FIRST DIVISION

[G.R. No. 138051. June 10, 2004]

JOSE

Y.
SONZA, petitioner, vs.
CORPORATION, respondent.

ABS-CBN

BROADCASTING

DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March
1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the
petition filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of
the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters
dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed
an Agreement (Agreement) with the Mel and Jay Management and Development
Corporation (MJMDC). ABS-CBN was represented by its corporate officers while
MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the Agreement as AGENT,
MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio
and television. The Agreement listed the services SONZA would render to ABS-CBN, as
follows:
a.CohostforMel&Jayradioprogram,8:00to10:00a.m.,MondaystoFridays;
b.CohostforMel&Jaytelevisionprogram,5:30to7:00p.m.,Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for
the first year and P317,000 for the second and third year of the Agreement. ABS-CBN
would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III,
which reads:

DearMr.Lopez,
WewouldliketocallyourattentiontotheAgreementdatedMay1994enteredintobyyour
goodselfonbehalfofABSCBNwithourcompanyrelativetoourtalentJOSEY.SONZA.
Asyouarewellaware,Mr.Sonzairrevocablyresignedinviewofrecenteventsconcerninghis
programsandcareer.WeconsidertheseactsofthestationviolativeoftheAgreementandthe
stationasinbreachthereof.Inthisconnection,weherebyservenoticeofrescissionofsaid
Agreementatourinstanceeffectiveasofdate.
Mr.Sonzainformedusthatheiswaivingandrenouncingrecoveryoftheremainingamount
stipulatedinparagraph7oftheAgreementbutreservestherighttoseekrecoveryoftheother
benefitsundersaidAgreement.
Thankyouforyourattention.
Verytrulyyours,
(Sgd.)
JOSEY.SONZA
PresidentandGen.Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in Quezon City. SONZA
complained that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the
Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no
employer-employee relationship existed between the parties. SONZA filed an
Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his
account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN
opened a new account with the same bank where ABS-CBN deposited SONZAs talent
fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to
dismiss and directed the parties to file their respective position papers. The Labor
Arbiter ruled:
Inthisinstantcase,complainantforhavinginvokedaclaimthathewasanemployeeof
respondentcompanyuntilApril15,1996andthathewasnotpaidcertainclaims,itissufficient
enoughastoconferjurisdictionovertheinstantcaseinthisOffice.Andastowhetherornot
suchclaimwouldentitlecomplainanttorecoveruponthecausesofactionassertedisamatterto
beresolvedonlyafterandasaresultofahearing.Thus,therespondentspleaoflackof
employeremployeerelationshipmaybepleadedonlyasamatterofdefense.Itbehoovesuponit

thedutytoprovethattherereallyisnoemployeremployeerelationshipbetweenitandthe
complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties
submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with
Motion to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4
and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz.
These witnesses stated in their affidavits that the prevailing practice in the television
and broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint
for lack of jurisdiction.[6] The pertinent parts of the decision read as follows:
xxx
WhilePhilippinejurisprudencehasnotyet,withcertainty,touchedonthetruenatureofthe
contractofatalent,itstandstoreasonthatatalentasabovedescribedcannotbeconsideredasan
employeebyreasonofthepeculiarcircumstancessurroundingtheengagementofhisservices.
Itmustbenotedthatcomplainantwasengagedbyrespondentbyreasonofhispeculiarskills
andtalentasaTVhostandaradiobroadcaster.Unlikeanordinaryemployee,hewasfree
toperformtheservicesheundertooktorenderinaccordancewithhisownstyle.The
benefitsconferredtocomplainantundertheMay1994Agreementarecertainlyverymuch
higherthanthosegenerallygiventoemployees.Forone,complainantSonzasmonthlytalentfees
amounttoastaggeringP317,000.Moreover,hisengagementasatalentwascoveredbya
specificcontract.Likewise,hewasnotboundtorendereight(8)hoursofworkperdayashe
workedonlyforsuchnumberofhoursasmaybenecessary.
ThefactthatpertheMay1994Agreementcomplainantwasaccordedsomebenefitsnormally
giventoanemployeeisinconsequential.Whateverbenefitscomplainantenjoyedarosefrom
specificagreementbythepartiesandnotbyreasonofemployeremployeerelationship.As
correctlyputbytherespondent,Allthesebenefitsaremerelytalentfeesandothercontractual
benefitsandshouldnotbedeemedassalaries,wagesand/orotherremunerationaccordedtoan
employee,notwithstandingthenomenclatureappendedtothesebenefits.Apropostothisisthe
rulethatthetermornomenclaturegiventoastipulatedbenefitisnotcontrolling,buttheintentof
thepartiestotheAgreementconferringsuchbenefit.
ThefactthatcomplainantwasmadesubjecttorespondentsRulesandRegulations,
likewise,doesnotdetractfromtheabsenceofemployeremployeerelationship.Asheldby
theSupremeCourt,Thelineshouldbedrawnbetweenrulesthatmerelyserveasguidelines
towardstheachievementofthemutuallydesiredresultwithoutdictatingthemeansormethodsto
beemployedinattainingit,andthosethatcontrolorfixthemethodologyandbindorrestrictthe
partyhiredtotheuseofsuchmeans.Thefirst,whichaimonlytopromotetheresult,createno

employeremployeerelationshipunlikethesecond,whichaddressboththeresultandthemeans
toachieveit.(InsularLifeAssuranceCo.,Ltd.vs.NLRC,etal.,G.R.No.84484,November15,
1989).
xxx(Emphasissupplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a
Decision affirming the Labor Arbiters decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court
of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the
Court of Appeals rendered a Decision dismissing the case. [8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee
relationship existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the
appellate court quoted the following findings of the NLRC:
xxxtheMay1994AgreementwillreadilyrevealthatMJMDCenteredintothecontractmerely
asanagentofcomplainantSonza,theprincipal.Byallindicationandasthelawputsit,theactof
theagentistheactoftheprincipalitself.Thisfactismadeparticularlytrueinthiscase,as
admittedlyMJMDCisamanagementcompanydevotedexclusivelytomanagingthecareersof
Mr.Sonzaandhisbroadcastpartner,Mrs.CarmelaC.Tiangco.(OppositiontoMotionto
Dismiss)
Clearly,therelationsofprincipalandagentonlyaccruesbetweencomplainantSonzaand
MJMDC,andnotbetweenABSCBNandMJMDC.ThisisclearfromtheprovisionsoftheMay
1994AgreementwhichspecificallyreferredtoMJMDCastheAGENT.Asamatteroffact,
whencomplainanthereinunilaterallyrescindedsaidMay1994Agreement,itwasMJMDC
whichissuedthenoticeofrescissioninbehalfofMr.Sonza,whohimselfsignedthesameinhis
capacityasPresident.
Moreover,previouscontractsbetweenMr.SonzaandABSCBNrevealthefactthathistorically,
thepartiestothesaidagreementsareABSCBNandMr.Sonza.AnditisonlyintheMay1994
Agreement,whichisthelatestAgreementexecutedbetweenABSCBNandMr.Sonza,that
MJMDCfiguredinthesaidAgreementastheagentofMr.Sonza.
WefinditerroneoustoassertthatMJMDCisamerelaboronlycontractorofABSCBNsuch
thatthereexist[s]employeremployeerelationshipbetweenthelatterandMr.Sonza.Onthe
contrary,Wefinditindubitable,thatMJMDCisanagent,notofABSCBN,butofthe

talent/contractorMr.Sonza,asexpresslyadmittedbythelatterandMJMDCintheMay1994
Agreement.
Itmaynotbeamisstostatethatjurisdictionovertheinstantcontroversyindeedbelongstothe
regularcourts,thesamebeinginthenatureofanactionforallegedbreachofcontractual
obligationonthepartofrespondentappellee.Assquarelyapparentfromcomplainantappellants
PositionPaper,hisclaimsforcompensationforservices,13thmonthpay,signingbonusand
travelallowanceagainstrespondentappelleearenotbasedontheLaborCodebutratheronthe
provisionsoftheMay1994Agreement,whilehisclaimsforproceedsunderStockPurchase
Agreementarebasedonthelatter.AportionofthePositionPaperofcomplainantappellant
bearsperusal:
Under[theMay1994Agreement]withrespondentABSCBN,thelattercontractuallybound
itselftopaycomplainantasigningbonusconsistingofsharesofstockswithFIVEHUNDRED
THOUSANDPESOS(P500,000.00).
Similarly,complainantisalsoentitledtobepaid13thmonthpaybasedonanamountnotlower
thantheamounthewasreceivingpriortoeffectivityof(the)Agreement.
Underparagraph9of(theMay1994Agreement),complainantisentitledtoacommutabletravel
benefitamountingtoatleastOneHundredFiftyThousandPesos(P150,000.00)peryear.
Thus,itispreciselybecauseofcomplainantappellantsownrecognitionofthefactthathis
contractualrelationswithABSCBNarefoundedontheNewCivilCode,ratherthantheLabor
Code,thatinsteadofmerelyresigningfromABSCBN,complainantappellantserveduponthe
latteranoticeofrescissionofAgreementwiththestation,perhisletterdatedApril1,1996,
whichassertedthatinsteadofreferringtounpaidemployeebenefits,heiswaivingand
renouncingrecoveryoftheremainingamountstipulatedinparagraph7oftheAgreementbut
reservestherighttosuchrecoveryoftheotherbenefitsundersaidAgreement.(Annex3ofthe
respondentABSCBNsMotiontoDismissdatedJuly10,1996).
Evidently,itispreciselybyreasonoftheallegedviolationoftheMay1994Agreementand/or
theStockPurchaseAgreementbyrespondentappelleethatcomplainantappellantfiledhis
complaint.Complainantappellantsclaimsbeinganchoredontheallegedbreachofcontracton
thepartofrespondentappellee,thesamecanberesolvedbyreferencetocivillawandnotto
laborlaw.Consequently,theyarewithintherealmofcivillawand,thus,liewiththeregular
courts.AsheldinthecaseofDaiChiElectronicsManufacturingvs.Villarama,238SCRA
267,21November1994,anactionforbreachofcontractualobligationisintrinsicallyacivil
dispute.[9](Emphasissupplied)
The Court of Appeals ruled that the existence of an employer-employee relationship
between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the
NLRC to resolve.[10] A special civil action for certiorari extends only to issues of want or
excess of jurisdiction of the NLRC. [11] Such action cannot cover an inquiry into the
correctness of the evaluation of the evidence which served as basis of the NLRCs

conclusion.[12] The Court of Appeals added that it could not re-examine the parties
evidence and substitute the factual findings of the NLRC with its own. [13]
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THECOURTOFAPPEALSGRAVELYERREDINAFFIRMINGTHENLRCSDECISION
ANDREFUSINGTOFINDTHATANEMPLOYEREMPLOYEERELATIONSHIP
EXISTEDBETWEENSONZAANDABSCBN,DESPITETHEWEIGHTOF
CONTROLLINGLAW,JURISPRUDENCEANDEVIDENCETOSUPPORTSUCHA
FINDING.[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of
Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the case
for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws
and jurisprudence define clearly the elements of an employer-employee relationship,
this is the first time that the Court will resolve the nature of the relationship between a
television and radio station and one of its talents. There is no case law stating that a
radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay
Sonza, a known television and radio personality, and ABS-CBN, one of the biggest
television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he
was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor
Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate
courts accord the factual findings of the Labor Arbiter and the NLRC not only respect
but also finality when supported by substantial evidence. [15] Substantial evidence means
such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.[16] A party cannot prove the absence of substantial evidence by simply
pointing out that there is contrary evidence on record, direct or circumstantial.The Court

does not substitute its own judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible. [17]
SONZA maintains that all essential elements of an employer-employee relationship
are present in this case. Case law has consistently held that the elements of an
employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employee on the means and methods by which the work is
accomplished.[18] The last element, the so-called control test, is the most important
element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs
because of SONZAs peculiar skills, talent and celebrity status. SONZA contends that
the discretion used by respondent in specifically selecting and hiring complainant over
other broadcasters of possibly similar experience and qualification as complainant
belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. The specific selection
and hiring of SONZA, because of his unique skills, talent and celebrity status not
possessed by ordinary employees, is a circumstance indicative, but not conclusive,
of an independent contractual relationship. If SONZA did not possess such unique skills,
talent and celebrity status, ABS-CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like any other
employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship, with
the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going
to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges which he would not have enjoyed if he were truly the subject of a valid job
contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need for
the parties to stipulate on benefits such as SSS, Medicare, x x x and 13 th month
pay[20] which the law automatically incorporates into every employer-employee contract.

[21]

Whatever benefits SONZA enjoyed arose from contract and not because of an
employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year,
are so huge and out of the ordinary that they indicate more an independent contractual
relationship rather than an employer-employee relationship. ABS-CBN agreed to pay
SONZA such huge talent fees precisely because of SONZAs unique skills, talent and
celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone
possessed enough bargaining power to demand and receive such huge talent fees for
his services. The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent
contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate
the status of SONZA as an independent contractor. The parties expressly agreed on
such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on
grounds other than breach of contract, such as retrenchment to prevent losses as
provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as
long as AGENT and Jay Sonza shall faithfully and completely perform each condition of
this Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not
retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees
during the life of the Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABSCBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the
Agreement to continue paying SONZAs talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.
[25]

SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement
as an admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that
if it were true that complainant was really an employee, he would merely resign, instead.
SONZA did actually resign from ABS-CBN but he also, as president of MJMDC,
rescinded the Agreement. SONZAs letter clearly bears this out. [26] However, the manner
by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether
SONZA rescinded the Agreement or resigned from work does not determine his status
as employee or independent contractor.

D. Power of Control
Since there is no local precedent on whether a radio and television program host is
an employee or an independent contractor, we refer to foreign case law in analyzing the
present case. The United States Court of Appeals, First Circuit, recently held in AlbertyVlez v. Corporacin De Puerto Rico Para La Difusin Pblica (WIPR) [27] that a television
program host is an independent contractor. We quote the following findings of
the U.S. court:
SeveralfactorsfavorclassifyingAlbertyasanindependentcontractor.First,atelevisionactress
isaskilledpositionrequiringtalentandtrainingnotavailableonthejob.xxxInthis
regard,Albertypossessesamastersdegreeinpubliccommunicationsandjournalism;istrained
indance,singing,andmodeling;taughtwiththedramadepartmentattheUniversityofPuerto
Rico;andactedinseveraltheaterandtelevisionproductionspriortoheraffiliationwithDesde
MiPueblo.Second,Albertyprovidedthetoolsandinstrumentalitiesnecessaryforherto
perform.Specifically,sheprovided,orobtainedsponsorstoprovide,thecostumes,jewelry,and
otherimagerelatedsuppliesandservicesnecessaryforherappearance.Albertydisputesthatthis
factorfavorsindependentcontractorstatusbecauseWIPRprovidedtheequipmentnecessaryto
tapetheshow.Albertysargumentismisplaced.TheequipmentnecessaryforAlbertyto
conductherjobashostofDesdeMiPueblorelatedtoherappearanceontheshow.Others
providedequipmentforfilmingandproducingtheshow,butthesewerenottheprimarytools
thatAlbertyusedtoperformherparticularfunction.Ifweacceptedthisargument,independent
contractorscouldneverworkoncollaborativeprojectsbecauseotherindividualsoftenprovide
theequipmentrequiredfordifferentaspectsofthecollaboration.xxx
Third,WIPRcouldnotassignAlbertyworkinadditiontofilmingDesdeMi
Pueblo.AlbertyscontractswithWIPRspecificallyprovidedthatWIPRhiredherprofessional
servicesasHostessfortheProgramDesdeMiPueblo.ThereisnoevidencethatWIPRassigned
Albertytasksinadditiontoworkrelatedtothesetapings.xxx[28](Emphasissupplied)
Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most important test
our courts apply in distinguishing an employee from an independent contractor. [29] This
test is based on the extent of control the hirer exercises over a worker. The greater the
supervision and control the hirer exercises, the more likely the worker is deemed an
employee. The converse holds true as well the less control the hirer exercises, the more
likely the worker is considered an independent contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means and
methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically
to co-host the Mel & Jay programs. ABS-CBN did not assign any other work to
SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA
delivered his lines, appeared on television, and sounded on radio were outside ABS-

CBNs control. SONZA did not have to render eight hours of work per day. The
Agreement required SONZA to attend only rehearsals and tapings of the shows, as well
as pre- and post-production staff meetings. [31] ABS-CBN could not dictate the contents
of SONZAs script. However, the Agreement prohibited SONZA from criticizing in his
shows ABS-CBN or its interests.[32] The clear implication is that SONZA had a free hand
on what to say or discuss in his shows provided he did not attack ABS-CBN or its
interests.
We find that ABS-CBN was not involved in the actual performance that produced
the finished product of SONZAs work. [33] ABS-CBN did not instruct SONZA how to
perform his job. ABS-CBN merely reserved the right to modify the program format and
airtime schedule for more effective programming. [34] ABS-CBNs sole concern was the
quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs
power over the means and methods of the performance of his work. Although ABS-CBN
did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay
SONZAs talent fees. Thus, even if ABS-CBN was completely dissatisfied with the
means and methods of SONZAs performance of his work, or even with the quality or
product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that
ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his
talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the
obligation to continue paying in full SONZAs talent fees, did not amount to control over
the means and methods of the performance of SONZAs work. ABS-CBN could not
terminate or discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to the result of SONZAs
work, whether to broadcast the final product or not. In either case, ABS-CBN must still
pay SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals
ruled that vaudeville performers were independent contractors although the
management reserved the right to delete objectionable features in their shows. Since
the management did not have control over the manner of performance of the skills of
the artists, it could only control the result of the work by deleting objectionable features.
[37]

SONZA further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew
and airtime needed to broadcast the Mel & Jay programs. However, the equipment,
crew and airtime are not the tools and instrumentalities SONZA needed to perform his
job. What SONZA principally needed were his talent or skills and the costumes
necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the
place of work and the necessary equipment, SONZA was still an independent contractor
since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for
SONZA to display his talent during the airing of the programs. [39]

A radio broadcast specialist who works under minimal supervision is an

independent contractor.[40] SONZAs work as television and radio program host required
special skills and talent, which SONZA admittedly possesses. The records do not show
that ABS-CBN exercised any supervision and control over how SONZA utilized his skills
and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABSCBN subjected him to its rules and standards of performance. SONZA claims that this
indicates ABS-CBNs control not only [over] his manner of work but also the quality of his
work.
The Agreement stipulates that SONZA shall abide with the rules and standards of
performance covering talents[41] of ABS-CBN. The Agreement does not require SONZA
to comply with the rules and standards of performance prescribed for employees of
ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the
Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP),
which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics. [42] The
KBP code applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the Agreement
are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that
the latter is an employee of the former.[43] In this case, SONZA failed to show that these
rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are
top-rating television and radio programs that comply with standards of the industry. We
have ruled that:
Further,noteveryformofcontrolthatapartyreservestohimselfovertheconductoftheother
partyinrelationtotheservicesbeingrenderedmaybeaccordedtheeffectofestablishingan
employeremployeerelationship.ThefactsofthiscasefallsquarelywiththecaseofInsularLife
AssuranceCo.,Ltd.vs.NLRC.Insaidcase,weheldthat:
Logically,thelineshouldbedrawnbetweenrulesthatmerelyserveasguidelinestowardsthe
achievementofthemutuallydesiredresultwithoutdictatingthemeansormethodstobe
employedinattainingit,andthosethatcontrolorfixthemethodologyandbindorrestrictthe
partyhiredtotheuseofsuchmeans.Thefirst,whichaimonlytopromotetheresult,createno
employeremployeerelationshipunlikethesecond,whichaddressboththeresultandthemeans
usedtoachieveit.[44]
The Vaughan case also held that one could still be an independent contractor
although the hirer reserved certain supervision to insure the attainment of the desired
result. The hirer, however, must not deprive the one hired from performing his services
according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most
extreme form of control which ABS-CBN exercised over him.

