Labor Cases 10-20

G.R. No.
172101 November 23, 2007
REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION and SOCIAL SECURITY SYSTEM,
Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure
seeking to annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236, dated 5
January 2006 and 20 March 2006, respectively, which annulled and set aside the Orders of the Social Security
Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February 20043 and 16 September 2004,4 respectively, thereby
dismissing the petition-complaint dated 12 June 2003 filed by herein petitioner Social Security System (SSS) against
herein respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to resolve
disputes arising under Republic Act No. 1161, as amended by Republic Act No. 8282.5 Petitioner SSS is a government
corporation created by virtue of Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro
Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No. 69386 and duly registered
with the Cooperative Development Authority (CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460.7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are of two
categories, to wit: (1) regular member, who is entitled to all the rights and privileges of membership; and (2) associate
member, who has no right to vote and be voted upon and shall be entitled only to such rights and privileges provided in
its by-laws.8 Its primary objectives are to provide savings and credit facilities and to develop other livelihood services for
its owners-members. In the discharge of the aforesaid primary objectives, respondent cooperative entered into several
Service Contracts9 with Stanfilco - a division of DOLE Philippines, Inc. and a company based in Bukidnon. The owners-
members do not receive compensation or wages from the respondent cooperative. Instead, they receive a share in the
service surplus10 which the respondent cooperative earns from different areas of trade it engages in, such as the income
derived from the said Service Contracts with Stanfilco. The owners-members get their income from the service surplus
generated by the quality and amount of services they rendered, which is determined by the Board of Directors of the
respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent
cooperative, who were assigned to Stanfilco requested the services of the latter to register them with petitioner SSS as
self-employed and to remit their contributions as such. Also, to comply with Section 19-A of Republic Act No. 1161, as
amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal to the share of both
the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A. Jara,
sent a letter11 to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General Manager Leo G.
Parma, informing the latter that based on the Service Contracts it executed with Stanfilco, respondent cooperative is
actually a manpower contractor supplying employees to Stanfilco and for that reason, it is an employer of its owners-
members working with Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an employer
and make the corresponding report and remittance of premium contributions in accordance with the Social Security Law
of 1997. On 9 October 2002,12 respondent cooperative, through its counsel, sent a reply to petitioner SSS’s letter
asserting that it is not an employer because its owners-members are the cooperative itself; hence, it cannot be its own
employer. Again, on 21 October 2002,13 petitioner SSS sent a letter to respondent cooperative ordering the latter to
register as an employer and report its owners-members as employees for compulsory coverage with the petitioner SSS.
Respondent cooperative continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC against the respondent cooperative
and Stanfilco praying that the respondent cooperative or, in the alternative, Stanfilco be directed to register as an
employer and to report respondent cooperative’s owners-members as covered employees under the compulsory
coverage of SSS and to remit the necessary contributions in accordance with the Social Security Law of 1997. The same
was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging that
no employer-employee relationship exists between it and its owners-members, thus, petitioner SSC has no jurisdiction
over the respondent cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim against the respondent
cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent cooperative.
The respondent cooperative moved for the reconsideration of the said Order, but it was likewise denied in another
Order issued by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a Petition for
Review before the Court of Appeals. Subsequently, respondent cooperative filed a Manifestation stating that it was no
longer filing a Petition for Review. In its place, respondent cooperative filed a Petition for Certiorari before the Court of
Appeals, docketed as CA-G.R. SP No. 87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were issued with grave abuse of
discretion amounting to a (sic) lack or excess of jurisdiction in that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the petition a quo, considering
that it failed to first resolve the issue of the existence of an employer-employee relationship between
[respondent] cooperative and its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS Law with respect to
coverage, benefits, contributions, and related matters, it is respectfully submitted that [petitioner] SSC may only
assume jurisdiction in cases where there is no dispute as to the existence of an employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee relationship raised in
[respondent’s] Motion to Dismiss can be preliminarily resolved through summary hearings prior to the hearing
on the merits. However, any inquiry beyond a preliminary determination, as what [petitioner SSC] wants to
accomplish, would be to encroach on the jurisdiction of the National Labor Relations Commission [NLRC], which
is the more competent body clothed with power to resolve issues relating to the existence of an employment
relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo.
A. [Respondent] is not an employer within the contemplation of the Labor Law but is a multi-purpose
cooperative created pursuant to Republic Act No. 6938 and composed of owners-members, not employees.
B. The rights and obligations of the owners-members of [respondent] cooperative are derived from their
Membership Agreements, the Cooperatives By-Laws, and Republic Act No. 6938, and not from any contract of
employment or from the Labor Laws. Moreover, said owners-members enjoy rights that are not consistent with
being mere employees of a company, such as the right to participate and vote in decision-making for the
cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent] cooperative are not
paid any compensation income.15 (Emphasis supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent cooperative.
The decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16 September 2004], are
ANNULLED and SET ASIDE and a new one is entered DISMISSING the petition-complaint dated [12 June 2003] of [herein
petitioner] Social Security System.16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the appellate
court in its Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that the SSC
has jurisdiction over the subject matter and it has a valid basis in denying respondent’s Motion to Dismiss. The said issue
is supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner SSS] under
R.A. No. 8282.
II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC after invoking its
jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent [cooperative’s]
[M]otion to [D]ismiss.
IV. The existence of an employer-employee relationship is a question of fact where presentation of evidence is
necessary.
V. There is an employer-employee relationship between [respondent cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved an
issue of whether or not a worker is entitled to compulsory coverage under the SSS Law. Petitioners avow that Section 5
of Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to
settle disputes on compulsory coverage, benefits, contributions and penalties thereon or any other matter related
thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is compulsory upon all employees. Thus,
when petitioner SSS filed a petition-complaint against the respondent cooperative and Stanfilco before the petitioner
SSC for the compulsory coverage of respondent cooperative’s owners-members as well as for collection of unpaid SSS
contributions, it was very obvious that the subject matter of the aforesaid petition-complaint was within the expertise
and jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an employer-
employee relationship between the respondent cooperative and its owners-members, said issue does not preclude
petitioner SSC from taking cognizance of the aforesaid petition-complaint. Considering that the principal relief sought in
the said petition-complaint has to be resolved by reference to the Social Security Law and not to the Labor Code or other
labor relations statutes, therefore, jurisdiction over the same solely belongs to petitioner SSC.
Petitioners further claim that the denial of the respondent cooperative’s Motion to Dismiss grounded on the alleged lack
of employer-employee relationship does not constitute grave abuse of discretion on the part of petitioner SSC because
the latter has the authority and power to deny the same. Moreover, the existence of an employer-employee
relationship is a question of fact where presentation of evidence is necessary. Petitioners also maintain that the
respondent cooperative is already estopped from assailing the jurisdiction of the petitioner SSC because it has already
filed its Answer before it, thus, respondent cooperative has already submitted itself to the jurisdiction of the petitioner
SSC.
Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative and
its owners-members. The respondent cooperative is the employer of its owners-members considering that it undertook
to provide services to Stanfilco, the performance of which is under the full and sole control of the respondent
cooperative.
On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no employer-
employee relationship can arise between them. The persons of the employer and the employee are merged in the
owners-members themselves. Likewise, respondent cooperative’s owners-members even requested the respondent
cooperative to register them with the petitioner SSS as self-employed individuals. Hence, petitioner SSC has no
jurisdiction over the petition-complaint filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with grave
abuse of discretion when it assumed jurisdiction over the petition-complaint without determining first if there was an
employer-employee relationship between the respondent cooperative and its owners-members. Respondent
cooperative claims that the question of whether an employer-employee relationship exists between it and its owners-
members is a legal and not a factual issue as the facts are undisputed and need only to be interpreted by the applicable
law and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of petitioner
SSC simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction is raised at the
very first instance and where the only relief being sought is the dismissal of the petition-complaint for lack of
jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against
the respondent cooperative.
II. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner SSC since it had
already filed an Answer with Motion to Dismiss before the said body.
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III of the
1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to coverage, benefits, contributions
and penalties thereon or any other matter related thereto, shall be cognizable by the Commission, x x x. (Emphasis
supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to coverage, entitlement of
benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall be
cognizable by the Commission after the SSS through its President, Manager or Officer-in-charge of the
Department/Branch/Representative Office concerned had first taken action thereon in writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within
the exclusive domain of the petitioner SSC. It is important to note, though, that the mandatory coverage under the SSS
Law is premised on the existence of an employer-employee relationship17 except in cases of compulsory coverage of the
self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to Dismiss,
determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend almost
entirely upon the defendant.18 Moreover, it is well-settled that once jurisdiction is acquired by the court, it remains with
it until the full termination of the case.19 The said principle may be applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent
cooperative and Stanfilco alleges that the owners-members of the respondent cooperative are subject to the
compulsory coverage of the SSS because they are employees of the respondent cooperative. Consequently, the
respondent cooperative being the employer of its owners-members must register as employer and report its owners-
members as covered members of the SSS and remit the necessary premium contributions in accordance with the Social
Security Law of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before the
petitioner SSC, the case clearly falls within its jurisdiction. Although the Answer with Motion to Dismiss filed by the
respondent cooperative challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-employee
relationship between itself and its owners-members, the same is not enough to deprive the petitioner SSC of its
jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC cannot be faulted for initially assuming
jurisdiction over the petition-complaint of the petitioner SSS.
Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its
owners-members was put in issue and considering that the compulsory coverage of the SSS Law is predicated on the
existence of such relationship, it behooves the petitioner SSC to determine if there is really an employer-employee
relationship that exists between the respondent cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the
National Labor Relations Commission (NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the Labor
Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising
from employer-employee relations, including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied with a claim for reinstatement.20
Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on the
coverage thereof, because claims are undeniably rooted in the coverage by the system. Hence, the question on the
existence of an employer-employee relationship for the purpose of determining the coverage of the Social Security
System is explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC which is
primarily charged with the duty of settling disputes arising under the Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory
coverage of the owners-members of the respondent cooperative, this Court agrees with the petitioner SSC when it
declared in its Order dated 17 February 2004 that as an incident to the issue of compulsory coverage, it may inquire into
the presence or absence of an employer-employee relationship without need of waiting for a prior pronouncement or
submitting the issue to the NLRC for prior determination. Since both the petitioner SSC and the NLRC are independent
bodies and their jurisdiction are well-defined by the separate statutes creating them, petitioner SSC has the authority to
inquire into the relationship existing between the worker and the person or entity to whom he renders service to
determine if the employment, indeed, is one that is excepted by the Social Security Law of 1997 from compulsory
coverage.21
Even before the petitioner SSC could make a determination of the existence of an employer-employee relationship,
however, the respondent cooperative already elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to
the Court of Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner SSC became a party to
the said Petition for Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282. The appellate court ruled in favor of
the respondent cooperative by declaring that the petitioner SSC has no jurisdiction over the petition-complaint filed
before it because there was no employer-employee relationship between the respondent cooperative and its owners-
members. Resultantly, the petitioners SSS and SSC, representing the Republic of the Philippines, filed a Petition for
Review before this Court.
Although as a rule, in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and the
findings of fact of the Court of Appeals are conclusive and binding on the Court,23 said rule is not without exceptions.
There are several recognized exceptions24 in which factual issues may be resolved by this Court. One of these exceptions
finds application in this present case which is, when the findings of fact are conflicting. There are, indeed, conflicting
findings espoused by the petitioner SSC and the appellate court relative to the existence of employer-employee
relationship between the respondent cooperative and its owners-members, which necessitates a departure from the
oft-repeated rule that factual issues may not be the subject of appeals to this Court.
In determining the existence of an employer-employee relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and
(4) the power to control the worker’s conduct, with the latter assuming primacy in the overall consideration.25 The most
important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done,
but also as to the means and methods to accomplish.26 The power of control refers to the existence of the power and
not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance
of duties of the employee; it is enough that the employer has the right to wield that power.27 All the aforesaid elements
are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive
discretion in the selection and engagement of the owners-members as well as its team leaders who will be assigned at
Stanfilco.28 Second. Wages are defined as "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 service rendered or to be rendered."29 In this case, the weekly stipends or the so-called
shares in the service surplus given by the respondent cooperative to its owners-members were in reality wages, as the
same were equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations,
including the wage order applicable to the area and industry; or the same shall not be lower than the prevailing rates of
wages.30 It cannot be doubted then that those stipends or shares in the service surplus are indeed wages, because these
are given to the owners-members as compensation in rendering services to respondent cooperative’s client, Stanfilco.
Third. It is also stated in the above-mentioned Service Contracts that it is the respondent cooperative which has the
power to investigate, discipline and remove the owners-members and its team leaders who were rendering services at
Stanfilco.31 Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is
the most important. In the case at bar, it is the respondent cooperative which has the sole control over the manner and
means of performing the services under the Service Contracts with Stanfilco as well as the means and methods of
work.32 Also, the respondent cooperative is solely and entirely responsible for its owners-members, team leaders and
other representatives at Stanfilco.33 All these clearly prove that, indeed, there is an employer-employee relationship
between the respondent cooperative and its owners-members.
It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide that
there shall be no employer-employee relationship between the respondent cooperative and its owners-members.34 This
Court, however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent
cooperative and its owners-members. The four elements in the four-fold test for the existence of an employment
relationship have been complied with. The respondent cooperative must not be allowed to deny its employment
relationship with its owners-members by invoking the questionable Service Contracts provision, when in actuality, it
does exist. The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a
contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is defined
and prescribed by law and not by what the parties say it should be.35
It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and
their agreement would have the force of law between them. However, the agreed terms and conditions must not be
contrary to law, morals, customs, public policy or public order.36 The Service Contract provision in question must be
struck down for being contrary to law and public policy since it is apparently being used by the respondent cooperative
merely to circumvent the compulsory coverage of its employees, who are also its owners-members, by the Social
Security Law.
This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-
Calleja37 wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons,
partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the
others are its employees x x x.
An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to
collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of August 14,
1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves members of the
cooperative have no right to form or join labor organizations for purposes of collective bargaining for being themselves
co-owners of the cooperative.1awp++i1
However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly
such employees are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations and
others as are enshrined in the Constitution and existing laws of the country.
The situation in the aforesaid case is very much different from the present case. The declaration made by the Court in
the aforesaid case was made in the context of whether an employee who is also an owner-member of a cooperative can
exercise the right to bargain collectively with the employer who is the cooperative wherein he is an owner-member.
Obviously, an owner-member cannot bargain collectively with the cooperative of which he is also the owner because an
owner cannot bargain with himself. In the instant case, there is no issue regarding an owner-member’s right to bargain
collectively with the cooperative. The question involved here is whether an employer-employee relationship can exist
between the cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will
show that it actually recognized that an owner-member of a cooperative can be its own employee.
It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative
Development Authority.38 It has its Board of Directors, which directs and supervises its business; meaning, its Board of
Directors is the one in charge in the conduct and management of its affairs.39 With that, a cooperative can be likened to
a corporation with a personality separate and distinct from its owners-members. Consequently, an owner-member of a
cooperative can be an employee of the latter and an employer-employee relationship can exist between them.
In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative
Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460.40 In its by-laws,41 its Board of
Directors directs, controls, and supervises the business and manages the property of the respondent cooperative.
Clearly then, the management of the affairs of the respondent cooperative is vested in its Board of Directors and not in
its owners-members as a whole. Therefore, it is completely logical that the respondent cooperative, as a juridical person
represented by its Board of Directors, can enter into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship between the respondent cooperative and its
owners-member, we conclude that the petitioner SSC has jurisdiction over the petition-complaint filed before it by the
petitioner SSS. This being our conclusion, it is no longer necessary to discuss the issue of whether the respondent
cooperative was estopped from assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion to
Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of the
Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED
and SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004 and 16 September 2004 are hereby
REINSTATED. The petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint filed before it by the
petitioner SSS as regards the compulsory coverage of the respondent cooperative and its owners-members. No costs.
SO ORDERED
G.R. No. 157214 June 7, 2005
PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner,

vs.
RICARDO DE VERA, respondent.
DECISION
GARCIA, J.:
Before us is this appeal by way of a petition for review on certiorari from the 12 September 2002 Decision1 and the 13
February 2003 Resolution2 of the Court of Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by
the National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the business of communication
services and allied activities, while respondent Ricardo De Vera is a physician by profession whom petitioner enlisted to
attend to the medical needs of its employees. At the crux of the controversy is Dr. De Vera’s status vis a vis petitioner
when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981,3 offered his services to the petitioner, therein
proposing his plan of works required of a practitioner in industrial medicine, to include the following:
1. Application of preventive medicine including periodic check-up of employees;
2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services
to employees;
3. Management and treatment of employees that may necessitate hospitalization including emergency cases
and accidents;
4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as accomplishing medical forms, evaluating conditions
of employees applying for sick leave of absence and subsequently issuing proper certification, and all matters
referred which are medical in nature.
The parties agreed and formalized respondent’s proposal in a document denominated as RETAINERSHIP CONTRACT4
which will be for a period of one year subject to renewal, it being made clear therein that respondent will cover "the
retainership the Company previously had with Dr. K. Eulau" and that respondent’s "retainer fee" will be at P4,000.00 a
month. Said contract was renewed yearly.5 The retainership arrangement went on from 1981 to 1994 with changes in
the retainer’s fee. However, for the years 1995 and 1996, renewal of the contract was only made verbally.
The turning point in the parties’ relationship surfaced in December 1996 when Philcom, thru a letter 6 bearing on the
subject boldly written as "TERMINATION – RETAINERSHIP CONTRACT", informed De Vera of its decision to discontinue
the latter’s "retainer’s contract with the Company effective at the close of business hours of December 31, 1996"
because management has decided that it would be more practical to provide medical services to its employees through
accredited hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor Relations Commission
(NLRC), alleging that that he had been actually employed by Philcom as its company physician since 1981 and was
dismissed without due process. He averred that he was designated as a "company physician on retainer basis" for
reasons allegedly known only to Philcom. He likewise professed that since he was not conversant with labor laws, he did
not give much attention to the designation as anyway he worked on a full-time basis and was paid a basic monthly salary
plus fringe benefits, like any other regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a decision7 dismissing De Vera’s complaint
for lack of merit, on the rationale that as a "retained physician" under a valid contract mutually agreed upon by the
parties, De Vera was an "independent contractor" and that he "was not dismissed but rather his contract with
[PHILCOM] ended when said contract was not renewed after December 31, 1996".
On De Vera’s appeal to the NLRC, the latter, in a decision8 dated 23 October 2000, reversed (the word used is
"modified") that of the Labor Arbiter, on a finding that De Vera is Philcom’s "regular employee" and accordingly directed
the company to reinstate him to his former position without loss of seniority rights and privileges and with full
backwages from the date of his dismissal until actual reinstatement. We quote the dispositive portion of the decision:
WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate complainant to his former
position without loss of seniority rights and privileges with full backwages from the date of his dismissal until his actual
reinstatement computed as follows:
Backwages:
a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00 x 39.33 mos. P1,750,185.00
13th Month Pay:

b) 145,848.75
1/12 of P1,750,185.00
Travelling allowance:
c) 39,330.00
P1,000.00 x 39.33 mos.
GRAND TOTAL P1,935,363.75
The decision stands in other aspects.
SO ORDERED.
With its motion for reconsideration having been denied by the NLRC in its order of 27 February 2001, 9 Philcom then
went to the Court of Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC when it reversed the findings of
the labor arbiter and awarded thirteenth month pay and traveling allowance to De Vera even as such award had no
basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a decision,10 modifying that of the NLRC by deleting the award of
traveling allowance, and ordering payment of separation pay to De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23 October 2000, is MODIFIED.
The award of traveling allowance is deleted as the same is hereby DELETED. Instead of reinstatement, private
respondent shall be paid separation pay computed at one (1) month salary for every year of service computed from the
time private respondent commenced his employment in 1981 up to the actual payment of the backwages and
separation pay. The awards of backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the appellate court in its resolution of 13 February
2003.11
Hence, Philcom’s present recourse on its main submission that -
THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION AND
RENDERING THE QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND
APPLICABLE LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING AGREEMENTS FROM THE
EMPLOYER-EMPLOYEE RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in decisions rendered by the
Court of Appeals. There are instances, however, where the Court departs from this rule and reviews findings of fact so
that substantial justice may be served. The exceptional instances are where:
"xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference
made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of
facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went beyond the issues of the case and its findings
are contrary to the admissions of both appellant and appellees; (7) the findings of fact of the Court of Appeals are
contrary to those of the trial court; (8) said findings of facts are conclusions without citation of specific evidence on
which they are based; (9) the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not
disputed by the respondents; and (10) the findings of fact of the Court of Appeals are premised on the supposed
absence of evidence and contradicted by the evidence on record."12
As we see it, the parties’ respective submissions revolve on the primordial issue of whether an employer-employee
relationship exists between petitioner and respondent, the existence of which is, in itself, a question of fact 13 well within
the province of the NLRC. Nonetheless, given the reality that the NLRC’s findings are at odds with those of the labor
arbiter, the Court, consistent with its ruling in Jimenez vs. National Labor Relations Commission,14 is constrained to look
deeper into the attendant circumstances obtaining in this case, as appearing on record.
In a long line of decisions,15 the Court, in determining the existence of an employer-employee relationship, 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 employee’s conduct, or the so-called "control test", considered
to be the most important element.
Applying the four-fold test to this case, we initially find that it was respondent himself who sets the parameters of what
his duties would be in offering his services to petitioner. This is borne by no less than his 15 May 1981 letter16 which, in
full, reads:
"May 15, 1981
Mrs. Adela L. Vicente

Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician with your corporation if you deemed it necessary. I
have the necessary qualifications, training and experience required by such position and I am confident that I can serve
the best interests of your employees, medically.
My plan of works and targets shall cover the duties and responsibilities required of a practitioner in industrial medicine
which includes the following:
1. Application of preventive medicine including periodic check-up of employees;
2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation
services to employees;
3. Management and treatment of employees that may necessitate hospitalization including emergency
cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as accomplishing medical forms, evaluating
conditions of employees applying for sick leave of absence and subsequently issuing proper certification,
and all matters referred which are medical in nature.
On the subject of compensation for the services that I propose to render to the corporation, you may state an offer
based on your belief that I can very well qualify for the job having worked with your organization for sometime now.
I shall be very grateful for whatever kind attention you may extend on this matter and hoping that it will merit
acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D."
Significantly, the foregoing letter was substantially the basis of the labor arbiter’s finding that there existed no
employer-employee relationship between petitioner and respondent, in addition to the following factual settings:
The fact that the complainant was not considered an employee was recognized by the complainant himself in a signed
letter to the respondent dated April 21, 1982 attached as Annex G to the respondent’s Reply and Rejoinder. Quoting the
pertinent portion of said letter:
‘To carry out your memo effectively and to provide a systematic and workable time schedule which will serve the best
interests of both the present and absent employee, may I propose an extended two-hour service (1:00-3:00 P.M.) during
which period I can devote ample time to both groups depending upon the urgency of the situation. I shall readjust my
private schedule to be available for the herein proposed extended hours, should you consider this proposal.
As regards compensation for the additional time and services that I shall render to the employees, it is dependent on
your evaluation of the merit of my proposal and your confidence on my ability to carry out efficiently said proposal.’
The tenor of this letter indicates that the complainant was proposing to extend his time with the respondent and
seeking additional compensation for said extension. This shows that the respondent PHILCOM did not have control over
the schedule of the complainant as it [is] the complainant who is proposing his own schedule and asking to be paid for
the same. This is proof that the complainant understood that his relationship with the respondent PHILCOM was a
retained physician and not as an employee. If he were an employee he could not negotiate as to his hours of work.
The complainant is a Doctor of Medicine, and presumably, a well-educated person. Yet, the complainant, in his position
paper, is claiming that he is not conversant with the law and did not give much attention to his job title- on a ‘retainer
basis’. But the same complainant admits in his affidavit that his service for the respondent was covered by a retainership
contract [which] was renewed every year from 1982 to 1994. Upon reading the contract dated September 6, 1982,
signed by the complainant himself (Annex ‘C’ of Respondent’s Position Paper), it clearly states that is a retainership
contract. The retainer fee is indicated thereon and the duration of the contract for one year is also clearly indicated in
paragraph 5 of the Retainership Contract. The complainant cannot claim that he was unaware that the ‘contract’ was
good only for one year, as he signed the same without any objections. The complainant also accepted its renewal every
year thereafter until 1994. As a literate person and educated person, the complainant cannot claim that he does not
know what contract he signed and that it was renewed on a year to year basis.17
The labor arbiter added the indicia, not disputed by respondent, that from the time he started to work with petitioner,
he never was included in its payroll; was never deducted any contribution for remittance to the Social Security System
(SSS); and was in fact subjected by petitioner to the ten (10%) percent withholding tax for his professional fee, in
accordance with the National Internal Revenue Code, matters which are simply inconsistent with an employer-employee
relationship. In the precise words of the labor arbiter:
"xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have noticed that no SSS
deductions were made on his remuneration or that the respondent was deducting the 10% tax for his fees and he surely
would have complained about them if he had considered himself an employee of PHILCOM. But he never raised those
issues. An ordinary employee would consider the SSS payments important and thus make sure they would be paid. The
complainant never bothered to ask the respondent to remit his SSS contributions. This clearly shows that the
complainant never considered himself an employee of PHILCOM and thus, respondent need not remit anything to the
SSS in favor of the complainant."18
Clearly, the elements of an employer-employee relationship are wanting in this case. We may add that the records are
replete with evidence showing that respondent had to bill petitioner for his monthly professional fees. 19 It simply runs
against the grain of common experience to imagine that an ordinary employee has yet to bill his employer to receive his
salary.
We note, too, that the power to terminate the parties’ relationship was mutually vested on both. Either may terminate
the arrangement at will, with or without cause.20
Finally, remarkably absent from the parties’ arrangement is the element of control, whereby the employer has reserved
the right to control the employee not only as to the result of the work done but also as to the means and methods by
which the same is to be accomplished.21
Here, petitioner had no control over the means and methods by which respondent went about performing his work at
the company premises. He could even embark in the private practice of his profession, not to mention the fact that
respondent’s work hours and the additional compensation therefor were negotiated upon by the parties.22 In fine, the
parties themselves practically agreed on every terms and conditions of respondent’s engagement, which thereby
negates the element of control in their relationship. For sure, respondent has never cited even a single instance when
petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of Appeals ruled that
respondent is petitioner’s regular employee at the time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondent’s written ‘retainer contract’ was renewed annually from 1981 to
1994 and the alleged ‘renewal’ for 1995 and 1996, when it was allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
‘The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the
parties, an employment shall be deemed to be regular where the employee has been engaged to perform in the usual
business or trade of the employer, except where the employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of the engagement of the employee or where
the work or services to be performed is seasonal in nature and the employment is for the duration of the season.’
‘An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one (1) year of service, whether such is continuous or broken, shall be considered
a regular with respect to the activity in which he is employed and his employment shall continue while such activity
exists.’
Parenthetically, the position of company physician, in the case of petitioner, is usually necessary and desirable because
the need for medical attention of employees cannot be foreseen, hence, it is necessary to have a physician at hand. In
fact, the importance and desirability of a physician in a company premises is recognized by Art. 157 of the Labor Code,
which requires the presence of a physician depending on the number of employees and in the case at bench, in
petitioner’s case, as found by public respondent, petitioner employs more than 500 employees.
Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a written agreement to the
contrary notwithstanding or the existence of a mere oral agreement, if the employee is engaged in the usual business or
trade of the employer, more so, that he rendered service for at least one year, such employee shall be considered as a
regular employee. Private respondent herein has been with petitioner since 1981 and his employment was not for a
specific project or undertaking, the period of which was pre-determined and neither the work or service of private
respondent seasonal. (Emphasis by the CA itself).
We disagree to the foregoing ratiocination.
The appellate court’s premise that regular employees are those who perform activities which are desirable and
necessary for the business of the employer is not determinative in this case. For, we take it that any agreement may
provide that one party shall render services for and in behalf of another, no matter how necessary for the latter’s
business, even without being hired as an employee. This set-up is precisely true in the case of an independent
contractorship as well as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court,
is not the yardstick for determining the existence of an employment relationship. As it is, the provision merely
distinguishes between two (2) kinds of employees, i.e., regular and casual. It does not apply where, as here, the very
existence of an employment relationship is in dispute.23
Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157 of the Labor Code,
and argues that he satisfies all the requirements thereunder. The provision relied upon reads:
ART. 157. Emergency medical and dental services. – It shall be the duty of every employer to furnish his employees in
any locality with free medical and dental attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more
than two hundred (200) except when the employer does not maintain hazardous workplaces, in which case the
services of a graduate first-aider shall be provided for the protection of the workers, where no registered nurse
is available. The Secretary of Labor shall provide by appropriate regulations the services that shall be required
where the number of employees does not exceed fifty (50) and shall determine by appropriate order hazardous
workplaces for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when
the number of employees exceeds two hundred (200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an
infirmary or emergency hospital with one bed capacity for every one hundred (100) employees when the
number of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the
premises of the establishment for at least two (2) hours, in the case of those engaged on part-time basis, and not less
than eight (8) hours in the case of those employed on full-time basis. Where the undertaking is nonhazardous in nature,
the physician and dentist may be engaged on retained basis, subject to such regulations as the Secretary of Labor may
prescribe to insure immediate availability of medical and dental treatment and attendance in case of emergency.
Had only respondent read carefully the very statutory provision invoked by him, he would have noticed that in non-
hazardous workplaces, the employer may engage the services of a physician "on retained basis." As correctly observed
by the petitioner, while it is true that the provision requires employers to engage the services of medical practitioners in
certain establishments depending on the number of their employees, nothing is there in the law which says that medical
practitioners so engaged be actually hired as employees,24 adding that the law, as written, only requires the employer
"to retain", not employ, a part-time physician who needed to stay in the premises of the non-hazardous workplace for
two (2) hours.25
Respondent takes no issue on the fact that petitioner’s business of telecommunications is not hazardous in nature. As
such, what applies here is the last paragraph of Article 157 which, to stress, provides that the employer may engage the
services of a physician and dentist "on retained basis", subject to such regulations as the Secretary of Labor may
prescribe. The successive "retainership" agreements of the parties definitely hue to the very statutory provision relied
upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is free from doubt. Where
the law is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to
it that the mandate is obeyed.26 As it is, Article 157 of the Labor Code clearly and unequivocally allows employers in non-
hazardous establishments to engage "on retained basis" the service of a dentist or physician. Nowhere does the law
provide that the physician or dentist so engaged thereby becomes a regular employee. The very phrase that they may be
engaged "on retained basis", revolts against the idea that this engagement gives rise to an employer-employee
relationship.
With the recognition of the fact that petitioner consistently engaged the services of respondent on a retainer basis, as
shown by their various "retainership contracts", so can petitioner put an end, with or without cause, to their
retainership agreement as therein provided.27
We note, however, that even as the contracts entered into by the parties invariably provide for a 60-day notice
requirement prior to termination, the same was not complied with by petitioner when it terminated on 17 December
1996 the verbally-renewed retainership agreement, effective at the close of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both parties,28 that execution of the NLRC decision had
already been made at the NLRC despite the pendency of the present recourse. For sure, accounts of petitioner had
already been garnished and released to respondent despite the previous Status Quo Order29 issued by this Court. To all
intents and purposes, therefore, the 60-day notice requirement has become moot and academic if not waived by the
respondent himself.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals REVERSED and SET ASIDE.
The 21 December 1998 decision of the labor arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED
G.R. No. 146881 February 5, 2007
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,

vs.
DR. DEAN N. CLIMACO, Respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari of the Decision of the Court of Appeals1 promulgated on July 7, 2000, and its
Resolution promulgated on January 30, 2001, denying petitioner’s motion for reconsideration. The Court of Appeals
ruled that an employer-employee relationship exists between respondent Dr. Dean N. Climaco and petitioner Coca-Cola
Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue
of a Retainer Agreement that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is
accepting such engagement upon terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained, the parties agree
as follows:
1. This Agreement shall only be for a period of one (1) year beginning January 1, 1988 up to December 31, 1988.
The said term notwithstanding, either party may terminate the contract upon giving a thirty (30)-day written
notice to the other.
2. The compensation to be paid by the company for the services of the DOCTOR is hereby fixed at PESOS: Three
Thousand Eight Hundred (₱3,800.00) per month. The DOCTOR may charge professional fee for hospital services
rendered in line with his specialization. All payments in connection with the Retainer Agreement shall be subject
to a withholding tax of ten percent (10%) to be withheld by the COMPANY under the Expanded Withholding Tax
System. In the event the withholding tax rate shall be increased or decreased by appropriate laws, then the rate
herein stipulated shall accordingly be increased or decreased pursuant to such laws.
3. That in consideration of the above mentioned retainer’s fee, the DOCTOR agrees to perform the duties and
obligations enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex "A" and made an
integral part of this Retainer Agreement.
4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry of Labor and
Employment shall be followed.
5. That the DOCTOR shall be directly responsible to the employee concerned and their dependents for any injury
inflicted on, harm done against or damage caused upon the employee of the COMPANY or their dependents
during the course of his examination, treatment or consultation, if such injury, harm or damage was committed
through professional negligence or incompetence or due to the other valid causes for action.
6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises from Monday to Saturday of a
minimum of two (2) hours each day or a maximum of TWO (2) hours each day or treatment from 7:30 a.m. to
8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such schedule is otherwise changed by the COMPANY
as [the] situation so warrants, subject to the Labor Code provisions on Occupational Safety and Health Standards
as the COMPANY may determine. It is understood that the DOCTOR shall stay at least two (2) hours a day in the
COMPANY clinic and that such two (2) hours be devoted to the workshift with the most number of employees. It
is further understood that the DOCTOR shall be on call at all times during the other workshifts to attend to
emergency case[s];
7. That no employee-employer relationship shall exist between the COMPANY and the DOCTOR whilst this
contract is in effect, and in case of its termination, the DOCTOR shall be entitled only to such retainer fee as may
be due him at the time of termination.2
The Comprehensive Medical Plan,3 which contains the duties and responsibilities of respondent, adverted to in the
Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the] employees’ and dependents’ health:
1. Prompt and adequate treatment of occupational and non-occupational injuries and diseases.
2. To protect employees from any occupational health hazard by evaluating health factors related to working
conditions.
3. To encourage employees [to] maintain good personal health by setting up employee orientation and
education on health, hygiene and sanitation, nutrition, physical fitness, first aid training, accident prevention
and personnel safety.
4. To evaluate other matters relating to health such as absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this program.
2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation, immunizations,
family planning, physical fitness and athletic programs and other activities such as group health education
program, safety and first aid classes, organization of health and safety committees.
3. Periodically, this program will be reviewed and adjusted based on employees’ needs.
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education materials.
6. Coordinate with Safety Committee in developing specific studies and program to minimize environmental
health hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical fitness and athletic programs.
9. Visiting and follow-up treatment of Company employees and their dependents confined in the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one expired on December 31,
1993. Despite the non-renewal of the Retainer Agreement, respondent continued to perform his functions as company
doctor to Coca-Cola until he received a letter4 dated March 9, 1995 from petitioner company concluding their
retainership agreement effective 30 days from receipt thereof.
It is noted that as early as September 1992, petitioner was already making inquiries regarding his status with petitioner
company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting President and Chairperson of the Committee on
Membership, Philippine College of Occupational Medicine. In response, Dr. Sy wrote a letter5 to the Personnel Officer of
Coca-Cola Bottlers Phils., Bacolod City, stating that respondent should be considered as a regular part-time physician,
having served the company continuously for four (4) years. He likewise stated that respondent must receive all the
benefits and privileges of an employee under Article 157 (b)6 of the Labor Code.
Petitioner company, however, did not take any action. Hence, respondent made another inquiry directed to the
Assistant Regional Director, Bacolod City District Office of the Department of Labor and Employment (DOLE), who
referred the inquiry to the Legal Service of the DOLE, Manila. In his letter7 dated May 18, 1993, Director Dennis P.
Ancheta, Legal Service, DOLE, stated that he believed that an employer-employee relationship existed between
petitioner and respondent based on the Retainer Agreement and the Comprehensive Medical Plan, and the application
of the "four-fold" test. However, Director Ancheta emphasized that the existence of employer-employee relationship is
a question of fact. Hence, termination disputes or money claims arising from employer-employee relations exceeding
₱5,000 may be filed with the National Labor Relations Commission (NLRC). He stated that their opinion is strictly
advisory.
An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-
Bacolod City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the legal
staff of his office was of the opinion that the services of respondent partake of the nature of work of a regular company
doctor and that he was, therefore, subject to social security coverage.
Respondent inquired from the management of petitioner company whether it was agreeable to recognizing him as a
regular employee. The management refused to do so.
On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking recognition as a regular
employee of petitioner company and prayed for the payment of all benefits of a regular employee, including 13th
Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was
docketed as RAB Case No. 06-02-10138-94.
While the complaint was pending before the Labor Arbiter, respondent received a letter dated March 9, 1995 from
petitioner company concluding their retainership agreement effective thirty (30) days from receipt thereof. This
prompted respondent to file a complaint for illegal dismissal against petitioner company with the NLRC, Bacolod City.
The case was docketed as RAB Case No. 06-04-10177-95.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner company lacked the
power of control over respondent’s performance of his duties, and recognized as valid the Retainer Agreement between
the parties. Thus, the Labor Arbiter dismissed respondent’s complaint in the first case, RAB Case No. 06-02-10138-94.
The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint seeking recognition as
a regular employee.
SO ORDERED.11
In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal dismissal (RAB Case
No. 06-04-10177-95) in view of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-02-
10138-94 that complainant therein, Dr. Dean Climaco, is not an employee of Coca-Cola Bottlers Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.
In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for lack of merit. It
declared that no employer-employee relationship existed between petitioner company and respondent based on the
provisions of the Retainer Agreement which contract governed respondent’s employment.
Respondent’s motion for reconsideration was denied by the NLRC in a Resolution14 promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee relationship existed
between petitioner company and respondent after applying the four-fold test: (1) the power to hire the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee with respect to
the means and methods by which the work is to be accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when read together with the Comprehensive Medical
Plan which was made an integral part of the retainer agreements, coupled with the actual services rendered by the
petitioner, would show that all the elements of the above test are present.
First, the agreements provide that "the COMPANY desires to engage on a retainer basis the services of a physician and
the said DOCTOR is accepting such engagement x x x" (Rollo, page 25). This clearly shows that Coca-Cola exercised its
power to hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final compensation of Three
Thousand Eight Hundred Pesos per month, which amount was later raised to Seven Thousand Five Hundred on the latest
contract. This would represent the element of payment of wages.
Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period of one year. "The
said term notwithstanding, either party may terminate the contract upon giving a thirty (30) day written notice to the
other." (Rollo, page 25). This would show that Coca-Cola had the power of dismissing the petitioner, as it later on did,
and this could be done for no particular reason, the sole requirement being the former’s compliance with the 30-day
notice requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important element of all, that
is, control, over the conduct of petitioner in the latter’s performance of his duties as a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations enumerated in the
Comprehensive Medical Plan referred to above. In paragraph (6), the fixed and definite hours during which the
petitioner must render service to the company is laid down.
We say that there exists Coca-Cola’s power to control petitioner because the particular objectives and activities to be
observed and accomplished by the latter are fixed and set under the Comprehensive Medical Plan which was made an
integral part of the retainer agreement. Moreover, the times for accomplishing these objectives and activities are
likewise controlled and determined by the company. Petitioner is subject to definite hours of work, and due to this, he
performs his duties to Coca-Cola not at his own pleasure but according to the schedule dictated by the company.
In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant’s Safety Committee. The
minutes of the meeting of the said committee dated February 16, 1994 included the name of petitioner, as plant
physician, as among those comprising the committee.
It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the reason that the latter
was not directed as to the procedure and manner of performing his assigned tasks. It went as far as saying that
"petitioner was not told how to immunize, inject, treat or diagnose the employees of the respondent (Rollo, page 228).
We believe that if the "control test" would be interpreted this strictly, it would result in an absurd and ridiculous
situation wherein we could declare that an entity exercises control over another’s activities only in instances where the
latter is directed by the former on each and every stage of performance of the particular activity. Anything less than that
would be tantamount to no control at all.
To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as in this case
where the objectives and activities were laid out, and the specific time for performing them was fixed by the controlling
party.15
Moreover, the Court of Appeals declared that respondent should be classified as a regular employee having rendered six
years of service as plant physician by virtue of several renewed retainer agreements. It underscored the provision in
Article 28016 of the Labor Code stating that "any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed, and his employment shall continue while such activity exists." Further, it held that the termination of
respondent’s services without any just or authorized cause constituted illegal dismissal.
In addition, the Court of Appeals found that respondent’s dismissal was an act oppressive to labor and was effected in a
wanton, oppressive or malevolent manner which entitled respondent to moral and exemplary damages.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission dated November 28,
1997 and its Resolution dated August 7, 1998 are found to have been issued with grave abuse of discretion in applying
the law to the established facts, and are hereby REVERSED and SET ASIDE, and private respondent Coca-Cola Bottlers,
Phils.. Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of seniority rights from the time his compensation
was withheld up to the time he is actually reinstated; however, if reinstatement is no longer possible, to pay the
petitioner separation pay equivalent to one (1) month’s salary for every year of service rendered, computed at
the rate of his salary at the time he was dismissed, plus backwages.
2. Pay petitioner moral damages in the amount of ₱50,000.00.
3. Pay petitioner exemplary damages in the amount of ₱50,000.00.
4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled from the time
petitioner became a regular employee (one year from effectivity date of employment) until the time of actual
payment.
SO ORDERED.17
Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner company noted that its
Decision failed to mention whether respondent was a full-time or part-time regular employee. It also questioned how
the benefits under their Collective Bargaining Agreement which the Court awarded to respondent could be given to him
considering that such benefits were given only to regular employees who render a full day’s work of not less that eight
hours. It was admitted that respondent is only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time employee and should be accorded all the
proportionate benefits due to this category of employees of [petitioner] Corporation under the CBA." It sustained its
decision on all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL
QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR
RELATIONS COMMISSION, CONTRARY TO THE DECISIONS OF THE HONORABLE SUPREME COURT ON THE
MATTER.
RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS NECESSARY AND
DESIRABLE TO THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO THE RULINGS OF THE SUPREME
COURT IN ANALOGOUS CASES.
RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE PETITIONERS EXERCISED CONTROL OVER THE
WORK OF THE RESPONDENT.
RELATIONS COMMISSION, AND FINDING THAT THERE IS EMPLOYER-EMPLOYEE RELATIONSHIP PURSUANT TO
ARTICLE 280 OF THE LABOR CODE.
RELATIONS COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL DISMISSAL WHEN THE EMPLOYENT OF
THE RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.
RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS A REGULAR PART TIME EMPLOYEE WHO IS
ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR PART TIME EMPLOYEE ACCORDING TO THE
PETITIONERS’ CBA.
RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY
DAMAGES.
The main issue in this case is whether or not there exists an employer-employee relationship between the parties. The
resolution of the main issue will determine whether the termination of respondent’s employment is illegal.
The Court, in determining the existence of an employer-employee relationship, has invariably adhered to the four-fold
test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employee’s conduct, or the so-called "control test," considered to be the most important
element.18
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case show that no
employer-employee relationship exists between the parties. The Labor Arbiter and the NLRC correctly found that
petitioner company lacked the power of control over the performance by respondent of his duties. The Labor Arbiter
reasoned that the Comprehensive Medical Plan, which contains the respondent’s objectives, duties and obligations,
does not tell respondent "how to conduct his physical examination, how to immunize, or how to diagnose and treat his
patients, employees of [petitioner] company, in each case." He likened this case to that of Neri v. National Labor
Relations Commission,19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a
radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by
FEBTC was actually the end result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds
received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to
ensure that the desired end result was achieved. It did not, however, tell Neri how the radio/telex machine should be
operated.
In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan, provided guidelines
merely to ensure that the end result was achieved, but did not control the means and methods by which respondent
performed his assigned tasks.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company lacks the power
of control that the contract provides that respondent shall be directly responsible to the employee concerned and their
dependents for any injury, harm or damage caused through professional negligence, incompetence or other valid causes
of action.
The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent was on call during
emergency cases did not make him a regular employee. He explained, thus:
Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes him a regular
employee is off-tangent. Complainant does not dispute the fact that outside of the two (2) hours that he is required to
be at respondent company’s premises, he is not at all further required to just sit around in the premises and wait for an
emergency to occur so as to enable him from using such hours for his own benefit and advantage. In fact, complainant
maintains his own private clinic attending to his private practice in the city, where he services his patients, bills them
accordingly -- and if it is an employee of respondent company who is attended to by him for special treatment that
needs hospitalization or operation, this is subject to a special billing. More often than not, an employee is required to
stay in the employer’s workplace or proximately close thereto that he cannot utilize his time effectively and gainfully for
his own purpose. Such is not the prevailing situation here.1awphi1.net
In addition, the Court finds that the schedule of work and the requirement to be on call for emergency cases do not
amount to such control, but are necessary incidents to the Retainership Agreement.
The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship
upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination.
The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent
as a retained physician of petitioner company and upholds the validity of the Retainership Agreement which clearly
stated that no employer-employee relationship existed between the parties. The Agreement also stated that it was only
for a period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis.
Considering that there is no employer-employee relationship between the parties, the termination of the Retainership
Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of
respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to
respondent due to his alleged illegal dismissal.
WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are REVERSED and SET
ASIDE. The Decision and Resolution dated November 28, 1997 and August 7, 1998, respectively, of the National Labor
Relations Commission are REINSTATED.
No costs.
SO ORDERED
G.R. No. 146530 January 17, 2005

