Republic of the Philippines

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

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

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Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's Committee on Personnel Affairs
deliberated and evaluated a number of past acts of misconduct or infractions attributed to her. 5 As a result of this
deliberation, said committee resolved:
1. That, respondent [Credo] committed the following offenses in the Code of Discipline, viz:
OFFENSE vs. Company Interest & Policies
No. 3 Any discourteous act to customer, officer and employee of client company or officer of the
Corporation.
OFFENSE vs. Public Moral
No. 7 Exhibit marked discourtesy in the course of official duties or use of profane or insulting
language to any superior officer.
OFFENSE vs. Authority
No. 3 Failure to comply with any lawful order or any instructions of a superior officer.
2. That, Management has already given due consideration to respondent's [Credo] scandalous
actuations for several times in the past. Records also show that she was reprimanded for some
offense and did not question it. Management at this juncture, has already met its maximum tolerance
point so it has decided to put an end to respondent's [Credo] being an undesirable employee. 6
The committee recommended Credo's termination, with forfeiture of benefits.

On 1 December 1983, Credo was called age to the office of Perez to be informed that she was being charged with
certain offenses. Notably, these offenses were those which NASECO's Committee on Personnel Affairs already
resolved, on 22 November 1983 to have been committed by Credo.
In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo was made to explain her
side in connection with the charges filed against her; however, due to her failure to do so, 8 she was handed a Notice
of Termination, dated 24 November 1983, and made effective 1 December 1983. 9 Hence, on 6 December 1983,
Credo filed a supplemental complaint for illegal dismissal in Case No. 11-4944-83, alleging absence of just or
authorized cause for her dismissal and lack of opportunity to be heard. 10
After both parties had submitted their respective position papers, affidavits and other documentary evidence in support
of their claims and defenses, on 9 May 1984, the labor arbiter rendered a decision: 1) dismissing Credo's complaint,
and 2) directing NASECO to pay Credo separation pay equivalent to one half month's pay for every year of service. 11
Both parties appealed to respondent National Labor Relations Commission (NLRC) which, on 28 November 1984,
rendered a decision: 1) directing NASECO to reinstate Credo to her former position, or substantially equivalent
position, with six (6) months' backwages and without loss of seniority rights and other privileges appertaining thereto,
and 2) dismissing Credo's claim for attorney's fees, moral and exemplary damages. As a consequence, both parties
filed their respective motions for reconsideration, 12 which the NLRC denied in a resolution of 16 January 1985. 13
Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge as grave abuse of discretion the
dispositive portion of the 28 November 1984 decision which ordered Credo's reinstatement with
backwages. 14 Petitioners contend that in arriving at said questioned order, the NLRC acted with grave abuse of
discretion in finding that: 1) petitioners violated the requirements mandated by law on termination, 2) petitioners failed
in the burden of proving that the termination of Credo was for a valid or authorized cause, 3) the alleged infractions
committed by Credo were not proven or, even if proved, could be considered to have been condoned by petitioners,
and 4) the termination of Credo was not for a valid or authorized cause. 15