This argument is futile. Being an exclusive talent does not by itself mean that
SONZA is an employee of ABS-CBN. Even an independent contractor can validly
provide his services exclusively to the hiring party. In the broadcast industry, exclusivity
is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry.[46] This practice is not designed to control the means and
methods of work of the talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial amounts of money, time and
effort in building up its talents as well as the programs they appear in and thus expects
that said talents remain exclusive with the station for a commensurate period of time.
[47]
Normally, a much higher fee is paid to talents who agree to work exclusively for a
particular radio or television station. In short, the huge talent fees partially compensates
for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which
contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of
MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a
labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only
contractor; (2) the employee who is ostensibly under the employ of the labor-only
contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only contractor as if the principal
itself directly hired or employed the employees. [48] These circumstances are not present
in this case.
There are essentially only two parties involved under the Agreement, namely,
SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement
expressly states that MJMDC acted as the AGENT of SONZA. The records do not show
that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned by
SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and
managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of
both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to
managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not
engaged in any other business, not even job contracting. MJMDC does not have any
other function apart from acting as agent of SONZA or TIANGCO to promote their
careers in the broadcast and television industry.[49]

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas
Ople on 8 January 1979 finally settled the status of workers in the broadcast
industry. Under this policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the
force and effect of law. There is no legal presumption that Policy Instruction No. 40
determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The
classification of workers in the broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when the classification has no
basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes
and Rolando Cruz without giving his counsel the opportunity to cross-examine these
witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing
practice in the radio and television industry. SONZA views the affidavits of these
witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never
prevented from denying or refuting the allegations in the affidavits. The Labor Arbiter
has the discretion whether to conduct a formal (trial-type) hearing after the submission
of the position papers of the parties, thus:
Section3.SubmissionofPositionPapers/Memorandum
xxx
Theseverifiedpositionpapersshallcoveronlythoseclaimsandcausesofactionraisedinthe
complaintexcludingthosethatmayhavebeenamicablysettled,andshallbeaccompaniedbyall
supportingdocumentsincludingtheaffidavitsoftheirrespectivewitnesseswhichshalltakethe
placeofthelattersdirecttestimony.xxx
Section4.DeterminationofNecessityofHearing.Immediatelyafterthesubmissionofthe
partiesoftheirpositionpapers/memorandum,theLaborArbitershallmotupropiodetermine
whetherthereisneedforaformaltrialorhearing.Atthisstage,hemay,athisdiscretionandfor
thepurposeofmakingsuchdetermination,askclarificatoryquestionstofurtherelicitfactsor
information,includingbutnotlimitedtothesubpoenaofrelevantdocumentaryevidence,ifany
fromanypartyorwitness.[50]

The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial. [51] The holding of a formal hearing or trial is
something that the parties cannot demand as a matter of right. [52] If the Labor Arbiter is
confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a Labor Arbiter are nonlitigious in nature. Subject to the requirements of due process, the technicalities of law
and the rules obtaining in the courts of law do not strictly apply in proceedings before a
Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent contractors.
SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution [53] arises
only if there is an employer-employee relationship under labor laws. Not every
performance of services for a fee creates an employer-employee relationship. To hold
that every person who renders services to another for a fee is an employee - to give
meaning to the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this
freedom to contract as independent contractors. The right of labor to security of tenure
cannot operate to deprive an individual, possessed with special skills, expertise and
talent, of his right to contract as an independent contractor. An individual like an artist or
talent has a right to render his services without any one controlling the means and
methods by which he performs his art or craft. This Court will not interpret the right of
labor to security of tenure to compel artists and talents to render their services only as
employees. If radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and television
hosts what they say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716,
as amended by Republic Act No. 8241, [56] treats talents, television and radio
broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax (VAT) on services they render. Exempted from the VAT are those under
an employer-employee relationship.[57] This different tax treatment accorded to talents
and broadcasters bolters our conclusion that they are independent contractors, provided
all the basic elements of a contractual relationship are present as in this case.
[55]

Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13 th month pay,
separation pay, service incentive leave, signing bonus, travel allowance, and amounts
due under the Employee Stock Option Plan. We agree with the findings of the Labor
Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present
case does not call for an application of the Labor Code provisions but an interpretation
and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular
courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of
Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against
petitioner.
SO ORDERED.
Davide,
JJ., concur.

Jr.,

C.J.,

(Chairman),

Panganiban,

Ynares-Santiago, and Azcuna,

THIRD DIVISION
RAUL G. LOCSIN and G.R. No. 185251
EDDIE B. TOMAQUIN,
Petitioners,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
PHILIPPINE LONG DISTANCE Promulgated:
TELEPHONE COMPANY,
Respondent. October 2, 2009
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6,
2008 Decision[1] and November 4, 2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R.
SP No. 97398, entitled Philippine Long Distance Telephone Company v. National Labor
Relations Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed decision set aside
the Resolutions of the National Labor Relations Commission (NLRC) dated October 28,
2005 and August 28, 2006 which in turn affirmed the Decision dated February 13, 2004 of the
Labor Arbiter. The assailed resolution, on the other hand, denied petitioners motion for
reconsideration of the assailed decision.
The Facts
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and
the Security and Safety Corporation of the Philippines (SSCP) entered into a Security Services
Agreement[3] (Agreement) whereby SSCP would provide armed security guards to PLDT to be
assigned to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security
guards, were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the
Agreement effective October 1, 2001.[4]
Despite the termination of the Agreement, however, petitioners continued to secure the premises
of their assigned office. They were allegedly directed to remain at their post by representatives of
respondent. In support of their contention, petitioners provided the Labor Arbiter with copies of
petitioner Locsins pay slips for the period of January to September 2002.[5]
Then, on September 30, 2002, petitioners services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of
money claims such as overtime pay, holiday pay, premium pay for holiday and rest day, service
incentive leave pay, Emergency Cost of Living Allowance, and moral and exemplary damages
against PLDT.

The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was
explained in the Decision that petitioners were found to be employees of PLDT and not of SSCP.
Such conclusion was arrived at with the factual finding that petitioners continued to serve as
guards of PLDTs offices. As such employees, petitioners were entitled to substantive and
procedural due process before termination of employment. The Labor Arbiter held that
respondent failed to observe such due process requirements. The dispositive portion of the Labor
Arbiters Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering
respondent Philippine Long Distance and Telephone Company (PLDT) to pay
complainants Raul E. Locsin and Eddie Tomaquin their separation pay and back
wages computed as follows:
1.
2.

NAME SEPARATION PAY BACKWAGES

Raul E. Locsin P127,500.00 P240,954.67
Eddie B. Tomaquin P127,500.00 P240,954.67
P736,909.34

All other claims are DISMISSED for want of factual basis.

Let the computation made by the Computation and Examination Unit form
part of this decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in
toto the Arbiters Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the
Resolution issued by the NLRC as well as the Labor Arbiters Decision. The CA rendered the
assailed decision granting PLDTs petition and dismissing petitioners complaint. The dispositive
portion of the CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions
dated October 28, 2005 and August 28, 2006 of the National Labor Relations
Commission are ANNULLED and SET ASIDE. Private respondents complaint
against Philippine Long Distance Telephone Company is DISMISSED.
SO ORDERED.

The CA applied the four-fold test in order to determine the existence of an employeremployee relationship between the parties but did not find such relationship. It determined that
SSCP was not a labor-only contractor and was an independent contractor having substantial
capital to operate and conduct its own business. The CA further bolstered its decision by citing
the Agreement whereby it was stipulated that there shall be no employer-employee relationship
between the security guards and PLDT.
Anent the pay slips that were presented by petitioners, the CA noted that those were
issued by SSCP and not PLDT; hence, SSCP continued to pay the salaries of petitioners after the
Agreement. This fact allegedly proved that petitioners continued to be employees of
SSCP albeit performing their work at PLDTs premises.
From such assailed decision, petitioners filed a motion for reconsideration which was
denied in the assailed resolution.
Hence, we have this petition.
The Issues
1.

Whether or not; complainants extended services to the respondent for one

(1) year from October 1, 2001, the effectivity of the termination of the
contract of complainants agency SSCP, up to September 30, 2002, without a
renewed contract, constitutes an employer-employee relationship between
respondent and the complainants.

2.

Whether or not; in accordance to the provision of the Article 280 of the

Labor Code, complainants extended services to the respondent for another one
(1) year without a contract be considered as contractual employment.

3.

Whether or not; in accordance to the provision of the Article 280 of the

Labor Code, does complainants thirteen (13) years of service to the
respondent with manifestation to the respondent thirteen (13) years renewal of
its security contract with the complainant agency SSCP, can be considered
only as seasonal in nature or fixed as [specific projects] or undertakings and
its completion or termination can be dictated as [controlled] by the respondent
anytime they wanted to.

4.

Whether or not; complainants from being an alleged contractual employees

of the respondent for thirteen (13) years as they were then covered by a

contract, becomes regular employees of the respondent as the one (1) year
extended services of the complainants were not covered by a contract, and can
be considered as direct employment pursuant to the provision of the Article
280 of the Labor Code.
5.

Whether or not; the Court of Appeals committed grave abuse of discretion

when it set aside and [annulled] the labor [arbiters] decision and of the
NLRCs resolution declaring the dismissal of the complainant as illegal.[6]
The Courts Ruling

This petition is hereby granted.

An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee relationship between the parties
from the time of petitioners first assignment to respondent by SSCP in 1988 until the alleged
termination of the Agreement between respondent and SSCP. In fact, this was the conclusion that
was reached by this Court inAbella v. Philippine Long Distance Telephone Company,[7] where we
ruled that petitioners therein, including herein petitioners, cannot be considered as employees of
PLDT. It bears pointing out that petitioners were among those declared to be employees of their
respective security agencies and not of PLDT.
The only issue in this case is whether petitioners became employees of respondent after
the Agreement between SSCP and respondent was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of
their offices even after the Agreement was terminated. And it is this fact that must be explained.
To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1)
petitioners failed to prove that SSCP was a labor-only contractor; and (2) petitioners are
employees of SSCP and not of PLDT.
In arriving at such conclusions, the CA relied on the provisions of the Agreement,
wherein SSCP undertook to supply PLDT with the required security guards, while furnishing

PLDT with a performance bond in the amount of PhP 707,000. Moreover, the CA gave weight to
the provision in the Agreement that SSCP warranted that it carry on an independent business and
has substantial capital or investment in the form of equipment, work premises, and other
materials which are necessary in the conduct of its business.
Further, in determining that no employer-employee relationship existed between the
parties, the CA quoted the express provision of the Agreement, stating that no employeremployee relationship existed between the parties herein. The CA disregarded the pay slips of
Locsin considering that they were in fact issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at
their post after the termination of the Agreement. Notably, in its Comment dated March 10, 2009,
[8]
respondent never denied that petitioners remained at their post until September 30, 2002.
While respondent denies the alleged circumstances stated by petitioners, that they were told to
remain at their post by respondents Security Department and that they were informed by SSCP
Operations Officer Eduardo Juliano that their salaries would be coursed through SSCP as per
arrangement with PLDT, it does not state why they were not made to vacate their posts.
Respondent said that it did not know why petitioners remained at their posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following presumptions are
satisfactory if uncontradicted, but may be contradicted and overcome by other
evidence:
xxxx
(y) That things have happened according to the ordinary course of nature
and the ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not
allow security guards of an agency with whom the owners or managers have severed ties with to
continue to stay within the business premises. This is because upon the termination of the owners
or managers agreement with the security agency, the agencys undertaking of liability for any
damage that the security guard would cause has already been terminated. Thus, in the event of an
accident or otherwise damage caused by such security guards, it would be the business owners
and/or managers who would be liable and not the agency. The business owners or managers

would, therefore, be opening themselves up to liability for acts of security guards over whom the
owners or managers allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why
such security guards were remaining at their posts, and would have a clear understanding of the
circumstances of the guards stay. It is but logical that responsible business owners or managers
would be aware of the situation in their premises.
We point out that with respondents hypothesis, it would seem that SSCP was paying
petitioners salaries while securing respondents premises despite the termination of their
Agreement. Obviously, it would only be respondent that would benefit from such a situation.
And it is seriously doubtful that a security agency that was established for profit would allow its
security guards to secure respondents premises when the Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners
remained at their post under the instructions of respondent. We can further conclude that
respondent dictated upon petitioners that the latter perform their regular duties to secure the
premises during operating hours. This, to our mind and under the circumstances, is sufficient to
establish the existence of an employer-employee relationship. Certainly, the facts as narrated by
petitioners are more believable than the irrational denials made by respondent. Thus, we ruled
in Lee Eng Hong v. Court of Appeals:[9]
Evidence, to be believed, must not only proceed from the mouth of a credible
witness, but it must be credible in itself such as the common experience and
observation of mankind can approve as probable under the circumstances. We
have no test of the truth of human testimony, except its conformity to our
knowledge, observation and experience. Whatever is repugnant to these belongs
to the miraculous and is outside judicial cognizance (Castaares v. Court of
Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the
termination of the Agreement, petitioners remained at their post securing the premises of
respondent while receiving their salaries, allegedly from SSCP. Clearly, such a situation makes
no sense, and the denials proffered by respondent do not shed any light to the situation. It is but
reasonable to conclude that, with the behest and, presumably, directive of respondent, petitioners
continued with their services. Evidently, such are indicia of control that respondent exercised
over petitioners.

Such power of control has been explained as the right to control not only the end to be
achieved but also the means to be used in reaching such end. [10]With the conclusion that
respondent directed petitioners to remain at their posts and continue with their duties, it is clear
that respondent exercised the power of control over them; thus, the existence of an employeremployee relationship.
In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,[11] we reiterated the oft
repeated rule that control is the most important element in the determination of the existence of
an employer-employee relationship:
In the determination of whether an employer-employee relationship exists
between two parties, this Court applies the four-fold test to determine the
existence of the elements of such relationship. In Pacific Consultants
International Asia, Inc. v. Schonfeld, the Court set out the elements of an
employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an
employment relationship is in dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employees conduct. It is the so-called control test
which constitutes the most important index of the existence of the
employer-employee relationship that is, whether the employer controls or
has reserved the right to control the employee not only as to the result of
the work to be done but also as to the means and methods by which the
same is to be accomplished. Stated otherwise, an employer-employee
relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the
means to be used in reaching such end.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a
contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if any, shall be paid
in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate

regulations, restrict or prohibit the contracting-out of labor to protect the
rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types
of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation
or circumvention of any provision of this Code.
There is labor-only contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly
employed by him. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002,
implementing Art. 106 as follows:
Section 5. Prohibition against labor-only contracting.Labor-only
contracting is hereby declared prohibited. For this purpose, labor-only contracting
shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial capital
or investment which relates to the job, work or service to be performed
and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal; or
(ii) the contractor does not exercise the right to control over the
performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of
Article 248 (C) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed
capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service
contracted out.

The right to control shall refer to the right reserved to the person for whom
the services of the contractual workers are performed, to determine not only the
end to be achieved, but also the manner and means to be used in reaching that
end.
On the other hand, Sec. 7 of the department order contains the consequence of such laboronly contracting:
Section 7. Existence of an employer-employee relationship.The contractor
or subcontractor shall be considered the employer of the contractual employee for
purposes of enforcing the provisions of the Labor Code and other social
legislation. The principal, however, shall be solidarily liable with the contractor in
the event of any violation of any provision of the Labor Code, including the
failure to pay wages.
The principal shall be deemed the employer of the contractual employee in
any of the following cases as declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions
provided in Section 6 (Prohibitions) hereof. (Emphasis supplied.)
Evidently, respondent having the power of control over petitioners must be considered as
petitioners employerfrom the termination of the Agreement onwardsas this was the only time that
any evidence of control was exhibited by respondent over petitioners and in light of our ruling
in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and
benefits of employees of respondent, including due process requirements in the termination of
their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due
process requirements. Having failed to do so, respondent is guilty of illegal dismissal.
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4,
2008 Resolution in CA-G.R. SP No. 97398. We hereby REINSTATEthe Labor Arbiters
Decision dated February 13, 2004 and the NLRCs Resolutions dated October 28,
2005 and August 28, 2006.
No costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 199166

April 20, 2015

NELSON V. BEGINO, GENER DEL VALLE, MONINA A VILA-LLORIN AND MA.

CRISTINA SUMAYAO,Petitioners,
vs.
ABS-CBN CORPORATION (FORMERLY, ABS-CBN BROADCASTING
CORPORATION) AND AMALIA VILLAFUERTE, Respondents.
DECISION
PEREZ, J.:
The existence of an employer-employee relationship is at the heart of this Petition for
Review on Certiorari filed pursuant to Rule 45 of the Rules of Court, primarily assailing
the 29 June 2011 Decision1 rendered by the Fourth Division of the Court of Appeals
(CA) in CA-G.R. SP No. 116928 which ruled out said relationship between the parties.
The Facts
Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting Corporation) is a
television and radio broadcasting corporation which, for its Regional Network Group in
Naga City, employed respondent Amalia Villafuerte (Villafuerte) as Manager. There is no
dispute regarding the fact that, thru Villafuerte, ABS-CBN engaged the services of
petitioners Nelson Begino (Begino) and Gener Del Valle (Del Valle) sometime in 1996
as Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina Sumayao
(Sumayao) and Monina Avila-Llorin (Llorin) were likewise similarly engaged as reporters
sometime in 1996 and 2002, respectively. With their services engaged by respondents
thru Talent Contracts which, though regularly renewed over the years, provided terms
ranging from three (3) months to one (1) year, petitioners were given Project
Assignment Forms which detailed, among other matters, the duration of a particular
project as well as the budget and the daily technical requirements thereof. In the
aforesaid capacities, petitioners were tasked with coverage of news items for
subsequent daily airings in respondents TV Patrol Bicol Program. 2

While specifically providing that nothing therein shall be deemed or construed to

establish an employer-employee relationship between the parties, the aforesaid Talent
Contracts included, among other matters, provisions on the following matters: (a) the
Talents creation and performance of work in accordance with the ABS-CBNs
professional standards and compliance with its policies and guidelines covering
intellectual property creators, industry codes as well as the rules and regulations of the
Kapisanan ng mga Broadcasters sa Pilipinas (KBP) and other regulatory agencies; (b)
the Talents non-engagement in similar work for a person or entity directly or indirectly in
competition with or adverse to the interests of ABS-CBN and non-promotion of any
product or service without prior written consent; and (c) the results-oriented nature of
the talents work which did not require them to observe normal or fixed working
hours.3 Subjected to contractors tax, petitioners remunerations were denominated as
Talent Fees which, as of last renewal, were admitted to be pegged per airing day
at P273.35 for Begino, P 302.92 for Del Valle, P 323.08 for Sumayao and P 315.39 for
Llorin.4
Claiming that they were regular employees of ABS-CBN, petitioners filed against
respondents the complaint5docketed as Sub-RAB 05-04- 00041-07 before the National
Labor Relations Commissions (NLRC) Sub-Regional Arbitration Branch No. 5, Naga
City. In support of their claims for regularization, underpayment of overtime pay, holiday
pay, 13th month pay, service incentive leave pay, damages and attorney's fees,
petitioners alleged that they performed functions necessary and desirable in ABS-CBN's
business. Mandated to wear company IDs and provided all the equipment they needed,
petitioners averred that they worked under the direct control and supervision of
Villafuerte and, at the end of each day, were informed about the news to be covered the
following day, the routes they were to take and, whenever the subject of their news
coverage is quite distant, even the start of their workday. Due to the importance of the
news items they covered and the necessity of their completion for the success of the
program, petitioners claimed that, under pain of immediate termination, they were
bound by the companys policy on, among others, attendance and punctuality.6
Aside from the constant evaluation of their actions, petitioners were reportedly
subjected to an annual competency assessment alongside other ABS-CBN employees,
as condition for their continued employment. Although their work involved dealing with
emergency situations at any time of the day or night, petitioners claimed that they were
not paid the labor standard benefits the law extends to regular employees. To avoid
paying what is due them, however, respondents purportedly resorted to the simple
expedient of using said Talent Contracts and/or Project Assignment Forms which
denominated petitioners as talents, despite the fact that they are not actors or TV hosts
of special skills. As a result of this iniquitous situation, petitioners asseverated that they
merely earned an average ofP7,000.00 to P8,000.00 per month, or decidedly lower than
the P21,773.00 monthly salary ABS-CBN paid its regular rank-and-file employees.
Considering their repeated re-hiring by respondents for ostensible fixed periods, this
situation had gone on for years since TV Patrol Bicol has continuously aired from 1996
onwards.7

