers are stockpiled.The supply of scrap metal is not steady as it depends upon many factors,such as availability of supplies, price, competition and demand amongothers. There are therefore (sic) instances when in a single week , one or twotrucks of scrap metal are delivered while there are weeks when not a singletruck of scrap metal are delivered although there may also be weeks whenquite a number of trucks are deliv

ered to the stockyard x x x. The arrivals of these trucks and the deliveries of scrap metal are not regular and the schedules of deliveries x x x to thestockyard x x x are not known before hand by the respondent (petitioner company).x x x [t]he trucks used in the delivery of scrap metal are owned and/or rentedby the different suppliers of scrap metal. These trucks have their own driver and truck boys employed by these different suppliers. Sometimes, thesetrucks do not have any truck boys, and in these instances, the respondent

from these trucks.It is for this reason that the unloaders hired by the respondent to unload thescrap metal from these trucks are basically seasonal workers. They are hiredonly whenever there are trucks of suppliers of scrap metal that deliver scrapmetal to the yard of the respondent and these trucks happen not to have anyaccompanying truck boys. Whoever are available and whoever are willing to

help unload x x x on a particular occasion are hired to unload x x x.Usually, there is a leader for a particular group who is tasked to unload thescrap metal from a particular truck. It is this leader who distributes theindividual take of each member of the particular group unloading the scrapmetal from a particular truck.In contrast, respondent complainants, Gregorio Saliling, Elias Bolido, Manuel

Alquiza and Benjie Amparado, in their position paper8 submitted to the Labor Arbiter, narrate:1. That complainants Gregorio Saliling was employed by defendantCorporation x x x in 1988, complainant Elias Bolido was hired in 1992 andcomplainant Benjie Amparado was hired by respondent in 1994; x x x.2. The aforesaid complainants, from the time they were employed by

respondent, they received their salary on (sic) the following rate:

GREGORIO ROBERT SALILING-------P5.00/hour in 19885.00/hour in 19896.00/hour in 19907.00/hour in 19917.00/hour in 19927.00/hour in 19937.00/hour in 19947.50/hour in 1995

8.75/hour in 1996ELIAS BOLIDO-------P100.00/day in 19927.00/hour in 19937.00/hour in 19947.50/hour in 19958.75/hour in 1996BENJIE AMPARADO

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-------P7 00/h i 1994

-----7 912 34



P7.00/hour in 19947.50/hour in 19958.75/hour in 19963. That the aforesaid complainants never received any other benefits fromthe respondent, except the amount indicated above; (sic) They received thesum of P10.93 per hour in case of overtime work, but they never received

additional benefits in case, (sic) they worked on Saturdays, Sundays, andHolidays;Complainants likewise never received 13th month pay, holiday pay, incentiveleave pay, bonuses and other labor benefits;4. Complainants were required to work from 8:00 A.M. to 12:00 noon andfrom 1:00 P.M. to 5:00 P.M. or for eight hours a day; seven days a week andthirty days a month;5. When these complainants demanded from respondent for the increase of their salary, respondent through Marlon got irritated and instructedcomplainants to stop working, thus, complainants, effective December 1996were precluded from entering respondent loading and unloading compound xx x.

On 10 January 1997, respondent complainants filed a Complaint9 before theRegional Arbitration Branch No VI, Bacolod City for underpayment of wagesand non-payment of the following benefits: 1) 13th month pay; 2) holiday pay;and 3) service incentive leave pay.On 6 March 1998, respondent complainants manifested10 that they wereincluding in their complaint against petitioner company, the claim for illegaldismissal. Such belated filing was alleged to have been due to the fact thatthey were only dismissed after the filing of their complaint.On 27 May 1999, the Labor Arbiter rendered a decision11 the dispositive of which reads:CONFORMABLY TO THE FOREGOING, respondent Cebu MetalCorporation, through its manager, MARLON RADEN, is hereby ordered to

REINSTATE complainants to their former positions with backwages limited toone (1) year and 13th month pay, ERA and COLA as follows:NAME OF COMPLAINANTS:

1. Gregorio Robert Saliling A) Backwages-----P42,238.30B) 13th Month Pay

7,912.34C) ERA-----1,139.83D) COLA-----

12,961.91TOTAL-----P64,252.382. Elias Bolido

A) Backwages-----P42,238.30B) 13th Month Pay-----7,912.34C) ERA

-----1,139.83D) COLA-----12,961.91TOTAL-----P64,252.38

A) Backwages

-----P42,238.30B) 13th Month Pay-----7,912.34C) ERA-----1,139.83D) COLA

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-----12 961 91

In case reinstatement is no longer feasible, complainants are to be givenseparation pay equivalent to fifteen (15) days to be given for every year of



12,961.91TOTAL-----P64,252.383. Manuel Alquiza

A) Backwages

-----P42,238.30B) 13th Month Pay-----7,912.34C) ERA-----1,139.83D) COLA-----12,961.91TOTAL

-----P64,252.384. Benjie Amparado

A) Backwages-----P42,238.30B) 13th Month Pay-----7,912.34C) ERA-----1,139.83

D) COLA-----12,961.91TOTAL-----P64,252.38GRAND TOTAL-----P257,009.52

separation pay equivalent to fifteen (15) days to be given for every year of service.

Attorney's fees of five percent (5%) of the total judgment award of theamount of Twelve Thousand Eight Hundred fifty Pesos and Forty-EightCentavos (P12,850.48) is also awarded.In ordering the reinstatement of respondent complainants, the Labor Arbiter

found them to have been illegally dismissed from their employment withpetitioner company. The decision explained that:Regarding the second issue which is illegal dismissal, we find the samemeritorious. Under Article 280 of the Labor Code, complainants are regular employees since they are "engaged to perform activities which are necessaryand desirable in the usual business or trade of the employer", (sic) x x x.Complainants job of loading, unloading and stockpiling scrap iron isnecessary and part of the business of respondent. Since complainants weredismissed without cause and due process of law, they are entitled toreinstatement with backwages limited to one (1) year.

Aggrieved, petitioner company appealed the foregoing decision to the NLRC.In a Decision12 promulgated on 9 October 2000, the Fourth Division of the

NLRC reversed and set aside the ruling of the Labor Arbiter. Instead, theCommission held that respondent complainants were not regular employeesof petitioner company, thus, they could not have been illegally dismissed.The order of reversal was based on the Commission's finding that the pettycash vouchers13 submitted by petitioner company confirmed the fact thatunloaders were paid on "pakiao" or task basis at P15.00 per metric ton. TheCommission further rationalized that with the irregular nature of the workinvolved, the stoppage and resumption of which depended solely on theavailability or supply of scrap metal, it necessarily follows that after the job of unloading was completed and "unloaders" were paid the contract price, thelatter's working relationship with petitioner company legally ended. They werethen free to offer their services to others.

As an aside, the Commission observed that it was erroneous for the Labor Arbiter to rule on the question of whether or not respondent complainantswere illegally dismissed since the complaint filed on 10 January 1997 failedto include such matter. To be sure, the complaint merely imputed thefollowing causes of action: 1) underpayment of wages; and 2) non-paymentof a) 13th month pay; b) holiday pay; and c) service incentive leave pay.Nowhere was the matter of illegal dismissal written on the same. The issuewas formally brought up only on 6 March 1998, via a Manifestation, long after the filing of the parties' respective position papers.

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underpaid since there is no minimum wage in this type of work.Complainants' earnings depend upon their own diligence and speed in

It is well settled that an act of a court or tribunal may only be considered tohave been done in grave abuse of discretion when the same was performed



Complainants earnings depend upon their own diligence and speed inunloading and stockpiling scrap iron. More importantly, it depends upon theavailability of scrap iron to be unloaded and stockpiled."The above findings validate respondent's position as to the nature of complainants' work. Their services are needed only when scrap metals aredelivered which occurs only one or twice a week or sometimes no delivery at

all in a given week. The irregular nature of work, stoppage of work and thenwork again depending on the supply of scrap metal has not been denied bycomplainants. On the contrary they even admitted the same in their Reply torespondent's Appeal. x x x. Indeed, it would be unjust to require respondentto maintain complainants in the payroll even if there is no more work to bedone. To do so would make complainants privileged retainers who collectpayment from their employer for work not done. This is extremely unfair andamount to cuddling of labor at the expense of management.16It should be remembered that The Philippine Constitution, while inexorablycommitted towards the protection of the working class from exploitation andunfair treatment, nevertheless mandates the policy of social justice so as tostrike a balance between an avowed predilection for labor, on the one hand,

and the maintenance of the legal rights of capital, the proverbial hen that laysthe golden egg, on the other. Indeed, we should not be unmindful of the legalnorm that justice is in every case for the deserving, to be dispensed with inthe light of established facts, the applicable law, and existing

jurisprudence.17 craUnder the circumstances abovestated:x x x there can be no illegal dismissal to speak of. Besides, complainantscannot claim regularity in the hiring every time a truck comes loaded withscrap metal. This is confirmed in the Petty cash Vouchers which are in thenames of different leaders who apportion the amount earned among hismembers.18