PEDRO CHAVEZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution1 dated December 15, 2000 of the Court of
Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the
Decision dated July 10, 1998 of the National Labor Relations Commission (NLRC), dismissing the complaint for illegal
dismissal filed by herein petitioner Pedro Chavez. The said NLRC decision similarly reversed its earlier Decision dated
January 27, 1998 which, affirming that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by
respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other packaging
materials for export and distribution. It engaged the services of the petitioner, Pedro Chavez, as truck driver on October
25, 1984. As such, the petitioner was tasked to deliver the respondent company’s products from its factory in Mariveles,
Bataan, to its various customers, mostly in Metro Manila. The respondent company furnished the petitioner with a
truck. Most of the petitioner’s delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and
returning thereto in the afternoon two or three days after. The deliveries were made in accordance with the routing
slips issued by respondent company indicating the order, time and urgency of delivery. Initially, the petitioner was paid
the sum of ₱350.00 per trip. This was later adjusted to ₱480.00 per trip and, at the time of his alleged dismissal, the
petitioner was receiving ₱900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent company’s plant manager, his (the
petitioner’s) desire to avail himself of the benefits that the regular employees were receiving such as overtime pay,
nightshift differential pay, and 13th month pay, among others. Although he promised to extend these benefits to the
petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration Branch No. III of
the NLRC in San Fernando, Pampanga. Before the case could be heard, respondent company terminated the services of
the petitioner. Consequently, on May 25, 1995, the petitioner filed an amended complaint against the respondents for
illegal dismissal, unfair labor practice and non-payment of overtime pay, nightshift differential pay, 13th month pay,
among others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee relationship between the respondent
company and the petitioner. They averred that the petitioner was an independent contractor as evidenced by the
contract of service which he and the respondent company entered into. The said contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the Contractor [referring
to Pedro Chavez], by nature of their specialized line or service jobs, accepts the services to be rendered to the Principal,
under the following terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by the contractor to the principal, shall
only cover travel route from Mariveles to Metro Manila. Otherwise, any change to this travel route shall be
subject to further agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery transport services fully rendered by
the Contractor shall be on a per trip basis depending on the size or classification of the truck being used in the
transport service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a per trip basis
from Mariveles to Metro Manila shall be THREE HUNDRED PESOS (₱300.00) and EFFECTIVE December
15, 1984.
b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per trip basis,
following the same route mentioned, shall be THREE HUNDRED FIFTY (₱350.00) Pesos and Effective
December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the Principal for the cost of any
damage to, loss of any goods, cargoes, finished products or the like, while the same are in transit, or due to
reckless [sic] of its men utilized for the purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its men working for him subject to
this agreement, and that the Contractor shall hold the Principal free and harmless from any liability or claim that
may arise by virtue of the Contractor’s non-compliance to the existing provisions of the Minimum Wage Law,
the Employees Compensation Act, the Social Security System Act, or any other such law or decree that may
hereafter be enacted, it being clearly understood that any truck drivers, helpers or men working with and for the
Contractor, are not employees who will be indemnified by the Principal for any such claim, including damages
incurred in connection therewith;
6. This contract shall take effect immediately upon the signing by the parties, subject to renewal on a year-to-
year basis.2
This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10, 1989 and
September 28, 1992. Except for the rates to be paid to the petitioner, the terms of the contracts were substantially the
same. The relationship of the respondent company and the petitioner was allegedly governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and methods by which his work was
accomplished. He paid the wages of his helpers and exercised control over them. As such, the petitioner was not entitled
to regularization because he was not an employee of the respondent company. The respondents, likewise, maintained
that they did not dismiss the petitioner. Rather, the severance of his contractual relation with the respondent company
was due to his violation of the terms and conditions of their contract. The petitioner allegedly failed to observe the
minimum degree of diligence in the proper maintenance of the truck he was using, thereby exposing respondent
company to unnecessary significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated February 3, 1997,
finding the respondents guilty of illegal dismissal. The Labor Arbiter declared that the petitioner was a regular employee
of the respondent company as he was performing a service that was necessary and desirable to the latter’s business.
Moreover, it was noted that the petitioner had discharged his duties as truck driver for the respondent company for a
continuous and uninterrupted period of more than ten years.
The contract of service invoked by the respondents was declared null and void as it constituted a circumvention of the
constitutional provision affording full protection to labor and security of tenure. The Labor Arbiter found that the
petitioner’s dismissal was anchored on his insistent demand to be regularized. Hence, for lack of a valid and just cause
therefor and for their failure to observe the due process requirements, the respondents were found guilty of illegal
dismissal. The dispositive portion of the Labor Arbiter’s decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent SUPREME PACKAGING,
INC. and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ, Mariveles, Bataan guilty of illegal dismissal,
ordering said respondent to pay complainant his separation pay equivalent to one (1) month pay per year of service
based on the average monthly pay of ₱10,800.00 in lieu of reinstatement as his reinstatement back to work will not do
any good between the parties as the employment relationship has already become strained and full backwages from the
time his compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-off date) until compliance,
otherwise, his backwages shall continue to run. Also to pay complainant his 13th month pay, night shift differential pay
and service incentive leave pay hereunder computed as follows:
a) Backwages ………………….. ₱248,400.00
b) Separation Pay ………….…... ₱140,400.00
c) 13th month pay ………….……₱ 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL ₱401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorney’s fees.
SO ORDERED.3
The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by the NLRC in its
Decision4 dated January 27, 1998, as it affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC
characterized the contract of service between the respondent company and the petitioner as a "scheme" that was
resorted to by the respondents who, taking advantage of the petitioner’s unfamiliarity with the English language and/or
legal niceties, wanted to evade the effects and implications of his becoming a regularized employee.5
The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon, the NLRC
rendered another Decision6 dated July 10, 1998, reversing its earlier decision and, this time, holding that no employer-
employee relationship existed between the respondent company and the petitioner. In reconsidering its earlier decision,
the NLRC stated that the respondents did not exercise control over the means and methods by which the petitioner
accomplished his delivery services. It upheld the validity of the contract of service as it pointed out that said contract
was silent as to the time by which the petitioner was to make the deliveries and that the petitioner could hire his own
helpers whose wages would be paid from his own account. These factors indicated that the petitioner was an
independent contractor, not an employee of the respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor Code on the
regularization of employees. Said contract, including the fixed period of employment contained therein, having been
knowingly and voluntarily entered into by the parties thereto was declared valid citing Brent School, Inc. v. Zamora.7 The
NLRC, thus, dismissed the petitioner’s complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC in its Resolution dated
September 7, 1998. He then filed with this Court a petition for certiorari, which was referred to the CA following the
ruling in St. Martin Funeral Home v. NLRC .8
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of the NLRC and
reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the petitioner was a regular
employee of the respondent company because as its truck driver, he performed a service that was indispensable to the
latter’s business. Further, he had been the respondent company’s truck driver for ten continuous years. The CA also
reasoned that the petitioner could not be considered an independent contractor since he had no substantial capital in
the form of tools and machinery. In fact, the truck that he drove belonged to the respondent company. The CA also
observed that the routing slips that the respondent company issued to the petitioner showed that it exercised control
over the latter. The routing slips indicated the chronological order and priority of delivery, the urgency of certain
deliveries and the time when the goods were to be delivered to the customers.
The CA, likewise, disbelieved the respondents’ claim that the petitioner abandoned his job noting that he just filed a
complaint for regularization. This actuation of the petitioner negated the respondents’ allegation that he abandoned his
job. The CA held that the respondents failed to discharge their burden to show that the petitioner’s dismissal was for a
valid and just cause. Accordingly, the respondents were declared guilty of illegal dismissal and the decision of the Labor
Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company and the
petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining the status of
regular employment, it is but necessary for the courts to scrutinize with extreme caution their legality and justness.
Where from the circumstances it is apparent that a contract has been entered into to preclude acquisition of tenurial
security by the employee, they should be struck down and disregarded as contrary to public policy and morals. In this
case, the "contract of service" is just another attempt to exploit the unwitting employee and deprive him of the
protection of the Labor Code by making it appear that the stipulations of the parties were governed by the Civil Code as
in ordinary transactions.9
However, on motion for reconsideration by the respondents, the CA made a complete turn around as it rendered the
assailed Resolution dated December 15, 2000 upholding the contract of service between the petitioner and the
respondent company. In reconsidering its decision, the CA explained that the extent of control exercised by the
respondents over the petitioner was only with respect to the result but not to the means and methods used by him. The
CA cited the following circumstances: (1) the respondents had no say on how the goods were to be delivered to the
customers; (2) the petitioner had the right to employ workers who would be under his direct control; and (3) the
petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was, according to the CA, of
no moment because his status was determined not by the length of service but by the contract of service. This contract,
not being contrary to morals, good customs, public order or public policy, should be given the force and effect of law as
between the respondent company and the petitioner. Consequently, the CA reinstated the July 10, 1998 Decision of the
NLRC dismissing the petitioner’s complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution of the appellate court
alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN
GIVING MORE CONSIDERATION TO THE "CONTRACT OF SERVICE" ENTERED INTO BY PETITIONER AND PRIVATE
RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR
EMPLOYMENT NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE ORAL
AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN
REVERSING ITS OWN FINDINGS THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL
TEST" WHICH IS CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF SAID RELATIONSHIP
IS NOT PRESENT.10
The threshold issue that needs to be resolved is whether there existed an employer-employee relationship between the
respondent company and the petitioner. We rule in the affirmative.
The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the
employee’s conduct.11 The most important element is the employer’s control of the employee’s conduct, not only as to
the result of the work to be done, but also as to the means and methods to accomplish it. 12 All the four elements are
present in this case.
First. Undeniably, it was the respondents who engaged the services of the petitioner without the intervention of a third
party.
Second. Wages are defined as "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 service rendered or to be rendered."13 That the petitioner was paid on a per trip basis is not
significant. This is merely a method of computing compensation and not a basis for determining the existence or
absence of employer-employee relationship. One may be paid on the basis of results or time expended on the work, and
may or may not acquire an employment status, depending on whether the elements of an employer-employee
relationship are present or not.14 In this case, it cannot be gainsaid that the petitioner received compensation from the
respondent company for the services that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his employees by means of
payroll.15 The payroll should show, among other things, the employee’s rate of pay, deductions made, and the amount
actually paid to the employee. Interestingly, the respondents did not present the payroll to support their claim that the
petitioner was not their employee, raising speculations whether this omission proves that its presentation would be
adverse to their case.16
Third. The respondents’ power to dismiss the petitioner was inherent in the fact that they engaged the services of the
petitioner as truck driver. They exercised this power by terminating the petitioner’s services albeit in the guise of
"severance of contractual relation" due allegedly to the latter’s breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is the most
important. Compared to an employee, an independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on its own account and under its own responsibility
according to its own manner and method, free from the control and direction of the principal in all matters connected
with the performance of the work except as to the results thereof.17 Hence, while an independent contractor enjoys
independence and freedom from the control and supervision of his principal, an employee is subject to the employer’s
power to control the means and methods by which the employee’s work is to be performed and accomplished.18
Although the respondents denied that they exercised control over the manner and methods by which the petitioner
accomplished his work, a careful review of the records shows that the latter performed his work as truck driver under
the respondents’ supervision and control. Their right of control was manifested by the following attendant
circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver
respondent company’s goods; 19
3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two
specific places only, to wit: at its office in Metro Manila at 2320 Osmeña Street, Makati City or at BEPZ,
Mariveles, Bataan;20 and
4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate
passes and routing slips. 21
a. The routing slips indicated on the column REMARKS, the chronological order and priority of delivery
such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to deliver the same
according to the order of priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by the
word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to be delivered to the
customers as, for example, the words "tomorrow morning" was written on slip no. 2776.
These circumstances, to the Court’s mind, prove that the respondents exercised control over the means and methods by
which the petitioner accomplished his work as truck driver of the respondent company. On the other hand, the Court is
hard put to believe the respondents’ allegation that the petitioner was an independent contractor engaged in providing
delivery or hauling services when he did not even own the truck used for such services. Evidently, he did not possess
substantial capitalization or investment in the form of tools, machinery and work premises. Moreover, the petitioner
performed the delivery services exclusively for the respondent company for a continuous and uninterrupted period of
ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed indubitably establish
the existence of an employer-employee relationship between the respondent company and the petitioner. It bears
stressing that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in a
contract and providing therein that the employee is an independent contractor when, as in this case, the facts clearly
show otherwise. Indeed, the employment status of a person is defined and prescribed by law and not by what the
parties say it should be.22
Having established that there existed an employer-employee relationship between the respondent company and the
petitioner, the Court shall now determine whether the respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause.23 In this case, the
respondents failed to prove any such cause for the petitioner’s dismissal. They insinuated that the petitioner abandoned
his job. To constitute abandonment, these two factors must concur: (1) the failure to report for work or absence without
valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship.24 Obviously, the petitioner
did not intend to sever his relationship with the respondent company for at the time that he allegedly abandoned his
job, the petitioner just filed a complaint for regularization, which was forthwith amended to one for illegal dismissal. A
charge of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so
when it includes a prayer for reinstatement.25
Neither can the respondents’ claim that the petitioner was guilty of gross negligence in the proper maintenance of the
truck constitute a valid and just cause for his dismissal. Gross negligence implies a want or absence of or failure to
exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences
without exerting any effort to avoid them.26 The negligence, to warrant removal from service, should not merely be
gross but also habitual.27 The single and isolated act of the petitioner’s negligence in the proper maintenance of the
truck alleged by the respondents does not amount to "gross and habitual neglect" warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
… As against the gratuitous allegation of the respondent that complainant was not dismissed from the service but due to
complainant’s breach of their contractual relation, i.e., his violation of the terms and conditions of the contract, we are
very much inclined to believe complainant’s story that his dismissal from the service was anchored on his insistent
demand that he be considered a regular employee. Because complainant in his right senses will not just abandon for
that reason alone his work especially so that it is only his job where he depends chiefly his existence and support for his
family if he was not aggrieved by the respondent when he was told that his services as driver will be terminated on
February 23, 1995.28
Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his dismissal illegal. Under
Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled to reinstatement, without loss of
seniority rights and other privileges, and to the payment of full backwages, 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.29 However, as found by the Labor Arbiter, the circumstances obtaining in this case do not warrant
the petitioner’s reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an award of
separation pay equivalent to one month for every year of service from the time of his illegal dismissal up to the finality
of this judgment in addition to his full backwages, allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the Court of Appeals
reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE. The Decision dated
February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of illegally
terminating the employment of petitioner Pedro Chavez, is REINSTATED.
SO ORDERED
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN
LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and
Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court
reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC
NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-
NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and
Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial
operation of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did
she attend any board meeting nor required to do so. She never prepared any legal document and never represented the
company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for
the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings with government agencies, especially with
the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to
administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei
Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00
plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign
a prepared resolution for her replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and
announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical
Assistant to Seiji Kamura and in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a
total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the
company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made
repeated follow-ups with the company cashier but she was advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that
she is no longer connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal
before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was
hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As
technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei
Corporation. Petitioner had no daily time record and she came to the office any time she wanted. The company never
interfered with her work except that from time to time, the management would ask her opinion on matters relating to
her profession. Petitioner did not go through the usual procedure of selection of employees, but her services were
engaged through a Board Resolution designating her as technical consultant. The money received by petitioner from the
corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was
not one of those reported to the BIR or SSS as one of the company’s employees. 12
Petitioner’s designation as technical consultant depended solely upon the will of management. As such, her consultancy
may be terminated any time considering that her services were only temporary in nature and dependent on the needs
of the corporation.
To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for
the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the
BIR, as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also
submitted showing that petitioner’s latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant’s dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and
severally pay complainant her money claims in accordance with the following computation:
a. Backwages 10/2001 – 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 – 09/2001) 22,500.00
c. Housing Allowance (01/2001 – 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00
h. 10% Attorney’s fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional
backwages that would accrue up to actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of
which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition
to full backwages from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of
P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorney’s fees shall be based on salary differential award only;
4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated
April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by
private respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between
petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and
the Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions
espoused by the contending parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where
the person for whom the services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence
of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the
parties, owing to the complexity of such a relationship where several positions have been held by the worker. There are
instances when, aside from the employer’s power to control the employee with respect to the means and methods by
which the work is to be accomplished, economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or
some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s power to
control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this
case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity
of the relationship based on the various positions and responsibilities given to the worker over the period of the latter’s
employment.
The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court
of Appeals, 20 where we held that there is an employer-employee relationship when the person for whom the services
are performed reserves the right to control not only the end achieved but also the manner and means used to achieve
that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between
the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a
clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of
economic circumstances of the worker.
Thus, the determination of the relationship between employer and employee depends upon the circumstances of the
whole economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the employer’s
business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment
or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the
relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer
for his continued employment in that line of business. 23
The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing
possible employment relationships for purposes of the Federal Labor Standards Act is dependency. 25 By analogy, the
benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to
be the economic dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was
under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She reported for work
regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and
Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the
company and performing functions necessary and desirable for the proper operation of the corporation such as securing
business permits and other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent
corporation because she had served the company for six years before her dismissal, receiving check vouchers indicating
her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General Manager,
respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioner’s membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and
the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation. 27
It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued
employment in the latter’s line of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is
provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm
that issues it. Together with the cash vouchers covering petitioner’s salaries for the months stated therein, these
matters constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private
respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter
were the former’s employees. The coverage of Social Security Law is predicated on the existence of an employer-
employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as
Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioner’s job was
as Kamura’s direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction
permits, license to operate and other requirements imposed by government agencies. Petitioner was never entrusted
with corporate documents of the company, nor required to attend the meeting of the corporation. She was never privy
to the preparation of any document for the corporation, although once in a while she was required to sign prepared
documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been
allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the
allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on
any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and
would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32
A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the
test of credibility and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main job function involved accounting and tax
services rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent
corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly,
respondent corporation had the power to control petitioner with the means and methods by which the work is to be
accomplished.
The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to
September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of
strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement. 34
A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an
involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores,
36
we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable
situation arises which creates an adverse working environment rendering it impossible for such employee to continue
working for her employer. Hence, her severance from the company was not of her own making and therefore amounted
to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed.
Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we
are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This
would enable employees to avail of the benefits accorded to them by law, in line with the constitutional mandate giving
maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social economic force in
furtherance of social justice and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and
October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to
the Labor Arbiter for the recomputation of petitioner Angelina Francisco’s full backwages from the time she was illegally
terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year
of service, where a fraction of at least six months shall be considered as one whole year.
SO ORDERED
G.R. No. 167622 June 29, 2010
GREGORIO V. TONGKO, Petitioner,

vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, Respondents.
RESOLUTION
BRION, J.:
This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by respondent The Manufacturers Life
Insurance Co. (Phils.), Inc. (Manulife) to set aside our Decision of November 7, 2008. In the assailed decision, we found
that an employer-employee relationship existed between Manulife and petitioner Gregorio Tongko and ordered
Manulife to pay Tongko backwages and separation pay for illegal dismissal.
The following facts have been stated in our Decision of November 7, 2008, now under reconsideration, but are
repeated, simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had two basic phases. The first or initial phase began on July
1, 1977, under a Career Agent’s Agreement (Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee relationship between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by
the Company, and collect, in exchange for provisional receipts issued by the Agent, money due to or become due to the
Company in respect of applications or policies obtained by or through the Agent or from policyholders allotted by the
Company to the Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company as
evidenced by an Official Receipt issued by the Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by
giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company
shall be construed for any previous failure to exercise its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other
party fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to maintain a
standard of knowledge and competency in the sale of Manulife’s products, satisfactory to Manulife and sufficient to
meet the volume of the new business, required by his Production Club membership.3
The second phase started in 1983 when Tongko was named Unit Manager in Manulife’s Sales Agency Organization. In
1990, he became a Branch Manager. Six years later (or in 1996), Tongko became a Regional Sales Manager.4
Tongko’s gross earnings consisted of commissions, persistency income, and management overrides. Since the beginning,
Tongko consistently declared himself self-employed in his income tax returns. Thus, under oath, he declared his gross
business income and deducted his business expenses to arrive at his taxable business income. Manulife withheld the
corresponding 10% tax on Tongko’s earnings.5
In 2001, Manulife instituted manpower development programs at the regional sales management level. Respondent
Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns that were brought up during the
October 18, 2001 Metro North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has been very clear – to increase the number of agents to
at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined
the organization. Since then, however, substantial changes have taken place in the organization, as these have been
influenced by developments both from within and without the company.
xxxx
The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers’
meeting earlier last month when Kevin O’Connor, SVP-Agency, took to the floor to determine from our senior agency
leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had presented
information where evidently, your Region was the lowest performer (on a per Manager basis) in terms of recruiting in
2000 and, as of today, continues to remain one of the laggards in this area.
While discussions, in general, were positive other than for certain comments from your end which were perceived to be
uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management,
were on the same plane. As gleaned from some of your previous comments in prior meetings (both in group and one-
on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent
meetings you reiterated certain views, the validity of which we challenged and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit
confused as to the directions the company was taking. For this reason, I sought a meeting with everyone in your
management team, including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales Managers meeting
held at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the table
before the rest of your Region’s Sales Managers to verify its validity. As you must have noted, no Sales Manager came
forward on their own to confirm your statement and it took you to name Malou Samson as a source of the same, an
allegation that Malou herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all along,
that these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet its
agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found that you made a lot more money in the
Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you probably will
make more money in the Year 2001 compared to Year 2000. Obviously, your above statement about making "less
money" did not refer to you but the way you argued this point had us almost believing that you were spouting the
gospel of truth when you were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction
that we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution
company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you
proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency
growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the
following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be
easily delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you
feel "may not be your cup of tea."
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The
above could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in
autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro
North. I will hold you solely responsible for meeting the objectives of these remaining groups.
xxxx
The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon
you. But you have to understand that meeting corporate objectives by everyone is primary and will not be
compromised. We are meeting tough challenges next year, and I would want everybody on board. Any resistance or
holding back by anyone will be dealt with accordingly.6
Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongko’s services:
It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between
yourself and SVP Kevin O’Connor, some of them with me, as well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with Management’s avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now
issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter.7
Tongko responded by filing an illegal dismissal complaint with the National Labor Relations Commission (NLRC)
Arbitration Branch. He essentially alleged – despite the clear terms of the letter terminating his Agency Agreement –
that he was Manulife’s employee before he was illegally dismissed.8
Thus, the threshold issue is the existence of an employment relationship. A finding that none exists renders the question
of illegal dismissal moot; a finding that an employment relationship exists, on the other hand, necessarily leads to the
need to determine the validity of the termination of the relationship.
A. Tongko’s Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding ₱50,000.00, regardless of
production levels attained and exclusive of commissions and bonuses. He also claimed that as Regional Sales Manager,
he was given a travel and entertainment allowance of ₱36,000.00 per year in addition to his overriding commissions; he
was tasked with numerous administrative functions and supervisory authority over Manulife’s employees, aside from
merely selling policies and recruiting agents for Manulife; and he recommended and recruited insurance agents subject
to vetting and approval by Manulife. He further alleges that he was assigned a definite place in the Manulife offices
when he was not in the field – at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village,
Makati City – for which he never paid any rental. Manulife provided the office equipment he used, including tables,
chairs, computers and printers (and even office stationery), and paid for the electricity, water and telephone bills. As
Regional Sales Manager, Tongko additionally asserts that he was required to follow at least three codes of conduct.9
B. Manulife’s Case – Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid commissions of
varying amounts, computed based on the premium paid in full and actually received by Manulife on policies obtained
through an agent. As sales manager, Tongko was paid overriding sales commission derived from sales made by agents
under his unit/structure/branch/region. Manulife also points out that it deducted and withheld a 10% tax from all
commissions Tongko received; Tongko even declared himself to be self-employed and consistently paid taxes as such—
i.e., he availed of tax deductions such as ordinary and necessary trade, business and professional expenses to which a
business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s claim as he was not its employee as
characterized in the four-fold test and our ruling in Carungcong v. National Labor Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship existed between the parties. However, the NLRC
reversed the labor arbiter’s decision on appeal; it found the existence of an employer-employee relationship and
concluded that Tongko had been illegally dismissed. In the petition for certiorari with the Court of Appeals (CA), the
appellate court found that the NLRC gravely abused its discretion in its ruling and reverted to the labor arbiter’s decision
that no employer-employee relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment relationship existed
between Tongko and Manulife. We concluded that Tongko is Manulife’s employee for the following reasons:
1. Our ruling in the first Insular11 case did not foreclose the possibility of an insurance agent becoming an
employee of an insurance company; if evidence exists showing that the company promulgated rules or
regulations that effectively controlled or restricted an insurance agent’s choice of methods or the methods
themselves in selling insurance, an employer-employee relationship would be present. The determination of the
existence of an employer-employee relationship is thus on a case-to-case basis depending on the evidence on
record.
2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as shown by
the following indicators:
2.1 Tongko undertook to comply with Manulife’s rules, regulations and other requirements, i.e., the
different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct,
and the Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife’s insurance agents and managers, who occupied similar positions
as Tongko, showed that they performed administrative duties that established employment with
Manulife;12 and
2.3 Tongko was tasked to recruit some agents in addition to his other administrative functions. De Dios’
letter harped on the direction Manulife intended to take, viz., greater agency recruitment as the primary
means to sell more policies; Tongko’s alleged failure to follow this directive led to the termination of his
employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife’s right to due process by: (a) confining the review only to
the issue of "control" and utterly disregarding all the other issues that had been joined in this case; (b)
mischaracterizing the divergence of conclusions between the CA and the NLRC decisions as confined only to that
on "control"; (c) grossly failing to consider the findings and conclusions of the CA on the majority of the material
evidence, especially [Tongko’s] declaration in his income tax returns that he was a "business person" or "self-
employed"; and (d) allowing [Tongko] to repudiate his sworn statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in contract law and agency, distorts not only the
legal relationships of agencies to sell but also distributorship and franchising, and ignores the constitutional and
policy context of contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the CA on the three elements of the four-fold test
other than the "control" test, reverses well-settled doctrines of law on employer-employee relationships, and
grossly misapplies the "control test," by selecting, without basis, a few items of evidence to the exclusion of
more material evidence to support its conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized by Articles 8 and 9 of the
Civil Code, beyond the powers granted to this Court under Article VIII, Section 1 of the Constitution and
contravenes through judicial legislation, the constitutional prohibition against impairment of contracts under
Article III, Section 10 of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversible errors, which
should be corrected, in concluding that Respondent Manulife and Petitioner had an employer-employee
relationship, that Respondent Manulife illegally dismissed Petitioner, and for consequently ordering Respondent
Manulife to pay Petitioner backwages, separation pay, nominal damages and attorney’s fees.13
THE COURT’S RULING
A. The Insurance and the Civil Codes;