In refutation of the foregoing assertions, on the other hand, respondents argued that,
although it occasionally engages in production and generates programs thru various
means, ABS-CBN is primarily engaged in the business of broadcasting television and
radio content. Not having the full manpower complement to produce its own program,
the company had allegedly resorted to engaging independent contractors like actors,
directors, artists, anchormen, reporters, scriptwriters and various production and
technical staff, who offered their services in relation to a particular program. Known in
the industry as talents, such independent contractors inform ABSCBN of their
availability and were required to accomplish Talent Information Forms to facilitate their
engagement for and appearance on designated project days. Given the unpredictability
of viewer preferences, respondents argued that the company cannot afford to provide
regular work for talents with whom it negotiates specific or determinable professional
fees on a per project, weekly or daily basis, usually depending on the budget allocation
for a project.8
Respondents insisted that, pursuant to their Talent Contracts and/or Project Assignment
Forms, petitioners were hired as talents, to act as reporters and/or cameramen for TV
Patrol Bicol for designated periods and rates. Fully aware that they were not considered
or to consider themselves as employees of a particular production or film outfit,
petitioners were supposedly engaged on the basis of the skills, knowledge or expertise
they already possessed and, for said reason, required no further training from ABSCBN. Although petitioners were inevitably subjected to some degree of control, the
same was allegedly limited to the imposition of general guidelines on conduct and
performance, simply for the purpose of upholding the standards of the company and the
strictures of the industry. Never subjected to any control or restrictions over the means
and methods by which they performed or discharged the tasks for which their services
were engaged, petitioners were, at most, briefed whenever necessary regarding the
general requirements of the project to be executed. 9
Having been terminated during the pendency of the case, Petitioners filed on 10 July
2007 a second complaint against respondents, for regularization, payment of labor
standard benefits, illegal dismissal and unfair labor practice, which was docketed as
Sub-RAB 05-08-00107-07. Upon respondents motion, this complaint was dismissed for
violation of the rules against forum shopping in view of the fact that the determination of
the issues in the second case hinged on the resolution of those raised in the first. 10 On
19 December 2007, however, Labor Arbiter Jesus Orlando Quiones (Labor Arbiter
Quiones) resolved Sub-RAB 05-04-00041-07 in favor of petitioners who, having
rendered services necessary and related to ABS-CBNs business for more than a year,
were determined to be its regular employees. With said conclusion found to be
buttressed by, among others, the exclusivity clause and prohibitions under petitioners
Talent Contracts and/or Project Assignment Forms which evinced respondents control
over them,11 Labor Arbiter Quiones disposed of the case in the following wise:
WHEREFORE, finding merit in the causes of action set forth by the complainants,
judgment is hereby rendered declaring complainants MONINA AVILA-LLORIN, GENER

L. DEL VALLE, NELSON V. BEGINO and MA. CRISTINA V. SUMAYAO, as regular

employees of respondent company, ABS-CBN BROADCASTING CORPORATION.
Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby ORDERED to
pay complainants, subject to the prescriptive period provided under Article 291 of the
Labor Code, however applicable, the total amount of Php2,440,908.36, representing
salaries/wage differentials, holiday pay, service incentive leave pay and 13th month pay,
to include 10% of the judgment award as attorneys fees of the judgment award
(computation of the monetary awards are attached hereto as integral part of this
decision).
Moreover, respondents are directed to admit back complainants to work under the same
terms and conditions prevailing prior to their separation or, at respondents' option,
merely reinstated in the payroll.
Other than the above, all other claims and charges are ordered DISMISSED for lack of
merit.12
Aggrieved by the foregoing decision, respondents elevated the case on appeal before
the NLRC, during the pendency of which petitioners filed a third complaint against the
former, for illegal dismissal, regularization, nonpayment of salaries and 13th month pay,
unfair labor practice, damages and attorneys fees. In turn docketed as NLRC Case No.
Sub-RAB-V-05-03-00039-08, the complaint was raffled to Labor Arbiter Quiones who
issued an Order dated 30 April 2008, inhibiting himself from the case and denying
respondents motion to dismiss on the grounds of res judicata and forum
shopping.13 Finding that respondents control over petitioners was indeed manifest from
the exclusivity clause and prohibitions in the Talent Contracts and/or Project Assignment
Forms, on the other hand, the NLRC rendered a Decision dated 31 March 2010,
affirming said Labor Arbiters appealed decision. 14 Undeterred by the NLRCs 31 August
2010 denial of their motion for reconsideration, 15 respondents filed the Rule 65 petition
for certiorari docketed before the CA as CA-G.R. SP No. 116928 which, in addition to
taking exceptions to the findings of the assailed decision, faulted petitioners for violating
the rule against forum shopping.16
On 29 June 2011, the CA rendered the herein assailed decision, reversing the findings
of the Labor Arbiter and the NLRC. Ruling out the existence of forum shopping on the
ground that petitioners' second and third complaints were primarily anchored on their
termination from employment after the filing of their first complaint, the CA nevertheless
discounted the existence of an employer-employee relation between the parties upon
the following findings and conclusions: (a) petitioners, were engaged by respondents as
talents for periods, work and the program specified in the Talent Contracts and/or
Project Assignment Forms concluded between them; (b) instead of fixed salaries,
petitioners were paid talent fees depending on the budget allocated for the program to
which they were assigned; (c) being mainly concerned with the result, respondents did
not exercise control over the manner and method by which petitioner accomplished their
work and, at most, ensured that they complied with the standards of the company, the

KBP and the industry; and, (d) the existence of an employer-employee relationship is
not necessarily established by the exclusivity clause and prohibitions which are but
terms and conditions on which the parties are allowed to freely stipulate. 17
Petitioners motion for reconsideration of the foregoing decision was denied in the CA's
3 October 2011 Resolution,18 hence, this petition.
The Issues
Petitioners seek the reversal of the CAs assailed Decision and Resolution on the
affirmative of the following issues:
1. Whether or not the CA seriously and reversibly erred in not dismissing respondents
petition for certiorari in view of the fact that they did file a Notice of Appeal at the NLRC
level and did not, by themselves or through their duly authorized representative, verify
and certify the Memorandum of Appeal they filed thereat, in accordance with the NLRC
Rules of Procedure; and 2. Whether or not the CA seriously and reversibly erred in
brushing aside the determination made by both the Labor Arbiter and the NLRC of the
existence of an employer-employee relationship between the parties, despite
established jurisprudence supporting the same.
The Court's Ruling
The Court finds the petition impressed with merit.
Petitioners preliminarily fault the CA for not dismissing respondents Rule 65 petition for
certiorari in view of the fact that the latter failed to file a Notice of Appeal from the Labor
Arbiters decision and to verify and certify the Memorandum of Appeal they filed before
the NLRC. While concededly required under the NLRC Rules of Procedure, however,
these matters should have been properly raised during and addressed at the appellate
stage before the NLRC. Instead, the record shows that the NLRC took cognizance of
respondents appeal and proceeded to resolve the same in favor of petitioners by
affirming the Labor Arbiters decision. Not having filed their own petition for certiorari to
take exception to the liberal attitude the NLRC appears to have adopted towards its own
rules of procedure, petitioners were hardly in the proper position to raise the same
before the CA or, for that matter, before this Court at this late stage. Aside from the
settled rule that a party who has not appealed is not entitled to affirmative relief other
than the ones granted in the decision 19 rendered, liberal interpretation of procedural
rules on appeal had, on occasion, been favored in the interest of substantive justice. 20
Although the existence of an employer-employee relationship is, on the other hand, a
question of fact21 which is ordinarily not the proper subject of a Rule 45 petition for
review on certiorari like the one at bar, the conflicting findings between the labor
tribunals and the CA justify a further consideration of the matter.22 To determine the
existence of said relation, case law has consistently applied the four-fold test, to wit: (a)
the selection and engagement of the employee; (b) the payment of wages;(c) the power

of dismissal; and (d) the employer's power to control the employee on the means and
methods by which the work is accomplished.23 Of these criteria, the so-called "control
test" is generally regarded as the most crucial and determinative indicator of the
presence or absence of an employer-employee relationship. Under this test, an
employer-employee relationship is said to exist where the person for whom the services
are performed reserves the right to control not only the end result but also the manner
and means utilized to achieve the same.24
In discounting the existence of said relationship between the parties, the CA ruled that
Petitioners' services were, first and foremost, engaged thru their Talent Contracts and/or
Project Assignment Forms which specified the work to be performed by them, the
project to which they were assigned, the duration thereof and their rates of pay
according to the budget therefor allocated. Because they are imbued with public
interest, it cannot be gainsaid, however, that labor contracts are subject to the police
power of the state and are placed on a higher plane than ordinary contracts. The
recognized supremacy of the law over the nomenclature of the contract and the
stipulations contained therein is aimed at bringing life to the policy enshrined in the
Constitution to afford protection to labor.25 Insofar as the nature of ones employment is
concerned, Article 280 of the Labor Code of the Philippines also provides as follows:
ART. 280. Regular and Casual Employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or service to be
performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment shall
continue while such actually exists.
It has been ruled that the foregoing provision contemplates four kinds of employees,
namely: (a) regular employees or those who have been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer;
(b) project employees or those whose employment has been fixed for a specific project
or undertaking, the completion or termination of which has been determined at the time
of the engagement of the employee; (c) seasonal employees or those who work or
perform services which are seasonal in nature, and the employment is for the duration
of the season; and (d) casual employees or those who are not regular, project, or
seasonal employees.26 To the foregoing classification of employee, jurisprudence has
added that of contractual or fixed term employee which, if not for the fixed term, would
fall under the category of regular employment in view of the nature of the employees

engagement, which is to perform activity usually necessary or desirable in the

employers business.27
The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or
Project Assignment Forms and the terms and condition embodied therein, petitioners
are regular employees of ABS-CBN. Time and again, it has been ruled that the test to
determine whether employment is regular or not is the reasonable connection between
the activity performed by the employee in relation to the business or trade of the
employer.28 As cameramen/editors and reporters, petitioners were undoubtedly
performing functions necessary and essential to ABS-CBNs business of broadcasting
television and radio content. It matters little that petitioners services were engaged for
specified periods for TV Patrol Bicol and that they were paid according to the budget
allocated therefor. Aside from the fact that said program is a regular weekday fare of the
ABS-CBNs Regional Network Group in Naga City, the record shows that, from their
initial engagement in the aforesaid capacities, petitioners were continuously re-hired by
respondents over the years. To the mind of the Court, respondents repeated hiring of
petitioners for its long-running news program positively indicates that the latter were
ABS-CBNs regular employees.
If the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated or
continuing performance as sufficient evidence of the necessity, if not indispensability of
that activity in the business.29 Indeed, an employment stops being co-terminous with
specific projects where the employee is continuously re-hired due to the demands of the
employers business.30 When circumstances show, moreover, that contractually
stipulated periods of employment have been imposed to preclude the acquisition of
tenurial security by the employee, this Court has not hesitated in striking down such
arrangements as contrary to public policy, morals, good customs or public order.31 The
nature of the employment depends, after all, on the nature of the activities to be
performed by the employee, considering the nature of the employers business, the
duration and scope to be done, and, in some cases, even the length of time of the
performance and its continued existence. 32 In the same manner that the practice of
having fixed-term contracts in the industry does not automatically make all talent
contracts valid and compliant with labor law, it has, consequently, been ruled that the
assertion that a talent contract exists does not necessarily prevent a regular
employment status.33
As cameramen/editors and reporters, it also appears that petitioners were subject to the
control and supervision of respondents which, first and foremost, provided them with the
equipments essential for the discharge of their functions. Prepared at the instance of
respondents, petitioners Talent Contracts tellingly provided that ABS-CBN retained "all
creative, administrative, financial and legal control" of the program to which they were
assigned. Aside from having the right to require petitioners "to attend and participate in
all promotional or merchandising campaigns, activities or events for the Program," ABSCBN required the former to perform their functions "at such locations and
Performance/Exhibition Schedules" it provided or, subject to prior notice, as it chose

determine, modify or change. Even if they were unable to comply with said schedule,
petitioners were required to give advance notice, subject to respondents
approval.34 However obliquely worded, the Court finds the foregoing terms and
conditions demonstrative of the control respondents exercised not only over the results
of petitioners work but also the means employed to achieve the same.
In finding that petitioners were regular employees, the NLRC further ruled that the
exclusivity clause and prohibitions in their Talent Contracts and/or Project Assignment
Forms were likewise indicative of respondents control over them. Brushing aside said
finding, however, the CA applied the ruling in Sonza v. ABS-CBN Broadcasting
Corporation35 where similar restrictions were considered not necessarily determinative
of the existence of an employer-employee relationship. Recognizing that independent
contractors can validly provide his exclusive services to the hiring party, said case
enunciated that guidelines for the achievement of mutually desired results are not
tantamount to control. As correctly pointed out by petitioners, however, parallels cannot
be expediently drawn between this case and that of Sonza case which involved a wellknown television and radio personality who was legitimately considered a talent and
amply compensated as such. While possessed of skills for which they were modestly
recompensed by respondents, petitioners lay no claim to fame and/or unique talents for
which talents like actors and personalities are hired and generally compensated in the
broadcast industry.
Later echoed in Dumpit-Murillo v. Court of Appeals,36 this Court has rejected the
application of the ruling in the Sonza case to employees similarly situated as petitioners
in ABS-CBN Broadcasting Corporation v. Nazareno. 37 The following distinctions were
significantly observed between employees like petitioners and television or radio
personalities like Sonza, to wit:
First. In the selection and engagement of respondents, no peculiar or unique skill, talent
or celebrity status was required from them because they were merely hired through
petitioners personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a
result of an employer-employee relationship.1wphi1 Respondents did not have the
power to bargain for huge talent fees, a circumstance negating independent contractual
relationship.
Third. Petitioner could always discharge respondents should it find their work
unsatisfactory, and respondents are highly dependent on the petitioner for continued
work.
Fourth. The degree of control and supervision exercised by petitioner over respondents
through its supervisors negates the allegation that respondents are independent
contractors.

The presumption is that when the work done is an integral part of the regular business
of the employer and when the worker, relative to the employer, does not furnish an
independent business or professional service, such work is a regular employment of
such employee and not an independent contractor. The Court will peruse beyond any
such agreement to examine the facts that typify the parties actual
relationship.38 (Emphasis omitted)
Rather than the project and/or independent contractors respondents claim them to be, it
is evident from the foregoing disquisition that petitioners are regular employees of ABSCBN. This conclusion is borne out by the ineluctable showing that petitioners perform
functions necessary and essential to the business of ABS-CBN which repeatedly
employed them for a long-running news program of its Regional Network Group in Naga
City. In the course of said employment, petitioners were provided the equipments they
needed, were required to comply with the Company's policies which entailed prior
approval and evaluation of their performance. Viewed from the prism of these
considerations, we find and so hold that the CA reversibly erred when it overturned the
NLRC's affirmance of the Labor Arbiter's finding that an employer-employee relationship
existed between the parties. Given the fact, however, that Sub-RAB-V-05-03-00039-08
had not been consolidated with this case and appears, for all intents and purposes, to
be pending still, the Court finds that the reinstatement of petitioners ordered by said
labor officer and tribunal should, as a relief provided in case of illegal dismissal, be left
for determination in said case.
WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and
Resolution dated 3 October 2011 in CA-G.R. SP No. 116928 are REVERSED and SET
ASIDE. Except for the reinstatement of Nelson V. Begino, Gener Del Valle, Monina
Avila-Llorin and Ma. Cristina Sumayao, the National Labor and Relations Commission's
31 March 2010 Decision is, accordingly, REINSTATED.
SO ORDERED.

FIRST DIVISION

PROFESSIONAL SERVICES, INC.,

Petitioner,
- versus THE COURT OF APPEALS and
NATIVIDAD and ENRIQUE AGANA,
Respondents,

G.R. No. 126297

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - x
NATIVIDAD (Substituted by her children
MARCELINO AGANA III, ENRIQUE
AGANA, JR., EMMA AGANA ANDAYA,
JESUS AGANA, and RAYMUND AGANA)
and ENRIQUE AGANA,
Petitioners,

G.R. No. 126467

- versus THE COURT

JUANFUENTES,

OF

APPEALS

and

Respondents,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - x
MIGUEL AMPIL,
Petitioner,

G.R. No. 127590

Present:

- versus THE COURT OF APPEALS and

NATIVIDAD AGANA and
ENRIQUEAGANA,
Respondents.

PUNO, C.J.,
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
LEONARDO-DE CASTRO, JJ.

Promulgated:
February 11, 2008
x---------------------------------------------------------x

RESOLUTION
SANDOVAL-GUTIERREZ, J.:

As the hospital industry changes, so must the laws and jurisprudence governing hospital
liability. The immunity from medical malpractice traditionally accorded to hospitals has to be
eroded if we are to balance the interest of the patients and hospitals under the present setting.

Before this Court is a motion for reconsideration filed by Professional Services, Inc. (PSI),
petitioner in G.R. No. 126297, assailing the Courts First Division Decision dated January 31,

2007, finding PSI and Dr. Miguel Ampil, petitioner in G.R. No. 127590, jointly and severally
liable for medical negligence.

A brief revisit of the antecedent facts is imperative.

On April
4,
1984,
Natividad
Agana
was
admitted
at
the Medical City General Hospital (Medical City) because of difficulty of bowel movement and
bloody anal discharge. Dr. Ampil diagnosed her to be suffering from cancer of the sigmoid. Thus,
on April 11, 1984, Dr. Ampil, assisted by the medical staff [1] of MedicalCity, performed an
anterior resection surgery upon her. During the surgery, he found that the malignancy in her
sigmoid area had spread to her left ovary, necessitating the removal of certain portions of
it. Thus, Dr. Ampil obtained the consent of Atty. Enrique Agana, Natividads husband, to permit
Dr. Juan Fuentes, respondent in G.R. No. 126467, to perform hysterectomy upon Natividad.

Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil took over,
completed the operation and closed the incision. However, the operation appeared to be flawed.
In the corresponding Record of Operation dated April 11, 1984, the attending nurses entered
these remarks:

sponge count lacking 2

announced to surgeon searched done (sic) but to no avail continue for
closure.

After a couple of days, Natividad complained of excruciating pain in her anal region. She
consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural
consequence of the surgical operation performed upon her. Dr. Ampil recommended that
Natividad consult an oncologist to treat the cancerous nodes which were not removed during the
operation.

On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek
further treatment. After four (4) months of consultations and laboratory examinations, Natividad
was told that she was free of cancer. Hence, she was advised to return to the Philippines.

On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two (2)
weeks thereafter, her daughter found a piece of gauze protruding from her vagina. Dr. Ampil was
immediately informed. He proceeded to Natividads house where he managed to extract by hand
a piece of gauze measuring 1.5 inches in width. Dr. Ampil then assured Natividad that the pains
would soon vanish.

Despite Dr. Ampils assurance, the pains intensified, prompting Natividad to seek treatment at
the Polymedic General Hospital. While confined thereat, Dr. Ramon Gutierrez detected the
presence of a foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in
width. The gauze had badly infected her vaginal vault. A recto-vaginal fistula had formed in her
reproductive organ which forced stool to excrete through the vagina. Another surgical operation
was needed to remedy the situation. Thus, in October 1984, Natividad underwent another
surgery.

On November 12, 1984, Natividad and her husband filed with the Regional Trial Court, Branch
96, Quezon City a complaint for damages against PSI (owner ofMedical City), Dr. Ampil and Dr.
Fuentes.

On February 16, 1986, pending the outcome of the above case, Natividad died. She was
duly substituted by her above-named children (the Aganas).

On March 17, 1993, the trial court rendered judgment in favor of spouses Agana finding
PSI, Dr. Ampil and Dr. Fuentes jointly and severally liable. On appeal, the Court of Appeals, in
its Decision dated September 6, 1996, affirmed the assailed judgment with modification in the
sense that the complaint against Dr. Fuentes was dismissed.

PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review
on certiorari. On January 31, 2007, the Court, through its First Division, rendered a Decision
holding that PSI is jointly and severally liable with Dr. Ampil for the following
reasons: first, there is an employer-employee relationship between Medical City and Dr.
Ampil. The Court relied on Ramos v. Court of Appeals,[2] holding that for the purpose of
apportioning responsibility in medical negligence cases, an employer-employee relationship in

effect exists between hospitals and their attending and visiting physicians; second, PSIs act of
publicly displaying in the lobby of the Medical City the names and specializations of its
accredited physicians, including Dr. Ampil, estopped it from denying the existence of an
employer-employee relationship between them under the doctrine of ostensible agency or
agency by estoppel; and third, PSIs failure to supervise Dr. Ampil and its resident physicians
and nurses and to take an active step in order to remedy their negligence rendered it directly
liable under thedoctrine of corporate negligence.