And, quite telling is the fact that not every truck delivery of scrap metal

requires the services of respondent complainants when a particular truck isaccompanied by its own "unloader." And whenever required, respondentcomplainants were not always the ones contracted to undertake theunloading of the trucks since the work was offered to whomever wereavailable at a given time.Finally, the judgment of the Commission that the Labor Arbiter actedincorrectly in ruling on a cause of action, i.e., illegal dismissal, not specificallystated in the complaint, did not constitute grave abuse of discretion on itspart.

have been done in grave abuse of discretion when the same was performedin a capricious or whimsical exercise of judgment which is equivalent to lackof jurisdiction.19 The abuse of discretion must be so patent and gross as toamount to an evasion of positive duty or to a virtual refusal to perform a dutyenjoined or to a ct at all in contemplation of law, as where the power isexercised in an arbitrary power and despotic manner by reason of passion or

personal hostility.20 craIn the case at bar, from the preceding definition, it is quite apparent that nograve abuse of discretion can be attributed to the NLRC. Its decision simplyexpressed an observation, to wit:Moreover, We note that in the complaint filed last January 10, 1997, theissue of illegal dismissal was not raised as a cause of action although it waslater discussed in their position paper filed on January 12, 1998. x x x.[Emphasis supplied.]The use of the word "moreover" clearly expresses NLRC's position in treatingthe matter of the non-inclusion of the issue of illegal dismissal in thecomplaint merely as an add-on, adjunct or a supplement to its finding thatrespondent complainants' were not regular employees of petitioner company.

At any rate, the Court is clothed with authority to review matters, even if theyare not assigned as errors in their appeal, if it finds that their consideration isnecessary in arriving at a just decision of the case.21 craWHEREFORE, in view of the foregoing, the instant petition is GRANTED.The Decision dated 18 February 2002, and the Resolution dated 27 June2002, both render

35. Francisco vs. NLRC ANGELINA FRANCISCO, Petitioner,vs.NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION,

SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENEBALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.D E C I S I O NYNARES-SANTIAGO, J.:This petition for review on certiorari under Rule 45 of the Rules of Courtseeks to annul and set aside the Decision and Resolution of the Court of

Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, inCA-G.R. SP No. 78515 dismissing the complaint for constructive dismissalfiled by herein petitioner Angelina Francisco. The appellate court reversed

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and set aside the Decision of the National Labor Relations Commission(NLRC) dated April 15 2003 3 in NLRC NCR CA No 032766-02 which

the company cashier but she was advised that the company was not earningwell 10



(NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 whichaffirmed with modification the decision of the Labor Arbiter dated July 31,2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that privaterespondents were liable for constructive dismissal.In 1995, petitioner was hired by Kasei Corporation during its incorporationstage. She was designated as Accountant and Corporate Secretary and was

assigned to handle all the accounting needs of the company. She was alsodesignated as Liaison Officer to the City of Makati to secure businesspermits, construction permits and other licenses for the initial operation of thecompany. 5

Although she was designated as Corporate Secretary, she was not entrustedwith the corporate documents; neither did she attend any board meeting nor required to do so. She never prepared any legal document and never represented the company as its Corporate Secretary. However, on someoccasions, she was prevailed upon to sign documentation for the company. 6In 1996, petitioner was designated Acting Manager. The corporation alsohired Gerry Nino as accountant in lieu of petitioner. As Acting Manager,petitioner was assigned to handle recruitment of all employees and perform

management administration functions; represent the company in all dealingswith government agencies, especially with the Bureau of Internal Revenue(BIR), Social Security System (SSS) and in the city government of Makati;and to administer all other matters pertaining to the operation of KaseiRestaurant which is owned and operated by Kasei Corporation. 7For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus P3,000.00 housingallowance and a 10% share in the profit of Kasei Corporation. 8In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.Petitioner alleged that she was required to sign a prepared resolution for her replacement but she was assured that she would still be connected withKasei Corporation. Timoteo Acedo, the designated Treasurer, convened a