the Parties’ Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective, oblivious that the factual antecedents were
set in the insurance industry so that the Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly
devoted to "Insurance Agents and Brokers" and specifically defines the agents and brokers relationship with the
insurance company and how they are governed by the Code and regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a civil law matter
governed by the Civil Code. Thus, at the very least, three sets of laws – namely, the Insurance Code, the Labor Code and
the Civil Code – have to be considered in looking at the present case. Not to be forgotten, too, is the Agreement (partly
reproduced on page 2 of this Dissent and which no one disputes) that the parties adopted to govern their relationship
for purposes of selling the insurance the company offers. To forget these other laws is to take a myopic view of the
present case and to add to the uncertainties that now exist in considering the legal relationship between the insurance
company and its "agents."
The main issue of whether an agency or an employment relationship exists depends on the incidents of the relationship.
The Labor Code concept of "control" has to be compared and distinguished with the "control" that must necessarily exist
in a principal-agent relationship. The principal cannot but also have his or her say in directing the course of the principal-
agent relationship, especially in cases where the company-representative relationship in the insurance industry is an
agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in the country, in terms particularly of who can be in
the insurance business, who can act for and in behalf of an insurer, and how these parties shall conduct themselves in
the insurance business. Section 186 of the Insurance Code provides that "No person, partnership, or association of
persons shall transact any insurance business in the Philippines except as agent of a person or corporation authorized to
do the business of insurance in the Philippines." Sections 299 and 300 of the Insurance Code on Insurance Agents and
Brokers, among other provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission
or other compensation to any person for services in obtaining insurance, unless such person shall have first procured
from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter
provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the
Commissioner x x x The Commissioner shall satisfy himself as to the competence and trustworthiness of the applicant
and shall have the right to refuse to issue or renew and to suspend or revoke any such license in his
discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or
transmits for a person other than himself an application for a policy or contract of insurance to or from such company or
offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this section
and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance agent is
subject.
The application for an insurance agent’s license requires a written examination, and the applicant must be of good moral
character and must not have been convicted of a crime involving moral turpitude.14 The insurance agent who collects
premiums from an insured person for remittance to the insurance company does so in a fiduciary capacity, and an
insurance company which delivers an insurance policy or contract to an authorized agent is deemed to have authorized
the agent to receive payment on the company’s behalf.15 Section 361 further prohibits the offer, negotiation, or
collection of any amount other than that specified in the policy and this covers any rebate from the premium or any
special favor or advantage in the dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also act within the
parameters of the authority granted under the license and under the contract with the principal. Other than the need
for a license, the agent is limited in the way he offers and negotiates for the sale of the company’s insurance products, in
his collection activities, and in the delivery of the insurance contract or policy. Rules regarding the desired results (e.g.,
the required volume to continue to qualify as a company agent, rules to check on the parameters on the authority given
to the agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in elements of control
specific to an insurance agency and should not and cannot be read as elements of control that attend an employment
relationship governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter." 16 While this is a very
broad definition that on its face may even encompass an employment relationship, the distinctions between agency and
employment are sufficiently established by law and jurisprudence.
Generally, the determinative element is the control exercised over the one rendering service. The employer controls the
employee both in the results and in the means and manner of achieving this result. The principal in an agency
relationship, on the other hand, also has the prerogative to exercise control over the agent in undertaking the assigned
task based on the parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be express in light of the need for a license
and for the designation by the insurance company. In the present case, the Agreement fully serves as grant of authority
to Tongko as Manulife’s insurance agent.17 This agreement is supplemented by the company’s agency practices and
usages, duly accepted by the agent in carrying out the agency.18 By authority of the Insurance Code, an insurance agency
is for compensation,19 a matter the Civil Code Rules on Agency presumes in the absence of proof to the contrary.20 Other
than the compensation, the principal is bound to advance to, or to reimburse, the agent the agreed sums necessary for
the execution of the agency.21 By implication at least under Article 1994 of the Civil Code, the principal can appoint two
or more agents to carry out the same assigned tasks,22 based necessarily on the specific instructions and directives given
to them.
With particular relevance to the present case is the provision that "In the execution of the agency, the agent shall act in
accordance with the instructions of the principal."23 This provision is pertinent for purposes of the necessary control that
the principal exercises over the agent in undertaking the assigned task, and is an area where the instructions can intrude
into the labor law concept of control so that minute consideration of the facts is necessary. A related article is Article
1891 of the Civil Code which binds the agent to render an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the company rules and
regulations that an agent has to comply with are indicative of an employer-employee relationship.24 The Dissenting
Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life Assurance Co. v.
National Labor Relations Commission (second Insular case)25 to support the view that Tongko is Manulife’s employee.
On the other hand, Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor
Relations Commission (AFPMBAI case)26 to support its allegation that Tongko was not its employee.
A caveat has been given above with respect to the use of the rulings in the cited cases because none of them is on all
fours with the present case; the uniqueness of the factual situation of the present case prevents it from being directly
and readily cast in the mold of the cited cases. These cited cases are themselves different from one another; this
difference underscores the need to read and quote them in the context of their own factual situations.
The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the second Insular
Life cases. A critical difference, however, exists as these cited cases dealt with the proper legal characterization of a
subsequent management contract that superseded the original agency contract between the insurance company and its
agent. Carungcong dealt with a subsequent Agreement making Carungcong a New Business Manager that clearly
superseded the Agreement designating Carungcong as an agent empowered to solicit applications for insurance. The
Grepalife case, on the other hand, dealt with the proper legal characterization of the appointment of the Ruiz brothers
to positions higher than their original position as insurance agents. Thus, after analyzing the duties and functions of the
Ruiz brothers, as these were enumerated in their contracts, we concluded that the company practically dictated the
manner by which the Ruiz brothers were to carry out their jobs. Finally, the second Insular Life case dealt with the
implications of de los Reyes’ appointment as acting unit manager which, like the subsequent contracts in the
Carungcong and the Grepalife cases, was clearly defined under a subsequent contract. In all these cited cases, a
determination of the presence of the Labor Code element of control was made on the basis of the stipulations of the
subsequent contracts.
In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only contract or document
extant and submitted as evidence in the present case is the Agreement – a pure agency agreement in the Civil Code
context similar to the original contract in the first Insular Life case and the contract in the AFPMBAI case. And while
Tongko was later on designated unit manager in 1983, Branch Manager in 1990, and Regional Sales Manager in 1996, no
formal contract regarding these undertakings appears in the records of the case. Any such contract or agreement, had
there been any, could have at the very least provided the bases for properly ascertaining the juridical relationship
established between the parties.
These critical differences, particularly between the present case and the Grepalife and the second Insular Life cases,
should therefore immediately drive us to be more prudent and cautious in applying the rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the parties’ relations
until the Agreement’s termination in 2001. This Agreement stood for more than two decades and, based on the records
of the case, was never modified or novated. It assumes primacy because it directly dealt with the nature of the parties’
relationship up to the very end; moreover, both parties never disputed its authenticity or the accuracy of its terms.
By the Agreement’s express terms, Tongko served as an "insurance agent" for Manulife, not as an employee. To be sure,
the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding on the courts;
as the dissent clearly stated, the characterization of the juridical relationship the Agreement embodied is a matter of law
that is for the courts to determine. At the same time, though, the characterization the parties gave to their relationship
in the Agreement cannot simply be brushed aside because it embodies their intent at the time they entered the
Agreement, and they were governed by this understanding throughout their relationship. At the very least, the provision
on the absence of employer-employee relationship between the parties can be an aid in considering the Agreement and
its implementation, and in appreciating the other evidence on record.
The parties’ legal characterization of their intent, although not conclusive, is critical in this case because this intent is not
illegal or outside the contemplation of law, particularly of the Insurance and the Civil Codes. From this perspective, the
provisions of the Insurance Code cannot be disregarded as this Code (as heretofore already noted) expressly envisions a
principal-agent relationship between the insurance company and the insurance agent in the sale of insurance to the
public.1awph!1 For this reason, we can take judicial notice that as a matter of Insurance Code-based business practice,
an agency relationship prevails in the insurance industry for the purpose of selling insurance. The Agreement, by its
express terms, is in accordance with the Insurance Code model when it provided for a principal-agent relationship, and
thus cannot lightly be set aside nor simply be considered as an agreement that does not reflect the parties’ true intent.
This intent, incidentally, is reinforced by the system of compensation the Agreement provides, which likewise is in
accordance with the production-based sales commissions the Insurance Code provides.
Significantly, evidence shows that Tongko’s role as an insurance agent never changed during his relationship with
Manulife. If changes occurred at all, the changes did not appear to be in the nature of their core relationship. Tongko
essentially remained an agent, but moved up in this role through Manulife’s recognition that he could use other agents
approved by Manulife, but operating under his guidance and in whose commissions he had a share. For want of a better
term, Tongko perhaps could be labeled as a "lead agent" who guided under his wing other Manulife agents similarly
tasked with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated under their own agency agreements. Thus, if
Tongko’s compensation scheme changed at all during his relationship with Manulife, the change was solely for purposes
of crediting him with his share in the commissions the agents under his wing generated. As an agent who was recruiting
and guiding other insurance agents, Tongko likewise moved up in terms of the reimbursement of expenses he incurred
in the course of his lead agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko
received greater reimbursements for his expenses and was even allowed to use Manulife facilities in his interactions
with the agents, all of whom were, in the strict sense, Manulife agents approved and certified as such by Manulife with
the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable conclusion that
results from the reading of the Agreement (the only agreement on record in this case) and his continuing role
thereunder as sales agent, from the perspective of the Insurance and the Civil Codes and in light of what Tongko himself
attested to as his role as Regional Sales Manager. To be sure, this interpretation could have been contradicted if other
agreements had been submitted as evidence of the relationship between Manulife and Tongko on the latter’s expanded
undertakings. In the absence of any such evidence, however, this reading – based on the available evidence and the
applicable insurance and civil law provisions – must stand, subject only to objective and evidentiary Labor Code tests on
the existence of an employer-employee relationship.
In applying such Labor Code tests, however, the enforcement of the Agreement during the course of the parties’
relationship should be noted. From 1977 until the termination of the Agreement, Tongko’s occupation was to sell
Manulife’s insurance policies and products. Both parties acquiesced with the terms and conditions of the Agreement.
Tongko, for his part, accepted all the benefits flowing from the Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling Manulife
insurance products since he invariably declared himself a business or self-employed person in his income tax returns.
This consistency with, and action made pursuant to the Agreement were pieces of evidence that were never
mentioned nor considered in our Decision of November 7, 2008. Had they been considered, they could, at the very
least, serve as Tongko’s admissions against his interest. Strictly speaking, Tongko’s tax returns cannot but be legally
significant because he certified under oath the amount he earned as gross business income, claimed business
deductions, leading to his net taxable income. This should be evidence of the first order that cannot be brushed aside by
a mere denial. Even on a layman’s view that is devoid of legal considerations, the extent of his annual income alone
renders his claimed employment status doubtful.27
Hand in hand with the concept of admission against interest in considering the tax returns, the concept of estoppel – a
legal and equitable concept28 – necessarily must come into play. Tongko’s previous admissions in several years of tax
returns as an independent agent, as against his belated claim that he was all along an employee, are too diametrically
opposed to be simply dismissed or ignored. Interestingly, Justice Velasco’s dissenting opinion states that Tongko was
forced to declare himself a business or self-employed person by Manulife’s persistent refusal to recognize him as its
employee.29 Regrettably, the dissent has shown no basis for this conclusion, an understandable omission since no
evidence in fact exists on this point in the records of the case. In fact, what the evidence shows is Tongko’s full
conformity with, and action as, an independent agent until his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its conclusion that the Agreement negated
any employment relationship between Tongko and Manulife so that the commissions he earned as a sales agent should
not be considered in the determination of the backwages and separation pay that should be given to him. This part of
the dissent is correct although it went on to twist this conclusion by asserting that Tongko had dual roles in his
relationship with Manulife; he was an agent, not an employee, in so far as he sold insurance for Manulife, but was an
employee in his capacity as a manager. Thus, the dissent concluded that Tongko’s backwages should only be with
respect to his role as Manulife’s manager.
The conclusion with respect to Tongko’s employment as a manager is, of course, unacceptable for the legal, factual and
practical reasons discussed in this Resolution. In brief, the factual reason is grounded on the lack of evidentiary support
of the conclusion that Manulife exercised control over Tongko in the sense understood in the Labor Code. The legal
reason, partly based on the lack of factual basis, is the erroneous legal conclusion that Manulife controlled Tongko and
was thus its employee. The practical reason, on the other hand, is the havoc that the dissent’s unwarranted conclusion
would cause the insurance industry that, by the law’s own design, operated along the lines of principal-agent
relationship in the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that Manulife ever exercised
means-and-manner control, even to a limited extent, over Tongko during his ascent in Manulife’s sales ladder. In 1983,
Tongko was appointed unit manager. Inexplicably, Tongko never bothered to present any evidence at all on what this
designation meant. This also holds true for Tongko’s appointment as branch manager in 1990, and as Regional Sales
Manager in 1996. The best evidence of control – the agreement or directive relating to Tongko’s duties and
responsibilities – was never introduced as part of the records of the case. The reality is, prior to de Dios’ letter, Manulife
had practically left Tongko alone not only in doing the business of selling insurance, but also in guiding the agents under
his wing. As discussed below, the alleged directives covered by de Dios’ letter, heretofore quoted in full, were policy
directions and targeted results that the company wanted Tongko and the other sales groups to realign with in their own
selling activities. This is the reality that the parties’ presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife imposes on its agents in
the sale of insurance. The mere presentation of codes or of rules and regulations, however, is not per se indicative of
labor law control as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on both the insurance company and its agents in the
performance of their respective obligations under the Code, particularly on licenses and their renewals, on the
representations to be made to potential customers, the collection of premiums, on the delivery of insurance policies, on
the matter of compensation, and on measures to ensure ethical business practice in the industry.
The general law on agency, on the other hand, expressly allows the principal an element of control over the agent in a
manner consistent with an agency relationship. In this sense, these control measures cannot be read as indicative of
labor law control. Foremost among these are the directives that the principal may impose on the agent to achieve the
assigned tasks, to the extent that they do not involve the means and manner of undertaking these tasks. The law
likewise obligates the agent to render an account; in this sense, the principal may impose on the agent specific
instructions on how an account shall be made, particularly on the matter of expenses and reimbursements. To these
extents, control can be imposed through rules and regulations without intruding into the labor law concept of control
for purposes of employment.
From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide by the
rules and regulations of an insurance company does not ipso facto make the insurance agent an employee. Neither do
guidelines somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life case tells us, should not merely
relate to the mutually desirable result intended by the contractual relationship; they must have the nature of
dictating the means or methods to be employed in attaining the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means. In fact, results-wise, the principal can impose production quotas
and can determine how many agents, with specific territories, ought to be employed to achieve the company’s
objectives. These are management policy decisions that the labor law element of control cannot reach. Our ruling in
these respects in the first Insular Life case was practically reiterated in Carungcong. Thus, as will be shown more fully
below, Manulife’s codes of conduct,30 all of which do not intrude into the insurance agents’ means and manner of
conducting their sales and only control them as to the desired results and Insurance Code norms, cannot be used as
basis for a finding that the labor law concept of control existed between Manulife and Tongko.
The dissent considers the imposition of administrative and managerial functions on Tongko as indicative of labor law
control; thus, Tongko as manager, but not as insurance agent, became Manulife’s employee. It drew this conclusion
from what the other Manulife managers disclosed in their affidavits (i.e., their enumerated administrative and
managerial functions) and after comparing these statements with the managers in Grepalife. The dissent compared the
control exercised by Manulife over its managers in the present case with the control the managers in the Grepalife case
exercised over their employees by presenting the following matrix:31
Duties of Manulife’s Manager Duties of Grepalife’s Managers/Supervisors