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On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of discretion the dispositive portion
of the 28 November 1984 decision which dismissed her claim for attorney's fees, moral and exemplary damages and
limited her right to backwages to only six (6) months. 16
As guidelines for employers in the exercise of their power to dismiss employees for just causes, the law provides that:
Section 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him a
written notice stating the particular acts or omission constituting the grounds for his dismissal.
xxx xxx xxx
Section 5. Answer and Hearing. The worker may answer the allegations stated against him in the
notice of dismissal within a reasonable period from receipt of such notice. The employer shall afford
the worker ample opportunity to be heard and to defend himself with the assistance of his
representative, if he so desires.
Section 6. Decision to dismiss. The employer shall immediately notify a worker in writing of a
decision to dismiss him stating clearly the reasons therefor. 17
These guidelines mandate that the employer furnish an employee sought to be dismissed two (2) written notices of
dismissal before a termination of employment can be legally effected. These are the notice which apprises the
employee of the particular acts or omissions for which his dismissal is sought and the subsequent notice which
informs the employee of the employer's decision to dismiss him.
Likewise, a reading of the guidelines in consonance with the express provisions of law on protection to labor 18(which
encompasses the right to security of tenure) and the broader dictates of procedural due process necessarily mandate
that notice of the employer's decision to dismiss an employee, with reasons therefor, can only be issued after the
employer has afforded the employee concerned ample opportunity to be heard and to defend himself.
In the case at bar, NASECO did not comply with these guidelines in effecting Credo's dismissal. Although she was
apprised and "given the chance to explain her side" of the charges filed against her, this chance was given so
perfunctorily, thus rendering illusory Credo's right to security of tenure. That Credo was not given ample opportunity to
be heard and to defend herself is evident from the fact that the compliance with the injunction to apprise her of the
charges filed against her and to afford her a chance to prepare for her defense was dispensed in only a day. This is
not effective compliance with the legal requirements aforementioned.
The fact also that the Notice of Termination of Credo's employment (or the decision to dismiss her) was dated 24
November 1983 and made effective 1 December 1983 shows that NASECO was already bent on terminating her
services when she was informed on 1 December 1983 of the charges against her, and that any hearing which
NASECO thought of affording her after 24 November 1983 would merely be pro forma or an exercise in futility.
Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry procedures in the company's
Statement of Billings Adjustment did not warrant the severe penalty of dismissal of the NLRC correctly held that:
... on the charge of gross discourtesy, the CPA found in its Report, dated 22 November 1983 that, "In
the process of her testimony/explanations she again exhibited a conduct unbecoming in front of
NASECO Officers and argued to Mr. S. S. Lloren in a sarcastic and discourteous manner,
notwithstanding, the fact that she was inside the office of the Acctg. General Manager." Let it be
noted, however, that the Report did not even describe how the so called "conduct unbecoming" or
"discourteous manner" was done by complainant. Anent the "sarcastic" argument of complainant, the
purported transcript 19 of the meeting held on 7 November 1983 does not indicate any sarcasm on the
part of complainant. At the most, complainant may have sounded insistent or emphatic about her work
being more complete than the work of Ms. de Castro, yet, the complaining officer signed the work of
Ms. de Castro and did not sign hers.
As to the charge of insubordination, it may be conceded, albeit unclear, that complainant failed to
place same corrections/additional remarks in the Statement of Billings Adjustments as instructed.

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However, under the circumstances obtaining, where complainant strongly felt that she was being
discriminated against by her superior in relation to other employees, we are of the considered view
and so hold, that a reprimand would have sufficed for the infraction, but certainly not termination from
services. 20
As this Court has ruled:
... where a penalty less punitive would suffice, whatever missteps may be committed by labor ought
not to be visited with a consequence so severe. It is not only because of the law's concern for the
working man. There is, in addition, his family to consider. Unemployment brings untold hardships and
sorrows on those dependent on the wage-earner. 21
Of course, in justifying Credo's termination of employment, NASECO claims as additional lawful causes for dismissal
Credo's previous and repeated acts of insubordination, discourtesy and sarcasm towards her superior officers, alleged
to have been committed from 1980 to July 1983. 22
If such acts of misconduct were indeed committed by Credo, they are deemed to have been condoned by NASECO.
For instance, sometime in 1980, when Credo allegedly "reacted in a scandalous manner and raised her voice" in a
discussion with NASECO's Acting head of the Personnel Administration 23 no disciplinary measure was taken or meted
against her. Nor was she even reprimanded when she allegedly talked 'in a shouting or yelling manner" with the Acting
Manager of NASECO's Building Maintenance and Services Department in 1980 24 or when she allegedly "shouted" at
NASECO's Corporate Auditor "in front of his subordinates displaying arrogance and unruly behavior" in 1980, or when
she allegedly shouted at NASECO's Internal Control Consultant in 1981. 25 But then, in sharp contrast to NASECO's
penchant for ignoring the aforesaid acts of misconduct, when Credo committed frequent tardiness in August and
September 1983, she was reprimanded. 26
Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily proven, NASECO's
condonation thereof is gleaned from the fact that on 4 October 1983, Credo was given a salary adjustment for having
performed in the job "at least [satisfactorily]" 27 and she was then rated "Very Satisfactory" 28as regards job
performance, particularly in terms of quality of work, quantity of work, dependability, cooperation, resourcefulness and
attendance.
Considering that the acts or omissions for which Credo's employment was sought to be legally terminated were
insufficiently proved, as to justify dismissal, reinstatement is proper. For "absent the reason which gave rise to [the
employee's] separation from employment, there is no intention on the part of the employer to dismiss the employee
concerned." 29 And, as a result of having been wrongfully dismissed, Credo is entitled to three (3) years of backwages
without deduction and qualification. 30
However, while Credo's dismissal was effected without procedural fairness, an award of exemplary damages in her
favor can only be justified if her dismissal was effected in a wanton, fraudulent, oppressive or malevolent manner. 31 A
judicious examination of the record manifests no such conduct on the part of management. However, in view of the
attendant circumstances in the case, i.e., lack of due process in effecting her dismissal, it is reasonable to award her
moral damages. And, for having been compelled to litigate because of the unlawful actuations of NASECO, a
reasonable award for attorney's fees in her favor is in order.
In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that the NLRC has no jurisdiction to order Credo's
reinstatement. NASECO claims that, as a government corporation (by virtue of its being a subsidiary of the National
Investment and Development Corporation (NIDC), a subsidiary wholly owned by the Philippine National Bank (PNB),
which in turn is a government owned corporation), the terms and conditions of employment of its employees are
governed by the Civil Service Law, rules and regulations. In support of this argument, NASECO cites National
Housing Corporation vs. JUCO, 33where this Court held that "There should no longer be any question at this time that
employees of government-owned or controlled corporations are governed by the civil service law and civil service
rifles and regulations."
It would appear that, in the interest of justice, the holding in said case should not be given retroactive effect, that is, to
cases that arose before its promulgation on 17 January 1985. To do otherwise would be oppressive to Credo and
other employees similarly situated, because under the same 1973 Constitution ,but prior to the ruling in National