In its motion for reconsideration, PSI contends that the Court erred in finding it liable
under Article 2180 of the Civil Code, there being no employer-employee relationship between it
and its consultant, Dr. Ampil. PSI stressed that the Courts Decision in Ramos holding that an
employer-employee relationship in effect exists between hospitals and their attending and
visiting physicians for the purpose of apportioning responsibility had been reversed in a
subsequent Resolution.[3] Further, PSI argues that the doctrine of ostensible agency or agency
by estoppel cannot apply because spouses Agana failed to establish one requisite of the doctrine,
i.e., that Natividad relied on the representation of the hospital in engaging the services of Dr.
Ampil. And lastly, PSI maintains that thedoctrine of corporate negligence is misplaced because
the proximate cause of Natividads injury was Dr. Ampils negligence.

The motion lacks merit.

As earlier mentioned, the First Division, in its assailed Decision, ruled that an employeremployee relationship in effect exists between the Medical Cityand Dr. Ampil. Consequently,
both are jointly and severally liable to the Aganas. This ruling proceeds from the following
ratiocination in Ramos:

We now discuss the responsibility of the hospital in this particular

incident. The unique practice (among private hospitals) of filling up specialist
staff with attending and visiting consultants, who are allegedly not hospital
employees, presents problems in apportioning responsibility for negligence in
medical malpractice cases. However, the difficulty is only more apparent than
real.
In the first place, hospitals exercise significant control in the hiring
and firing of consultants and in the conduct of their work within the

hospital premises.Doctors who apply for consultant slots, visiting or attending,

are required to submit proof of completion of residency, their educational
qualifications; generally, evidence of accreditation by the appropriate board
(diplomate), evidence of fellowship in most cases, and references. These
requirements are carefully scrutinized by members of the hospital administration
or by a review committee set up by the hospital who either accept or reject the
application. This is particularly true with respondent hospital.
After a physician is accepted, either as a visiting or attending
consultant, he is normally required to attend clinico-pathological
conferences, conduct bedside rounds for clerks, interns and residents,
moderate grand rounds and patient audits and perform other tasks and
responsibilities, for the privilege of being able to maintain a clinic in the
hospital, and/or for the privilege of admitting patients into the hospital. In
addition to these, the physicians performance as a specialist is generally
evaluated by a peer review committee on the basis of mortality and
morbidity statistics, and feedback from patients, nurses, interns and
residents. A consultant remiss in his duties, or a consultant who regularly
falls short of the minimum standards acceptable to the hospital or its peer
review committee, is normally politely terminated.
In other words, private hospitals hire, fire and exercise real control over
their attending and visiting consultant staff. While consultants are not,
technically employees, a point which respondent hospital asserts in denying
all responsibility for the patients condition, the control exercised, the hiring,
and the right to terminate consultants all fulfill the important hallmarks of
an employer-employee relationship, with the exception of the payment of
wages. In assessing whether such a relationship in fact exists, the control test
is determining. Accordingly, on the basis of the foregoing, we rule that for
the purpose of allocating responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their
attending and visiting physicians. This being the case, the question now arises
as to whether or not respondent hospital is solidarily liable with respondent
doctors for petitioners condition.
The basis for holding an employer solidarily responsible for the
negligence of its employee is found in Article 2180 of the Civil Code which
considers a person accountable not only for his own acts but also for those of
others based on the formers responsibility under a relationship of partia ptetas.

Clearly, in Ramos, the Court considered the peculiar relationship between a hospital and
its consultants on the bases of certain factors. One such factor is the control test wherein the
hospital exercises control in the hiring and firing of consultants, like Dr. Ampil, and in the
conduct of their work.

Actually, contrary to PSIs contention, the Court did not reverse its ruling in Ramos. What
it clarified was that the De Los Santos Medical Clinic did not exercise control over its consultant,
hence, there is no employer-employee relationship between them. Thus, despite the granting of
the said hospitals motion for reconsideration, the doctrine in Ramos stays, i.e., for the purpose of
allocating responsibility in medical negligence cases, an employer-employee relationship exists
between hospitals and their consultants.

In the instant cases, PSI merely offered a general denial of responsibility, maintaining
that consultants, like Dr. Ampil, are independent contractors, not employees of the hospital. Even
assuming that Dr. Ampil is not an employee of Medical City, but an independent contractor, still
the said hospital is liable to the Aganas.

In Nograles, et al. v. Capitol Medical Center, et al.,[4] through Mr. Justice Antonio T.
Carpio, the Court held:

The question now is whether CMC is automatically exempt from liability

considering that Dr. Estrada is an independent contractor-physician.
In general, a hospital is not liable for the negligence of an independent
contractor-physician. There is, however, an exception to this principle. The
hospital may be liable if the physician is the ostensible agent of the hospital.
(Jones v. Philpott, 702 F. Supp. 1210 [1988]) This exception is also known as the
doctrine of apparent authority. (Sometimes referred to as the apparent or
ostensible agency theory. [King v. Mitchell, 31 A.D.3rd 958, 819 N.Y. S.2d 169
(2006)].
xxx
The doctrine of apparent authority essentially involves two factors to
determine the liability of an independent contractor-physician.
The first factor focuses on the hospitals manifestations and is sometimes
described as an inquiry whether the hospital acted in a manner which would lead a
reasonable person to conclude that the individual who was alleged to be negligent
was an employee or agent of the hospital. (Diggs v. Novant Health, Inc., 628
S.E.2d 851 (2006) citing Hylton v. Koontz, 138 N.C. App. 629 (2000). In this
regard, the hospital need not make express representations to the patient that
the treating physician is an employee of the hospital; rather a representation
may be general and implied. (Id.)
The doctrine of apparent authority is a specie of the doctrine of estoppel.
Article 1431 of the Civil Code provides that [t]hrough estoppel, an admission or

representation is rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon. Estoppel rests on this
rule: Whether a party has, by his own declaration, act, or omission, intentionally
and deliberately led another to believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such declaration, act or omission,
be permitted to falsify it. (De Castro v. Ginete, 137 Phil. 453 [1969], citing Sec. 3,
par. A, Rule 131 of the Rules of Court. See also King v. Mitchell, 31 A.D.3rd 958,
819 N.Y.S.2d 169 [2006]).
xxx
The second factor focuses on the patients reliance. It is sometimes
characterized as an inquiry on whether the plaintiff acted in reliance upon the
conduct of the hospital or its agent, consistent with ordinary care and prudence.
(Diggs v. Novant Health, Inc.)

PSI argues that the doctrine of apparent authority cannot apply to these cases because
spouses Agana failed to establish proof of their reliance on the representation
of Medical City that Dr. Ampil is its employee.

The argument lacks merit.

Atty. Agana categorically testified that one of the reasons why he chose Dr. Ampil was
that he knew him to be a staff member of Medical City, a prominent and known hospital.

Q Will you tell us what transpired in your visit to Dr. Ampil?

A Well, I saw Dr. Ampil at the Medical City, I know him to be a staff member
there, and I told him about the case of my wife and he asked me to bring
my wife over so she could be examined. Prior to that, I have known Dr.
Ampil, first, he was staying in front of our house, he was a neighbor,
second, my daughter was his student in the University of the East School
of Medicine at Ramon Magsaysay; and when my daughter opted to
establish a hospital or a clinic, Dr. Ampil was one of our consultants on
how to establish that hospital. And from there, I have known that he was
a specialist when it comes to that illness.
Atty. Agcaoili

On that particular occasion, April 2, 1984, what was your reason for choosing to
contact Dr. Ampil in connection with your wifes illness?
A First, before that, I have known him to be a specialist on that part of the body
as a surgeon; second, I have known him to be a staff member of
the Medical City which is a prominent and known hospital. And
third, because he is a neighbor, I expect more than the usual medical
service to be given to us, than his ordinary patients.[5]

Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying
his name and those of the other physicians in the public directory at the lobby of the hospital
amounts to holding out to the public that it offers quality medical service through the listed
physicians. This justifies Atty. Aganas belief that Dr. Ampil was a member of the hospitals
staff. It must be stressed that under the doctrine of apparent authority, the question in
every case is whether the principal has by his voluntary act placed the agent in such a
situation that a person of ordinary prudence, conversant with business usages and the
nature of the particular business, is justified in presuming that such agent has authority to
perform the particular act in question.[6] In these cases, the circumstances yield a positive
answer to the question.

The challenged Decision also anchors its ruling on the doctrine of corporate
responsibility.[7] The duty of providing quality medical service is no longer the sole prerogative
and responsibility of the physician. This is because the modern hospital now tends to organize
a highly-professional medical staff whose competence and performance need also to be
monitored by the hospital commensurate with its inherent responsibility to provide quality
medical care.[8] Such responsibility includes the proper supervision of the members of its
medical staff. Accordingly, the hospital has the duty to make a reasonable effort to monitor
and oversee the treatment prescribed and administered by the physicians practicing in its
premises.

Unfortunately, PSI had been remiss in its duty. It did not conduct an immediate
investigation on the reported missing gauzes to the great prejudice and agony of its patient. Dr.
Jocson, a member of PSIs medical staff, who testified on whether the hospital conducted an
investigation, was evasive, thus:

Q We go back to the operative technique, this was signed by Dr. Puruganan,

was this submitted to the hospital?
A Yes, sir, this was submitted to the hospital with the record of the patient.
Q Was the hospital immediately informed about the missing sponges?
A That is the duty of the surgeon, sir.
Q As a witness to an untoward incident in the operating room, was it not
your obligation, Dr., to also report to the hospital because you are
under the control and direction of the hospital?
A The hospital already had the record of the two OS missing, sir.
Q If you place yourself in the position of the hospital, how will you recover.
A You do not answer my question with another question.
Q Did the hospital do anything about the missing gauzes?
A The hospital left it up to the surgeon who was doing the operation, sir.
Q Did the hospital investigate the surgeon who did the operation?
A I am not in the position to answer that, sir.
Q You never did hear the hospital investigating the doctors involved in this
case of those missing sponges, or did you hear something?
xxxxxx
A I think we already made a report by just saying that two sponges were
missing, it is up to the hospital to make the move.
Atty. Agana
Precisely, I am asking you if the hospital did a move, if the hospital did a
move.
A I cannot answer that.
Court
By that answer, would you mean to tell the Court that you were aware if
there was such a move done by the hospital?
A I cannot answer that, your honor, because I did not have any more followup of the case that happened until now.[9]

The above testimony obviously shows Dr. Jocsons lack of concern for the
patients. Such conduct is reflective of the hospitals manner of supervision.Not only did PSI

breach its duty to oversee or supervise all persons who practice medicine within its walls, it
also failed to take an active step in fixing the negligence committed. This renders PSI, not
only vicariously liable for the negligence of Dr. Ampil under Article 2180 of the Civil Code, but
also directly liable for its own negligence under Article 2176.

Moreover, there is merit in the trial courts finding that the failure of PSI to conduct an
investigation established PSIs part in the dark conspiracy of silence and concealment about
the gauzes. The following testimony of Atty. Agana supports such findings, thus:

Q You said you relied on the promise of Dr. Ampil and despite the promise you
were not able to obtain the said record. Did you go back to the record
custodian?
A I did not because I was talking to Dr. Ampil. He promised me.
Q After your talk to Dr. Ampil, you went to the record custodian?
A I went to the record custodian to get the clinical record of my wife, and I
was given a portion of the records consisting of the findings, among
them, the entries of the dates, but not the operating procedure and
operative report.[10]

In sum, we find no merit in the motion for reconsideration.

WHEREFORE, we DENY PSIs motion for reconsideration with finality.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 186621

March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. and/or

ESTANISLAO1 AGBAY, Petitioners,
vs.
JESUS J. COMING, Respondent.
DECISION
VILLARAMA, JR., J.:
Before the Court is a petition for review on certiorari under Rule 45 to reverse and set
aside the Decision2 dated February 21, 2008 and Resolution3 dated February 9, 2009 of
the Court of Appeals (CA) in CA-GR. CEB-SP No. 02113.
Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation
engaged in the business of manufacturing and exporting furniture to various countries
with principal place of business at Paknaan, Mandaue City, while petitioner Estanislao
Agbay, as per records, is the President and General Manager of SEIRI. 4
On November 3, 2003, respondent Jesus J. Coming filed a complaint 5 for illegal
dismissal, underpayment of wages, non-payment of holiday pay, 13th month pay and
service incentive leave pay, with prayer for reinstatement, back wages, damages and
attorneys fees.
Respondent alleged that he was hired by petitioners as Sizing Machine Operator on
March 17, 1984. His work schedule is from 8:00 a.m. to 5:00 p.m. Initially, his
compensation was on "pakiao" basis but sometime in June 1984, it was fixed
at P150.00 per day which was paid weekly. In 1990, without any apparent reason, his
employment was interrupted as he was told by petitioners to resume work in two
months time. Being an uneducated person, respondent was persuaded by the
management as well as his brother not to complain, as otherwise petitioners might
decide not to call him back for work. Fearing such consequence, respondent accepted
his fate. Nonetheless, after two months he reported back to work upon order of
management.6
Despite being an employee for many years with his work performance never questioned
by petitioners, respondent was dismissed on January 1, 2002 without lawful cause. He
was told that he will be terminated because the company is not doing well financially
and that he would be called back to work only if they need his services again.
Respondent waited for almost a year but petitioners did not call him back to work. When
he finally filed the complaint before the regional arbitration branch, his brother Vicente
was used by management to persuade him to withdraw the case. 7
On their part, petitioners denied having hired respondent asserting that SEIRI was
incorporated only in 1986, and that respondent actually worked for SEIRIs furniture

suppliers because when the company started in 1987 it was engaged purely in buying
and exporting furniture and its business operations were suspended from the last
quarter of 1989 to August 1992. They stressed that respondent was not included in the
list of employees submitted to the Social Security System (SSS). Moreover,
respondents brother, Vicente Coming, executed an affidavit 8 in support of petitioners
position while Allan Mayol and Faustino Apondar issued notarized certifications 9 that
respondent worked for them instead.10
With the denial of petitioners that respondent was their employee, the latter submitted
an affidavit11 signed by five former co-workers stating that respondent was one of the
pioneer employees who worked in SEIRI for almost twenty years.
In his Decision12 dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that
respondent is a regular employee of SEIRI and that the termination of his employment
was illegal. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the
respondent South East (Intl.) Rattan, Inc. to pay complainant Jesus J. Coming the
following:
1. Separation pay

P114,400.00

2. Backwages

P 30,400.00

3. Wage differential

P 15,015.00

4. 13th month pay

P 5,958.00

5. Holiday pay

P 4,000.00

6. Service incentive leave pay

P 2,000.00

Total award

P171,773.00

The other claims and the case against respondent Estanislao Agbay are dismissed for
lack of merit.
SO ORDERED.13
Petitioners appealed to the National Labor Relations Commission (NLRC)-Cebu City
where they submitted the following additional evidence: (1) copies of SEIRIs payrolls
and individual pay records of employees;14 (2) affidavit15of SEIRIs Treasurer, Angelina
Agbay; and (3) second affidavit16 of Vicente Coming.

On July 28, 2005, the NLRCs Fourth Division rendered its Decision, 17 the dispositive
portion of which states:
WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET
ASIDE and VACATED and a new one entered DISMISSING the complaint.
SO ORDERED.18
The NLRC likewise denied respondents motion for reconsideration. 19
Respondent elevated the case to the CA via a petition for certiorari under Rule 65.
By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there
existed an employer-employee relationship between petitioners and respondent who
was dismissed without just and valid cause.
The CA thus decreed:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed
Decision dated July 28, 2005 issued by the National Labor Relations Commission
(NLRC), Fourth Division, Cebu City in NLRC Case No. V-000625-2004 is REVERSED
and SET ASIDE. The Decision of the Labor Arbiter dated April 30, 2004 is REINSTATED
with MODIFICATION on the computation of backwages which should be computed from
the time of illegal termination until the finality of this decision.
Further, the Labor Arbiter is directed to make the proper adjustment in the computation
of the award of separation pay as well as the monetary awards of wage differential, 13th
month pay, holiday pay and service incentive leave pay.
SO ORDERED.20
Petitioners filed a motion for reconsideration but the CA denied it under Resolution
dated February 9, 2009.
Hence, this petition raising the following issues:
6.1
WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF
THE HONORABLE COURT OF APPEALS THAT THERE EXISTS EMPLOYEREMPLOYEE RELATIONSHIP BETWEEN PETITIONERS AND RESPONDENT IS IN
ACCORD WITH LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT.
6.2

WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN

ACCORDANCE WITH APPLICABLE LAW AND JURISPRUDENCE THE EVIDENCE
PRESENTED BY BOTH PARTIES.
6.3
WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF
THE HONORABLE COURT OF APPEALS THAT PETITIONERS ARE LIABLE FOR
ILLEGAL DISMISSAL OF RESPONDENT IS IN ACCORD WITH APPLICABLE LAW
AND JURISPRUDENCE.
6.4
WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE
COURT OF APPEALS THAT THE BACKWAGES DUE THE RESPONDENT SHOULD
BE COMPUTED FROM THE TIME OF ILLEGAL TERMINATION UNTIL THE FINALITY
OF THE DECISION IS SUPPORTED BY PREVAILING JURISPRUDENCE.21
Resolution of the first issue is paramount in view of petitioners denial of the existence of
employer-employee relationship.
The issue of whether or not an employer-employee relationship exists in a given case is
essentially a question of fact. As a rule, this Court is not a trier of facts and this applies
with greater force in labor cases.22 Only errors of law are generally reviewed by this
Court.23 This rule is not absolute, however, and admits of exceptions. For one, the Court
may look into factual issues in labor cases when the factual findings of the Labor Arbiter,
the NLRC, and the CA are conflicting. 24 Here, the findings of the NLRC differed from
those of the Labor Arbiter and the CA, which compels the Courts exercise of its
authority to review and pass upon the evidence presented and to draw its own
conclusions therefrom.25
To ascertain the existence of an employer-employee relationship jurisprudence has
invariably adhered to the four-fold test, to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct, or the so-called "control test." 26 In resolving the issue of
whether such relationship exists in a given case, substantial evidence that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion is sufficient. Although no particular form of evidence is required to prove
the existence of the relationship, and any competent and relevant evidence to prove the
relationship may be admitted, a finding that the relationship exists must nonetheless
rest on substantial evidence.27
In support of their claim that respondent was not their employee, petitioners presented
Employment Reports to the SSS from 1987 to 2002, the Certifications issued by Mayol
and Apondar, two affidavits of Vicente Coming, payroll sheets (1999-2000), individual
pay envelopes and employee earnings records (1999-2000) and affidavit of Angelina

Agbay (Treasurer and Human Resources Officer). The payroll and pay records did not
include the name of respondent. The affidavit of Ms. Agbay stated that after SEIRI
started its business in 1986 purely on export trading, it ceased operations in 1989 as
evidenced by Certification dated January 18, 1994 from the Securities and Exchange
Commission (SEC); that when business resumed in 1992, SEIRI undertook only a little
of manufacturing; that the company never hired any workers for varnishing and pole
sizing because it bought the same from various suppliers, including Faustino Apondar;
respondent was never hired by SEIRI; and while it is true that Mr. Estanislao Agbay is
the company President, he never dispensed the salaries of workers. 28
In his first affidavit, Vicente Coming averred that:
6. [Jesus Coming] is a furniture factory worker. In 1982 to 1986, he was working
with Ben Mayol as round core maker/splitter.
7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This is
a rattan trader with business address near Cebu Rattan Factory on a "Pakiao"
basis.
8. However, Jesus and I did not stay long at Okay Okay Yard and instead we
joined Eleuterio Agbay in Labogon, Cebu in 1989. In 1991, we went back to Okay
Okay located near the residence of Atty. Vicente de la Serna in Mandaue City.
We were on a "pakiao" basis. We stayed put until 1993 when we resigned and
joined Dodoy Luna in Labogon, Mandaue City as classifier until 1995. In 1996[,]
Jesus rested. It was only in 1997 that he worked back. He replaced me, as a
classifier in Rattan Traders owned by Allan Mayol. But then, towards the end of
the year, he left the factory and relaxed in our place of birth, in Sogod, Cebu.
9. It was only towards the end of 1999 that Jesus was taken back by Allan Mayol
as sizing machine operator. However, the work was off and on basis. Not regular
in nature, he was harping a side line job with me knowing that I am now working
with Faustino Apondar that supplies rattan furnitures [sic] to South East (Intl)
Rattan, Inc. As a brother, I allowed Jesus to work with me and collect the
proceeds of his services as part of my collectibles from Faustino Apondar since I
was on a "pakiao" basis. He was working at his pleasure. Which means, he
works if he likes to? That will be until 10:00 oclock in the evening.
x x x x29
The Certification dated January 20, 2004 of Allan Mayol reads:
This is to certify that I personally know Jesus Coming, the brother of Vicente Coming.
Jesus is a rattan factory worker and he was working with me as rattan pole
sizing/classifier of my business from 1997 up to part of 1998 when he left my factory at
will. I took him back towards the end of 1999, this time as a sizing machine operator. In
all these years, his services are not regular. He works only if he likes to. 30