- to render or recommend prospective agents - train understudies for the position of district
to be licensed, trained and contracted to sell manager
Manulife products and who will be part of my
Unit
- to coordinate activities of the agents under - properly account, record and document the
[the managers’] Unit in [the agents’] daily, company’s funds, spot-check and audit the work
weekly and monthly selling activities, making of the zone supervisors, x x x follow up the
sure that their respective sales targets are submission of weekly remittance reports of the
met; debit agents and zone supervisors
- to conduct periodic training sessions for - direct and supervise the sales activities of the
[the] agents to further enhance their sales debit agents under him, x x x undertake and
skill; and discharge the functions of absentee debit agents,
spot-check the record of debit agents, and insure
- to assist [the] agents with their sales proper documentation of sales and collections of
activities by way of joint fieldwork, debit agents.
consultations and one-on-one evaluation and
analysis of particular accounts
Aside from these affidavits however, no other evidence exists regarding the effects of Tongko’s additional roles in
Manulife’s sales operations on the contractual relationship between them.
To the dissent, Tongko’s administrative functions as recruiter, trainer, or supervisor of other sales agents constituted a
substantive alteration of Manulife’s authority over Tongko and the performance of his end of the relationship with
Manulife. We could not deny though that Tongko remained, first and foremost, an insurance agent, and that his
additional role as Branch Manager did not lessen his main and dominant role as insurance agent; this role continued to
dominate the relations between Tongko and Manulife even after Tongko assumed his leadership role among agents.
This conclusion cannot be denied because it proceeds from the undisputed fact that Tongko and Manulife never altered
their July 1, 1977 Agreement, a distinction the present case has with the contractual changes made in the second Insular
Life case. Tongko’s results-based commissions, too, attest to the primacy he gave to his role as insurance sales agent.
The dissent apparently did not also properly analyze and appreciate the great qualitative difference that exists between:
 the Manulife managers’ role is to coordinate activities of the agents under the managers’ Unit in the agents’
daily, weekly, and monthly selling activities, making sure that their respective sales targets are met.
 the District Manager’s duty in Grepalife is to properly account, record, and document the company's funds,
spot-check and audit the work of the zone supervisors, conserve the company's business in the district through
"reinstatements," follow up the submission of weekly remittance reports of the debit agents and zone
supervisors, preserve company property in good condition, train understudies for the position of district
managers, and maintain his quota of sales (the failure of which is a ground for termination).
 the Zone Supervisor’s (also in Grepalife) has the duty to direct and supervise the sales activities of the debit
agents under him, conserve company property through "reinstatements," undertake and discharge the functions
of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and
collections by the debit agents.
These job contents are worlds apart in terms of "control." In Grepalife, the details of how to do the job are specified and
pre-determined; in the present case, the operative words are the "sales target," the methodology being left undefined
except to the extent of being "coordinative." To be sure, a "coordinative" standard for a manager cannot be indicative of
control; the standard only essentially describes what a Branch Manager is – the person in the lead who orchestrates
activities within the group. To "coordinate," and thereby to lead and to orchestrate, is not so much a matter of control
by Manulife; it is simply a statement of a branch manager’s role in relation with his agents from the point of view of
Manulife whose business Tongko’s sales group carries.
A disturbing note, with respect to the presented affidavits and Tongko’s alleged administrative functions, is the selective
citation of the portions supportive of an employment relationship and the consequent omission of portions leading to
the contrary conclusion. For example, the following portions of the affidavit of Regional Sales Manager John Chua, with
counterparts in the other affidavits, were not brought out in the Decision of November 7, 2008, while the other portions
suggesting labor law control were highlighted. Specifically, the following portions of the affidavits were not brought
out:32
1.a. I have no fixed wages or salary since my services are compensated by way of commissions based on the
computed premiums paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method in soliticing insurance at a time and place I see
fit;
1.c. I have my own assistant and messenger who handle my daily work load;
1.d. I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance;
xxxx
6. I have my own staff that handles the day to day operations of my office;
7. My staff are my own employees and received salaries from me;
xxxx
9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a self-
employed individual or professional with a ten (10) percent creditable withholding tax. I also remit monthly for
professionals.
These statements, read with the above comparative analysis of the Manulife and the Grepalife cases, would have readily
yielded the conclusion that no employer-employee relationship existed between Manulife and Tongko.
Even de Dios’ letter is not determinative of control as it indicates the least amount of intrusion into Tongko’s exercise of
his role as manager in guiding the sales agents. Strictly viewed, de Dios’ directives are merely operational guidelines on
how Tongko could align his operations with Manulife’s re-directed goal of being a "big league player." The method is to
expand coverage through the use of more agents. This requirement for the recruitment of more agents is not a means-
and-method control as it relates, more than anything else, and is directly relevant, to Manulife’s objective of expanded
business operations through the use of a bigger sales force whose members are all on a principal-agent relationship. An
important point to note here is that Tongko was not supervising regular full-time employees of Manulife engaged in the
running of the insurance business; Tongko was effectively guiding his corps of sales agents, who are bound to Manulife
through the same Agreement that he had with Manulife, all the while sharing in these agents’ commissions through his
overrides. This is the lead agent concept mentioned above for want of a more appropriate term, since the title of Branch
Manager used by the parties is really a misnomer given that what is involved is not a specific regular branch of the
company but a corps of non-employed agents, defined in terms of covered territory, through which the company sells
insurance. Still another point to consider is that Tongko was not even setting policies in the way a regular company
manager does; company aims and objectives were simply relayed to him with suggestions on how these objectives can
be reached through the expansion of a non-employee sales force.
Interestingly, a large part of de Dios’ letter focused on income, which Manulife demonstrated, in Tongko’s case, to be
unaffected by the new goal and direction the company had set. Income in insurance agency, of course, is dependent on
results, not on the means and manner of selling – a matter for Tongko and his agents to determine and an area into
which Manulife had not waded. Undeniably, de Dios’ letter contained a directive to secure a competent assistant at
Tongko’s own expense. While couched in terms of a directive, it cannot strictly be understood as an intrusion into
Tongko’s method of operating and supervising the group of agents within his delineated territory. More than anything
else, the "directive" was a signal to Tongko that his results were unsatisfactory, and was a suggestion on how Tongko’s
perceived weakness in delivering results could be remedied. It was a solution, with an eye on results, for a consistently
underperforming group; its obvious intent was to save Tongko from the result that he then failed to grasp – that he
could lose even his own status as an agent, as he in fact eventually did.
The present case must be distinguished from the second Insular Life case that showed the hallmarks of an employer-
employee relationship in the management system established. These were: exclusivity of service, control of assignments
and removal of agents under the private respondent’s unit, and furnishing of company facilities and materials as well as
capital described as Unit Development Fund. All these are obviously absent in the present case. If there is a commonality
in these cases, it is in the collection of premiums which is a basic authority that can be delegated to agents under the
Insurance Code.
As previously discussed, what simply happened in Tongko’s case was the grant of an expanded sales agency role that
recognized him as leader amongst agents in an area that Manulife defined. Whether this consequently resulted in the
establishment of an employment relationship can be answered by concrete evidence that corresponds to the
following questions:
 as lead agent, what were Tongko’s specific functions and the terms of his additional engagement;
 was he paid additional compensation as a so-called Area Sales Manager, apart from the commissions he
received from the insurance sales he generated;
 what can be Manulife’s basis to terminate his status as lead agent;
 can Manulife terminate his role as lead agent separately from his agency contract; and
 to what extent does Manulife control the means and methods of Tongko’s role as lead agent?
The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly discussed above.
But strictly speaking, the questions cannot definitively and concretely be answered through the evidence on record. The
concrete evidence required to settle these questions is simply not there, since only the Agreement and the anecdotal
affidavits have been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite confluence of the factors determinative of the
existence of employer-employee relationship, the Court cannot conclusively find that the relationship exists in the
present case, even if such relationship only refers to Tongko’s additional functions. While a rough deduction can be
made, the answer will not be fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made is that the absence of evidence showing Manulife’s
control over Tongko’s contractual duties points to the absence of any employer-employee relationship between Tongko
and Manulife. In the context of the established evidence, Tongko remained an agent all along; although his subsequent
duties made him a lead agent with leadership role, he was nevertheless only an agent whose basic contract yields no
evidence of means-and-manner control.
This conclusion renders unnecessary any further discussion of the question of whether an agent may simultaneously
assume conflicting dual personalities. But to set the record straight, the concept of a single person having the dual role
of agent and employee while doing the same task is a novel one in our jurisprudence, which must be viewed with
caution especially when it is devoid of any jurisprudential support or precedent. The quoted portions in Justice Carpio-
Morales’ dissent,33 borrowed from both the Grepalife and the second Insular Life cases, to support the duality approach
of the Decision of November 7, 2008, are regrettably far removed from their context – i.e., the cases’ factual situations,
the issues they decided and the totality of the rulings in these cases – and cannot yield the conclusions that the
dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers’ appointment as zone supervisor and district
manager made them employees of Grepalife. Indeed, because of the presence of the element of control in their contract
of engagements, they were considered Grepalife’s employees. This did not mean, however, that they were
simultaneously considered agents as well as employees of Grepalife; the Court’s ruling never implied that this situation
existed insofar as the Ruiz brothers were concerned. The Court’s statement – the Insurance Code may govern the
licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor
Code with regard to labor standards and labor relations – simply means that when an insurance company has exercised
control over its agents so as to make them their employees, the relationship between the parties, which was otherwise
one for agency governed by the Civil Code and the Insurance Code, will now be governed by the Labor Code. The reason
for this is simple – the contract of agency has been transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have jurisdiction over an
illegal termination dispute involving parties who had two contracts – first, an original contract (agency contract), which
was undoubtedly one for agency, and another subsequent contract that in turn designated the agent acting unit
manager (a management contract). Both the Insular Life and the labor arbiter were one in the position that both were
agency contracts. The Court disagreed with this conclusion and held that insofar as the management contract is
concerned, the labor arbiter has jurisdiction. It is in this light that we remanded the case to the labor arbiter for further
proceedings. We never said in this case though that the insurance agent had effectively assumed dual personalities for
the simple reason that the agency contract has been effectively superseded by the management contract. The
management contract provided that if the appointment was terminated for any reason other than for cause, the acting
unit manager would be reverted to agent status and assigned to any unit.
The dissent pointed out, as an argument to support its employment relationship conclusion, that any doubt in the
existence of an employer-employee relationship should be resolved in favor of the existence of the relationship.34 This
observation, apparently drawn from Article 4 of the Labor Code, is misplaced, as Article 4 applies only when a doubt
exists in the "implementation and application" of the Labor Code and its implementing rules; it does not apply where no
doubt exists as in a situation where the claimant clearly failed to substantiate his claim of employment relationship by
the quantum of evidence the Labor Code requires.
On the dissent’s last point regarding the lack of jurisprudential value of our November 7, 2008 Decision, suffice it to
state that, as discussed above, the Decision was not supported by the evidence adduced and was not in accordance with
controlling jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the manner the dissent
suggests as the dissenting opinions are as factually and as legally erroneous as the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’ letter, as a
ground for termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence of an
employer-employee relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance,
agency and contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7, 2008, GRANT Manulife’s
motion for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.
SO ORDERED
G.R. No. 157802 October 13, 2010
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER, CATHERINE SPENCER, AND ALEX
MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
DECISION
BERSAMIN, J.:
This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is cognizable by the Labor
Arbiter (LA) or by the Regional Trial Court (RTC). The determination of whether the dismissed officer was a regular
employee or a corporate officer unravels the conundrum. In the case of the regular employee, the LA has jurisdiction;
otherwise, the RTC exercises the legal authority to adjudicate.
In this appeal via petition for review on certiorari, the petitioners challenge the decision dated September 13, 2002 1 and
the resolution dated April 2, 2003,2 both promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial and
Commercial Corporation, et al. v. Ricardo R. Coros and National Labor Relations Commission, whereby by the Court of
Appeals (CA) sustained the ruling of the National Labor Relations Commission (NLRC) to the effect that the LA had
jurisdiction because the respondent was not a corporate officer of petitioner Matling Industrial and Commercial
Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and Administration, the respondent filed on August 10,
2000 a complaint for illegal suspension and illegal dismissal against Matling and some of its corporate officers
(petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.3
The petitioners moved to dismiss the complaint,4 raising the ground, among others, that the complaint pertained to the
jurisdiction of the Securities and Exchange Commission (SEC) due to the controversy being intra-corporate inasmuch as
the respondent was a member of Matling’s Board of Directors aside from being its Vice-President for Finance and
Administration prior to his termination.
The respondent opposed the petitioners’ motion to dismiss,5 insisting that his status as a member of Matling’s Board of
Directors was doubtful, considering that he had not been formally elected as such; that he did not own a single share of
stock in Matling, considering that he had been made to sign in blank an undated indorsement of the certificate of stock
he had been given in 1992; that Matling had taken back and retained the certificate of stock in its custody; and that even
assuming that he had been a Director of Matling, he had been removed as the Vice President for Finance and
Administration, not as a Director, a fact that the notice of his termination dated April 10, 2000 showed.
On October 16, 2000, the LA granted the petitioners’ motion to dismiss,6 ruling that the respondent was a corporate
officer because he was occupying the position of Vice President for Finance and Administration and at the same time
was a Member of the Board of Directors of Matling; and that, consequently, his removal was a corporate act of Matling
and the controversy resulting from such removal was under the jurisdiction of the SEC, pursuant to Section 5, paragraph
(c) of Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,7 urging that:
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING APPELLEE’S MOTION TO
DISMISS WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS OPPOSITION THERETO THEREBY VIOLATING
THE BASIC PRINCIPLE OF DUE PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that the respondent’s complaint for illegal dismissal
was properly cognizable by the LA, not by the SEC, because he was not a corporate officer by virtue of his position in
Matling, albeit high ranking and managerial, not being among the positions listed in Matling’s Constitution and By-Laws.8
The NLRC disposed thuswise:
WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding that the case at bench
does not involve any intracorporate matter. Hence, jurisdiction to hear and act on said case is vested with the Labor
Arbiter, not the SEC, considering that the position of Vice-President for Finance and Administration being held by
complainant-appellant is not listed as among respondent's corporate officers.
Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order that the Labor Arbiter
below could act on the case at bench, hear both parties, receive their respective evidence and position papers fully
observing the requirements of due process, and resolve the same with reasonable dispatch.
SO ORDERED.
The petitioners sought reconsideration,9 reiterating that the respondent, being a member of the Board of Directors, was
a corporate officer whose removal was not within the LA’s jurisdiction.
The petitioners later submitted to the NLRC in support of the motion for reconsideration the certified machine copies of
Matling’s Amended Articles of Incorporation and By Laws to prove that the President of Matling was thereby granted
"full power to create new offices and appoint the officers thereto, and the minutes of special meeting held on June 7,
1999 by Matling’s Board of Directors to prove that the respondent was, indeed, a Member of the Board of Directors.10
Nonetheless, on April 30, 2001, the NLRC denied the petitioners’ motion for reconsideration.11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.-G.R. No. SP 65714, contending
that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in reversing the correct decision of
the LA.
In its assailed decision promulgated on September 13, 2002,12 the CA dismissed the petition for certiorari, explaining:
For a position to be considered as a corporate office, or, for that matter, for one to be considered as a corporate officer,
the position must, if not listed in the by-laws, have been created by the corporation's board of directors, and the
occupant thereof appointed or elected by the same board of directors or stockholders. This is the implication of the
ruling in Tabang v. National Labor Relations Commission, which reads:
"The president, vice president, secretary and treasurer are commonly regarded as the principal or executive officers of a
corporation, and modern corporation statutes usually designate them as the officers of the corporation. However, other
offices are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered
under the by-laws of a corporation to create additional offices as may be necessary.
It has been held that an 'office' is created by the charter of the corporation and the officer is elected by the directors or
stockholders. On the other hand, an 'employee' usually occupies no office and generally is employed not by action of the
directors or stockholders but by the managing officer of the corporation who also determines the compensation to be
paid to such employee."
This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor Relations Commission and De Rossi v.
National Labor Relations Commission.
The position of vice-president for administration and finance, which Coros used to hold in the corporation, was not
created by the corporation’s board of directors but only by its president or executive vice-president pursuant to the by-
laws of the corporation. Moreover, Coros’ appointment to said position was not made through any act of the board of
directors or stockholders of the corporation. Consequently, the position to which Coros was appointed and later on
removed from, is not a corporate office despite its nomenclature, but an ordinary office in the corporation.
Coros’ alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners’ motion for reconsideration on April 2, 2003.13
Issue
Thus, the petitioners are now before the Court for a review on certiorari, positing that the respondent was a
stockholder/member of the Matling’s Board of Directors as well as its Vice President for Finance and Administration; and
that the CA consequently erred in holding that the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer of Matling or not. The resolution of the issue
determines whether the LA or the RTC had jurisdiction over his complaint for illegal dismissal.
Ruling
The appeal fails.
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the LA. This
is pursuant to Article 217 (a) 2 of the Labor Code, as amended, which provides as follows:
Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided under this Code,
the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after
the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages,
rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality
of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (₱5,000.00) regardless of
whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those
arising from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor
Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said
agreements. (As amended by Section 9, Republic Act No. 6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the
jurisdiction of the Securities and Exchange Commission (SEC), because the controversy arises out of intra-corporate or
partnership relations between and among stockholders, members, or associates, or between any or all of them and the
corporation, partnership, or association of which they are stockholders, members, or associates, respectively; and
between such corporation, partnership, or association and the State insofar as the controversy concerns their individual
franchise or right to exist as such entity; or because the controversy involves the election or appointment of a director,
trustee, officer, or manager of such corporation, partnership, or association.14 Such controversy, among others, is known
as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No. 8799,15 otherwise known as The Securities Regulation
Code, the SEC’s jurisdiction over all intra-corporate disputes was transferred to the RTC, pursuant to Section 5.2 of RA
No. 8799, to wit:
5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby
transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme
Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over
these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for
final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall
retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed.
Considering that the respondent’s complaint for illegal dismissal was commenced on August 10, 2000, it might come
under the coverage of Section 5.2 of RA No. 8799, supra, should it turn out that the respondent was a corporate, not a
regular, officer of Matling.
II
Was the Respondent’s Position of Vice President

for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondent’s position as Vice President for Finance and Administration was a
corporate office. If it was, his dismissal by the Board of Directors rendered the matter an intra-corporate dispute
cognizable by the RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and Administration was a corporate office,
having been created by Matling’s President pursuant to By-Law No. V, as amended,16 to wit:
BY LAW NO. V
Officers
The President shall be the executive head of the corporation; shall preside over the meetings of the stockholders and
directors; shall countersign all certificates, contracts and other instruments of the corporation as authorized by the
Board of Directors; shall have full power to hire and discharge any or all employees of the corporation; shall have full
power to create new offices and to appoint the officers thereto as he may deem proper and necessary in the operations
of the corporation and as the progress of the business and welfare of the corporation may demand; shall make reports
to the directors and stockholders and perform all such other duties and functions as are incident to his office or are
properly required of him by the Board of Directors. In case of the absence or disability of the President, the Executive
Vice President shall have the power to exercise his functions.
The petitioners argue that the power to create corporate offices and to appoint the individuals to assume the offices
was delegated by Matling’s Board of Directors to its President through By-Law No. V, as amended; and that any office
the President created, like the position of the respondent, was as valid and effective a creation as that made by the
Board of Directors, making the office a corporate office. In justification, they cite Tabang v. National Labor Relations
Commission,17 which held that "other offices are sometimes created by the charter or by-laws of a corporation, or the
board of directors may be empowered under the by-laws of a corporation to create additional officers as may be
necessary."
The respondent counters that Matling’s By-Laws did not list his position as Vice President for Finance and Administration
as one of the corporate offices; that Matling’s By-Law No. III listed only four corporate officers, namely: President,
Executive Vice President, Secretary, and Treasurer; 18 that the corporate offices contemplated in the phrase "and such
other officers as may be provided for in the by-laws" found in Section 25 of the Corporation Code should be clearly and
expressly stated in the By-Laws; that the fact that Matling’s By-Law No. III dealt with Directors & Officers while its By-
Law No. V dealt with Officers proved that there was a differentiation between the officers mentioned in the two
provisions, with those classified under By-Law No. V being ordinary or non-corporate officers; and that the officer, to be
considered as a corporate officer, must be elected by the Board of Directors or the stockholders, for the President could
only appoint an employee to a position pursuant to By-Law No. V.
We agree with respondent.
Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their election, the directors of a corporation must formally
organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a
secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the
by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as
president and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of
the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the
number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of
corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which
there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a
majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be considered as a
corporate office. Thus, the creation of an office pursuant to or under a By-Law enabling provision is not enough to make
a position a corporate office. Guerrea v. Lezama,19 the first ruling on the matter, held that the only officers of a
corporation were those given that character either by the Corporation Code or by the By-Laws; the rest of the corporate
officers could be considered only as employees or subordinate officials. Thus, it was held in Easycall Communications
Phils., Inc. v. King:20
An "office" is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the
other hand, an employee occupies no office and generally is employed not by the action of the directors or stockholders
but by the managing officer of the corporation who also determines the compensation to be paid to such employee.
In this case, respondent was appointed vice president for nationwide expansion by Malonzo, petitioner’'s general
manager, not by the board of directors of petitioner. It was also Malonzo who determined the compensation package of
respondent. Thus, respondent was an employee, not a "corporate officer." The CA was therefore correct in ruling that
jurisdiction over the case was properly with the NLRC, not the SEC (now the RTC).
This interpretation is the correct application of Section 25 of the Corporation Code, which plainly states that the
corporate officers are the President, Secretary, Treasurer and such other officers as may be provided for in the By-Laws.
Accordingly, the corporate officers in the context of PD No. 902-A are exclusively those who are given that character
either by the Corporation Code or by the corporation’s By-Laws.
A different interpretation can easily leave the way open for the Board of Directors to circumvent the constitutionally
guaranteed security of tenure of the employee by the expedient inclusion in the By-Laws of an enabling clause on the
creation of just any corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency administering the Corporation Code, adopted a
similar interpretation of Section 25 of the Corporation Code in its Opinion dated November 25, 1993,21 to wit:
Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the corporate officers
enumerated in the by-laws are the exclusive Officers of the corporation and the Board has no power to create other
Offices without amending first the corporate By-laws. However, the Board may create appointive positions other than
the positions of corporate Officers, but the persons occupying such positions are not considered as corporate officers
within the meaning of Section 25 of the Corporation Code and are not empowered to exercise the functions of the
corporate Officers, except those functions lawfully delegated to them. Their functions and duties are to be determined
by the Board of Directors/Trustees.
Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate office to the
President, in light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the corporate
officers. Verily, the power to elect the corporate officers was a discretionary power that the law exclusively vested in the
Board of Directors, and could not be delegated to subordinate officers or agents.22 The office of Vice President for
Finance and Administration created by Matling’s President pursuant to By Law No. V was an ordinary, not a corporate,
office.
To emphasize, the power to create new offices and the power to appoint the officers to occupy them vested by By-Law
No. V merely allowed Matling’s President to create non-corporate offices to be occupied by ordinary employees of
Matling. Such powers were incidental to the President’s duties as the executive head of Matling to assist him in the daily
operations of the business.
The petitioners’ reliance on Tabang, supra, is misplaced. The statement in Tabang, to the effect that offices not
expressly mentioned in the By-Laws but were created pursuant to a By-Law enabling provision were also considered
corporate offices, was plainly obiter dictum due to the position subject of the controversy being mentioned in the By-
Laws. Thus, the Court held therein that the position was a corporate office, and that the determination of the rights and
liabilities arising from the ouster from the position was an intra-corporate controversy within the SEC’s jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,23 which may be the more appropriate ruling, the position subject
of the controversy was not expressly mentioned in the By-Laws, but was created pursuant to a By-Law enabling
provision authorizing the Board of Directors to create other offices that the Board of Directors might see fit to create.
The Court held there that the position was a corporate office, relying on the obiter dictum in Tabang.
Considering that the observations earlier made herein show that the soundness of their dicta is not unassailable, Tabang
and Nacpil should no longer be controlling.
III
Did Respondent’s Status as Director and

Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a Director/stockholder of Matling, and relying on Paguio v.
National Labor Relations Commission24 and Ongkingko v. National Labor Relations Commission,25 the NLRC had no
jurisdiction over his complaint, considering that any case for illegal dismissal brought by a stockholder/officer against the
corporation was an intra-corporate matter that must fall under the jurisdiction of the SEC conformably with the context
of PD No. 902-A.
The petitioners’ insistence is bereft of basis.