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Housing Corporation vs. Juco, this Court had recognized the applicability of the Labor Code to, and the authority of
the NLRC to exercise jurisdiction over, disputes involving terms and conditions of employment in government owned
or controlled corporations, among them, the National Service Corporation (NASECO).<re||an1w> 34
Furthermore, in the matter of coverage by the civil service of government-owned or controlled corporations, the 1987
Constitution starkly varies from the 1973 Constitution, upon which National Housing Corporation vs. Juco is based.
Under the 1973 Constitution, it was provided that:
The civil service embraces every branch, agency, subdivision, and instrumentality of the Government,
including every government-owned or controlled corporation. ... 35
On the other hand, the 1987 Constitution provides that:
The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government,
including
government-owned
or
controlled
corporations
with
original
charter. 36(Emphasis supplied)
Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the Court in the National
Housing . Corporation case in the following manner
The infirmity of the respondents' position lies in its permitting a circumvention or emasculation of
Section 1, Article XII-B of the constitution. It would be possible for a regular ministry of government to
create a host of subsidiary corporations under the Corporation Code funded by a willing legislature. A
government-owned corporation could create several subsidiary corporations. These subsidiary
corporations would enjoy the best of two worlds. Their officials and employees would be privileged
individuals, free from the strict accountability required by the Civil Service Decree and the regulations
of the Commission on Audit. Their incomes would not be subject to the competitive restrains of the
open market nor to the terms and conditions of civil service employment. Conceivably, all
government-owned or controlled corporations could be created, no longer by special charters, but
through incorporations under the general law. The Constitutional amendment including such
corporations in the embrace of the civil service would cease to have application. Certainly, such a
situation cannot be allowed to exist. 37
appear relegated to relative insignificance by the 1987 Constitutional provision that the Civil Service embraces
government-owned or controlled corporations with original charter; and, therefore, by clear implication, the Civil
Service does not include government-owned or controlled corporations which are organized as subsidiaries of
government-owned or controlled corporations under the general corporation law.
The proceedings in the 1986 Constitutional Commission also shed light on the Constitutional intent and meaning in
the use of the phrase "with original charter." Thus
THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is recognized.
MR. ROMULO. I beg the indulgence of the Committee. I was reading the wrong
provision.
I refer to Section 1, subparagraph I which reads:
The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the
government, including government-owned or controlled corporations.
My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the Commissioner please
state his previous question?
MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1, under the Civil
Service Commission, says: "including government-owned or controlled corporations.'