meeting of all employees of Kasei Corporation and announced that nothinghad changed and that petitioner was still connected with Kasei Corporationas Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9Thereafter, Kasei Corporation reduced her salary by P2,500.00 a monthbeginning January up to September 2001 for a total reduction of P22,500.00as of September 2001. Petitioner was not paid her mid-year bonus allegedlybecause the company was not earning well. On October 2001, petitioner didnot receive her salary from the company. She made repeated follow-ups with

well. 10On October 15, 2001, petitioner asked for her salary from Acedo and the restof the officers but she was informed that she is no longer connected with thecompany. 11Since she was no longer paid her salary, petitioner did not report for workand filed an action for constructive dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of KaseiCorporation. They alleged that petitioner was hired in 1995 as one of itstechnical consultants on accounting matters and act concurrently asCorporate Secretary. As technical consultant, petitioner performed her workat her own discretion without control and supervision of Kasei Corporation.Petitioner had no daily time record and she came to the office any time shewanted. The company never interfered with her work except that from time totime, the management would ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolutiondesignating her as technical consultant. The money received by petitioner from the corporation was her professional fee subject to the 10% expanded

withholding tax on professionals, and that she was not one of those reportedto the BIR or SSS as one of the company’s employees. 12Petitioner’s designation as technical consultant depended solely upon the willof management. As such, her consultancy may be terminated any timeconsidering that her services were only temporary in nature and dependenton the needs of the corporation.To prove that petitioner was not an employee of the corporation, privaterespondents submitted a list of employees for the years 1999 and 2000 dulyreceived by the BIR showing that petitioner was not among the employeesreported to the BIR, as well as a list of payees subject to expandedwithholding tax which included petitioner. SSS records were also submittedshowing that petitioner’s latest employer was Seiji Corporation. 13

The Labor Arbiter found that petitioner was illegally dismissed, thus:WHEREFORE, premises considered, judgment is hereby rendered asfollows:1. finding complainant an employee of respondent corporation;2. declaring complainant’s dismissal as illegal;3. ordering respondents to reinstate complainant to her former positionwithout loss of seniority rights and jointly and severally pay complainant her money claims in accordance with the following computation:a. Backwages 10/2001 – 07/2002 275,000.00

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In Sevilla v. Court of Appeals, 21 we observed the need to consider theexisting economic conditions prevailing between the parties, in addition to the

August 1, 1999 to December 18, 2000. 26 When petitioner was designatedGeneral Manager, respondent corporation made a report to the SSS signed



existing economic conditions prevailing between the parties, in addition to thestandard of right-of-control like the inclusion of the employee in the payrolls,to give a clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of economiccircumstances of the worker.Thus, the determination of the relationship between employer and employee

depends upon the circumstances of the whole economic activity, 22 such as:(1) the extent to which the services performed are an integral part of theemployer’s business; (2) the extent of the worker’s investment in equipmentand facilities; (3) the nature and degree of control exercised by the employer;(4) the worker’s opportunity for profit and loss; (5) the amount of initiative,skill, judgment or foresight required for the success of the claimedindependent enterprise; (6) the permanency and duration of the relationshipbetween the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business. 23The proper standard of economic dependence is whether the worker isdependent on the alleged employer for his continued employment in that line

of business. 24 In the United States, the touchstone of economic reality inanalyzing possible employment relationships for purposes of the FederalLabor Standards Act is dependency. 25 By analogy, the benchmark of economic reality in analyzing possible employment relationships for purposesof the Labor Code ought to be the economic dependence of the worker onhis employer.By applying the control test, there is no doubt that petitioner is an employeeof Kasei Corporation because she was under the direct control andsupervision of Seiji Kamura, the corporation’s Technical Consultant. Shereported for work regularly and served in various capacities as Accountant,Liaison Officer, Technical Consultant, Acting Manager and CorporateSecretary, with substantially the same job functions, that is, rendering

accounting and tax services to the company and performing functionsnecessary and desirable for the proper operation of the corporation such assecuring business permits and other licenses over an indefinite period of engagement.Under the broader economic reality test, the petitioner can likewise be said tobe an employee of respondent corporation because she had served thecompany for six years before her dismissal, receiving check vouchersindicating her salaries/wages, benefits, 13th month pay, bonuses andallowances, as well as deductions and Social Security contributions from