To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the complainants were undeniably
corporate officers due to their positions being expressly mentioned in the By-Laws, aside from the fact that both of them
had been duly elected by the respective Boards of Directors. But the herein respondent’s position of Vice President for
Finance and Administration was not expressly mentioned in the By-Laws; neither was the position of Vice President for
Finance and Administration created by Matling’s Board of Directors. Lastly, the President, not the Board of Directors,
appointed him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between a stockholder and the corporation. There is no
distinction, qualification or any exemption whatsoever. The provision is broad and covers all kinds of controversies
between stockholders and corporations.26
However, the Tabang pronouncement is not controlling because it is too sweeping and does not accord with reason,
justice, and fair play. In order to determine whether a dispute constitutes an intra-corporate controversy or not, the
Court considers two elements instead, namely: (a) the status or relationship of the parties; and (b) the nature of the
question that is the subject of their controversy. This was our thrust in Viray v. Court of Appeals:27
The establishment of any of the relationships mentioned above will not necessarily always confer jurisdiction over the
dispute on the SEC to the exclusion of regular courts. The statement made in one case that the rule admits of no
exceptions or distinctions is not that absolute. The better policy in determining which body has jurisdiction over a case
would be to consider not only the status or relationship of the parties but also the nature of the question that is the
subject of their controversy.
Not every conflict between a corporation and its stockholders involves corporate matters that only the SEC can resolve
in the exercise of its adjudicatory or quasi-judicial powers. If, for example, a person leases an apartment owned by a
corporation of which he is a stockholder, there should be no question that a complaint for his ejectment for non-
payment of rentals would still come under the jurisdiction of the regular courts and not of the SEC. By the same token, if
one person injures another in a vehicular accident, the complaint for damages filed by the victim will not come under
the jurisdiction of the SEC simply because of the happenstance that both parties are stockholders of the same
corporation. A contrary interpretation would dissipate the powers of the regular courts and distort the meaning and
intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated these determinants thuswise:
In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must pertain to any of the
following relationships:
a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its stockholders, partners, members or officers;
c) between the corporation, partnership or association and the State as far as its franchise, permit or license to
operate is concerned; and
d) among the stockholders, partners or associates themselves.
The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders
and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of SEC. The better policy
to be followed in determining jurisdiction over a case should be to consider concurrent factors such as the status or
relationship of the parties or the nature of the question that is the subject of their controversy. In the absence of any
one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict
between the corporation and its stockholders would involve such corporate matters as only the SEC can resolve in the
exercise of its adjudicatory or quasi-judicial powers.29
The criteria for distinguishing between corporate officers who may be ousted from office at will, on one hand, and
ordinary corporate employees who may only be terminated for just cause, on the other hand, do not depend on the
nature of the services performed, but on the manner of creation of the office. In the respondent’s case, he was
supposedly at once an employee, a stockholder, and a Director of Matling. The circumstances surrounding his
appointment to office must be fully considered to determine whether the dismissal constituted an intra-corporate
controversy or a labor termination dispute. We must also consider whether his status as Director and stockholder had
any relation at all to his appointment and subsequent dismissal as Vice President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice President for Finance and Administration because of his
being a stockholder or Director of Matling. He had started working for Matling on September 8, 1966, and had been
employed continuously for 33 years until his termination on April 17, 2000, first as a bookkeeper, and his climb in 1987
to his last position as Vice President for Finance and Administration had been gradual but steady, as the following
sequence indicates:
1966 – Bookkeeper
1968 – Senior Accountant
1969 – Chief Accountant
1972 – Office Supervisor
1973 – Assistant Treasurer
1978 – Special Assistant for Finance
1980 – Assistant Comptroller
1983 – Finance and Administrative Manager
1985 – Asst. Vice President for Finance and Administration
1987 to April 17, 2000 – Vice President for Finance and Administration
Even though he might have become a stockholder of Matling in 1992, his promotion to the position of Vice President for
Finance and Administration in 1987 was by virtue of the length of quality service he had rendered as an employee of
Matling. His subsequent acquisition of the status of Director/stockholder had no relation to his promotion. Besides, his
status of Director/stockholder was unaffected by his dismissal from employment as Vice President for Finance and
Administration.1avvphi1
In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank manager who had risen from the ranks but
was dismissed, the Court held that her complaint for illegal dismissal was correctly brought to the NLRC, because she
was deemed a regular employee of the bank. The Court observed thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position she
rose to become supervisor. Then in 1982, she was appointed Assistant Vice-President which she occupied until her
illegal dismissal on July 19, 1991. The bank’s contention that she merely holds an elective position and that in effect
she is not a regular employee is belied by the nature of her work and her length of service with the Bank. As earlier
stated, she rose from the ranks and has been employed with the Bank since 1963 until the termination of her
employment in 1991. As Assistant Vice President of the Foreign Department of the Bank, she is tasked, among others, to
collect checks drawn against overseas banks payable in foreign currency and to ensure the collection of foreign bills or
checks purchased, including the signing of transmittal letters covering the same. It has been stated that "the primary
standard of determining regular employment is the reasonable connection between the particular activity performed by
the employee in relation to the usual trade or business of the employer. Additionally, "an employee is regular because of
the nature of work and the length of service, not because of the mode or even the reason for hiring them." As Assistant
Vice-President of the Foreign Department of the Bank she performs tasks integral to the operations of the bank and her
length of service with the bank totaling 28 years speaks volumes of her status as a regular employee of the bank. In fine,
as a regular employee, she is entitled to security of tenure; that is, her services may be terminated only for a just or
authorized cause. This being in truth a case of illegal dismissal, it is no wonder then that the Bank endeavored to the
very end to establish loss of trust and confidence and serious misconduct on the part of private respondent but, as will
be discussed later, to no avail.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of Appeals.
Costs of suit to be paid by the petitioners.
SO ORDERED
G.R. No. 201298 February 5, 2014

RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court, which assails the Decision2
dated November 24, 2011 and Resolution3 dated March 26, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No.
117356, wherein the CA ruled that the Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the jurisdiction
over petitioner Raul C. Cosare's (Cosare) complaint for illegal dismissal against Broadcom Asia, Inc. (Broadcom) and
Dante Arevalo (Arevalo), the President of Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and monetary claims filed with the
National Capital Region Arbitration Branch of the National Labor Relations Commission (NLRC) by Cosare against the
respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo, who was then in the business
of selling broadcast equipment needed by television networks and production houses. In December 2000, Arevalo set up
the company Broadcom, still to continue the business of trading communication and broadcast equipment. Cosare was
named an incorporator of Broadcom, having been assigned 100 shares of stock with par value of ₱1.00 per share.5 In
October 2001, Cosare was promoted to the position of Assistant Vice President for Sales (AVP for Sales) and Head of the
Technical Coordination, having a monthly basic net salary and average commissions of ₱18,000.00 and ₱37,000.00,
respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for Sales and thus, became
Cosare’s immediate superior. On March 23, 2009, Cosare sent a confidential memo7 to Arevalo to inform him of the
following anomalies which were allegedly being committed by Abiog against the company: (a) he failed to report to
work on time, and would immediately leave the office on the pretext of client visits; (b) he advised the clients of
Broadcom to purchase camera units from its competitors, and received commissions therefor; (c) he shared in the
"under the-table dealings" or "confidential commissions" which Broadcom extended to its clients’ personnel and
engineers; and (d) he expressed his complaints and disgust over Broadcom’s uncompetitive salaries and wages and delay
in the payment of other benefits, even in the presence of office staff. Cosare ended his memo by clarifying that he was
not interested in Abiog’s position, but only wanted Arevalo to know of the irregularities for the corporation’s sake.
Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was instead called for a meeting by
Arevalo on March 25, 2009, wherein he was asked to tender his resignation in exchange for "financial assistance" in the
amount of ₱300,000.00.8 Cosare refused to comply with the directive, as signified in a letter9 dated March 26, 2009
which he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s Manager for Finance and
Administration, a memo10 signed by Arevalo, charging him of serious misconduct and willful breach of trust, and
providing in part:
1. A confidential memo was received from the VP for Sales informing me that you had directed, or at the very
least tried to persuade, a customer to purchase a camera from another supplier. Clearly, this action is a gross
and willful violation of the trust and confidence this company has given to you being its AVP for Sales and is an
attempt to deprive the company of income from which you, along with the other employees of this company,
derive your salaries and other benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned in another place outside of
the office without proper turnover from you to this office which had assigned said vehicle to you. The vehicle
was found to be inoperable and in very bad condition, which required that the vehicle be towed to a nearby
auto repair shop for extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the company of your activities within and
outside of company premises despite repeated reminders. However, it has been observed that you have been
both frequently absent and/or tardy without proper information to this office or your direct supervisor, the VP
for Sales Mr. Alex Abiog, of your whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as evidenced by the fact that you
have not recorded any sales for the past immediate twelve (12) months. This was inspite of the fact that my
office decided to relieve you of your duties as technical coordinator between Engineering and Sales since June
last year so that you could focus and concentrate [on] your activities in sales.11
Cosare was given forty-eight (48) hours from the date of the memo within which to present his explanation on the
charges. He was also "suspended from having access to any and all company files/records and use of company assets
effective immediately."12 Thus, Cosare claimed that he was precluded from reporting for work on March 31, 2009, and
was instead instructed to wait at the office’s receiving section. Upon the specific instructions of Arevalo, he was also
prevented by Villareal from retrieving even his personal belongings from the office.
On April 1, 2009, Cosare was totally barred from entering the company premises, and was told to merely wait outside
the office building for further instructions. When no such instructions were given by 8:00 p.m., Cosare was impelled to
seek the assistance of the officials of Barangay San Antonio, Pasig City, and had the incident reported in the barangay
blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a Memo14 by which he addressed and denied the
accusations cited in Arevalo’s memo dated March 30, 2009. The respondents refused to receive the memo on the
ground of late filing, prompting Cosare to serve a copy thereof by registered mail. The following day, April 3, 2009,
Cosare filed the subject labor complaint, claiming that he was constructively dismissed from employment by the
respondents. He further argued that he was illegally suspended, as he placed no serious and imminent threat to the life
or property of his employer and co-employees.15
In refuting Cosare’s complaint, the respondents argued that Cosare was neither illegally suspended nor dismissed from
employment. They also contended that Cosare committed the following acts inimical to the interests of Broadcom: (a)
he failed to sell any broadcast equipment since the year 2007; (b) he attempted to sell a Panasonic HMC 150 Camera
which was to be sourced from a competitor; and (c) he made an unauthorized request in Broadcom’s name for its
principal, Panasonic USA, to issue an invitation for Cosare’s friend, one Alex Paredes, to attend the National Association
of Broadcasters’ Conference in Las Vegas, USA.16 Furthermore, they contended that Cosare abandoned his job17 by
continually failing to report for work beginning April 1, 2009, prompting them to issue on April 14, 2009 a
memorandum18 accusing Cosare of absence without leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19 dismissing the complaint on the
ground of Cosare’s failure to establish that he was dismissed, constructively or otherwise, from his employment. For the
LA, what transpired on March 30, 2009 was merely the respondents’ issuance to Cosare of a show-cause memo, giving
him a chance to present his side on the charges against him. He explained:
It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the charges leveled against him in the show-
cause memo. What he did was to pre-empt that action by filing this complaint just a day after he submitted his written
explanation. Moreover, by specifically seeking payment of "Separation Pay" instead of reinstatement, [Cosare’s] motive
for filing this case becomes more evident.20
It was also held that Cosare failed to substantiate by documentary evidence his allegations of illegal suspension and non-
payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA Menese. The dispositive portion of
the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents are found guilty of Illegal
Constructive Dismissal. Respondents BROADCOM ASIA, INC. and Dante Arevalo are ordered to pay [Cosare’s]
backwages, and separation pay, as well as damages, in the total amount of ₱1,915,458.33, per attached Computation.
SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded to [Cosare’s] contention that
he was constructively dismissed by Respondent Arevalo when he was asked to resign from his employment."23 The fact
that Cosare was suspended from using the assets of Broadcom was also inconsistent with the respondents’ claim that
Cosare opted to abandon his employment.
Exemplary damages in the amount of ₱100,000.00 was awarded, given the NLRC’s finding that the termination of
Cosare’s employment was effected by the respondents in bad faith and in a wanton, oppressive and malevolent manner.
The claim for unpaid commissions was denied on the ground of the failure to include it in the prayer of pleadings filed
with the LA and in the appeal.
The respondents’ motion for reconsideration was denied.24 Dissatisfied, they filed a petition for certiorari with the CA
founded on the following arguments: (1) the respondents did not have to prove just cause for terminating the
employment of Cosare because the latter’s complaint was based on an alleged constructive dismissal; (2) Cosare
resigned and was thus not dismissed from employment; (3) the respondents should not be declared liable for the
payment of Cosare’s monetary claims; and (4) Arevalo should not be held solidarily liable for the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they raised a new argument, i.e., the
case involved an intra-corporate controversy which was within the jurisdiction of the RTC, instead of the LA.25 They
argued that the case involved a complaint against a corporation filed by a stockholder, who, at the same time, was a
corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision26 granting the respondents’ petition. It agreed with the
respondents’ contention that the case involved an intra-corporate controversy which, pursuant to Presidential Decree
No. 902-A, as amended, was within the exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed as one of its directors.
Moreover, he held the position of [AVP] for Sales which is listed as a corporate office. Generally, the president, vice-
president, secretary or treasurer are commonly regarded as the principal or executive officers of a corporation, and
modern corporation statutes usually designate them as the officers of the corporation. However, it bears mentioning
that under Section 25 of the Corporation Code, the Board of Directors of [Broadcom] is allowed to appoint such other
officers as it may deem necessary. Indeed, [Broadcom’s] By-Laws provides:
Article IV
Officer
Section 1. Election / Appointment – Immediately after their election, the Board of Directors shall formally organize by
electing the President, the Vice-President, the Treasurer, and the Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may determine to be necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that [Cosare] indeed held a corporate office,
as evidenced by the General Information Sheet which was submitted to the Securities and Exchange Commission (SEC)
on October 22, 2009.27 (Citations omitted and emphasis supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one dismissing the labor complaint on
the ground of lack of jurisdiction, finding it unnecessary to resolve the main issues that were raised in the petition.
Cosare filed a motion for reconsideration, but this was denied by the CA via the Resolution28 dated March 26, 2012.
Hence, this petition.
The Present Petition
The pivotal issues for the petition’s full resolution are as follows: (1) whether or not the case instituted by Cosare was an
intra-corporate dispute that was within the original jurisdiction of the RTC, and not of the LAs; and (2) whether or not
Cosare was constructively and illegally dismissed from employment by the respondents.
The Court’s Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of the CA, it is the LA, and not
the regular courts, which has the original jurisdiction over the subject controversy. An intra-corporate controversy,
which falls within the jurisdiction of regular courts, has been regarded in its broad sense to pertain to disputes that
involve any of the following relationships: (1) between the corporation, partnership or association and the public; (2)
between the corporation, partnership or association and the state in so far as its franchise, permit or license to operate
is concerned; (3) between the corporation, partnership or association and its stockholders, partners, members or
officers; and (4) among the stockholders, partners or associates, themselves.29 Settled jurisprudence, however, qualifies
that when the dispute involves a charge of illegal dismissal, the action may fall under the jurisdiction of the LAs upon
whose jurisdiction, as a rule, falls termination disputes and claims for damages arising from employer-employee
relations as provided in Article 217 of the Labor Code. Consistent with this jurisprudence, the mere fact that Cosare was
a stockholder and an officer of Broadcom at the time the subject controversy developed failed to necessarily make the
case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished between a "regular employee" and
a "corporate officer" for purposes of establishing the true nature of a dispute or complaint for illegal dismissal and
determining which body has jurisdiction over it. Succinctly, it was explained that "[t]he determination of whether the
dismissed officer was a regular employee or corporate officer unravels the conundrum" of whether a complaint for
illegal dismissal is cognizable by the LA or by the RTC. "In case of the regular employee, the LA has jurisdiction;
otherwise, the RTC exercises the legal authority to adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over the complaint for illegal dismissal
because Cosare, although an officer of Broadcom for being its AVP for Sales, was not a "corporate officer" as the term is
defined by law. We emphasized in Real v. Sangu Philippines, Inc.32 the definition of corporate officers for the purpose of
identifying an intra-corporate controversy. Citing Garcia v. Eastern Telecommunications Philippines, Inc.,33 we held:
" ‘Corporate officers’ in the context of Presidential Decree No. 902-A are those officers of the corporation who are given
that character by the Corporation Code or by the corporation’s by-laws. There are three specific officers whom a
corporation must have under Section 25 of the Corporation Code. These are the president, secretary and the treasurer.
The number of officers is not limited to these three. A corporation may have such other officers as may be provided for
by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager. The number of corporate
officers is thus limited by law and by the corporation’s by-laws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of corporate offices:
It has been held that an "office" is created by the charter of the corporation and the officer is elected by the directors
and stockholders. On the other hand, an "employee" usually occupies no office and generally is employed not by action
of the directors or stockholders but by the managing officer of the corporation who also determines the compensation
to be paid to such employee.36 (Citations omitted)
As may be deduced from the foregoing, there are two circumstances which must concur in order for an individual to be
considered a corporate officer, as against an ordinary employee or officer, namely: (1) the creation of the position is
under the corporation’s charter or by-laws; and (2) the election of the officer is by the directors or stockholders. It is only
when the officer claiming to have been illegally dismissed is classified as such corporate officer that the issue is deemed
an intra-corporate dispute which falls within the jurisdiction of the trial courts.
To support their argument that Cosare was a corporate officer, the respondents referred to Section 1, Article IV of
Broadcom’s by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment – Immediately after their election, the Board of Directors shall formally organize by
electing the President, the Vice-President, the Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be necessary or proper. Any two
(2) or more compatible positions may be held concurrently by the same person, except that no one shall act as President
and Treasurer or Secretary at the same time.37 (Emphasis ours)
This was also the CA’s main basis in ruling that the matter was an intra-corporate dispute that was within the trial
courts’ jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the aforequoted provision, the only
officers who are specifically listed, and thus with offices that are created under Broadcom’s by-laws are the following:
the President, Vice-President, Treasurer and Secretary. Although a blanket authority provides for the Board’s
appointment of such other officers as it may deem necessary and proper, the respondents failed to sufficiently establish
that the position of AVP for Sales was created by virtue of an act of Broadcom’s board, and that Cosare was specifically
elected or appointed to such position by the directors. No board resolutions to establish such facts form part of the case
records. Further, it was held in Marc II Marketing, Inc. v. Joson38 that an enabling clause in a corporation’s by-laws
empowering its board of directors to create additional officers, even with the subsequent passage of a board resolution
to that effect, cannot make such position a corporate office. The board of directors has no power to create other
corporate offices without first amending the corporate by-laws so as to include therein the newly created corporate
office.39 "To allow the creation of a corporate officer position by a simple inclusion in the corporate by-laws of an
enabling clause empowering the board of directors to do so can result in the circumvention of that constitutionally well-
protected right [of every employee to security of tenure]."40
The CA’s heavy reliance on the contents of the General Information Sheets41, which were submitted by the respondents
during the appeal proceedings and which plainly provided that Cosare was an "officer" of Broadcom, was clearly
misplaced. The said documents could neither govern nor establish the nature of the office held by Cosare and his
appointment thereto. Furthermore, although Cosare could indeed be classified as an officer as provided in the General
Information Sheets, his position could only be deemed a regular office, and not a corporate office as it is defined under
the Corporation Code. Incidentally, the Court noticed that although the Corporate Secretary of Broadcom, Atty. Efren L.
Cordero, declared under oath the truth of the matters set forth in the General Information Sheets, the respondents
failed to explain why the General Information Sheet officially filed with the Securities and Exchange Commission in 2011
and submitted to the CA by the respondents still indicated Cosare as an AVP for Sales, when among their defenses in the
charge of illegal dismissal, they asserted that Cosare had severed his relationship with the corporation since the year
2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the case’s filing did not necessarily make
the action an intra- corporate controversy. "Not all conflicts between the stockholders and the corporation are classified
as intra-corporate. There are other facts to consider in determining whether the dispute involves corporate matters as
to consider them as intra-corporate controversies."42 Time and again, the Court has ruled that in determining the
existence of an intra-corporate dispute, the status or relationship of the parties and the nature of the question that is
the subject of the controversy must be taken into account.43 Considering that the pending dispute particularly relates to
Cosare’s rights and obligations as a regular officer of Broadcom, instead of as a stockholder of the corporation, the
controversy cannot be deemed intra-corporate. This is consistent with the "controversy test" explained by the Court in
Reyes v. Hon. RTC, Br. 142,44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of
ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the existence
of an intra-corporate relationship, but must as well pertain to the enforcement of the parties’ correlative rights and
obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation. If the
relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the
relationship does not exist, then no intra-corporate controversy exists.45 (Citation omitted)
It bears mentioning that even the CA’s finding46 that Cosare was a director of Broadcom when the dispute commenced
was unsupported by the case records, as even the General Information Sheet of 2009 referred to in the CA decision to
support such finding failed to provide such detail.
All told, it is then evident that the CA erred in reversing the NLRC’s ruling that favored Cosare solely on the ground that
the dispute was an intra-corporate controversy within the jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the correctness of the NLRC’s ruling
finding Cosare to have been illegally dismissed from employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing among other circumstances
the charges that were hurled and the suspension that was imposed against him via Arevalo’s memo dated March 30,
2009. Even prior to such charge, he claimed to have been subjected to mental torture, having been locked out of his files
and records and disallowed use of his office computer and access to personal belongings.47 While Cosare attempted to
furnish the respondents with his reply to the charges, the latter refused to accept the same on the ground that it was
filed beyond the 48-hour period which they provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the service of the memo,
particularly the continued refusal of the respondents to allow Cosare’s entry into the company’s premises. These
incidents were cited in the CA decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could retrieve his personal belongings,
but the latter said that x x x Arevalo directed her to deny his request, so [Cosare] again waited at the receiving section of
the office. On April 1, 2009, [Cosare] was not allowed to enter the office premises. He was asked to just wait outside of
the Tektite (PSE) Towers, where [Broadcom] had its offices, for further instructions on how and when he could get his
personal belongings. [Cosare] waited until 8 p.m. for instructions but none were given. Thus, [Cosare] sought the
assistance of the officials of Barangay San Antonio, Pasig who advised him to file a labor or replevin case to recover his
personal belongings. x x x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated March 30, 2009, Cosare was allegedly
summoned to Arevalo’s office and was asked to tender his immediate resignation from the company, in exchange for a
financial assistance of ₱300,000.00.49 The directive was said to be founded on Arevalo’s choice to retain Abiog’s
employment with the company.50 The respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosare’s claim of constructive and illegal dismissal. "[C]onstructive
dismissal occurs when there is cessation of work because continued employment is rendered impossible, unreasonable,
or unlikely as when there is a demotion in rank or diminution in pay or when a clear discrimination, insensibility, or
disdain by an employer becomes unbearable to the employee leaving the latter with no other option but to quit."51 In
Dimagan v. Dacworks United, Incorporated,52 it was explained:
The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt compelled
to give up his position under the circumstances. It is an act amounting to dismissal but is made to appear as if it were
not. Constructive dismissal is therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of
employees in order to protect their rights and interests from the coercive acts of the employer.53 (Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosare’s continued involvement with the
company. Even their refusal to accept the explanation which Cosare tried to tender on April 2, 2009 further evidenced
the resolve to deny Cosare of the opportunity to be heard prior to any decision on the termination of his employment.
The respondents allegedly refused acceptance of the explanation as it was filed beyond the mere 48-hour period which
they granted to Cosare under the memo dated March 30, 2009. However, even this limitation was a flaw in the memo or
notice to explain which only further signified the respondents’ discrimination, disdain and insensibility towards Cosare,
apparently resorted to by the respondents in order to deny their employee of the opportunity to fully explain his
defenses and ultimately, retain his employment. The Court emphasized in King of Kings Transport, Inc. v. Mamac54 the
standards to be observed by employers in complying with the service of notices prior to termination:
[T]he first written notice to be served on the employees should contain the specific causes or grounds for termination
against them, and a directive that the employees are given the opportunity to submit their written explanation within a
reasonable period. "Reasonable opportunity" under the Omnibus Rules means every kind of assistance that
management must accord to the employees to enable them to prepare adequately for their defense. This should be
construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity
to study the accusation against them, consult a union official or lawyer, gather data and evidence, and decide on the
defenses they will raise against the complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of the facts and circumstances that will serve
as basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the notice
should specifically mention which company rules, if any, are violated and/or which among the grounds under Art. 282 is
being charged against the employees.55 (Citation omitted, underscoring ours, and emphasis supplied)
In sum, the respondents were already resolute on a severance of their working relationship with Cosare,
notwithstanding the facts which could have been established by his explanations and the respondents’ full investigation
on the matter. In addition to this, the fact that no further investigation and final disposition appeared to have been
made by the respondents on Cosare’s case only negated the claim that they actually intended to first look into the
matter before making a final determination as to the guilt or innocence of their employee. This also manifested from the
fact that even before Cosare was required to present his side on the charges of serious misconduct and willful breach of
trust, he was summoned to Arevalo’s office and was asked to tender his immediate resignation in exchange for financial
assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their persistent accusation that Cosare
abandoned his post, allegedly signified by his failure to report to work or file a leave of absence beginning April 1, 2009.
This was even the subject of a memo56 issued by Arevalo to Cosare on April 14, 2009, asking him to explain his absence
within 48 hours from the date of the memo. As the records clearly indicated, however, Arevalo placed Cosare under
suspension beginning March 30, 2009. The suspension covered access to any and all company files/records and the use
of the assets of the company, with warning that his failure to comply with the memo would be dealt with drastic
management action. The charge of abandonment was inconsistent with this imposed suspension. "Abandonment is the
deliberate and unjustified refusal of an employee to resume his employment. To constitute abandonment of work, two
elements must concur: ‘(1) the employee must have failed to report for work or must have been absent without valid or
justifiable reason; and (2) there must have been a clear intention on the part of the employee to sever the employer-
employee relationship manifested by some overt act.’"57 Cosare’s failure to report to work beginning April 1, 2009 was
neither voluntary nor indicative of an intention to sever his employment with Broadcom. It was illogical to be requiring
him to report for work, and imputing fault when he failed to do so after he was specifically denied access to all of the
company’s assets. As correctly observed by the NLRC:
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on April 1, 2009. However[,] the
show-cause letter dated March 3[0], 2009 (Annex "F", ibid) suspended [Cosare] from using not only the equipment but
the "assets" of Respondent [Broadcom]. This insults rational thinking because the Respondents tried to mislead us and
make [it appear] that [Cosare] failed to report for work when they had in fact had [sic] placed him on suspension. x x
x.58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify the NLRC's monetary awards in
Cosare's favor. In Robinsons Galleria/Robinsons Supermarket Corporation v. Ranchez,59 the Court reiterated that an
illegally or constructively dismissed employee is entitled to: (1) either reinstatement, if viable, or separation pay, if
reinstatement is no longer viable; and (2) backwages.60 The award of exemplary damages was also justified given the
NLRC's finding that the respondents acted in bad faith and in a wanton, oppressive and malevolent manner when they
dismissed Cosare. It is also by reason of such bad faith that Arevalo was correctly declared solidarily liable for the
monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and Resolution dated March 26, 2012 of
the Court of Appeals in CA-G.R. SP. No. 117356 are SET ASIDE. The Decision dated August 24, 2010 of the National Labor
Relations Commission in favor of petitioner Raul C. Cosare is AFFIRMED.
SO ORDERED
G.R. No. 187320 January 26, 2011
ATLANTA INDUSTRIES, INC. and/or ROBERT CHAN, Petitioners,