Faustino Apondar likewise issued a Certification which states:

This is to certify that I am a maker/supplier of finished Rattan Furniture. As such, I have
several rattan furniture workers under me, one of whom is Vicente Coming, the brother
of Jesus Coming.
That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus
who was already connected with Allan Mayol. Having vouched for the integrity of his
brother and knowing that the job is temporary in character, I allowed Jesus to work with
his brother Vicente. However, the proceeds will be collected together with his brother
Vicente since it was the latter who was working with me. He renders services to his
brother work only after the regular working hours but off and on basis. 31
On the other hand, respondent submitted the affidavit executed by Eleoterio Brigoli,
Pedro Brigoli, Napoleon Coming, Efren Coming and Gil Coming who all attested that
respondent was their co-worker at SEIRI.
Their affidavit reads:
We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having
been duly sworn to in accordance with law, depose and say:
That we are former employees of SOUTH EAST RATTAN which is owned by Estan
Eslao Agbay;
That we personally know JESUS COMING considering that we worked together in one
company SOUTH EAST RATTANT [sic];
That we together with JESUS COMING are all under the employ of ESTAN ESLAO
AGBAY considering that the latter is the one directly paying us and holds the absolute
control of all aspects of our employment;
That it is not true that JESUS COMING is under the employ of one person other than
ESTAN ESLAO AGBAY OF SOUTH EAST RATTAN;
That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had
been employed therein for almost twenty years;
That we executed this affidavit to attest to the truth of the foregoing facts and to deny
any contrary allegation made by the company against his employment with SOUTH
EAST RATTAN.32
In his decision, Labor Arbiter Carreon found that respondents work as sizing machine
operator is usually necessary and desirable to the rattan furniture business of
petitioners and their failure to include respondent in the employment report to SSS is
not conclusive proof that respondent is not their employee. As to the affidavit of Vicente

Coming, Labor Arbiter Carreon did not give weight to his statement that respondent is
not petitioners employee but that of one Faustino Apondar. Labor Arbiter Carreon was
not convinced that Faustino Apondar is an independent contractor who has a
contractual relationship with petitioners.
In reversing the Labor Arbiter, the NLRC reasoned as follows:
First complainant alleged that he worked continuously from March 17, 1984 up to
January 21, 2002.1wphi1 Records reveal however that South East (Intl.) Rattan, Inc.
was incorporated only last July 18, 1986 (p. 55 records)[.] Moreover, when they started
to actually operate in 1987, the company was engaged purely on "buying and exporting
rattan furniture" hence no manufacturing employees were hired. Furthermore, from the
last quarter of 1989 up to August of 1992, the company suspended operations due to
economic reverses as per Certification issued by the Securities and Exchange
Commission (p. 56 records)[.]
Second, for all his insistence that he was a regular employee, complainant failed to
present a single payslip, voucher or a copy of a company payroll showing that he
rendered service during the period indicated therein. x x x
From the above established facts we are inclined to give weight and credence to the
Certifications of Allan Mayol and Faustino Apondar, both suppliers of finished Rattan
Furniture (pp. 442-43, records). It appears that complainant first worked with Allan
Mayol and later with Faustino Apondar upon the proddings of his brother Vicente.
Vicentes affidavit as to complainants employment history was more detailed and
forthright. x x x
xxxx
In the case at bar, there is likewise substantial evidence to support our findings that
complainant was not an employee of respondents. Thus:
1. Complainants name does not appear in the list of employees reported to the
SSS.
2. His name does not also appear in the sample payrolls of respondents
employees.
3. The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished
rattan products[,] that complainant had at one time or another worked with them.
4. The Affidavit of Vicente Coming, complainants full brother[,] attesting that
complainant had never been an employee of respondent. The only connection
was that their employer Faustino Apondar supplies finished rattan products to
respondents.33

On the other hand, the CA gave more credence to the declarations of the five former
employees of petitioners that respondent was their co-worker in SEIRI. One of said
affiants is Vicente Comings own son, Gil Coming. Vicente averred in his second
affidavit that when he confronted his son, the latter explained that he was merely told by
their Pastor to sign the affidavit as it will put an end to the controversy. Vicente insisted
that his son did not know the contents and implications of the document he signed. As
to the absence of respondents name in the payroll and SSS employment report, the CA
observed that the payrolls submitted were only from January 1, 1999 to December 29,
2000 and not the entire period of eighteen years when respondent claimed he worked
for SEIRI. It further noted that the names of the five affiants, whom petitioners admitted
to be their former employees, likewise do not appear in the aforesaid documents.
According to the CA, it is apparent that petitioners maintained a separate payroll for
certain employees or willfully retained a portion of the payroll.
x x x As to the "control test", the following facts indubitably reveal that respondents
wielded control over the work performance of petitioner, to wit: (1) they required him to
work within the company premises; (2) they obliged petitioner to report every day of the
week and tasked him to usually perform the same job; (3) they enforced the observance
of definite hours of work from 8 oclock in the morning to 5 oclock in the afternoon; (4)
the mode of payment of petitioners salary was under their discretion, at first paying him
on pakiao basis and thereafter, on daily basis; (5) they implemented company rules and
regulations; (6) [Estanislao] Agbay directly paid petitioners salaries and controlled all
aspects of his employment and (7) petitioner rendered work necessary and desirable in
the business of the respondent company.34
We affirm the CA.
In Tan v. Lagrama,35 the Court held that the fact that a worker was not reported as an
employee to the SSS is not conclusive proof of the absence of employer-employee
relationship. Otherwise, an employer would be rewarded for his failure or even neglect
to perform his obligation.36
Nor does the fact that respondents name does not appear in the payrolls and pay
envelope records submitted by petitioners negate the existence of employer-employee
relationship. For a payroll to be utilized to disprove the employment of a person, it must
contain a true and complete list of the employee.37 In this case, the exhibits offered by
petitioners before the NLRC consisting of copies of payrolls and pay earnings records
are only for the years 1999 and 2000; they do not cover the entire 18-year period during
which respondent supposedly worked for SEIRI.
In their comment to the petition filed by respondent in the CA, petitioners emphasized
that in the certifications issued by Mayol and Apondar, it was shown that respondent
was employed and working for them in those years he claimed to be working for SEIRI.
However, a reading of the certification by Mayol would show that while the latter claims
to have respondent under his employ in 1997, 1998 and 1999, respondents services
were not regular and that he works only if he wants to. Apondars certification likewise

stated that respondent worked for him since 1999 through his brother Vicente as
"sideline" but only after regular working hours and "off and on" basis. Even assuming
the truth of the foregoing statements, these do not foreclose respondents regular or fulltime employment with SEIRI. In effect, petitioners suggest that respondent was
employed by SEIRIs suppliers, Mayol and Apondar but no competent proof was
presented as to the latters status as independent contractors.
In the same comment, petitioners further admitted that the five affiants who attested to
respondents employment with SEIRI are its former workers whom they describe as
"disgruntled workers of SEIRI" with an axe to grind against petitioners, and that their
execution of affidavit in support of respondents claim is "their very way of hitting back
the management of SEIRI after disciplinary measures were meted against them." 38 This
allegation though was not substantiated by petitioners. Instead, after the CA rendered
its decision reversing the NLRCs ruling, petitioners subsequently changed their theory
by denying the employment relationship with the five affiants in their motion for
reconsideration, thus:
x x x Since the five workers were occupying and working on a leased premises of the
private respondent, they were called workers of SEIRI (private respondent). Such
admission however, does not connote employment. For the truth of the matter, all of the
five employees of the supplier assigned at the leased premises of the private
respondent. Because of the recommendation of the private respondent with regards to
the disciplinary measures meted on the five workers, they wanted to hit back against the
private respondent. Their motive to implicate private respondent was to vindicate.
Definitely, they have an axe to grind against the private respondent. Mention has to be
made that despite the dismissal of these five (5) witnesses from their service, none of
them ever went to the National Labor [Relations] Commission and invoked their rights, if
any, against their employer or at the very least against the respondent. The reason is
obvious, since they knew pretty well that they were not employees of SEIRI but rather
under the employ of Allan Mayol and Faustino Apondar, working on a leased premise of
respondent. x x x39
Petitioners admission that the five affiants were their former employees is binding upon
them. While they claim that respondent was the employee of their suppliers Mayol and
Apondar, they did not submit proof that the latter were indeed independent contractors;
clearly, petitioners failed to discharge their burden of proving their own affirmative
allegation.40 There is thus no showing that the five former employees of SEIRI were
motivated by malice, bad faith or any ill-motive in executing their affidavit supporting the
claims of respondent.
In any controversy between a laborer and his master, doubts reasonably arising from
the evidence are resolved in favor of the laborer.41
As a regular employee, respondent enjoys the right to security of tenure under Article
27942 of the Labor Code and may only be dismissed for a just 43 or authorized44 cause,
otherwise the dismissal becomes illegal.

Respondent, whose employment was terminated without valid cause by petitioners, is

entitled to reinstatement without loss of seniority rights and other privileges and to his
full back wages, inclusive of allowances and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to the time of his
actual reinstatement. Where reinstatement is no longer viable as an option, back wages
shall be computed from the time of the illegal termination up to the finality of the
decision. Separation pay equivalent to one month salary for every year of service
should likewise be awarded as an alternative in case reinstatement in not possible. 45
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated
February 21, 2008 and Resolution dated February 9, 2009 of the Court of Appeals in
CA-G.R. No. CEB-SP No. 02113 are hereby AFFIRMED and UPHELD.
Petitioners to pay the costs of suit.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-69870 November 29, 1988
NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L.
PEREZ, petitioners,
vs.
THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS
COMMISSION, MINISTRY OF LABOR AND EMPLOYMENT, MANILA AND EUGENIA
C. CREDO, respondents.
G.R. No. 70295 November 29,1988
EUGENIA C. CREDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES
CORPORATION AND ARTURO L. PEREZ, respondents.
The Chief Legal Counsel for respondents NASECO and Arturo L. Perez.
Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA, J.:
Consolidated special civil actions for certiorari seeking to review the decision * of the
Third Division, National Labor Relations Commission in Case No. 11-4944-83 dated 28
November 1984 and its resolution dated 16 January 1985 denying motions for
reconsideration of said decision.
Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a
domestic corporation which provides security guards as well as messengerial, janitorial
and other similar manpower services to the Philippine National Bank (PNB) and its
agencies. She was first employed with NASECO as a lady guard on 18 July 1975.
Through the years, she was promoted to Clerk Typist, then Personnel Clerk until she
became Chief of Property and Records, on 10 March 1980. 1
Sometime before 7 November 1983, Credo was administratively charged by Sisinio S.
Lloren, Manager of Finance and Special Project and Evaluation Department of
NASECO, stemming from her non-compliance with Lloren's memorandum, dated 11
October 1983, regarding certain entry procedures in the company's Statement of
Billings Adjustment. Said charges alleged that Credo "did not comply with Lloren's
instructions to place some corrections/additional remarks in the Statement of Billings
Adjustment; and when [Credo] was called by Lloren to his office to explain further the
said instructions, [Credo] showed resentment and behaved in a scandalous manner by
shouting and uttering remarks of disrespect in the presence of her co-employees." 2
On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General
Manager of NASECO, to explain her side before Perez and NASECO's Committee on
Personnel Affairs in connection with the administrative charges filed against her. After
said meeting, on the same date, Credo was placed on "Forced Leave" status for 1 5
days, effective 8 November 1983. 3
Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a
complaint, docketed as Case No. 114944-83, with the Arbitration Branch, National
Capital Region, Ministry of Labor and Employment, Manila, against NASECO for placing
her on forced leave, without due process. 4
Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's
Committee on Personnel Affairs deliberated and evaluated a number of past acts of
misconduct or infractions attributed to her. 5 As a result of this deliberation, said
committee resolved:
1. That, respondent [Credo] committed the following offenses in the Code
of Discipline, viz:
OFFENSE vs. Company Interest & Policies

No. 3 Any discourteous act to customer, officer and employee of client

company or officer of the Corporation.
OFFENSE vs. Public Moral
No. 7 Exhibit marked discourtesy in the course of official duties or use
of profane or insulting language to any superior officer.
OFFENSE vs. Authority
No. 3 Failure to comply with any lawful order or any instructions of a
superior officer.
2. That, Management has already given due consideration to respondent's
[Credo] scandalous actuations for several times in the past. Records also
show that she was reprimanded for some offense and did not question it.
Management at this juncture, has already met its maximum tolerance
point so it has decided to put an end to respondent's [Credo] being an
undesirable employee. 6
The committee recommended Credo's termination, with forfeiture of benefits.

On 1 December 1983, Credo was called age to the office of Perez to be informed that
she was being charged with certain offenses. Notably, these offenses were those which
NASECO's Committee on Personnel Affairs already resolved, on 22 November 1983 to
have been committed by Credo.
In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs,
Credo was made to explain her side in connection with the charges filed against her;
however, due to her failure to do so, 8 she was handed a Notice of Termination, dated 24
November 1983, and made effective 1 December 1983. 9 Hence, on 6 December 1983,
Credo filed a supplemental complaint for illegal dismissal in Case No. 11-4944-83,
alleging absence of just or authorized cause for her dismissal and lack of opportunity to
be heard. 10
After both parties had submitted their respective position papers, affidavits and other
documentary evidence in support of their claims and defenses, on 9 May 1984, the
labor arbiter rendered a decision: 1) dismissing Credo's complaint, and 2) directing
NASECO to pay Credo separation pay equivalent to one half month's pay for every year
of service. 11
Both parties appealed to respondent National Labor Relations Commission (NLRC)
which, on 28 November 1984, rendered a decision: 1) directing NASECO to reinstate
Credo to her former position, or substantially equivalent position, with six (6) months'
backwages and without loss of seniority rights and other privileges appertaining thereto,
and 2) dismissing Credo's claim for attorney's fees, moral and exemplary damages. As

a consequence, both parties filed their respective motions for reconsideration,

the NLRC denied in a resolution of 16 January 1985. 13

12

which

Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge
as grave abuse of discretion the dispositive portion of the 28 November 1984 decision
which ordered Credo's reinstatement with backwages. 14Petitioners contend that in
arriving at said questioned order, the NLRC acted with grave abuse of discretion in
finding that: 1) petitioners violated the requirements mandated by law on termination, 2)
petitioners failed in the burden of proving that the termination of Credo was for a valid or
authorized cause, 3) the alleged infractions committed by Credo were not proven or,
even if proved, could be considered to have been condoned by petitioners, and 4) the
termination of Credo was not for a valid or authorized cause. 15
On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of
discretion the dispositive portion of the 28 November 1984 decision which dismissed
her claim for attorney's fees, moral and exemplary damages and limited her right to
backwages to only six (6) months. 16
As guidelines for employers in the exercise of their power to dismiss employees for just
causes, the law provides that:
Section 2. Notice of dismissal. Any employer who seeks to dismiss a
worker shall furnish him a written notice stating the particular acts or
omission constituting the grounds for his dismissal.
xxx xxx xxx
Section 5. Answer and Hearing. The worker may answer the
allegations stated against him in the notice of dismissal within a
reasonable period from receipt of such notice. The employer shall afford
the worker ample opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires.
Section 6. Decision to dismiss. The employer shall immediately notify a
worker in writing of a decision to dismiss him stating clearly the reasons
therefor. 17
These guidelines mandate that the employer furnish an employee sought to be
dismissed two (2) written notices of dismissal before a termination of employment can
be legally effected. These are the notice which apprises the employee of the particular
acts or omissions for which his dismissal is sought and the subsequent notice which
informs the employee of the employer's decision to dismiss him.
Likewise, a reading of the guidelines in consonance with the express provisions of law
on protection to labor 18(which encompasses the right to security of tenure) and the
broader dictates of procedural due process necessarily mandate that notice of the

employer's decision to dismiss an employee, with reasons therefor, can only be issued
after the employer has afforded the employee concerned ample opportunity to be heard
and to defend himself.
In the case at bar, NASECO did not comply with these guidelines in effecting Credo's
dismissal. Although she was apprised and "given the chance to explain her side" of the
charges filed against her, this chance was given so perfunctorily, thus rendering illusory
Credo's right to security of tenure. That Credo was not given ample opportunity to be
heard and to defend herself is evident from the fact that the compliance with the
injunction to apprise her of the charges filed against her and to afford her a chance to
prepare for her defense was dispensed in only a day. This is not effective compliance
with the legal requirements aforementioned.
The fact also that the Notice of Termination of Credo's employment (or the decision to
dismiss her) was dated 24 November 1983 and made effective 1 December 1983
shows that NASECO was already bent on terminating her services when she was
informed on 1 December 1983 of the charges against her, and that any hearing which
NASECO thought of affording her after 24 November 1983 would merely be pro forma
or an exercise in futility.
Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry
procedures in the company's Statement of Billings Adjustment did not warrant the
severe penalty of dismissal of the NLRC correctly held that:
... on the charge of gross discourtesy, the CPA found in its Report, dated
22 November 1983 that, "In the process of her testimony/explanations she
again exhibited a conduct unbecoming in front of NASECO Officers and
argued to Mr. S. S. Lloren in a sarcastic and discourteous manner,
notwithstanding, the fact that she was inside the office of the Acctg.
General Manager." Let it be noted, however, that the Report did not even
describe how the so called "conduct unbecoming" or "discourteous
manner" was done by complainant. Anent the "sarcastic" argument of
complainant, the purported transcript 19 of the meeting held on 7
November 1983 does not indicate any sarcasm on the part of
complainant. At the most, complainant may have sounded insistent or
emphatic about her work being more complete than the work of Ms. de
Castro, yet, the complaining officer signed the work of Ms. de Castro and
did not sign hers.
As to the charge of insubordination, it may be conceded, albeit unclear,
that complainant failed to place same corrections/additional remarks in the
Statement of Billings Adjustments as instructed. However, under the
circumstances obtaining, where complainant strongly felt that she was
being discriminated against by her superior in relation to other employees,
we are of the considered view and so hold, that a reprimand would have
sufficed for the infraction, but certainly not termination from services. 20

As this Court has ruled:

... where a penalty less punitive would suffice, whatever missteps may be
committed by labor ought not to be visited with a consequence so severe.
It is not only because of the law's concern for the working man. There is,
in addition, his family to consider. Unemployment brings untold hardships
and sorrows on those dependent on the wage-earner. 21
Of course, in justifying Credo's termination of employment, NASECO claims as
additional lawful causes for dismissal Credo's previous and repeated acts of
insubordination, discourtesy and sarcasm towards her superior officers, alleged to have
been committed from 1980 to July 1983. 22
If such acts of misconduct were indeed committed by Credo, they are deemed to have
been condoned by NASECO. For instance, sometime in 1980, when Credo allegedly
"reacted in a scandalous manner and raised her voice" in a discussion with NASECO's
Acting head of the Personnel Administration 23 no disciplinary measure was taken or
meted against her. Nor was she even reprimanded when she allegedly talked 'in a
shouting or yelling manner" with the Acting Manager of NASECO's Building
Maintenance and Services Department in 1980 24 or when she allegedly "shouted" at
NASECO's Corporate Auditor "in front of his subordinates displaying arrogance and
unruly behavior" in 1980, or when she allegedly shouted at NASECO's Internal Control
Consultant in 1981. 25 But then, in sharp contrast to NASECO's penchant for ignoring
the aforesaid acts of misconduct, when Credo committed frequent tardiness in August
and September 1983, she was reprimanded. 26
Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily
proven, NASECO's condonation thereof is gleaned from the fact that on 4 October
1983, Credo was given a salary adjustment for having performed in the job "at least
[satisfactorily]" 27 and she was then rated "Very Satisfactory" 28as regards job
performance, particularly in terms of quality of work, quantity of work, dependability,
cooperation, resourcefulness and attendance.
Considering that the acts or omissions for which Credo's employment was sought to be
legally terminated were insufficiently proved, as to justify dismissal, reinstatement is
proper. For "absent the reason which gave rise to [the employee's] separation from
employment, there is no intention on the part of the employer to dismiss the employee
concerned." 29 And, as a result of having been wrongfully dismissed, Credo is entitled to
three (3) years of backwages without deduction and qualification. 30
However, while Credo's dismissal was effected without procedural fairness, an award of
exemplary damages in her favor can only be justified if her dismissal was effected in a
wanton, fraudulent, oppressive or malevolent manner. 31A judicious examination of the
record manifests no such conduct on the part of management. However, in view of the
attendant circumstances in the case, i.e., lack of due process in effecting her dismissal,
it is reasonable to award her moral damages. And, for having been compelled to litigate

because of the unlawful actuations of NASECO, a reasonable award for attorney's fees
in her favor is in order.
In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that the NLRC has
no jurisdiction to order Credo's reinstatement. NASECO claims that, as a government
corporation (by virtue of its being a subsidiary of the National Investment and
Development Corporation (NIDC), a subsidiary wholly owned by the Philippine National
Bank (PNB), which in turn is a government owned corporation), the terms and
conditions of employment of its employees are governed by the Civil Service Law, rules
and regulations. In support of this argument, NASECO cites National Housing
Corporation vs. JUCO, 33where this Court held that "There should no longer be any
question at this time that employees of government-owned or controlled corporations
are governed by the civil service law and civil service rifles and regulations."
It would appear that, in the interest of justice, the holding in said case should not be
given retroactive effect, that is, to cases that arose before its promulgation on 17
January 1985. To do otherwise would be oppressive to Credo and other employees
similarly situated, because under the same 1973 Constitution ,but prior to the ruling
in National Housing Corporation vs. Juco, this Court had recognized the applicability of
the Labor Code to, and the authority of the NLRC to exercise jurisdiction over, disputes
involving terms and conditions of employment in government owned or controlled
corporations, among them, the National Service Corporation (NASECO).<re||
an1w> 34
Furthermore, in the matter of coverage by the civil service of government-owned or
controlled corporations, the 1987 Constitution starkly varies from the 1973 Constitution,
upon which National Housing Corporation vs. Juco is based. Under the 1973
Constitution, it was provided that:
The civil service embraces every branch, agency, subdivision, and
instrumentality of the Government, including every government-owned or
controlled corporation. ... 35
On the other hand, the 1987 Constitution provides that:
The civil service embraces all branches, subdivisions, instrumentalities,
and agencies of the Government, including government-owned or
controlled corporations with original charter. 36 (Emphasis supplied)
Thus, the situations sought to be avoided by the 1973 Constitution and expressed by
the Court in the National Housing . Corporation case in the following manner
The infirmity of the respondents' position lies in its permitting a
circumvention or emasculation of Section 1, Article XII-B of the
constitution. It would be possible for a regular ministry of government to
create a host of subsidiary corporations under the Corporation Code

funded by a willing legislature. A government-owned corporation could

create several subsidiary corporations. These subsidiary corporations
would enjoy the best of two worlds. Their officials and employees would be
privileged individuals, free from the strict accountability required by the
Civil Service Decree and the regulations of the Commission on Audit.
Their incomes would not be subject to the competitive restrains of the
open market nor to the terms and conditions of civil service employment.
Conceivably, all government-owned or controlled corporations could be
created, no longer by special charters, but through incorporations under
the general law. The Constitutional amendment including such
corporations in the embrace of the civil service would cease to have
application. Certainly, such a situation cannot be allowed to exist. 37
appear relegated to relative insignificance by the 1987 Constitutional provision that the
Civil Service embraces government-owned or controlled corporations with original
charter; and, therefore, by clear implication, the Civil Service does not include
government-owned or controlled corporations which are organized as subsidiaries of
government-owned or controlled corporations under the general corporation law.
The proceedings in the 1986 Constitutional Commission also shed light on the
Constitutional intent and meaning in the use of the phrase "with original charter." Thus
THE PRESIDING OFFICER (Mr. Trenas) Commissioner
Romulo is recognized.
MR. ROMULO. I beg the indulgence of the Committee. I was
reading the wrong provision.
I refer to Section 1, subparagraph I which reads:
The Civil Service embraces all branches, subdivisions, instrumentalities,
and agencies of the government, including government-owned or
controlled corporations.
My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will
the Commissioner please state his previous question?
MR. ROMULO. The phrase on line 4 of Section 1,
subparagraph 1, under the Civil Service Commission, says:
"including government-owned or controlled corporations.'
Does that include a corporation, like the Philippine Airlines
which is government-owned or controlled?
MR. FOZ. I would like to throw a question to the
Commissioner. Is the Philippine Airlines controlled by the

government in the sense that the majority of stocks are

owned by the government?
MR. ROMULO. It is owned by the GSIS. So, this is what we
might call a tertiary corporation. The GSIS is owned by the
government. Would this be covered because the provision
says "including government-owned or controlled
corporations."
MR. FOZ. The Philippine Airlines was established as a
private corporation. Later on, the government, through the
GSIS, acquired the controlling stocks. Is that not the correct
situation?
MR. ROMULO. That is true as Commissioner Ople is about
to explain. There was apparently a Supreme Court decision
that destroyed that distinction between a government-owned
corporation created under the Corporation Law and a
government-owned corporation created by its own charter.
MR. FOZ. Yes, we recall the Supreme Court decision in the
case of NHA vs. Juco to the effect that all government
corporations irrespective of the manner of creation, whether
by special charter or by the private Corporation Law, are
deemed to be covered by the civil service because of the
wide-embracing definition made in this section of the existing
1973 Constitution. But we recall the response to the question
of Commissioner Ople that our intendment in this provision is
just to give a general description of the civil service. We are
not here to make any declaration as to whether employees
of government-owned or controlled corporations are barred
from the operation of laws, such as the Labor Code of the
Philippines.
MR. ROMULO. Yes.
MR. OPLE. May I be recognized, Mr. Presiding Officer, since
my name has been mentioned by both sides.
MR. ROMULO. I yield part of my time.
THE PRESIDING OFFICER (Mr.Trenas). Commissioner
Ople is recognized.
MR. OPLE. In connection with the coverage of the Civil
Service Law in Section 1 (1), may I volunteer some

information that may be helpful both to the interpellator and

to the Committee. Following the proclamation of martial law
on September 21, 1972, this issue of the coverage of the
Labor Code of the Philippines and of the Civil Service Law
almost immediately arose. I am, in particular, referring to the
period following the coming into force and effect of the
Constitution of 1973, where the Article on the Civil Service
was supposed to take immediate force and effect. In the
case of LUZTEVECO, there was a strike at the time. This
was a government-controlled and government-owned
corporation. I think it was owned by the PNOC with just the
minuscule private shares left. So, the Secretary of Justice at
that time, Secretary Abad Santos, and myself sat down, and
the result of that meeting was an opinion of the Secretary of
Justice which 9 became binding immediately on the
government that government corporations with original
charters, such as the GSIS, were covered by the Civil
Service Law and corporations spun off from the GSIS, which
we called second generation corporations functioning as
private subsidiaries, were covered by the Labor Code.
Samples of such second generation corporations were the
Philippine Airlines, the Manila
Hotel and the Hyatt. And that demarcation worked very well. In fact, all of
these companies I have mentioned as examples, except for the Manila
Hotel, had collective bargaining agreements. In the Philippine Airlines,
there were, in fact, three collective bargaining agreements; one, for the
ground people or the PALIA one, for the flight attendants or the PASAC
and one for the pilots of the ALPAC How then could a corporation like that
be covered by the Civil Service law? But, as the Chairman of the
Committee pointed out, the Supreme Court decision in the case of NHA
vs. Juco unrobed the whole thing. Accordingly, the Philippine Airlines, the
Manila Hotel and the Hyatt are now considered under that decision
covered by the Civil Service Law. I also recall that in the emergency
meeting of the Cabinet convened for this purpose at the initiative of the
Chairman of the Reorganization Commission, Armand Fabella, they
agreed to allow the CBA's to lapse before applying the full force and effect
of the Supreme Court decision. So, we were in the awkward situation
when the new government took over. I can agree with Commissioner
Romulo when he said that this is a problem which I am not exactly sure
we should address in the deliberations on the Civil Service Law or whether
we should be content with what the Chairman said that Section 1 (1) of the
Article on the Civil Service is just a general description of the coverage of
the Civil Service and no more.
Thank you, Mr. Presiding Officer.

MR. ROMULO. Mr. Presiding Officer, for the moment, I

would be satisfied if the Committee puts on records that it is
not their intent by this provision and the phrase "including
government-owned or controlled corporations" to cover such
companies as the Philippine Airlines.
MR. FOZ. Personally, that is my view. As a matter of fact,
when this draft was made, my proposal was really to
eliminate, to drop from the provision, the phrase "including
government- owned or controlled corporations."
MR. ROMULO. Would the Committee indicate that is the
intent of this provision?
MR. MONSOD. Mr. Presiding Officer, I do not think the
Committee can make such a statement in the face of an
absolute exclusion of government-owned or controlled
corporations. However, this does not preclude the Civil
Service Law to prescribe different rules and procedures,
including emoluments for employees of proprietary
corporations, taking into consideration the nature of their
operations. So, it is a general coverage but it does not
preclude a distinction of the rules between the two types of
enterprises.
MR. FOZ. In other words, it is something that should be left
to the legislature to decide. As I said before, this is just a
general description and we are not making any declaration
whatsoever.
MR. MONSOD. Perhaps if Commissioner Romulo would like
a definitive understanding of the coverage and the
Gentleman wants to exclude government-owned or
controlled corporations like Philippine Airlines, then the
recourse is to offer an amendment as to the coverage, if the
Commissioner does not accept the explanation that there
could be a distinction of the rules, including salaries and
emoluments.
MR. ROMULO. So as not to delay the proceedings, I will
reserve my right to submit such an amendment.
xxx xxx xxx
THE PRESIDING OFFICE (Mr. Trenas) Commissioner
Romulo is recognized.

MR. ROMULO. On page 2, line 5, I suggest the following

amendment after "corporations": Add a comma (,) and the
phrase EXCEPT THOSE EXERCISING PROPRIETARY
FUNCTIONS.
THE PRESIDING OFFICER (Mr. Trenas). What does the
Committee say?
SUSPENSION OF SESSION
MR. MONSOD. May we have a suspension of the session?
THE PRESIDING OFFICER (Mr. Trenas). The session is
suspended.
It was 7:16 p.m.
RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed
amendment to now read as follows: "including government-owned or
controlled corporations WITH ORIGINAL CHARTERS." The purpose of
this amendment is to indicate that government corporations such as the
GSIS and SSS, which have original charters, fall within the ambit of the
civil service. However, corporations which are subsidiaries of these
chartered agencies such as the Philippine Airlines, Manila Hotel and Hyatt
are excluded from the coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does the
Committee say?
MR. FOZ. Just one question, Mr. Presiding Officer. By the
term "original charters," what exactly do we mean?
MR. ROMULO. We mean that they were created by law, by
an act of Congress, or by special law.
MR. FOZ. And not under the general corporation law.
MR. ROMULO. That is correct. Mr. Presiding Officer.

MR. FOZ. With that understanding and clarification, the

Committee accepts the amendment.
MR. NATIVIDAD. Mr. Presiding officer, so those created by
the general corporation law are out.
MR. ROMULO. That is correct: 38
On the premise that it is the 1987 Constitution that governs the instant case because it
is the Constitution in place at the time of decision thereof, the NLRC has jurisdiction to
accord relief to the parties. As an admitted subsidiary of the NIDC, in turn a subsidiary
of the PNB, the NASECO is a government-owned or controlled corporation without
original charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring
opinion in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G.
No. 8, pp. 2687, 2694; also published in 78 Phil. 221) on the effectivity of the principle of
social justice embodied in the 1935 Constitution, said:
Certainly, this principle of social justice in our Constitution as generously
conceived and so tersely phrased, was not included in the fundamental
law as a mere popular gesture. It was meant to (be) a vital, articulate,
compelling principle of public policy. It should be observed in the
interpretation not only of future legislation, but also of all laws already
existing on November 15, 1935. It was intended to change the spirit of our
laws, present and future. Thus, all the laws which on the great historic
event when the Commonwealth of the Philippines was born, were
susceptible of two interpretations strict or liberal, against or in favor of
social justice, now have to be construed broadly in order to promote and
achieve social justice. This may seem novel to our friends, the advocates
of legalism but it is the only way to give life and significance to the abovequoted principle of the Constitution. If it was not designed to apply to these
existing laws, then it would be necessary to wait for generations until all
our codes and all our statutes shall have been completely charred by
removing every provision inimical to social justice, before the policy of
social justice can become really effective. That would be an absurd
conclusion. It is more reasonable to hold that this constitutional principle
applies to all legislation in force on November 15, 1935, and all laws
thereafter passed.
WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is
AFFIRMED with modifications. Petitioners in G.R. No. 69870, who are the private
respondents in G.R. No. 70295, are ordered to: 1) reinstate Eugenia C. Credo to her
former position at the time of her termination, or if such reinstatement is not possible, to
place her in a substantially equivalent position, with three (3) years backwages, from 1
December 1983, without qualification or deduction, and without loss of seniority rights

and other privileges appertaining thereto, and 2) pay Eugenia C. Credo P5,000.00 for
moral damages and P5,000.00 for attorney's fees.
If reinstatement in any event is no longer possible because of supervening events,
petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295 are
ordered to pay Eugenia C. Credo, in addition to her backwages and damages as above
described, separation pay equivalent to one-half month's salary for every year of
service, to be computed on her monthly salary at the time of her termination on 1
December 1983.
SO ORDERED.
Fernan, C.J., Melencio-Herrera, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes,
Grio-Aquino, Medialdea and Regalado, JJ., concur.
Narvasa, J., is on leave.
Gutierrez, Jr., J., in the result.

FIRST DIVISION
[G.R. No. 98107. August 18, 1997]
BENJAMIN C. JUCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
and NATIONAL HOUSING CORPORATION,respondents.
DECISION
HERMOSISIMA, JR., J.:
This is a petition for certiorari to set aside the Decision of the National Labor
Relations Commission (NLRC) dated March 14, 1991, which reversed the Decision
dated May 21, 1990 of Labor Arbiter Manuel R. Caday, on the ground of lack of
jurisdiction.
Petitioner Benjamin C. Juco was hired as a project engineer of respondent National
Housing Corporation (NHC) from November 16, 1970 to May 14, 1975. On May 14,
1975, he was separated from the service for having been implicated in a crime of theft
and/or malversation of public funds.
On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC
with the Department of Labor.

On September 17, 1977, the Labor Arbiter rendered a decision dismissing the
complaint on the ground that the NLRC had no jurisdiction over the case. [1]
Petitioner then elevated the case to the NLRC which rendered a decision on
December 28, 1982, reversing the decision of the Labor Arbiter.[2]
Dissatisfied with the decision of the NLRC, respondent NHC appealed before this
Court and on January 17, 1985, we rendered a decision, the dispositive portion thereof
reads as follows:
WHEREFORE,thepetitionisherebyGRANTED.Thequestioneddecisionoftherespondent
NationalLaborRelationsCommissionisSETASIDE.ThedecisionoftheLaborArbiter
dismissingthecasebeforeitforlackofjurisdictionisREINSTATED.[3]
On January 6, 1989, petitioner filed with the Civil Service Commission a complaint
for illegal dismissal, with preliminary mandatory injunction. [4]
On February 6, 1989, respondent NHC moved for the dismissal of the complaint on
the ground that the Civil Service Commission has no jurisdiction over the case. [5]
On April 11, 1989, the Civil Service Commission issued an order dismissing the
complaint for lack of jurisdiction. It ratiocinated that:
TheBoardfindsthecommentand/ormotiontodismissmeritorious.Itwasnotdisputedthat
NHCisagovernmentcorporationwithoutanoriginalcharterbutorganized/createdunderthe
CorporateCode.
ArticleIX,Section2(1)ofthe1987Constitutionprovides:
Thecivilserviceembracesallbranches,subdivisions,instrumentalitiesandagenciesofthe
government,includinggovernmentownedandcontrolledcorporationswithoriginalcharters.
(underscoringsupplied)
Fromtheaforequotedconstitutionalprovision,itisclearthatrespondentNHCisnotwithinthe
scopeofthecivilserviceandisthereforebeyondthejurisdictionofthisboard.Moreover,itis
pertinenttostatethatthe1987ConstitutionwasratifiedandbecameeffectiveonFebruary2,
1987.
WHEREFORE,forlackofjurisdiction,theinstantcomplaintisherebydismissed.[6]
On April 28, 1989, petitioner filed with respondent NLRC a complaint for illegal
dismissal with preliminary mandatory injunction against respondent NHC. [7]
On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that
petitioner was illegally dismissed from his employment by respondent as there was
evidence in the record that the criminal case against him was purely fabricated,

prompting the trial court to dismiss the charges against him. Hence, he concluded that
the dismissal was illegal as it was devoid of basis, legal or factual.
He further ruled that the complaint is not barred by prescription considering that the
period from which to reckon the reglementary period of four years should be from the
date of the receipt of the decision of the Civil Service Commission promulgated on April
11, 1989. He also ratiocinated that:
ItappearsxxxcomplainantfiledthecomplaintforillegaldismissalwiththeCivilService
CommissiononJanuary6,1989andthesamewasdismissedonApril11,1989afterwhichon
April28,1989,thiscasewasfiledbythecomplainant.Priortothat,thiscasewasruleduponby
theSupremeCourtonJanuary17,1985whichenjoinedthecomplainanttogototheCivil
ServiceCommissionwhichinfact,complainantdid.Underthecircumstances,thereismeriton
thecontentionthattherunningofthereglementaryperiodoffour(4)yearswassuspendedwith
thefilingofthecomplaintwiththesaidCommission.Verily,itwasnotthefaultofthe
respondentforfailingtofilethecomplaintasallegedbytherespondentbutdueto,inthewords
ofthecomplainant,alegalknotthathastobeuntangled.[8]
Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of which
reads:
"Premisesconsidered,judgmentisherebyrendereddeclaringthedismissalofthecomplainantas
illegalandorderingtherespondenttoimmediatelyreinstatehimtohisformerpositionwithout
lossofseniorityrightswithfullbackwagesinclusiveofallowanceandtohisotherbenefitsor
equivalentcomputedfromthetimeitiswithheldfromhimwhenhewasdismissedonMarch27,
1977,untilactuallyreinstated.[9]
On June 1, 1990, respondent NHC filed its appeal before the NLRC and on March
14, 1991, the NLRC promulgated a decision which reversed the decision of Labor
Arbiter Manuel R. Caday on the ground of lack of jurisdiction. [10]
The primordial issue that confronts us is whether or not public respondent
committed grave abuse of discretion in holding that petitioner is not governed by the
Labor Code.
Under the laws then in force, employees of government-owned and /or controlled
corporations were governed by the Civil Service Law and not by the Labor Code.
Hence,
Article 277 of the Labor Code (PD 442) then provided:
"Thetermsandconditionsofemploymentofallgovernmentemployees,includingemployeesof
governmentownedandcontrolledcorporationsshallbegovernedbytheCivilServiceLaw,
rulesandregulationsxxx.