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Does that include a corporation, like the Philippine Airlines which is governmentowned or controlled?
MR. FOZ. I would like to throw a question to the Commissioner. Is the Philippine
Airlines controlled by the government in the sense that the majority of stocks are
owned by the government?
MR. ROMULO. It is owned by the GSIS. So, this is what we might call a tertiary
corporation. The GSIS is owned by the government. Would this be covered because
the provision says "including government-owned or controlled corporations."
MR. FOZ. The Philippine Airlines was established as a private corporation. Later on,
the government, through the GSIS, acquired the controlling stocks. Is that not the
correct situation?
MR. ROMULO. That is true as Commissioner Ople is about to explain. There was
apparently a Supreme Court decision that destroyed that distinction between a
government-owned corporation created under the Corporation Law and a
government-owned corporation created by its own charter.
MR. FOZ. Yes, we recall the Supreme Court decision in the case of NHA vs. Juco to
the effect that all government corporations irrespective of the manner of creation,
whether by special charter or by the private Corporation Law, are deemed to be
covered by the civil service because of the wide-embracing definition made in this
section of the existing 1973 Constitution. But we recall the response to the question
of Commissioner Ople that our intendment in this provision is just to give a general
description of the civil service. We are not here to make any declaration as to whether
employees of government-owned or controlled corporations are barred from the
operation of laws, such as the Labor Code of the Philippines.
MR. ROMULO. Yes.
MR. OPLE. May I be recognized, Mr. Presiding Officer, since my name has been
mentioned by both sides.
MR. ROMULO. I yield part of my time.
THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is recognized.
MR. OPLE. In connection with the coverage of the Civil Service Law in Section 1 (1),
may I volunteer some information that may be helpful both to the interpellator and to
the Committee. Following the proclamation of martial law on September 21, 1972,
this issue of the coverage of the Labor Code of the Philippines and of the Civil
Service Law almost immediately arose. I am, in particular, referring to the period
following the coming into force and effect of the Constitution of 1973, where the
Article on the Civil Service was supposed to take immediate force and effect. In the
case of LUZTEVECO, there was a strike at the time. This was a governmentcontrolled and government-owned corporation. I think it was owned by the PNOC with
just the minuscule private shares left. So, the Secretary of Justice at that time,
Secretary Abad Santos, and myself sat down, and the result of that meeting was an
opinion of the Secretary of Justice which 9 became binding immediately on the
government that government corporations with original charters, such as the GSIS,
were covered by the Civil Service Law and corporations spun off from the GSIS,
which we called second generation corporations functioning as private subsidiaries,
were covered by the Labor Code. Samples of such second generation corporations
were the Philippine Airlines, the Manila

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Hotel and the Hyatt. And that demarcation worked very well. In fact, all of these companies I have
mentioned as examples, except for the Manila Hotel, had collective bargaining agreements. In the
Philippine Airlines, there were, in fact, three collective bargaining agreements; one, for the ground
people or the PALIA one, for the flight attendants or the PASAC and one for the pilots of the ALPAC
How then could a corporation like that be covered by the Civil Service law? But, as the Chairman of
the Committee pointed out, the Supreme Court decision in the case of NHA vs. Juco unrobed the
whole thing. Accordingly, the Philippine Airlines, the Manila Hotel and the Hyatt are now considered
under that decision covered by the Civil Service Law. I also recall that in the emergency meeting of
the Cabinet convened for this purpose at the initiative of the Chairman of the Reorganization
Commission, Armand Fabella, they agreed to allow the CBA's to lapse before applying the full force
and effect of the Supreme Court decision. So, we were in the awkward situation when the new
government took over. I can agree with Commissioner Romulo when he said that this is a problem
which I am not exactly sure we should address in the deliberations on the Civil Service Law or
whether we should be content with what the Chairman said that Section 1 (1) of the Article on the Civil
Service is just a general description of the coverage of the Civil Service and no more.
Thank you, Mr. Presiding Officer.
MR. ROMULO. Mr. Presiding Officer, for the moment, I would be satisfied if the
Committee puts on records that it is not their intent by this provision and the phrase
"including government-owned or controlled corporations" to cover such companies as
the Philippine Airlines.
MR. FOZ. Personally, that is my view. As a matter of fact, when this draft was made,
my proposal was really to eliminate, to drop from the provision, the phrase "including
government- owned or controlled corporations."
MR. ROMULO. Would the Committee indicate that is the intent of this provision?
MR. MONSOD. Mr. Presiding Officer, I do not think the Committee can make such a
statement in the face of an absolute exclusion of government-owned or controlled
corporations. However, this does not preclude the Civil Service Law to prescribe
different rules and procedures, including emoluments for employees of proprietary
corporations, taking into consideration the nature of their operations. So, it is a
general coverage but it does not preclude a distinction of the rules between the two
types of enterprises.
MR. FOZ. In other words, it is something that should be left to the legislature to
decide. As I said before, this is just a general description and we are not making any
declaration whatsoever.
MR. MONSOD. Perhaps if Commissioner Romulo would like a definitive
understanding of the coverage and the Gentleman wants to exclude governmentowned or controlled corporations like Philippine Airlines, then the recourse is to offer
an amendment as to the coverage, if the Commissioner does not accept the
explanation that there could be a distinction of the rules, including salaries and
emoluments.
MR. ROMULO. So as not to delay the proceedings, I will reserve my right to submit
such an amendment.
xxx xxx xxx
THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is recognized.