General Manager, respondent corporation made a report to the SSS signedby Irene Ballesteros. Petitioner’s membership in the SSS as manifested by acopy of the SSS specimen signature card which was signed by the Presidentof Kasei Corporation and the inclusion of her name in the on-line inquirysystem of the SSS evinces the existence of an employer-employeerelationship between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically dependent onrespondent corporation for her continued employment in the latter’s line of business.In Domasig v. National Labor Relations Commission, 28 we held that in abusiness establishment, an identification card is provided not only as asecurity measure but mainly to identify the holder thereof as a bona fideemployee of the firm that issues it. Together with the cash vouchers coveringpetitioner’s salaries for the months stated therein, these matters constitutesubstantial evidence adequate to support a conclusion that petitioner was anemployee of private respondent.We likewise ruled in Flores v. Nuestro 29 that a corporation who registers itsworkers with the SSS is proof that the latter were the former’s employees.

The coverage of Social Security Law is predicated on the existence of anemployer-employee relationship.Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 hasclearly established that petitioner never acted as Corporate Secretary andthat her designation as such was only for convenience. The actual nature of petitioner’s job was as Kamura’s direct assistant with the duty of acting asLiaison Officer in representing the company to secure construction permits,license to operate and other requirements imposed by government agencies.Petitioner was never entrusted with corporate documents of the company,nor required to attend the meeting of the corporation. She was never privy tothe preparation of any document for the corporation, although once in a whileshe was required to sign prepared documentation for the company. 30

The second affidavit of Kamura dated March 7, 2002 which repudiated theDecember 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convincedthat the allegations in the first affidavit are sufficient to establish thatpetitioner is an employee of Kasei Corporation.Granting arguendo, that the second affidavit validly repudiated the first one,courts do not generally look with favor on any retraction or recantedtestimony, for it could have been secured by considerations other than to tellthe truth and would make solemn trials a mockery and place the investigation

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of the truth at the mercy of unscrupulous witnesses. 32 A recantation doesnot necessarily cancel an earlier declaration, but like any other testimony the

promoting their welfare and reaffirming it as a primary social economic forcein furtherance of social justice and national development.



ot ecessa y ca ce a ea e dec a at o , but e a y ot e test o y t esame is subject to the test of credibility and should be received with caution.33Based on the foregoing, there can be no other conclusion that petitioner is anemployee of respondent Kasei Corporation. She was selected and engagedby the company for compensation, and is economically dependent upon

respondent for her continued employment in that line of business. Her main job function involved accounting and tax services rendered to respondentcorporation on a regular basis over an indefinite period of engagement.Respondent corporation hired and engaged petitioner for compensation, withthe power to dismiss her for cause. More importantly, respondent corporationhad the power to control petitioner with the means and methods by which thework is to be accomplished.The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September 2001. This amounts toan illegal termination of employment, where the petitioner is entitled to fullbackwages. Since the position of petitioner as accountant is one of trust andconfidence, and under the principle of strained relations, petitioner is further

entitled to separation pay, in lieu of reinstatement. 34 A diminution of pay is prejudicial to the employee and amounts toconstructive dismissal. Constructive dismissal is an involuntary resignationresulting in cessation of work resorted to when continued employmentbecomes impossible, unreasonable or unlikely; when there is a demotion inrank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee. 35 In GlobeTelecom, Inc. v. Florendo-Flores, 36 we ruled that where an employeeceases to work due to a demotion of rank or a diminution of pay, anunreasonable situation arises which creates an adverse working environmentrendering it impossible for such employee to continue working for her employer. Hence, her severance from the company was not of her own

making and therefore amounted to an illegal termination of employment.In affording full protection to labor, this Court must ensure equal workopportunities regardless of sex, race or creed. Even as we, in every case,attempt to carefully balance the fragile relationship between employees andemployers, we are mindful of the fact that the policy of the law is to apply theLabor Code to a greater number of employees. This would enableemployees to avail of the benefits accorded to them by law, in line with theconstitutional mandate giving maximum aid and protection to labor,

u t e a ce o soc a just ce a d at o a de e op e tWHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and October 7, 2005,respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE.The Decision of the National Labor Relations Commission dated April 15,2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is

REMANDED to the Labor Arbiter for the recomputation of petitioner AngelinaFrancisco’s full backwages from the time she was illegally terminated untilthe date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a fraction of at least six monthsshall be considered as one whole year.