The1973Constitution,ArticleIIB,Section1(1),ontheotherhandprovided:
TheCivilServiceembraceseverybranch,agency,subdivisionandinstrumentalityofthe
government,includinggovernmentownedorcontrolledcorporations.
Although we had earlier ruled in National Housing Corporation v. Juco,[11] that
employees of government-owned and/or controlled corporations, whether created by
special law or formed as subsidiaries under the general Corporation Law, are governed
by the Civil Service Law and not by the Labor Code, this ruling has been supplanted by
the 1987 Constitution. Thus, the said Constitution now provides:
Thecivilserviceembracesallbranches,subdivision,instrumentalities,andagenciesofthe
Government,includinggovernmentownedorcontrolledcorporationswithoriginalcharter.
(ArticleIXB,Section2[1])
In National Service Corporation (NASECO) v. National Labor Relations
Commission,[12] we had the occasion to apply the present Constitution in deciding
whether or not the employees of NASECO are covered by the Civil Service Law or the
Labor Code notwithstanding that the case arose at the time when the 1973 Constitution
was still in effect. We ruled that the NLRC has jurisdiction over the employees of
NASECO on the ground that it is the 1987 Constitution that governs because it is the
Constitution in place at the time of the decision. Furthermore, we ruled that the new
phrase with original charter means that government-owned and controlled corporations
refer to corporations chartered by special law as distinguished from corporations
organized under the Corporation Code. Thus, NASECO which had been organized
under the general incorporation stature and a subsidiary of the National Investment
Development Corporation, which in turn was a subsidiary of the Philippine National
Bank, is excluded from the purview of the Civil Service Commission.
We see no cogent reason to depart from the ruling in the aforesaid case.
In the case at bench, the National Housing Corporation is a government owned
corporation organized in 1959 in accordance with Executive Order No. 399, otherwise
known as the Uniform Charter of Government Corporation, dated January 1, 1959. Its
shares of stock are and have been one hundred percent (100%) owned by the
Government from its incorporation under Act 1459, the former corporation law. The
government entities that own its shares of stock are the Government Service Insurance
System, the Social Security System, the Development Bank of the Philippines, the
National Investment and Development Corporation and the Peoples Homesite and
Housing Corporation.[13] Considering the fact that the NHA had been incorporated under
act 1459, the former corporation law, it is but correct to say that it is a governmentowned or controlled corporation whose employees are subject to the provisions of the
Labor Code. This observation is reiterated in recent case of Trade Union of the
Philippines and Allied Services (TUPAS) v. National Housing Corporation, [14] where we
held that the NHA is now within the jurisdiction of the Department of Labor and
Employment, it being a government-owned and/or controlled corporation without an

original charter. Furthermore, we also held that the workers or employees of the NHC
(now NHA) undoubtedly have the right to form unions or employees organization and
that there is no impediment to the holding of a certification election among them as they
are covered by the Labor Code.
Thus, the NLRC erred in dismissing petitioners complaint for lack of jurisdiction
because the rule now is that the Civil Service now covers only government-owned or
controlled corporations with original charters. [15] Having been incorporated under the
Corporation Law, its relations with its personnel are governed by the Labor Code and
come under the jurisdiction of the National Labor Relations Commission.
One final point. Petitioners have been tossed from one forum to another for a simple
illegal dismissal case. It is but apt that we put an end to his dilemma in the interest of
justice.
WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March
14, 1991 is hereby REVERSED and the Decision of the Labor Arbiter dated May 21,
1990 is REINSTATED.
SO ORDERED.
Padilla, (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 186439

January 15, 2014

UNIVERSAL ROBINA SUGAR MILLING CORPORATION and RENE

CABATI, Petitioners,
vs.
FERDINAND ACIBO, ROBERTO AGUILAR, EDDIE BALDOZA, RENE ABELLAR,
DIOMEDES ALICOS, MIGUEL ALICOS, ROGELIO AMAHIT, LARRY AMASCO,
FELIPE BALANSAG, ROMEO BALANSAG, MANUEL BANGOT, ANDY BANJAO,
DIONISIO BENDIJO, JR., JOVENTINO BROCE, ENRICO LITERAL, RODGER
RAMIREZ, BIENVENIDO RODRIGUEZ, DIOCITO PALAGTIW, ERNIE SABLAN,
RICHARD PANCHO, RODRIGO ESTRABELA, DANNY KADUSALE and
ALLYROBYL OLPUS, Respondents.

DECISION
BRION, J.:
We resolve in this petition for review on certiorari 1 the challenge to the November 29,
2007 decision2 and the January 22, 2009 resolution3 of the Court of Appeals (CA) in CAG.R. CEB-SP No. 02028. This CA decision affirmed with modification the July 22, 2005
decision4 and the April 28, 2006 resolution5 of the National Labor Relations Commission
(NLRC) in NLRC Case No. V-00006-03 which, in turn, reversed the October 9, 2002
decision6 of the Labor Arbiter (LA). The LAs decision dismissed the complaint filed by
complainants Ferdinand Acibo, et al.7 against petitioners Universal Robina Sugar Milling
Corporation (URSUMCO) and Rene Cabati.
The Factual Antecedents
URSUMCO is a domestic corporation engaged in the sugar cane milling business;
Cabati is URSUMCOs Business Unit General Manager.
The complainants were employees of URSUMCO. They were hired on various dates
(between February 1988 and April 1996) and on different capacities, 8 i.e., drivers, crane
operators, bucket hookers, welders, mechanics, laboratory attendants and aides, steel
workers, laborers, carpenters and masons, among others. At the start of their respective
engagements, the complainants signed contracts of employment for a period of one (1)
month or for a given season. URSUMCO repeatedly hired the complainants to perform
the same duties and, for every engagement, required the latter to sign new employment
contracts for the same duration of one month or a given season.
On August 23, 2002,9 the complainants filed before the LA complaints for regularization,
entitlement to the benefits under the existing Collective Bargaining Agreement
(CBA),and attorneys fees.
In the decision10 dated October 9, 2002, the LA dismissed the complaint for lack of
merit. The LA held that the complainants were seasonal or project workers and not
regular employees of URSUMCO. The LA pointed out that the complainants were
required to perform, for a definite period, phases of URSUMCOs several projects that
were not at all directly related to the latters main operations. As the complainants were
project employees, they could not be regularized since their respective employments
were coterminous with the phase of the work or special project to which they were
assigned and which employments end upon the completion of each project. Accordingly,
the complainants were not entitled to the benefits granted under the CBA that, as
provided, covered only the regular employees of URSUMCO.
Of the twenty-two original complainants before the LA, seven appealed the LAs ruling
before the NLRC, namely: respondents Ferdinand Acibo, Eddie Baldoza, Andy Banjao,
Dionisio Bendijo, Jr., Rodger Ramirez, Diocito Palagtiw, Danny Kadusale and Allyrobyl
Olpus.

The Ruling of the NLRC

In its decision11 of July 22, 2005, the NLRC reversed the LAs ruling; it declared the
complainants as regular URSUMCO employees and granted their monetary claims
under the CBA. The NLRC pointed out that the complainants performed activities which
were usually necessary and desirable in the usual trade or business of URSUMCO, and
had been repeatedly hired for the same undertaking every season. Thus, pursuant to
Article 280 of the Labor Code, the NLRC declared that the complainants were regular
employees. As regular employees, the NLRC held that the complainants were entitled to
the benefits granted, under the CBA, to the regular URSUMCO employees.
The petitioners moved to reconsider this NLRC ruling which the NLRC denied in its April
28, 2006 resolution.12 The petitioners elevated the case to the CA via a petition for
certiorari.13
The Ruling of the CA
In its November 29, 2007 decision,14 the CA granted in part the petition; it affirmed the
NLRCs ruling finding the complainants to be regular employees of URSUMCO, but
deleted the grant of monetary benefits under the CBA.
The CA pointed out that the primary standard for determining regular employment is the
reasonable connection between a particular activity performed by the employee vis-vis the usual trade or business of the employer. This connection, in turn, can be
determined by considering the nature of the work performed and the relation of this
work to the business or trade of the employer in its entirety.
In this regard, the CA held that the various activities that the complainants were tasked
to do were necessary, if not indispensable, to the nature of URSUMCOs business. As
the complainants had been performing their respective tasks for at least one year, the
CA held that this repeated and continuing need for the complainants performance of
these same tasks, regardless of whether the performance was continuous or
intermittent, constitutes sufficient evidence of the necessity, if not indispensability, of the
activity to URSUMCOs business.
Further, the CA noted that the petitioners failed to prove that they gave the complainants
opportunity to work elsewhere during the off-season, which opportunity could have
qualified the latter as seasonal workers. Still, the CA pointed out that even during this
off-season period, seasonal workers are not separated from the service but are simply
considered on leave until they are re-employed. Thus, the CA concluded that the
complainants were regular employees with respect to the activity that they had been
performing and while the activity continued.
On the claim for CBA benefits, the CA, however, ruled that the complainants were not
entitled to receive them. The CA pointed out that while the complainants were
considered regular, albeit seasonal, workers, the CBA-covered regular employees of

URSUMCO were performing tasks needed by the latter for the entire year with no
regard to the changing sugar milling season. Hence, the complainants did not belong to
and could not be grouped together with the regular employees of URSUMCO, for
collective bargaining purposes; they constitute a bargaining unit separate and distinct
from the regular employees. Consequently, the CA declared that the complainants could
not be covered by the CBA.
The petitioners filed the present petition after the CA denied their motion for partial
reconsideration15 in the CAs January 22, 2009 resolution. 16
The Issues
The petition essentially presents the following issues for the Courts resolution: (1)
whether the respondents are regular employees of URSUMCO; and (2) whether
affirmative relief can be given to the fifteen (15) of the complainants who did not appeal
the LAs decision.17
The Courts Ruling
We resolve to partially GRANT the petition.
On the issue of the status of the respondents employment
The petitioners maintain that the respondents are contractual or project/seasonal
workers and not regular employees of URSUMCO. They thus argue that the CA erred in
applying the legal parameters and guidelines for regular employment to the
respondents case. They contend that the legal standards length of the employees
engagement and the desirability or necessity of the employees work in the usual trade
or business of the employer apply only to regular employees under paragraph 1,
Article 280 of the Labor Code, and, under paragraph 2 of the same article, to casual
employees who are deemed regular by their length of service.
The respondents, the petitioners point out, were specifically engaged for a fixed and
predetermined duration of, on the average, one (1) month at a time that coincides with a
particular phase of the companys business operations or sugar milling season. By the
nature of their engagement, the respondents employment legally ends upon the end of
the predetermined period; thus, URSUMCO was under no legal obligation to rehire the
respondents.
In their comment,18 the respondents maintain that they are regular employees of
URSUMCO. Relying on the NLRC and the CA rulings, they point out that they have
been continuously working for URSUMCO for more than one year, performing tasks
which were necessary and desirable to URSUMCOs business. Hence, under the
above-stated legal parameters, they are regular employees.

We disagree with the petitioners position.1wphi1 We find the respondents to be

regular seasonal employees of URSUMCO.
As the CA has explained in its challenged decision, Article 280 of the Labor Code
provides for three kinds of employment arrangements, namely: regular, project/seasonal
and casual. Regular employment refers to that arrangement whereby the employee
"has been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer[.]"19 Under the definition, the primary standard
that determines regular employment is the reasonable connection between the
particular activity performed by the employee and the usual business or trade of the
employer;20 the emphasis is on the necessity or desirability of the employees activity.
Thus, when the employee performs activities considered necessary and desirable to the
overall business scheme of the employer, the law regards the employee as regular.
By way of an exception, paragraph 2, Article 280 of the Labor Code also considers
regular a casual employment arrangement when the casual employees engagement
has lasted for at least one year, regardless of the engagements continuity. The
controlling test in this arrangement is the length of time during which the employee is
engaged.
A project employment, on the other hand, contemplates on arrangement whereby "the
employment has been fixed for a specific project or undertaking whose completion or
termination has been determined at the time of the engagement of the
employee[.]"21 Two requirements, therefore, clearly need to be satisfied to remove the
engagement from the presumption of regularity of employment, namely: (1) designation
of a specific project or undertaking for which the employee is hired; and (2) clear
determination of the completion or termination of the project at the time of the
employees engagement.22 The services of the project employees are legally and
automatically terminated upon the end or completion of the project as the employees
services are coterminous with the project.
Unlike in a regular employment under Article 280 of the Labor Code, however, the
length of time of the asserted "project" employees engagement is not controlling as the
employment may, in fact, last for more than a year, depending on the needs or
circumstances of the project. Nevertheless, this length of time (or the continuous
rehiring of the employee even after the cessation of the project) may serve as a badge
of regular employment when the activities performed by the purported "project"
employee are necessary and indispensable to the usual business or trade of the
employer.23 In this latter case, the law will regard the arrangement as regular
employment.24
Seasonal employment operates much in the same way as project employment, albeit it
involves work or service that is seasonal in nature or lasting for the duration of the
season.25 As with project employment, although the seasonal employment arrangement
involves work that is seasonal or periodic in nature, the employment itself is not
automatically considered seasonal so as to prevent the employee from attaining regular

status. To exclude the asserted "seasonal" employee from those classified as regular
employees, the employer must show that: (1) the employee must be performing work or
services that are seasonal in nature; and (2) he had been employed for the duration of
the season.26 Hence, when the "seasonal" workers are continuously and repeatedly
hired to perform the same tasks or activities for several seasons or even after the
cessation of the season, this length of time may likewise serve as badge of regular
employment.27 In fact, even though denominated as "seasonal workers," if these
workers are called to work from time to time and are only temporarily laid off during the
off-season, the law does not consider them separated from the service during the offseason period. The law simply considers these seasonal workers on leave until reemployed.28
Casual employment, the third kind of employment arrangement, refers to any other
employment arrangement that does not fall under any of the first two categories, i.e.,
regular or project/seasonal.
Interestingly, the Labor Code does not mention another employment arrangement
contractual or fixed term employment (or employment for a term) which, if not for the
fixed term, should fall under the category of regular employment in view of the nature of
the employees engagement, which is to perform an activity usually necessary or
desirable in the employers business.
In Brent School, Inc. v. Zamora,29 the Court, for the first time, recognized and resolved
the anomaly created by a narrow and literal interpretation of Article 280 of the Labor
Code that appears to restrict the employees right to freely stipulate with his employer
on the duration of his engagement. In this case, the Court upheld the validity of the
fixed-term employment agreed upon by the employer, Brent School, Inc., and the
employee, Dorotio Alegre, declaring that the restrictive clause in Article 280 "should be
construed to refer to the substantive evil that the Code itself x x x singled out:
agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where [the] fixed period of employment was agreed upon
knowingly and voluntarily by the parties x x x absent any x x x circumstances vitiating
[the employees] consent, or where [the facts satisfactorily show] that the employer and
[the] employee dealt with each other on more or less equal terms[.]" 30 The
indispensability or desirability of the activity performed by the employee will not preclude
the parties from entering into an otherwise valid fixed term employment agreement; a
definite period of employment does not essentially contradict the nature of the
employees duties31 as necessary and desirable to the usual business or trade of the
employer.
Nevertheless, "where the circumstances evidently show that the employer imposed the
period precisely to preclude the employee from acquiring tenurial security, the law and
this Court will not hesitate to strike down or disregard the period as contrary to public
policy, morals, etc."32 In such a case, the general restrictive rule under Article 280 of the
Labor Code will apply and the employee shall be deemed regular.

Clearly, therefore, the nature of the employment does not depend solely on the will or
word of the employer or on the procedure for hiring and the manner of designating the
employee. Rather, the nature of the employment depends on the nature of the activities
to be performed by the employee, considering the nature of the employers business,
the duration and scope to be done,33 and, in some cases, even the length of time of the
performance and its continued existence.
In light of the above legal parameters laid down by the law and applicable
jurisprudence, the respondents are neither project, seasonal nor fixed-term employees,
but regular seasonal workers of URSUMCO. The following factual considerations from
the records support this conclusion:
First, the respondents were made to perform various tasks that did not at all pertain to
any specific phase of URSUMCOs strict milling operations that would ultimately cease
upon completion of a particular phase in the milling of sugar; rather, they were tasked to
perform duties regularly and habitually needed in URSUMCOs operations during the
milling season. The respondents duties as loader operators, hookers, crane operators
and drivers were necessary to haul and transport the sugarcane from the plantation to
the mill; laboratory attendants, workers and laborers to mill the sugar; and welders,
carpenters and utility workers to ensure the smooth and continuous operation of the mill
for the duration of the milling season, as distinguished from the production of the
sugarcane which involves the planting and raising of the sugarcane until it ripens for
milling. The production of sugarcane, it must be emphasized, requires a different set of
workers who are experienced in farm or agricultural work. Needless to say, they perform
the activities that are necessary and desirable in sugarcane production. As in the milling
of sugarcane, the plantation workers perform their duties only during the planting
season.
Second, the respondents were regularly and repeatedly hired to perform the same tasks
year after year. This regular and repeated hiring of the same workers (two different sets)
for two separate seasons has put in place, principally through jurisprudence, the system
of regular seasonal employment in the sugar industry and other industries with a similar
nature of operations.
Under the system, the plantation workers or the mill employees do not work
continuously for one whole year but only for the duration of the growing of the
sugarcane or the milling season. Their seasonal work, however, does not detract from
considering them in regular employment since in a litany of cases, this Court has
already settled that seasonal workers who are called to work from time to time and are
temporarily laid off during the off-season are not separated from the service in said
period, but are merely considered on leave until re-employment. 34 Be this as it may,
regular seasonal employees, like the respondents in this case, should not be confused
with the regular employees of the sugar mill such as the administrative or office
personnel who perform their tasks for the entire year regardless of the season. The
NLRC, therefore, gravely erred when it declared the respondents regular employees of

URSUMCO without qualification and that they were entitled to the benefits granted,
under the CBA, to URSUMCOS regular employees.
Third, while the petitioners assert that the respondents were free to work elsewhere
during the off-season, the records do not support this assertion. There is no evidence on
record showing that after the completion of their tasks at URSUMCO, the respondents
sought and obtained employment elsewhere.
Contrary to the petitioners position, Mercado, Sr. v. NLRC, 3rd Div.35 is not applicable to
the respondents as this case was resolved based on different factual considerations. In
Mercado, the workers were hired to perform phases of the agricultural work in their
employers farm for a definite period of time; afterwards, they were free to offer their
services to any other farm owner. The workers were not hired regularly and repeatedly
for the same phase(s) of agricultural work, but only intermittently for any single phase.
And, more importantly, the employer in Mercado sufficiently proved these factual
circumstances. The Court reiterated these same observations in Hda. Fatima v. Natl
Fed. of Sugarcane Workers-Food and Gen. Trade36 and Hacienda Bino/Hortencia
Starke, Inc. v. Cuenca.37
At this point, we reiterate the settled rule that in this jurisdiction, only questions of law
are allowed in a petition for review on certiorari. 38 This Courts power of review in a Rule
45 petition is limited to resolving matters pertaining to any perceived legal errors, which
the CA may have committed in issuing the assailed decision. 39 In reviewing the legal
correctness of the CAs Rule 65 decision in a labor case, we examine the CA decision in
the context that it determined, i.e., the presence or absence of grave abuse of discretion
in the NLRC decision before it and not on the basis of whether the NLRC decision on
the merits of the case was correct.40 In other words, we have to be keenly aware that
the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it.41
Viewed in this light, we find the need to place the CAs affirmation, albeit with
modification, of the NLRC decision of July 22, 2005 in perspective. To recall, the NLRC
declared the respondents as regular employees of URSUMCO. 42With such a
declaration, the NLRC in effect granted the respondents prayer for regularization and,
concomitantly, their prayer for the grant of monetary benefits under the CBA for
URSUMCOs regular employees. In its challenged ruling, the CA concurred with the
NLRC finding, but with the respondents characterized as regular seasonal employees of
URSUMCO.
The CA misappreciated the real import of the NLRC ruling. The labor agency did not
declare the respondents as regular seasonal employees, but as regular employees.
This is the only conclusion that can be drawn from the NLRC decisions dispositive
portion, thus:
WHEREFORE, premises considered, the appeal is hereby GRANTED. Complainants
are declared regular employees of respondent.1wphi1 As such, they are entitled to the

monetary benefits granted to regular employees of respondent company based on the

CBA, reckoned three (3) years back from the filing of the above-entitled case on 23
August 2002 up to the present or to their entire service with respondent after the date of
filing of the said complaint if they are no longer connected with respondent company. 43
It is, therefore, clear that the issue brought to the CA for resolution is whether the NLRC
gravely abused its discretion in declaring the respondents regular employees of
URSUMCO and, as such, entitled to the benefits under the CBA for the regular
employees.
Based on the established facts, we find that the CA grossly misread the NLRC ruling
and missed the implications of the respondents regularization. To reiterate, the
respondents are regular seasonal employees, as the CA itself opined when it declared
that "private respondents who are regular workers with respect to their seasonal tasks
or activities and while such activities exist, cannot automatically be governed by the
CBA between petitioner URSUMCO and the authorized bargaining representative of the
regular and permanent employees." 44 Citing jurisprudential standards,45 it then
proceeded to explain that the respondents cannot be lumped with the regular
employees due to the differences in the nature of their duties and the duration of their
work vis-a-vis the operations of the company.
The NLRC was well aware of these distinctions as it acknowledged that the
respondents worked only during the milling season, yet it ignored the distinctions and
declared them regular employees, a marked departure from existing jurisprudence.
This, to us, is grave abuse of discretion, as it gave no reason for disturbing the system
of regular seasonal employment already in place in the sugar industry and other
industries with similar seasonal operations. For upholding the NLRCs flawed decision
on the respondents employment status, the CA committed a reversible error of
judgment.
In sum, we find the complaint to be devoid of merit. The issue of granting affirmative
relief to the complainants who did not appeal the CA ruling has become academic.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. Except for
the denial of the respondents' claim for CBA benefits, the November 29, 2007 decision
and the January 22, 2009 resolution of the Court of Appeals are SET ASIDE. The
complaint is DISMISSED for lack of merit.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION
G.R. No. 195466