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

"corporations": Add a comma (,) and the phrase EXCEPT THOSE EXERCISING
PROPRIETARY FUNCTIONS.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?
SUSPENSION OF SESSION
MR. MONSOD. May we have a suspension of the session?
THE PRESIDING OFFICER (Mr. Trenas). The session is suspended.
It was 7:16 p.m.
RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed amendment to now read
as follows: "including government-owned or controlled corporations WITH ORIGINAL CHARTERS."
The purpose of this amendment is to indicate that government corporations such as the GSIS and
SSS, which have original charters, fall within the ambit of the civil service. However, corporations
which are subsidiaries of these chartered agencies such as the Philippine Airlines, Manila Hotel and
Hyatt are excluded from the coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?
MR. FOZ. Just one question, Mr. Presiding Officer. By the term "original charters,"
what exactly do we mean?
MR. ROMULO. We mean that they were created by law, by an act of Congress, or by
special law.
MR. FOZ. And not under the general corporation law.
MR. ROMULO. That is correct. Mr. Presiding Officer.
MR. FOZ. With that understanding and clarification, the Committee accepts the
amendment.
MR. NATIVIDAD. Mr. Presiding officer, so those created by the general corporation
law are out.
MR. ROMULO. That is correct: 38
On the premise that it is the 1987 Constitution that governs the instant case because it is the Constitution in place at
the time of decision thereof, the NLRC has jurisdiction to accord relief to the parties. As an admitted subsidiary of the
NIDC, in turn a subsidiary of the PNB, the NASECO is a government-owned or controlled corporation without original
charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring opinion in Gomez vs.
Government Insurance Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694; also published in 78 Phil. 221)
on the effectivity of the principle of social justice embodied in the 1935 Constitution, said:

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Certainly, this principle of social justice in our Constitution as generously conceived and so tersely
phrased, was not included in the fundamental law as a mere popular gesture. It was meant to (be) a
vital, articulate, compelling principle of public policy. It should be observed in the interpretation not
only of future legislation, but also of all laws already existing on November 15, 1935. It was intended
to change the spirit of our laws, present and future. Thus, all the laws which on the great historic event
when the Commonwealth of the Philippines was born, were susceptible of two interpretations strict or
liberal, against or in favor of social justice, now have to be construed broadly in order to promote and
achieve social justice. This may seem novel to our friends, the advocates of legalism but it is the only
way to give life and significance to the above-quoted principle of the Constitution. If it was not
designed to apply to these existing laws, then it would be necessary to wait for generations until all
our codes and all our statutes shall have been completely charred by removing every provision
inimical to social justice, before the policy of social justice can become really effective. That would be
an absurd conclusion. It is more reasonable to hold that this constitutional principle applies to all
legislation in force on November 15, 1935, and all laws thereafter passed.
WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED with modifications.
Petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295, are ordered to: 1) reinstate
Eugenia C. Credo to her former position at the time of her termination, or if such reinstatement is not possible, to place
her in a substantially equivalent position, with three (3) years backwages, from 1 December 1983, without qualification
or deduction, and without loss of seniority rights and other privileges appertaining thereto, and 2) pay Eugenia C.
Credo P5,000.00 for moral damages and P5,000.00 for attorney's fees.
If reinstatement in any event is no longer possible because of supervening events, petitioners in G.R. No. 69870, who
are the private respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo, in addition to her backwages and
damages as above described, separation pay equivalent to one-half month's salary for every year of service, to be
computed on her monthly salary at the time of her termination on 1 December 1983.
SO ORDERED.
Fernan, C.J., Melencio-Herrera, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and
Regalado, JJ., concur.
Narvasa, J., is on leave.
Gutierrez, Jr., J., in the result.