36. Sevilla vs. CADR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,vs.THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEOS.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.:The petitioners invoke the provisions on human relations of the Civil Code inthis appeal by certiorari. The facts are beyond dispute:

xxx xxx xxxOn the strength of a contract (Exhibit A for the appellantExhibit 2 for the appellees) entered into on Oct. 19, 1960 byand between Mrs. Segundina Noguera, party of the first part;the Tourist World Service, Inc., represented by Mr. EliseoCanilao as party of the second part, and hereinafter referredto as appellants, the Tourist World Service, Inc. leased thepremises belonging to the party of the first part at Mabini St.,

Manila for the former-s use as a branch office. In the saidcontract the party of the third part held herself solidarily liablewith the party of the part for the prompt payment of themonthly rental agreed on. When the branch office wasopened, the same was run by the herein appellant Una 0.Sevilla payable to Tourist World Service Inc. by any airlinefor 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 theTourist World Service, Inc.

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On or about November 24, 1961 (Exhibit 16) the TouristWorld Service, Inc. appears to have been informed that Lina

I. THE LOWER COURT ERRED EVEN IN APPRECIATINGTHE NATURE OF PLAINTIFF-APPELLANT MRS. LINA O.



, ppSevilla was connected with a rival firm, the Philippine TravelBureau, and, since the branch office was anyhow losing, theTourist 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 themanager and vice-president of the Tourist World Service,Inc., Ermita Branch, and the second,authorizing thecorporate secretary to receive the properties of the TouristWorld Service then located at the said branch office. Itfurther appears that on Jan. 3, 1962, the contract with theappellees for the use of the Branch Office premises wasterminated and while the effectivity thereof was Jan. 31,1962, the appellees no longer used it. As a matter of factappellants used it since Nov. 1961. Because of this, and tocomply with the mandate of the Tourist World Service, thecorporate secretary Gabino Canilao went over to the branch

office, and, finding the premises locked, and, being unable tocontact 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 wallfiled by the herein appellants against the appellees with aprayer for the issuance of mandatory preliminary injunction.Both appellees answered with counterclaims. For apparentlack of interest of the parties therein, the trial court orderedthe 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 topresent evidence in support of her counterclaim.On June 17,1963, appellant Lina Sevilla refiled her caseagainst the herein appellees and after the issues were

joined, the reinstated counterclaim of Segundina Nogueraand the new complaint of appellant Lina Sevilla were jointlyheard following which the court a quo ordered both casesdismiss for lack of merit, on the basis of which was elevatedthe instant appeal on the following assignment of errors:

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 BUSINESSVENTURE.III. THE LOWER COURT ERRED IN RULING THATPLAINTIFF-APPELLANT MRS. LINA O. SEVILLA ISESTOPPED FROM DENYING THAT SHE WAS A MEREEMPLOYEE OF DEFENDANT-APPELLEE TOURISTWORLD SERVICE, INC. EVEN AS AGAINST THE LATTER.IV. THE LOWER COURT ERRED IN NOT HOLDING THAT

APPELLEES HAD NO RIGHT TO EVICT APPELLANTMRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BYTAKING 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 FORCIBLEDISPOSSESSION OF THE A. MABINI PREMISES.VI. THE LOWER COURT ERRED IN FINDING THAT

APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNEDMERELY AS GUARANTOR FOR RENTALS.

On the foregoing facts and in the light of the errors asigned the issues to beresolved are:

1. Whether the appellee Tourist World Service unilaterallydisco 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 belongingto the appellee Noguera was appellees TWS or TWS andthe appellant.In this appeal, appealant Lina Sevilla claims that a jointbussiness venture was entered into by and between her andappellee TWS with offices at the Ermita branch office andthat she was not an employee of the TWS to the end that her

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relationship with TWS was one of a joint business ventureappellant made declarations showing:

5. Appellant Mrs. Sevilla likewise shared inthe expenses of maintaining the A. Mabini



pp g1. Appellant Mrs. Lina 0. Sevilla, aprominent figure and wife of an eminent eye,ear and nose specialist as well as aimediately columnist had been in the travelbusiness prior to the establishment of the

joint business venture with appellee TouristWorld Service, Inc. and appellee EliseoCanilao, her compadre, she being thegodmother of one of his children, with her own clientele, coming mostly from her ownsocial circle (pp. 3-6 tsn. February 16,1965).2. Appellant Mrs. Sevilla was signatory to alease agreement dated 19 October 1960(Exh. 'A') covering the premises at A. MabiniSt., she expressly warranting and holding[sic] herself 'solidarily' liable with appelleeTourist World Service, Inc. for the prompt

payment of the monthly rentals thereof toother appellee Mrs. Noguera (pp. 14-15, tsn.Jan. 18,1964).3. Appellant Mrs. Sevilla did not receive anysalary from appellee Tourist World Service,Inc., which had its own, separate officelocated at the Trade & Commerce Building;nor was she an employee thereof, having noparticipation in nor connection with saidbusiness 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 TouristWorld Service, Inc.) obtained from the airlinecompanies. She shared the 7%commissions given by the airline companiesgiving appellee Tourist World Service, Lic.3% thereof aid retaining 4% for herself (pp.18 tsn. Id .)

p gSt. office, paying for the salary of an officesecretary, Miss Obieta, and other sundryexpenses, aside from desicion the officefurniture and supplying some of ficefurnishings (pp. 15,18 tsn. April 6,1965),

appellee Tourist World Service, Inc.shouldering the rental and other expenses inconsideration for the 3% split in the coprocured by appellant Mrs. Sevilla (p. 35 tsnFeb. 16,1965).6. It was the understanding between themthat appellant Mrs. Sevilla would be giventhe title of branch manager for appearance'ssake only (p. 31 tsn. Id.), appellee EliseoCanilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965- testimonyof appellee Eliseo Canilao pp. 38-39 tsn

April 61965-testimony of corporate secretaryGabino Canilao (pp- 2-5, Appellants' ReplyBrief)

Upon the other hand, appellee TWS contend that theappellant was an employee of the appellee Tourist WorldService, Inc. and as such was designated manager. 1

xxx xxx xxxThe trial court 2 held for the private respondent on the premise that theprivate respondent, Tourist World Service, Inc., being the true lessee, it waswithin its prerogative to terminate the lease and padlock the premises. 3 Itlikewise found the petitioner, Lina Sevilla, to be a mere employee of saidTourist World Service, Inc. and as such, she was bound by the acts of her

employer.4

The respondent Court of Appeal5

rendered 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 ANDGRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THEPADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC.WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINASEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF

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HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING

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



INCIDENT, WAS IN CONFERENCE WITH THE CORPORATESECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THEPERSON 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 ADHERESTO THE RULE OF LAW.IITHE COURT OF APPEALS ERRED ON A QUESTION OF LAW ANDGRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLARELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMPPROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BYBOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)IIITHE COURT OF APPEALS ERRED ON A QUESTION OF LAW ANDGRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT

PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTIONFOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ONRELATIONS.IVTHE COURT OF APPEALS ERRED ON A QUESTION OF LAW ANDGRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANTSEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS INJOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEASTITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BETERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLDSERVICE INC. 6

As a preliminary inquiry, the Court is asked to declare the true nature of the

relation between Lina Sevilla and Tourist World Service, Inc. The respondentCourt 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 entitledthe latter to the relief of damages prayed for and whether or not the evidencefor the said appellant supports the contention that the appellee Tourist WorldService, Inc. unilaterally and without the consent of the appellantdisconnected the telephone lines of the Ermita branch office of the appelleeTourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other

executed with the private respondent, Segundina Noguera. The petitionerscontend, however, that relation between the between parties was one of jointventure, but concede that "whatever might have been the true relationshipbetween Sevilla and Tourist World Service," the Rule of Law enjoined TouristWorld Service and Canilao from taking the law into their own hands, 8 in

reference to the padlocking now questioned.The Court finds the resolution of the issue material, for if, as the privaterespondent, Tourist World Service, Inc., maintains, that the relation betweenthe parties was in the character of employer and employee, the courts wouldhave been without jurisdiction to try the case, labor disputes being theexclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9