July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG
DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari 1 the challenge to the November 22,
2010 decision2 and the January 31, 2011 resolution3 of the Court of Appeals (CA) in CAG.R. SP No. 116003. The CA decision annulled and set aside the May 26, 2010
decision4 of the National Labor Relations Commission (NLRC) 5 which, in turn, affirmed
the April 30, 2009 Decision6 of the Labor Arbiter (LA). The LA's decision dismissed
respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint 7 against petitioner Ariel L.
David, doing business under the name and style "Yiels Hog Dealer," for non-payment of
overtime pay, holiday pay and 13th month pay. He also claimed payment for moral and
exemplary damages and attorneys fees. Macasio also claimed payment for service
incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for David since
January 6, 1995. Macasio claimed that David exercised effective control and
supervision over his work, pointing out that David: (1) set the work day, reporting time
and hogs to be chopped, as well as the manner by which he was to perform his work;
(2) daily paid his salary of P700.00, which was increased from P600.00 in
2007, P500.00 in 2006 and P400.00 in 2005; and (3) approved and disapproved his
leaves. Macasio added that David owned the hogs delivered for chopping, as well as
the work tools and implements; the latter also rented the workplace. Macasio further
claimed that David employs about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that
he only has ten employees. He alleged that he hired Macasio as a butcher or chopper
on "pakyaw" or task basis who is, therefore, not entitled to overtime pay, holiday pay
and 13th month pay pursuant to the provisions of the Implementing Rules and
Regulations (IRR) of the Labor Code. David pointed out that Macasio: (1) usually starts
his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending
on the volume of the delivered hogs; (2) received the fixed amount of P700.00 per
engagement, regardless of the actual number of hours that he spent chopping the

delivered hogs; and (3) was not engaged to report for work and, accordingly, did not
receive any fee when no hogs were delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his
business only in 2005. He pointed to the Certificate of Employment 12 that David issued
in his favor which placed the date of his employment, albeit erroneously, in January
2000. Second, he reported for work every day which the payroll or time record could
have easily proved had David submitted them in evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as
he hired the latter on "pakyaw" or task basis. He also claimed that he issued the
Certificate of Employment, upon Macasios request, only for overseas employment
purposes. He pointed to the "Pinagsamang Sinumpaang Salaysay," 14 executed by
Presbitero Solano and Christopher (Antonio Macasios co-butchers), to corroborate his
claims.
In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit.
The LA gave credence to Davids claim that he engaged Macasio on "pakyaw" or task
basis. The LA noted the following facts to support this finding: (1) Macasio received the
fixed amount of P700.00 for every work done, regardless of the number of hours that he
spent in completing the task and of the volume or number of hogs that he had to chop
per engagement; (2) Macasio usually worked for only four hours, beginning from 10:00
p.m. up to 2:00 a.m. of the following day; and (3) the P700.00 fixed wage far exceeds
the then prevailing daily minimum wage of P382.00. The LA added that the nature of
Davids business as hog dealer supports this "pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not
entitled to overtime, holiday, SIL and 13th month pay.
The NLRCs Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed
that David did not require Macasio to observe an eight hour work schedule to earn the
fixed P700.00 wage; and that Macasio had been performing a non-time work, pointing
out that Macasio was paid a fixed amount for the completion of the assigned task,
irrespective of the time consumed in its performance. Since Macasio was paid by result
and not in terms of the time that he spent in the workplace, Macasio is not covered by
the Labor Standards laws on overtime, SIL and holiday pay, and 13th month pay under
the Rules and Regulations Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11,
2010 resolution,20 prompting Macasio to elevate his case to the CA via a petition for
certiorari.21
The CAs Ruling

In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition
and reversed the NLRCs ruling for having been rendered with grave abuse of
discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis
employee, it nevertheless found Macasio entitled to his monetary claims following the
doctrine laid down in Serrano v. Severino Santos Transit. 23 The CA explained that as a
task basis employee, Macasio is excluded from the coverage of holiday, SIL and 13th
month pay only if he is likewise a "field personnel." As defined by the Labor Code, a
"field personnel" is one who performs the work away from the office or place of work
and whose regular work hours cannot be determined with reasonable certainty. In
Macasios case, the elements that characterize a "field personnel" are evidently lacking
as he had been working as a butcher at Davids "Yiels Hog Dealer" business in Sta.
Mesa, Manila under Davids supervision and control, and for a fixed working schedule
that starts at 10:00 p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for
three years, with 10% attorneys fees on the total monetary award. The CA, however,
denied Macasios claim for moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration 24 in
the CAs January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task
basis. Hence, the latter is excluded from the coverage of holiday, SIL and 13th month
pay. David reiterates his submissions before the lower tribunals 27 and adds that he
never had any control over the manner by which Macasio performed his work and he
simply looked on to the "end-result." He also contends that he never compelled Macasio
to report for work and that under their arrangement, Macasio was at liberty to choose
whether to report for work or not as other butchers could carry out his tasks. He points
out that Solano and Antonio had, in fact, attested to their (David and Macasios)
established "pakyawan" arrangement that rendered a written contract unnecessary. In
as much as Macasio is a task basis employee who is paid the fixed amount
of P700.00 per engagement regardless of the time consumed in the performance
David argues that Macasio is not entitled to the benefits he claims. Also, he posits that
because he engaged Macasio on "pakyaw" or task basis then no employer-employee
relationship exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain
finality especially when, as in this case, they are supported by substantial evidence.
Hence, David posits that the CA erred in reversing the labor tribunals findings and
granting the prayed monetary claims.
The Case for the Respondent

Macasio counters that he was not a task basis employee or a "field personnel" as David
would have this Court believe.28 He reiterates his arguments before the lower tribunals
and adds that, contrary to Davids position, theP700.00 fee that he was paid for each
day that he reported for work does not indicate a "pakyaw" or task basis employment as
this amount was paid daily, regardless of the number or pieces of hogs that he had to
chop. Rather, it indicates a daily-wage method of payment and affirms his regular
employment status. He points out that David did not allege or present any evidence as
regards the quota or number of hogs that he had to chop as basis for the "pakyaw" or
task basis payment; neither did David present the time record or payroll to prove that he
worked for less than eight hours each day. Moreover, David did not present any contract
to prove that his employment was on task basis. As David failed to prove the alleged
task basis or "pakyawan" agreement, Macasio concludes that he was Davids
employee. Procedurally, Macasio points out that Davids submissions in the present
petition raise purely factual issues that are not proper for a petition for review on
certiorari. These issues whether he (Macasio) was paid by result or on "pakyaw"
basis; whether he was a "field personnel"; whether an employer-employee relationship
existed between him and David; and whether David exercised control and supervision
over his work are all factual in nature and are, therefore, proscribed in a Rule 45
petition. He argues that the CAs factual findings bind this Court, absent a showing that
such findings are not supported by the evidence or the CAs judgment was based on a
misapprehension of facts. He adds that the issue of whether an employer-employee
relationship existed between him and David had already been settled by the LA 29 and
the NLRC30 (as well as by the CA per Macasios manifestation before this Court dated
November 15, 2012),31 in his favor, in the separate illegal case that he filed against
David.
The Issue
The issue revolves around the proper application and interpretation of the labor law
provisions on holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or task
basis. In the context of the Rule 65 petition before the CA, the issue is whether the CA
correctly found the NLRC in grave abuse of discretion in ruling that Macasio is entitled
to these labor standards benefits.
The Courts Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CAs decision rendered under a
Rule 65 proceeding, this Courts power of review is limited to resolving matters
pertaining to any perceived legal errors that the CA may have committed in issuing the
assailed decision. This is in contrast with the review for jurisdictional errors, which we
undertake in an original certiorari action. In reviewing the legal correctness of the CA
decision, we examine the CA decision based on how it determined the presence or

absence of grave abuse of discretion in the NLRC decision before it and not on the
basis of whether the NLRC decision on the merits of the case was correct. 32 In other
words, we have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. 33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of
law raised against the assailed CA decision.34
In this petition, David essentially asks the question whether Macasio is entitled to
holiday, SIL and 13th month pay. This one is a question of law. The determination of this
question of law however is intertwined with the largely factual issue of whether Macasio
falls within the rule on entitlement to these claims or within the exception. In either case,
the resolution of this factual issue presupposes another factual matter, that is, the
presence of an employer-employee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he
engaged the latter on "pakyaw" or task basis. Very noticeably, David confuses
engagement on "pakyaw" or task basis with the lack of employment relationship.
Impliedly, David asserts that their "pakyawan" or task basis arrangement negates the
existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task
basis does not characterize the relationship that may exist between the parties, i.e.,
whether one of employment or independent contractorship. Article 97(6) of the Labor
Code defines wages as "xxx the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time,
task, piece, or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be
rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of
workers paid by results or those whose pay is calculated in terms of the quantity or
quality of their work output which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or
task basis negates employer-employee relationship, David would want the Court to
engage on a factual appellate review of the entire case to determine the presence or
existence of that relationship. This approach however is not authorized under a Rule 45
petition for review of the CA decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an
employer-employee but because of its finding that since Macasio is paid on pakyaw or
task basis, then he is not entitled to SIL, holiday and 13th month pay. Second, we
consider it crucial, that in the separate illegal dismissal case Macasio filed with the LA,
the LA, the NLRC and the CA uniformly found the existence of an employer-employee
relationship.37

In other words, aside from being factual in nature, the existence of an employeremployee relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule
45 petition for review of a labor decision rendered by the CA under 65, the narrow scope
of inquiry is whether the CA correctly determined the presence or absence of grave
abuse of discretion on the part of the NLRC. In concrete question form, "did the NLRC
gravely abuse its discretion in denying Macasios claims simply because he is paid on a
non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employeremployee relationship exists baseless. Employing the control test, 38 we find that such a
relationship exist in the present case.
Even a factual review shows that Macasio is Davids employee
To determine the existence of an employer-employee relationship, four elements
generally need to be considered, namely: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct. These elements or indicators comprise the so-called
"four-fold" test of employment relationship. Macasios relationship with David satisfies
this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection
and engagement of the employee." David categorically confirmed this fact when, in his
"Sinumpaang Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na
chopper[.]"39 Also, Solano and Antonio stated in their "Pinagsamang Sinumpaang
Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David
bilang butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at
kasama namin siya sa aming trabaho."
Second, David paid Macasios wages.Both David and Macasio categorically stated in
their respective pleadings before the lower tribunals and even before this Court that the
former had been paying the latter P700.00 each day after the latter had finished the
days task. Solano and Antonio also confirmed this fact of wage payment in their
"Pinagsamang Sinumpaang Salaysay."41 This satisfies the element of "payment of
wages."
Third, David had been setting the day and time when Macasio should report for work.
This power to determine the work schedule obviously implies power of control. By
having the power to control Macasios work schedule, David could regulate Macasios
work and could even refuse to give him any assignment, thereby effectively dismissing
him.
And fourth, David had the right and power to control and supervise Macasios work as to
the means and methods of performing it. In addition to setting the day and time when
Macasio should report for work, the established facts show that David rents the place
where Macasio had been performing his tasks. Moreover, Macasio would leave the

workplace only after he had finished chopping all of the hog meats given to him for the
days task. Also, David would still engage Macasios services and have him report for
work even during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally
be expected to observe certain rules and requirements and David would necessarily
exercise some degree of control as the chopping of the hog meats would be subject to
his specifications. Also, since Macasio performed his tasks at Davids workplace, David
could easily exercise control and supervision over the former. Accordingly, whether or
not David actually exercised this right or power to control is beside the point as the law
simply requires the existence of this power to control 4243 or, as in this case, the
existence of the right and opportunity to control and supervise Macasio. 44
In sum, the totality of the surrounding circumstances of the present case sufficiently
points to an employer-employee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals the LA, the NLRC and the CA found that
Macasio was engaged or paid on "pakyaw" or task basis. This factual finding binds the
Court under the rule that factual findings of labor tribunals when supported by the
established facts and in accord with the laws, especially when affirmed by the CA, is
binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to
straight-hour wage payment, is the non-consideration of the time spent in working. In a
task-basis work, the emphasis is on the task itself, in the sense that payment is
reckoned in terms of completion of the work, not in terms of the number of time spent in
the completion of work.45 Once the work or task is completed, the worker receives a
fixed amount as wage, without regard to the standard measurements of time generally
used in pay computation.
In Macasios case, the established facts show that he would usually start his work at
10:00 p.m. Thereafter, regardless of the total hours that he spent at the workplace or of
the total number of the hogs assigned to him for chopping, Macasio would receive the
fixed amount of P700.00 once he had completed his task. Clearly, these circumstances
show a "pakyaw" or task basis engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by
applying the "four-fold" test; engagement on "pakyaw" or task basis does not determine
the parties relationship as it is simply a method of pay computation. Accordingly,
Macasio is Davids employee, albeit engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of
whether Macasio is entitled to holiday, 13th month, and SIL pay.

On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation
to Section 1, Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as
well as Presidential Decree (PD) No. 851. The NLRC, on the other hand, relied on
Article 82 of the Labor Code and the Rules and Regulations Implementing PD No. 851.
Uniformly, these provisions exempt workers paid on "pakyaw" or task basis from the
coverage of holiday, SIL and 13th month pay.
In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as
well as on Section 1, Rule V of the IRR of the Labor Code and the Courts ruling in
Serrano v. Severino Santos Transit.46 These labor law provisions, when read together
with the Serrano ruling, exempt those engaged on "pakyaw" or task basis only if they
qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to
conclude that the worker is exempted or covered depends on the facts and in this
sense, is a question of fact: first, whether Macasio is a "field personnel"; and second,
whether those engaged on "pakyaw" or task basis, but who are not "field personnel,"
are exempted from the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA
decision rendered under Rule 65 and framed in question form, the legal question is
whether the CA correctly ruled that it was grave abuse of discretion on the part of the
NLRC to deny Macasios monetary claims simply because he is paid on a non-time
basis without determining whether he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book
III of the Labor Code - provisions governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their
duties away from the principal place of business or branch office of the employer and

whose actual hours of work in the field cannot be determined with reasonable certainty.
[emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the
Labor Code) and SIL pay (under Article 95 of the Labor Code). Under Article 82,"field
personnel" on one hand and "workers who are paid by results" on the other hand, are
not covered by the Title I provisions. The wordings of Article82 of the Labor Code
additionally categorize workers "paid by results" and "field personnel" as separate and
distinct types of employees who are exempted from the Title I provisions of the Labor
Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in
the IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly employing
less than (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised
by the employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one
year of service shall be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days and those
employed in establishments regularly employing less than ten employees or in
establishments exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of such establishment.
[emphases ours]
xxxx
Section 1. Coverage. This rule shall apply to all employees except:

xxxx
(e) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all
employees. To be excluded from their coverage, an employee must be one of those that
these provisions expressly exempt, strictly in accordance with the exemption. Under the
IRR, exemption from the coverage of holiday and SIL pay refer to "field personnel and
other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis[.]" Note that unlike Article 82
of the Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged
on task basis" as a separate and distinct category from employees classified as "field
personnel." Rather, these employees are altogether merged into one classification of
exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to
mean that those who are engaged on task basis, per se, are excluded from the SIL and
holiday payment since this is what the Labor Code provisions, in contrast with the IRR,
strongly suggest. The arguable interpretation of this rule may be conceded to be within
the discretion granted to the LA and NLRC as the quasi-judicial bodies with expertise on
labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople 49 the
phrase "those who are engaged on task or contract basis" in the rule has already been
interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the rule on
ejusdem generis that general and unlimited terms are restrained and limited by the
particular terms that they follow xxx Clearly, petitioner's teaching personnel cannot be
deemed field personnel which refers "to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's
claim that private respondents are not entitled to the service incentive leave benefit
cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to
exclude one from the coverage of SIL and holiday pay. They are exempted from the
coverage of Title I (including the holiday and SIL pay) only if they qualify as "field
personnel." The IRR therefore validly qualifies and limits the general exclusion of
"workers paid by results" found in Article 82 from the coverage of holiday and SIL pay.
This is the only reasonable interpretation since the determination of excluded workers

who are paid by results from the coverage of Title I is "determined by the Secretary of
Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport
Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations
of the Labor Code to apply only to those employees not explicitly excluded by Section 1
of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply
to employees classified as "field personnel." The phrase "other employees whose
performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted.
Rather, it serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those "whose actual hours of work in the field
cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract
basis, purely commission basis." Said phrase should be related with "field personnel,"
applying the rule on ejusdem generis that general and unlimited terms are restrained
and limited by the particular terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited
in support of granting Macasios petition.
In Serrano, the Court, applying the rule on ejusdem generis 50 declared that "employees
engaged on task or contract basis xxx are not automatically exempted from the grant of
service incentive leave, unless, they fall under the classification of field
personnel."51 The Court explained that the phrase "including those who are engaged on
task or contract basis, purely commission basis" found in Section 1(d), Rule V of Book
III of the IRR should not be understood as a separate classification of employees to
which SIL shall not be granted. Rather, as with its preceding phrase - "other employees
whose performance is unsupervised by the employer" - the phrase "including those who
are engaged on task or contract basis" serves to amplify the interpretation of the Labor
Code definition of "field personnel" as those "whose actual hours of work in the field
cannot be determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still
interpreted the Labor Code provisions and the IRR as exempting an employee from the
coverage of Title I of the Labor Code based simply and solely on the mode of payment
of an employee. The NLRCs utter disregard of this consistent jurisprudential ruling is a
clear act of grave abuse of discretion.52 In other words, by dismissing Macasios
complaint without considering whether Macasio was a "field personnel" or not, the
NLRC proceeded based on a significantly incomplete consideration of the case. This
action clearly smacks of grave abuse of discretion.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC
had only taken counsel from Serrano and earlier cases, they would have correctly
reached a similar conclusion regarding the payment of holiday pay since the rule
exempting "field personnel" from the grant of holiday pay is identically worded with the
rule exempting "field personnel" from the grant of SIL pay. To be clear, the phrase
"employees engaged on task or contract basis "found in the IRR on both SIL pay and
holiday pay should be read together with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled
to holiday and SIL pay, the presence (or absence) of employer supervision as regards
the workers time and performance is the key: if the worker is simply engaged on
pakyaw or task basis, then the general rule is that he is entitled to a holiday pay and SIL
pay unless exempted from the exceptions specifically provided under Article 94 (holiday
pay) and Article95 (SIL pay) of the Labor Code. However, if the worker engaged on
pakyaw or task basis also falls within the meaning of "field personnel" under the law,
then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that
Macasio does not fall under the definition of "field personnel." The CAs finding in this
regard is supported by the established facts of this case: first, Macasio regularly
performed his duties at Davids principal place of business; second, his actual hours of
work could be determined with reasonable certainty; and, third, David supervised his
time and performance of duties. Since Macasio cannot be considered a "field
personnel," then he is not exempted from the grant of holiday, SIL pay even as he was
engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the
NLRCs ruling dismissing Macasios complaint for holiday and SIL pay for having been
rendered with grave abuse of discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally
erred in finding that the NLRC gravely abused its discretion in denying this benefit to
Macasio.1wphi1
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an
employee must be one of those expressly enumerated to be exempted. Section 3 of the
Rules and Regulations Implementing P.D. No. 851 54enumerates the exemptions from
the coverage of 13th month pay benefits. Under Section 3(e), "employers of those who

are paid on xxx task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance thereof" 55 are
exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the
Rules and Regulations Implementing PD No. 851 exempts employees "paid on task
basis" without any reference to "field personnel." This could only mean that insofar as
payment of the 13th month pay is concerned, the law did not intend to qualify the
exemption from its coverage with the requirement that the task worker be a "field
personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the
petition insofar as the payment of 13th month pay to respondent is concerned. In all
other aspects, we AFFIRM the decision dated November 22, 2010 and the resolution
dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No. 116003.
SO ORDERED.
ARTURO D. BRION
Associate Justice