vs.
APRILITO R. SEBOLINO, KHIM V. COSTALES, ALVIN V. ALMOITE, and JOSEPH S. SAGUN, Respondents.
DECISION
BRION, J.:
For resolution is the petition for review on certiorari1 assailing the decision2 and the resolution3 of the Court of Appeals
(CA) rendered on November 4, 2008 and March 25, 2009, respectively, in CA-G.R. SP. No. 99340.4
The Antecedents
The facts are summarized below.
In the months of February and March 2005, complainants Aprilito R. Sebolino, Khim V. Costales, Alvin V. Almoite, Joseph
S. Sagun, Agosto D. Zaño, Domingo S. Alegria, Jr., Ronie Ramos, Edgar Villagomez, Melvin Pedregoza, Teofanes B. Chiong,
Jr., Leonardo L. dela Cruz, Arnold A. Magalang, and Saturnino M. Mabanag filed several complaints for illegal dismissal,
regularization, underpayment, nonpayment of wages and other money claims, as well as claims for moral and exemplary
damages and attorney’s fees against the petitioners Atlanta Industries, Inc. (Atlanta) and its President and Chief
Operating Officer Robert Chan. Atlanta is a domestic corporation engaged in the manufacture of steel pipes.
The complaints were consolidated and were raffled to Labor Arbiter Daniel Cajilig, but were later transferred to Labor
Arbiter Dominador B. Medroso, Jr.
The complainants alleged that they had attained regular status as they were allowed to work with Atlanta for more than
six (6) months from the start of a purported apprenticeship agreement between them and the company. They claimed
that they were illegally dismissed when the apprenticeship agreement expired.
In defense, Atlanta and Chan argued that the workers were not entitled to regularization and to their money claims
because they were engaged as apprentices under a government-approved apprenticeship program. The company
offered to hire them as regular employees in the event vacancies for regular positions occur in the section of the plant
where they had trained. They also claimed that their names did not appear in the list of employees (Master List) 5 prior to
their engagement as apprentices.
On May 24, 2005, dela Cruz, Magalang, Zaño and Chiong executed a Pagtalikod at Pagwawalang Saysay before Labor
Arbiter Cajilig.
The Compulsory Arbitration Rulings
On April 24, 2006, Labor Arbiter Medroso dismissed the complaint with respect to dela Cruz, Magalang, Zaño and
Chiong, but found the termination of service of the remaining nine to be illegal.6 Consequently, the arbiter awarded the
dismissed workers backwages, wage differentials, holiday pay and service incentive leave pay amounting to
₱1,389,044.57 in the aggregate.
Atlanta appealed to the National Labor Relations Commission (NLRC). In the meantime, or on October 10, 2006, Ramos,
Alegria, Villagomez, Costales and Almoite allegedly entered into a compromise agreement with Atlanta. 7 The agreement
provided that except for Ramos, Atlanta agreed to pay the workers a specified amount as settlement, and to
acknowledge them at the same time as regular employees.
On December 29, 2006,8 the NLRC rendered a decision, on appeal, modifying the ruling of the labor arbiter, as follows:
(1) withdrawing the illegal dismissal finding with respect to Sagun, Mabanag, Sebolino and Pedregoza; (2) affirming the
dismissal of the complaints of dela Cruz, Zaño, Magalang and Chiong; (3) approving the compromise agreement entered
into by Costales, Ramos, Villagomez, Almoite and Alegria, and (4) denying all other claims.
Sebolino, Costales, Almoite and Sagun moved for the reconsideration of the decision, but the NLRC denied the motion in
its March 30, 20079 resolution. The four then sought relief from the CA through a petition for certiorari under Rule 65 of
the Rules of Court. They charged that the NLRC committed grave abuse of discretion in: (1) failing to recognize their
prior employment with Atlanta; (2) declaring the second apprenticeship agreement valid; (3) holding that the dismissal
of Sagun, Mabanag, Sebolino and Melvin Pedregoza is legal; and (4) upholding the compromise agreement involving
Costales, Ramos, Villagomez, Almoite and Alegria.
The CA Decision
The CA granted the petition based on the following findings:10
1. The respondents were already employees of the company before they entered into the first and second
apprenticeship agreements – Almoite and Costales were employed as early as December 2003 and,
subsequently, entered into a first apprenticeship agreement from May 13, 2004 to October 12, 2004; before this
first agreement expired, a second apprenticeship agreement, from October 9, 2004 to March 8, 2005 was
executed. The same is true with Sebolino and Sagun, who were employed by Atlanta as early as March 3, 2004.
Sebolino entered into his first apprenticeship agreement with the company from March 20, 2004 to August 19,
2004, and his second apprenticeship agreement from August 20, 2004 to January 19, 2005. Sagun, on the other
hand, entered into his first agreement from May 28, 2004 to October 8, 2004, and the second agreement from
October 9, 2004 to March 8, 2005.
2. The first and second apprenticeship agreements were defective as they were executed in violation of the law
and the rules.11 The agreements did not indicate the trade or occupation in which the apprentice would be
trained; neither was the apprenticeship program approved by the Technical Education and Skills Development
Authority (TESDA).
3. The positions occupied by the respondents – machine operator, extruder operator and scaleman – are usually
necessary and desirable in the manufacture of plastic building materials, the company’s main business. Costales,
Almoite, Sebolino and Sagun were, therefore, regular employees whose dismissals were illegal for lack of a just
or authorized cause and notice.
4. The compromise agreement entered into by Costales and Almoite, together with Ramos, Villagomez and
Alegria, was not binding on Costales and Almoite because they did not sign the agreement.
The petitioners themselves admitted that Costales and Almoite were initially planned to be a part of the compromise
agreement, but their employment has been regularized as early as January 11, 2006; hence, the company did not pursue
their inclusion in the compromise agreement.12
The CA faulted the NLRC for failing to appreciate the evidence regarding the respondents’ prior employment with
Atlanta. The NLRC recognized the prior employment of Costales and Almoite on Atlanta’s monthly report for December
2003 for the CPS Department/Section dated January 6, 2004.13 This record shows that Costales and Almoite were
assigned to the company’s first shift from 7:00 a.m. to 3:00 p.m. The NLRC ignored Sebolino and Sagun’s prior
employment under the company’s Production and Work Schedule for March 7 to 12, 2005 dated March 3, 2004, 14 as
they had been Atlanta’s employees as early as March 3, 2004, with Sebolino scheduled to work on March 7-12, 2005 at
7:00 a.m. to 7:00 p.m., while Sagun was scheduled to work for the same period but from 7:00 p.m. to 7:00 a.m. The CA
noted that Atlanta failed to challenge the authenticity of the two documents before it and the labor authorities.
Atlanta and Chan moved for reconsideration, but the CA denied the motion in a resolution rendered on March 25,
2009.15 Hence, the present petition.
The Petition
Atlanta seeks a reversal of the CA decision, contending that the appellate court erred in (1) concluding that Costales,
Almoite, Sebolino and Sagun were employed by Atlanta before they were engaged as apprentices; (2) ruling that a
second apprenticeship agreement is invalid; (3) declaring that the respondents were illegally dismissed; and (4)
disregarding the compromise agreement executed by Costales and Almoite. It submits the following arguments:
First. The CA’s conclusion that the respondent workers were company employees before they were engaged as
apprentices was primarily based on the Monthly Report16 and the Production and Work Schedule for March 7-12,
2005,17 in total disregard of the Master List18 prepared by the company accountant, Emelita M. Bernardo. The names of
Costales, Almoite, Sebolino and Sagun do not appear as employees in the Master List which "contained the names of all
the persons who were employed by and at petitioner."19
Atlanta faults the CA for relying on the Production and Work Schedule and the Monthly Report which were not sworn to,
and in disregarding the Master List whose veracity was sworn to by Bernardo and by Alex Go who headed the company’s
accounting division. It maintains that the CA should have given more credence to the Master List.
Second. In declaring invalid the apprenticeship agreements it entered into with the respondent workers, the CA failed to
recognize the rationale behind the law on apprenticeship. It submits that under the law,20 apprenticeship agreements
are valid, provided they do not exceed six (6) months and the apprentices are paid the appropriate wages of at least 75%
of the applicable minimum wage.
The respondents initially executed a five-month apprenticeship program with Atlanta, at the end of which, they
"voluntarily and willingly entered into another apprenticeship agreement with the petitioner for the training of a second
skill"21 for five months; thus, the petitioners committed no violation of the apprenticeship period laid down by the law.
Further, the apprenticeship agreements, entered into by the parties, complied with the requisites under Article 62 of the
Labor Code; the company’s authorized representative and the respondents signed the agreements and these were
ratified by the company’s apprenticeship committee. The apprenticeship program itself was approved and certified by
the TESDA.22 The CA, thus, erred in overturning the NLRC’s finding that the apprenticeship agreements were valid.
Third. There was no illegal dismissal as the respondent workers’ tenure ended with the expiration of the apprenticeship
agreement they entered into. There was, therefore, no regular employer-employee relationship between Atlanta and
the respondent workers.
The Case for Costales, Almoite, Sebolino and Sagun
In a Comment filed on August 6, 2009,23 Costales, Almoite, Sebolino and Sagun pray for a denial of the petition for being
procedurally defective and for lack of merit.
The respondent workers contend that the petition failed to comply with Section 4, Rule 45 of the Rules of Court which
requires that the petition be accompanied by supporting material portions of the records. The petitioners failed to
attach to the petition a copy of the Production and Work Schedule despite their submission that the CA relied heavily on
the document in finding the respondent workers’ prior employment with Atlanta. They also did not attach a copy of the
compromise agreement purportedly executed by Costales and Almoite. For this reason, the respondent workers submit
that the petition should be dismissed.
The respondents posit that the CA committed no error in holding that they were already Atlanta’s employees before
they were engaged as apprentices, as confirmed by the company’s Production and Work Schedule.24 They maintain that
the Production and Work Schedule meets the requirement of substantial evidence as the petitioners failed to question
its authenticity. They point out that the schedule was prepared by Rose A. Quirit and approved by Adolfo R. Lope, head
of the company’s PE/Spiral Section. They argue that it was highly unlikely that the head of a production section of the
company would prepare and assign work to the complainants if the latter had not been company employees.
The respondent workers reiterate their mistrust of the Master List25 as evidence that they were not employees of the
company at the time they became apprentices. They label the Master List as "self-serving, dubious and even if
considered as authentic, its content contradicts a lot of petitioner’s claim and allegations,"26 thus -
1. Aside from the fact that the Master List is not legible, it contains only the names of inactive employees. Even
those found by the NLRC to have been employed in the company (such as Almoite, Costales and Sagun) do not
appear in the list. If Costales and Almoite had been employed with Atlanta since January 11, 2006, as the
company claimed,27 their names would have been in the list, considering that the Master List accounts for all
employees "as of May 2006" – the notation carried on top of each page of the document.
2. There were no entries of employees hired or resigned in the years 2005 and 2006 despite the "as of May
2006" notation; several pages making up the Master List contain names of employees for the years 1999 - 2004.
3. The fact that Atlanta presented the purported Master List instead of the payroll raised serious doubts on the
authenticity of the list.
In sum, the respondent workers posit that the presentation of the Master List revealed the "intention of the herein
petitioner[s] to perpetually hide the fact of [their] prior employment."28
On the supposed apprenticeship agreements they entered into, Costales, Almoite, Sebolino and Sagun refuse to accept
the agreements’ validity, contending that the company’s apprenticeship program is merely a ploy "to continually deprive
[them] of their rightful wages and benefits which are due them as regular employees."29 They submit the following
"indubitable facts and ratiocinations:"30
1. The apprenticeship agreements were submitted to TESDA only in 2005 (with dates of receipt on "1/4/05" &
"2/22/05"31 ), when the agreements were supposed to have been executed in April or May 2004. Thus, the
submission was made long after the starting date of the workers’ apprenticeship or even beyond the
agreement’s completion/termination date, in violation of Section 23, Rule VI, Book II of the Labor Code.
2. The respondent workers were made to undergo apprenticeship for occupations different from those allegedly
approved by TESDA. TESDA approved Atlanta’s apprenticeship program on "Plastic Molder"32 and not for
extrusion molding process, engineering, pelletizing process and mixing process.
3. The respondents were already skilled workers prior to the apprenticeship program as they had been
employed and made to work in the different job positions where they had undergone training. Sagun and
Sebolino, together with Mabanag, Pedregoza, dela Cruz, Chiong, Magalang and Alegria were even given
production assignments and work schedule at the PE/Spiral Section from May 11, 2004 to March 23, 2005, and
some of them were even assigned to the 3:00 p.m. – 11:00 p.m. and graveyard shifts (11:00 p.m. – 7:00 a.m.)
during the period.33
4. The respondent workers were required to continue as apprentices beyond six months. The TESDA certificate
of completion indicates that the workers’ apprenticeship had been completed after six months. Yet, they were
suffered to work as apprentices beyond that period.
Costales, Almoite, Sebolino and Sagun resolutely maintain that they were illegally dismissed, as the reason for the
termination of their employment – notice of the completion of the second apprenticeship agreement – did not
constitute either a just or authorized cause under Articles 282 and 283 of the Labor Code.
Finally, Costales and Almoite refuse to be bound by the compromise agreement34 that Atlanta presented to defeat the
two workers’ cause of action. They claim that the supposed agreement is invalid as against them, principally because
they did not sign it.
The procedural issue
The respondent workers ask that the petition be dismissed outright for the petitioners’ failure to attach to the petition a
copy of the Production and Work Schedule and a copy of the compromise agreement Costales and Almoite allegedly
entered into — material portions of the record that should accompany and support the petition, pursuant to Section 4,
Rule 45 of the Rules of Court.
In Mariners Polytechnic Colleges Foundation, Inc. v. Arturo J. Garchitorena35 where the Court addressed essentially the
same issue arising from Section 2(d), Rule 42 of the Rules of Court,36 we held that the phrase "of the pleadings and other
material portions of the record xxx as would support the allegation of the petition clearly contemplates the exercise of
discretion on the part of the petitioner in the selection of documents that are deemed to be relevant to the petition. The
crucial issue to consider then is whether or not the documents accompanying the petition sufficiently supported the
allegations therein."37
As in Mariners, we find that the documents attached to the petition sufficiently support the petitioners’ allegations. The
accompanying CA decision38 and resolution,39 as well as those of the labor arbiter40 and the NLRC,41 referred to the
parties’ position papers and even to their replies and rejoinders. Significantly, the CA decision narrates the factual
antecedents, defines the complainants’ cause of action, and cites the arguments, including the evidence the parties
adduced. If any, the defect in the petition lies in the petitioners’ failure to provide legible copies of some of the material
documents mentioned, especially several pages in the decisions of the labor arbiter and of the NLRC. This defect,
however, is not fatal as the challenged CA decision clearly summarized the labor tribunal’s rulings. We, thus, find no
procedural obstacle in resolving the petition on the merits.
The merits of the case
We find no merit in the petition. The CA committed no reversible error in nullifying the NLRC decision42 and in affirming
the labor arbiter’s ruling,43 as it applies to Costales, Almoite, Sebolino and Sagun. Specifically, the CA correctly ruled that
the four were illegally dismissed because (1) they were already employees when they were required to undergo
apprenticeship and (2) apprenticeship agreements were invalid.
The following considerations support the CA ruling.
First. Based on company operations at the time material to the case, Costales, Almoite, Sebolino and Sagun were already
rendering service to the company as employees before they were made to undergo apprenticeship. The company itself
recognized the respondents’ status through relevant operational records – in the case of Costales and Almoite, the CPS
monthly report for December 200344 which the NLRC relied upon and, for Sebolino and Sagun, the production and work
schedule for March 7 to 12, 200545 cited by the CA.
Under the CPS monthly report, Atlanta assigned Costales and Almoite to the first shift (7:00 a.m. to 3:00 p.m.) of the
Section’s work. The Production and Work Schedules, in addition to the one noted by the CA, showed that Sebolino and
Sagun were scheduled on different shifts vis-à-vis the production and work of the company’s PE/Spiral Section for the
periods July 5-10, 2004;46 October 25-31, 2004;47 November 8-14, 2004;48 November 16-22, 2004;49 January 3-9, 2005;50
January 10-15, 2005;51 March 7-12, 200552 and March 17-23, 2005.53
We stress that the CA correctly recognized the authenticity of the operational documents, for the failure of Atlanta to
raise a challenge against these documents before the labor arbiter, the NLRC and the CA itself. The appellate court, thus,
found the said documents sufficient to establish the employment of the respondents before their engagement as
apprentices.
Second. The Master List54 (of employees) that the petitioners heavily rely upon as proof of their position that the
respondents were not Atlanta’s employees, at the time they were engaged as apprentices, is unreliable and does not
inspire belief.
The list, consisting of several pages, is hardly legible. It requires extreme effort to sort out the names of the employees
listed, as well as the other data contained in the list. For this reason alone, the list deserves little or no consideration. As
the respondents also pointed out, the list itself contradicts a lot of Atlanta’s claims and allegations, thus: it lists only the
names of inactive employees; even the names of those the NLRC found to have been employed by Atlanta, like Costales
and Almoite, and those who even Atlanta claims attained regular status on January 11, 2006, 55 do not appear in the list
when it was supposed to account for all employees "as of May 6, 2006." Despite the "May 6, 2006" cut off date, the list
contains no entries of employees who were hired or who resigned in 2005 and 2006. We note that the list contains the
names of employees from 1999 to 2004.
We cannot fault the CA for ignoring the Master List even if Bernardo, its head office accountant, swore to its correctness
and authenticity.56 Its substantive unreliability gives it very minimal probative value. Atlanta would have been better
served, in terms of reliable evidence, if true copies of the payroll (on which the list was based, among others, as
Bernardo claimed in her affidavit) were presented instead.1âwphi1
Third. The fact that Costales, Almoite, Sebolino and Sagun were already rendering service to the company when they
were made to undergo apprenticeship (as established by the evidence) renders the apprenticeship agreements
irrelevant as far as the four are concerned. This reality is highlighted by the CA finding that the respondents occupied
positions such as machine operator, scaleman and extruder operator - tasks that are usually necessary and desirable in
Atlanta’s usual business or trade as manufacturer of plastic building materials.57 These tasks and their nature
characterized the four as regular employees under Article 280 of the Labor Code. Thus, when they were dismissed
without just or authorized cause, without notice, and without the opportunity to be heard, their dismissal was illegal
under the law.58
Even if we recognize the company’s need to train its employees through apprenticeship, we can only consider the first
apprenticeship agreement for the purpose. With the expiration of the first agreement and the retention of the
employees, Atlanta had, to all intents and purposes, recognized the completion of their training and their acquisition of
a regular employee status. To foist upon them the second apprenticeship agreement for a second skill which was not
even mentioned in the agreement itself,59 is a violation of the Labor Code’s implementing rules60 and is an act manifestly
unfair to the employees, to say the least. This we cannot allow.
Fourth. The compromise agreement61 allegedly entered into by Costales and Almoite, together with Ramos, Villagomez
and Alegria, purportedly in settlement of the case before the NLRC, is not binding on Costales and Almoite because they
did not sign it. The company itself admitted62 that while Costales and Almoite were initially intended to be a part of the
agreement, it did not pursue their inclusion "due to their regularization as early as January 11, 2006."63
WHEREFORE, premises considered, we hereby DENY the petition for lack of merit.1âwphi1 The assailed decision and
resolution of the Court of Appeals are AFFIRMED. Costs against the petitioner Atlanta Industries, Inc.
SO ORDERED
G.R. No. 200575 February 5, 2014
INTEL TECHNOLOGY PHILIPPINES, INC., Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND JEREMIAS CABILES, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner Intel Technology
Philippines, Inc. (Intel Phil.). It assails the October 28, 20111 and February 3, 20122 Resolutions of the Court of Appeals
(CA) in CA-G.R. SP No.118880, which dismissed the petition for certiorari filed by Intel Phil. thereby affirming the
September 2, 2010 Decision3 of the National Labor Relations Commission (NLRC) and its February 9, 2011 Resolution.
The NLRC decision modified the March 18, 2010 Decision4 of the Labor Arbiter (LA), and held Intel Phil. solely liable for
the retirement benefits of respondent Jeremias Cabiles (Cabiles).
The Facts
This case concerns the eligibility of Cabiles to receive retirement benefits from Intel Phil. granted to employees who had
complied with the ten (10)-year service period requirement of the company.
Cabiles was initially hired by Intel Phil. on April 16, 1997 as an Inventory Analyst. He was subsequently promoted several
times over the years and was also assigned at Intel Arizona and Intel Chengdu. He later applied for a position at Intel
Semiconductor Limited Hong Kong (Intel HK).
In a letter,5 dated December 12, 2006, Cabiles was offered the position of Finance Manager by Intel HK. Before
accepting the offer, he inquired from Intel Phil., through an email, the consequences of accepting the newly presented
opportunity in Hong Kong, to wit:
Are there any clearance requirements I need to fulfil as I move as a local hire to Hong Kong starting February 1?? I am
still on my expat assignment in Chengdu till it ends January 31. Then immediately I become a HK local employee so I
don’t technically repatriate and work back to my home site Philippines at all. Nevertheless, I still need to close I think my
employment there and so that all my ES benefits and clearance will be closed like conversion of my vacation leaves to
cash, carry over of my service tenure in CV to HK etc. Please do let me know what process I need to go through or would
an email notification be enough?
Another issue I would like to clarify is with regard to my retirement benefits. I will celebrate my 10th year of service with
Intel on April 16, 2007. However, because I will be moving to Hong Kong as a local hire starting February 1, would I still
be entitled to retirement benefits?? Do we roundup the years of service if its close enough to 10 years?? If not, what
other alternatives I have or do I just lose my years of service at Intel Philippines? Any possibility that I keep my 9.5 years
and start from there when I work in the Philippines again in the future??6
On January 23, 2007, Intel Phil., through Penny Gabronino (Gabronino), replied as follows:
Jerry – you are not eligible to receive your retirement benefit given that you have not reached 10 years of service at the
time you moved to Hong Kong. We do not round up the years of service.
There will [be] no gap in your years of service. So in case that you move back to the Philippines your total tenure of
service will be computed less on the period that you are out of Intel Philippines.7 [Emphasis supplied]
On January 31, 2007, Cabiles signed the job offer.8
On March 8, 2007, Intel Phil. issued Cabiles his "Intel Final Pay Separation Voucher" indicating a net payout of
₱165,857.62. On March 26, 2007, Cabiles executed a Release, Waiver and Quitclaim (Waiver)9 in favor of Intel Phil.
acknowledging receipt of ₱165,857.62 as full and complete settlement of all benefits due him by reason of his
separation from Intel Phil.
On September 8, 2007, after seven (7) months of employment, Cabiles resigned from Intel HK.
About two years thereafter, or on August 18, 2009, Cabiles filed a complaint for non-payment of retirement benefits and
for moral and exemplary damages with the NLRC Regional Arbitration Branch-IV. He insisted that he was employed by
Intel for 10 years and 5 months from April 1997 to September 2007 – a period which included his seven (7) month stint
with Intel HK. Thus, he believed he was qualified to avail of the benefits under the company’s retirement policy allowing
an employee who served for 10 years or more to receive retirement benefits.
The Labor Arbiter’s Decision
On March 18, 2010, the LA ordered Intel Phil. together with Grace Ong, Nida delos Santos, Gabronino, and Pia Viloria, to
pay Cabiles the amount of HKD 419,868.77 or its peso equivalent as retirement pay with legal interest and attorney’s
fees. The LA held that Cabiles did not sever his employment with Intel Phil. when he moved to Intel HK, similar to the
instances when he was assigned at Intel Arizona and Intel Chengdu. Despite the clarification made by Intel Phil.
regarding his ineligibility to receive retirement benefits, the LA stated that Cabiles could not be faulted if he was made to
believe his non-entitlement to retirement benefits. Thus, it should not prevent him from asserting his right to receive
them. Finally, the Waiver executed by Cabiles when he left Intel Phil., was treated by the LA as no bar for claiming his
retirement pay because it merely covered the last salary and commutation of sick leaves and vacation leaves to the
exclusion of retirement benefits. The dispositive portion of the LA decision reads:
WHEREFORE, premises considered, Respondents are hereby ordered to pay complainant the amount of Four Hundred
Nineteen Thousand Eight Hundred Sixty-Eight and 77/100 Hong Kong Dollars (HKD419,868.77) or its Peso equivalent as
retirement pay with legal interest until satisfied, and to pay attorney’s fees equivalent to ten percent (10%) of the
judgment award.
SO ORDERED.10
The NLRC Ruling
On appeal, the NLRC affirmed with modification the LA decision. In its September 2, 2010 Decision, the NLRC held Intel
Phil. solely liable to pay Cabiles his retirement benefits. It determined that his decision to move to Intel HK was not
definitive proof of permanent severance of his ties with Intel Phil. It treated his transfer to Hong Kong as akin to his
overseas assignments in Arizona and Chengdu. As to the email exchange between Cabiles and Intel Phil., the NLRC
considered the same as insufficient to diminish his right over retirement benefits under the law. Meanwhile, the NLRC
disregarded the Waiver because at the time it was signed, the retirement pay due him had not yet accrued. Hence:
WHEREFORE, the appealed Decision is MODIFIED. Respondent-appellant Intel Technology Phil., Inc. is ordered to pay
complainant-appellee Jeremias Cabiles the sum [xx] of Four Hundred Nineteen Thousand Eight Hundred Sixty Eight and
77/100 Hong Kong Dollars (HKD419,868.77) or its equivalent in Philippine peso as retirement pay together with legal
interest thereon and attorney’s fees computed at ten percent (10%) of the award.
The individual respondents-appellants Grace Ong, Nida delos Santos, Penny Gabronino and Pia Viloria are RELIEVED
from any personal liability resulting from the foregoing.
SO ORDERED.11
Intel Phil. moved for reconsideration but its motion was denied in the NLRC Resolution,12 dated February 9, 2011.
The CA Decision
Aggrieved, Intel Phil. elevated the case to the CA via a petition for certiorari with application for a Temporary Restraining
Order (TRO) on April 5, 2011. The application for TRO was denied in a Resolution, dated July 5, 2011. A motion for
reconsideration, dated July 27, 2011, was filed, but it was denied in a Resolution, dated October 28, 2011, which also
dismissed the petition for certiorari.13
On December 1, 2011, Intel Phil. filed a motion for reconsideration.
Earlier, on September 19, 2011, pending disposition of the petition before the CA, the NLRC issued a writ of execution14
against Intel Phil.:
NOW, THEREFORE, you are commanded to proceed to the premises of respondent INTEL TECHNOLOGY PHILIPPINES,
INCORPORATED located at Gateway Business Park, Javalera, General Trias, Cavite or anywhere in the Philippines where
it could be located to collect the amount of Three Million Two Hundred One Thousand Three Hundred Ninety Eight
Pesos and Sixty Centavos (₱3,201,398.60) and turn over the same to this Office for appropriate disposition.
You are likewise directed to collect from the respondents the amount of Thirty One Thousand Five Hundred Ten Pesos
(₱31,510.00) representing the execution fees pursuant to the provisions of the NLRC Manual of Execution of Judgment.
In case you fail to collect the said amount in cash, you are directed to cause the satisfaction of the same out of the
respondents’ chattels or movable goods or in the absence thereof, out of the immovable properties not exempt from
execution and return this Writ of Execution to the undersigned not more than five (5) years from receipt hereof together
with the report not later than thirty (30) days from receipt and every thirty (30) days thereafter pursuant to Section 12,
Rule XI of the 2001 NLRC Rules of Procedures.15
As ordered by the NLRC, Intel Phil. satisfied the judgment on December 13, 2011 by paying the amount of ₱3,201,398.60
which included the applicable withholding taxes due and paid to the Bureau of InternalRevenue. Cabiles received a net
amount of ₱2,485,337.35, covered by the Bank of the Philippine Islands Manager’s Check No. 0000000806.16
By reason thereof, Intel Phil. filed on December 21, 2011 a Supplement to the Petition for Certiorari17 praying, in
addition to the reliefs sought in the main, that the CA order the restitution of all the amounts paid by them pursuant to
the NLRC’s writ of execution, dated September 19, 2011.
In its February 3, 2012 Resolution,18 the CA noted without action the supplement to the petition for certiorari of Intel
Phil. and denied the December 21, 2011 motion for reconsideration.
Hence, this petition.
ISSUES
The Court of Appeals committed serious error in dismissing the Petition for Certiorari without expressing clearly and
distinctly the facts and the law on which its decision was based.
II
The Court of appeals committed serious and reversible error in not finding that respondent NLRC gravely abused its
discretion when it ruled that private respondent was entitled to retire under Intel Philippines’ retirement plan.
III
The Court of Appeals committed serious and reversible error in not finding that respondent NLRC gravely abused its
discretion in annulling private respondent’s quitclaim.
IV
The Court of Appeals committed serious and reversible error in not finding that Cabiles has the legal obligation to return
all the amounts paid by Intel pursuant to the writ of execution.19
Intel Phil. insists as serious error the CA’s affirmation of the NLRC decision holding it liable for the retirement benefits
claimed by Cabiles. It contends that he is disqualified to receive the benefits for his failure to complete the required
minimum ten (10) years of service as he resigned to assume new responsibilities with Intel HK effective February 1,
2007.
Respondent’s Position
In his Comment,20 Cabiles submits (1) that the petition presents questions of fact which cannot be reviewed via Rule 45;
and (2) that the CA did not err when it affirmed the NLRC ruling:
(a) for his entitlement to retirement pay as he was under the employ of Intel Phil. for more than ten (10) years in
accordance with the prevailing retirement policy;
(b) for the nullity of the quitclaim as he was misled to believe that he was disqualified to receive retirement
benefits; and
(c) for his right to receive legal interest, damages and attorney’s fees.
Cabiles views his employment with Intel HK as a continuation of his service with Intel Phil. alleging that it was but an
assignment by his principal employer, similar to his assignments to Intel Arizona and Intel Chengdu. Having rendered 9.5
years of service with Intel Phil. and an additional seven months with Intel HK, he claims that he had completed the
required 10 year continuous service21 with Intel Phil., thus, qualifying him for retirement benefits.
In its Reply, Intel Phil. reiterates the arguments contained in its petition.
Review of Factual Findings
As a general rule, this Court is not a trier of facts and a petition for review on certiorari under Rule 45 of the Rules of
Court must exclusively raise questions of law.22 Nevertheless, this Court will not hesitate to deviate from what are
clearly procedural guidelines and disturb and strike down the findings of the CA and those of the labor tribunals if there
is a showing that they are unsupported by the evidence on record or there was a patent misappreciation of facts.
Indeed, that the impugned decision of the CA is consistent with the findings of the labor tribunals does not per se
conclusively demonstrate its correctness. By way of exception to the general rule, this Court will scrutinize the facts if
only to rectify the prejudice and injustice resulting from an incorrect assessment of the evidence presented.23
It is in this wise that the Court agrees with Intel Phil. that the CA seriously erred in affirming the findings of the NLRC on
the face of substantial evidence showing Cabiles’ disqualification to receive the retirement benefits. The Court,
therefore, reverses the ruling of the CA for the reasons hereinafter discussed.
Cabiles Resigned from Intel Philippines
Cabiles calls the attention of the Court to the lack of evidence proving his resignation. On the contrary, he states that no
severance of relationship was made upon his transfer to Intel HK.
The Court is not convinced.
Resignation is the formal relinquishment of an office,24 the overt act of which is coupled with an intent to renounce.
This intent could be inferred from the acts of the employee before and after the alleged resignation.25
In this case, Cabiles, while still on a temporary assignment in Intel Chengdu, was offered by Intel HK the job of a Finance
Manager.
In contemplating whether to accept the offer, Cabiles wrote Intel Phil. providing details and asking as follows:
Are there any clearance requirements I need to fulfil as I move as a local hire to Hong Kong starting February 1?? I am
still on my expat assignment in Chengdu till it ends January 31. Then immediately I become a HK local employee so I
don’t technically repatriate and work back to my home site Philippines at all.
Nevertheless, I still need to close I think my employment there and so that all my ES benefits and clearance will be
closed like conversion of my vacation leaves to cash, carry over of my service tenure in CV to HK etc. Please do let me
know what process I need to go through or would an email notification be enough?
Another issue I would like to clarify is with regard to my retirement benefits. Will celebrate my 10th year of service with
Intel on April 16, 2007. However, because I will be moving to Hong Kong as a local hire starting February 1, would I still
be entitled to retirement benefits?? Do we roundup the years of service if its close enough to 10 years?? If not, what
other alternatives I have or do I just lose my years of service at Intel Philippines? Any possibility that I keep my 9.5 years
and start it from there when I work in the Philippines again in the future??26 [Emphases supplied]
This communication manifested two of his main concerns: a) clearance procedures; and b) the probability of getting his
retirement pay despite the non-completion of the required 10 years of employment service. Beyond these concerns,
however, was his acceptance of the fact that he would be ending his relationship with Intel Phil. as his employer. The
words he used - local hire, close, clearance – denote nothing but his firm resolve to voluntarily disassociate himself from
Intel Phil. and take on new responsibilities with Intel HK.
Despite a non-favorable reply as to his retirement concerns, Cabiles still accepted the offer of Intel HK.
His acceptance of the offer meant letting go of the retirement benefits he now claims as he was informed through email
correspondence that his 9.5 years of service with Intel Phil. would not be rounded off in his favor. He, thus, placed
himself in this position, as he chose to be employed in a company that would pay him more than what he could earn in
Chengdu or in the Philippines.
The choice of staying with Intel Phil. vis-à-vis a very attractive opportunity with Intel HK put him in a dilemma. If he
would wait to complete ten (10) years of service with Intel Phil. (in about 4 months) he would enjoy the fruits of his
retirement but at the same time it would mean forfeiture of Intel HK’s compensation offer in the amount of HK $
942,500.00, an amount a lot bigger than what he would receive under the plan. He decided to forfeit and became Intel
HK’s newest hire.
All these are indicative of the clearest intent of Cabiles to sever ties with Intel Phil. He chose to forego his tenure with
Intel Phil., with all its associated benefits, in favor of a more lucrative job for him and his family with Intel HK.
The position of Cabiles that he was being merely assigned leads the Court to its next point.
No Secondment Contract Exists
Cabiles views his employment in Hong Kong as an assignment or an extension of his employment with Intel Phil. He cited
as evidence the offer made to him as well as the letter, dated January 8, 2007,27 both of which used the word
"assignment" in reference to his engagement in Hong Kong as a clear indication of the alleged continuation of his ties
with Intel Phil.
The foregoing arguments of Cabiles, in essence, speak of the "theory of secondment."
The Court, however, is again not convinced.
The continuity, existence or termination of an employer-employee relationship in a typical secondment contract or any
employment contract for that matter is measured by the following yardsticks:
1. the selection and engagement of the employee;
2. the payment of wages;
3. the power of dismissal; and
4. the employer’s power to control the employee’s conduct.28
As applied, all of the above benchmarks ceased upon Cabiles’ assumption of duties with Intel HK on February 1, 2007.
Intel HK became the new employer. It provided Cabiles his compensation. Cabiles then became subject to Hong Kong
labor laws, and necessarily, the rights appurtenant thereto, including the right of Intel HK to fire him on available
grounds. Lastly, Intel HK had control and supervision over him as its new Finance Manager. Evidently, Intel Phil. no
longer had any control over him.
Although in various instances, his move to Hong Kong was referred to as an "assignment," it bears stressing that it was
categorized as a "permanent transfer." In Sta. Maria v. Lopez,29 the Court held that "no permanent transfer can take
place unless the officer or employee is first removed from the position held, and then appointed to another position."
Undoubtedly, Cabiles’ decision to move to Hong Kong required the abandonment of his permanent position with Intel
Phil. in order for him to assume a position in an entirely different company. Clearly, the "transfer" was more than just an
assignment. It constituted a severance of Cabiles’ relationship with Intel Phil., for the assumption of a position with a
different employer, rank, compensation and benefits.
Hence, Cabiles’ theory of secondment must fail.
The NLRC, however, was of the view that the transfer of Cabiles to Intel HK was similar to his assignments in Intel
Chengdu and Intel Arizona.
The Court finds this conclusion baseless.
What distinguishes Intel Chengdu and Intel Arizona from Intel HK is the lack of intervention of Intel Phil. on the matter.
In the two previous transfers, Intel Phil. remained as the principal employer while Cabiles was on a temporary
assignment. By virtue of which, it still assumed responsibility for the payment of compensation and benefits due him.
The assignment to Intel HK, on the other hand, was a permanent transfer and Intel Phil. never participated in any way in
the process of his employment there. It was Cabiles himself who took the opportunity and the risk. If it were indeed
similar to Intel Arizona and Intel Chengdu assignments, Intel Philippines would have had a say in it.
Release, Waiver and Quitclaim Valid Terms Are Clear
Contrary to the conclusion affirmed by the CA, the Waiver executed by Cabiles was valid.
In Goodrich Manufacturing Corporation, v. Ativo,30 the Court reiterated the standards that must be observed in
determining whether a waiver and quitclaim had been validly executed:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and
represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a
change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable
transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what
he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as
a valid and binding undertaking.
In Callanta v. National Labor Relations Commission,31 this Court ruled that:
It is highly unlikely and incredible for a man of petitioner’s position and educational attainment to so easily succumb to
private respondent company’s alleged pressures without even defending himself nor demanding a final audit report
before signing any resignation letter. Assuming that pressure was indeed exerted against him, there was no urgency for
petitioner to sign the resignation letter. He knew the nature of the letter that he was signing, for as argued by
respondent company, petitioner being "a man of high educational attainment and qualification, x x x he is expected to
know the import of everything that he executes, whether written or oral.32
Here, the NLRC concluded in its February 9, 2011 Resolution33 that the Waiver was executed merely to allow Intel Phil.
to escape its obligation to pay the retirement benefits, thus, violative of law, morals, and public policy. The Court,
however, sees no clear evidence in the records showing that Cabiles was constrained into signing the document. Also, it
cannot be said that Cabiles did not fully understand the consequences of signing the Waiver. Being a person well-versed
in matters of finance, it would have been impossible for him not to have comprehended the consequences of signing a
waiver. Failing to see any evidence to warrant the disregard of the Waiver, the Court is unable to affirm the CA and,
hence, declares it as valid and binding between Cabiles and Intel Phil..
Assuming the Waiver was valid, the NLRC contended that it could not be construed to cover the claims for the
retirement pay because it had not yet accrued at the time the document was signed by Cabiles.
The Court finds Itself unable to agree.
The terms of the Waiver are clear:
I, Jeremias P. Cabiles, Filipino, of legal age and a resident of xxx hereby acknowledge receipt from Intel Technology
Philippines, Inc. (the Company) the amount of xxx, in full and complete settlement of all benefits due me by reason of
my lawful separation from the Company effective February 1, 2007.
In consideration of the foregoing:

1. I release, remise and forever discharge the Company, its successors-in-interest, its stockholders, its officers, directors,
agents or employees from any action, sum of money, damages, claims and demands whatsoever, which in law or in
equity I ever had, now have, or which I, my heirs, successors and assigns hereafter may have by reason of any matter,
cause or thing whatsoever, up to the time of these presents, the intention thereof being to completely and absolutely
release the Company, its successors-in-interest, xxx from all liabilities arising wholly, partially, or directly from my
employment with the Company.
xxx xxx xxx
5. I acknowledge that I have received all amounts that are now or in the future may be due me from the Company. I also
acknowledge that during the entire period of my employment with the Company, I received or was paid all
compensation, benefits and privileges, to which I am entitled under all laws and policies of the Company by reason of
my past employment and/or engagement therewith, and if I hereafter be found in any manner to be entitled to any
amount, the aforementioned monetary amount is a full and final satisfaction of any and all such undisclosed claims.
(Emphasis supplied)34
Suffice it to state that nothing is clearer than the words used in the Waiver duly signed by Cabiles - that all claims, in the
present and in the future, were waived in consideration of his receipt of the amount of ₱165,857.62. Because the waiver
included all present and future claims, the non-accrual of benefits cannot be used as a basis in awarding retirement
benefits to him.
Lastly, even if the Court assumes that the Waiver was invalid, Cabiles nonetheless remains disqualified as a recipient of
retirement benefits because, as previously discussed, the ten-year minimum requirement was not satisfied on account
of his early resignation.
Cabiles is not entitled to the Retirement Benefits
Having effectively resigned before completing his 10th year anniversary with Intel Phil. and after having validly waived
all the benefits due him, if any, Cabiles is hereby declared ineligible to receive the retirement pay pursuant to the
retirement policy of Intel Phil.
For that reason, Cabiles must return all the amounts he received from Intel Phil. pursuant to the Writ of Execution issued
by the NLRC, dated September 19, 2011.
WHEREFORE, the petition is GRANTED. The assailed October 28, 2011 and February 3, 2012 Resolutions of the Court of
Appeals are hereby REVERSED and SET ASIDE.
Respondent Jeremias P. Cabiles is ordered to make restitution to petitioner Intel Technology Philippines Inc. for
whatever amounts he received pursuant to the Writ of Execution issued by the National Labor Relations Commission,
dated September 19, 2011.
SO ORDERED

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G.R. No.

172101 November 23, 2007

The antecedents of this case are as follows:

Hence, this Petition.

V. There is an employer-employee relationship between [respondent cooperative] and its [owners-members].

Section 5 of Republic Act No. 8282 provides:

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.

PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner,

As culled from the records, the pertinent facts are:

1. Application of preventive medicine including periodic check-up of employees;

5. Conduct home visits whenever necessary;

13th Month Pay:

GRAND TOTAL P1,935,363.75

The decision stands in other aspects.

Hence, Philcom’s present recourse on its main submission that -

"May 15, 1981

Mrs. Adela L. Vicente

1. Application of preventive medicine including periodic check-up of employees;

5. Conduct home visits whenever necessary;

Very truly yours,

Partly says the appellate court in its assailed decision:

Article 280 of the Labor code (sic) provides:

We disagree to the foregoing ratiocination.

G.R. No. 146881 February 5, 2007

COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,

5. To give family planning motivations.

1. All employees and their dependents are embraced by this program.

1. Annual Physical Examination.

3. Immunizations necessary for job conditions.

4. Periodic inspections for food services and rest rooms.

5. Conduct health education programs and present education materials.

7. Give family planning motivations.

Respondent filed a petition for review with the Court of Appeals.

The Court of Appeals held:

The dispositive portion of the Decision reads:

2. Pay petitioner moral damages in the amount of ₱50,000.00.

3. Pay petitioner exemplary damages in the amount of ₱50,000.00.

Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.

The issues are:

G.R. No. 146530 January 17, 2005

CALLEJO, SR., J.:

The case stemmed from the following facts:

a) Backwages ………………….. ₱248,400.00

b) Separation Pay ………….…... ₱140,400.00

c) 13th month pay ………….……₱ 10,800.00

d) Service Incentive Leave Pay .. 2,040.00

1. The truck driven by the petitioner belonged to respondent company;

G.R. No. 170087 August 31, 2006

ANGELINA FRANCISCO, Petitioner,

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainant’s dismissal as illegal;

a. Backwages 10/2001 – 07/2002 275,000.00

b. Salary Differentials (01/2001 – 09/2001) 22,500.00

c. Housing Allowance (01/2001 – 07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

h. 10% Attorney’s fees 87,076.50

On appeal, the Court of Appeals reversed the NLRC decision, thus:

G.R. No. 167622 June 29, 2010

GREGORIO V. TONGKO, Petitioner,

A. Tongko’s Case for Employment Relationship