In this jurisdiction, there has been no uniform test to determine the evidenceof an employer-employee relation. In general, we have relied on the so-calledright of control test, "where the person for whom the services are performedreserves a right to control not only the end to be achieved but also themeans to be used in reaching such end." 10 Subsequently, however, we have

considered, in addition to the standard of right-of control, the existingeconomic conditions prevailing between the parties, like the inclusion of theemployee in the payrolls, in determining the existence of an employer-employee relationship. 11

The records will show that the petitioner, Lina Sevilla, was not subject tocontrol by the private respondent Tourist World Service, Inc., either as to theresult of the enterprise or as to the means used in connection therewith. Inthe first place, under the contract of lease covering the Tourist Worlds Ermitaoffice, she had bound herself in solidumas and for rental payments, anarrangement that would be like claims of a master-servant relationship. Truethe respondent Court would later minimize her participation in the lease asone of mere guaranty, 12 that does not make her an employee of Tourist

World, since in any case, a true employee cannot be made to part with hisown money in pursuance of his employer's business, or otherwise, assumeany 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 branchoffice was opened, the same was run by the herein appellant Lina O. Sevillapayable to Tourist World Service, Inc. by any airline for any fare brought inon the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot besaid that Sevilla was under the control of Tourist World Service, Inc. "as to

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the means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities.

been created for mutual interest, of the agent and the principal. 19 It appearsthat Lina Sevilla is a bona fide travel agent herself, and as such, she had



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 remaining3% going to Tourist World. Unlike an employee then, who earns a fixedsalary usually, she earned compensation in fluctuating amounts dependingon her booking successes.

The fact that Sevilla had been designated 'branch manager" does not makeher, ergo, Tourist World's employee. As we said, employment is determinedby the right-of-control test and certain economic parameters. But titles areweak indicators.In rejecting Tourist World Service, Inc.'s arguments however, we are not, asa consequence, accepting Lina Sevilla's own, that is, that the parties hadembarked on a joint venture or otherwise, a partnership. And apparently,Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service,Inc.'s] right to stop the operation of your branch office 14 in effect, acceptingTourist World Service, Inc.'s control over the manner in which the businesswas run. A joint venture, including a partnership, presupposes generally a of

standing between the joint co-venturers or partners, in which each party hasan equal proprietary interest in the capital or property contributed 15 andwhere each party exercises equal rights in the conduct of thebusiness. 16 furthermore, the parties did not hold themselves out as partners,and the building itself was embellished with the electric sign "Tourist WorldService, 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.'sErmita office, she must have done so pursuant to a contract of agency. It isthe essence of this contract that the agent renders services "inrepresentation or on behalf of another. 18 In the case at bar, Sevilla solicitedairline 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 theconcept 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 thebusiness undertaking. We are convinced, considering the circumstances andfrom the respondent Court's recital of facts, that the ties had contemplated aprincipal agent relationship, rather than a joint managament or a partnership..But unlike simple grants of a power of attorney, the agency that we herebydeclare to be compatible with the intent of the parties, cannot be revoked atwill. The reason is that it is one coupled with an interest, the agency having

acquired an interest in the business entrusted to her. Moreover, she hadassumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, usingher 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 thepower of management delegated to her. It is an agency that, as we said,cannot be revoked at the pleasure of the principal. Accordingly, therevocation complained of should entitle the petitioner, Lina Sevilla, todamages.

As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent thedisconnection issue, it is the holding of the Court of Appeals that there is 'noevidence showing that the Tourist World Service, Inc. disconnected thetelephone lines at the branch office. 20Yet, what cannot be denied is the factthat 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 telephonelines, it must shoulder responsibility therefor.The Court of Appeals must likewise be held to be in error with respect to thepadlocking incident. For the fact that Tourist World Service, Inc. was thelessee named in the lease con-tract did not accord it any authority toterminate that contract without notice to its actual occupant, and to padlockthe premises in such fashion. As this Court has ruled, the petitioner, LinaSevilla, 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 incharge of rental payments (solidarily with Tourist World, Inc.). She could notbe ousted from possession as summarily as one would eject an interloper.

The Court is satisfied that from the chronicle of events, there was indeedsome malevolent design to put the petitioner, Lina Sevilla, in a bad lightfollowing disclosures that she had worked for a rival firm. To be sure, therespondent court speaks of alleged business losses to justify theclosure '21 but there is no clear showing that Tourist World Ermita Branchhad in fact sustained such reverses, let alone, the fact that Sevilla hadmoonlit 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

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