Separate Opinions

CRUZ, J., concurring:

While concurring with Mr. Justice Padilla's well-researched ponencia, I have to express once again my disappointment
over still another avoidable ambiguity in the 1987 Constitution.
It is clear now from the debates of the Constitutional Commission that the government-owned or controlled
corporations included in the Civil Service are those with legislative charters. Excluded are its subsidiaries organized
under the Corporation Code.
If that was the intention, the logical thing, I should imagine, would have been to simply say so. This would have
avoided the suggestion that there are corporations with duplicate charters as distinguished from those with original
charters.

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All charters are original regardless of source unless they are amended. That is the acceptable distinction. Under the
provision, however, the charter is still and always original even if amended as long it was granted by the legislature.
It would have been clearer, I think, to say "including government owned or controlled corporations with legislative
charters." Why this thought did not occur to the Constitutional Commission places one again in needless puzzlement.

Separate Opinions
CRUZ, J., concurring:
While concurring with Mr. Justice Padilla's well-researched ponencia, I have to express once again my disappointment
over still another avoidable ambiguity in the 1987 Constitution.
It is clear now from the debates of the Constitutional Commission that the government-owned or controlled
corporations included in the Civil Service are those with legislative charters. Excluded are its subsidiaries organized
under the Corporation Code.
If that was the intention, the logical thing, I should imagine, would have been to simply say so. This would have
avoided the suggestion that there are corporations with duplicate charters as distinguished from those with original
charters.
All charters are original regardless of source unless they are amended. That is the acceptable distinction. Under the
provision, however, the charter is still and always original even if amended as long it was granted by the legislature.
It would have been clearer, I think, to say "including government owned or controlled corporations with legislative
charters." Why this thought did not occur to the Constitutional Commission places one again in needless puzzlement.
Footnotes
* Signed by Guillermo C. Medina, Presiding Commissioner, Gabriel M. Gatchalian and Miguel B.
Varela, Commissioners; the last one concurring in the result.
1 Rollo (G.R. No. 69870), p. 122
2 Ibid., p. 123.
3 Ibid.
4 Ibid., p. 22.
5 Ibid., p. 62.
6 Ibid., p. 63.
7 Ibid.
8 Ibid., p. 66.
9 Ibid., p. 65.
10 Ibid., p. 25.
11 Ibid., p. 104.

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12 Ibid., p. 126.
13 Ibid., p. 148.
14 Ibid., p. 8.
15 Ibid.
16 Rollo, (G.R. No. 70295), p. 8.
17 Rule XIV, Book V, Implementing Rules and Regulations.
18 Constitution (1973), Art. II, Sec. 9; Constitution (1 987), Art. II, Sec. 18; Labor Code, Art. III.
19 Rollo, (G.R. No. 69870), p. 57-59.
20 Ibid., p. 125.
21 Almira vs. B.F. Goodrich Philippine, Inc., 58 SCRA 120.
22 Rollo, (G.R. No. 69870), p. 2-5.
23 Ibid., p. 13.
24 Ibid.
25 Ibid.
26 Ibid.
27 Ibid., p. 91.
28 Ibid., p. 78.
29 Pepito vs. Secretary of Labor, 98 SCRA 454.
30 Ibid.
31 Civil Code, Art. 2232.
32 Rollo (G.R. No. 70295), p. 125.
33 134 SCRA 172.
34 Philippine Air Line, Inc. vs. NLRC, 124 SCRA 583; Philippine Air Lines, Inc. vs. NLRC, 126 SCRA
223 and National Service Corporation vs. Leogardo, Jr., 130 SCRA 502.
35 Constitution, 1973, Art. II-B, Sec. I(1).
36 Constitution (1987), Art. IX-B, Sec. 2(l).
37 134 SCRA 182-183.
38 Record of the Constitutional Commission, Vol. I, pp. 583-585.

Page 11 of 191

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 98107 August 18, 1997

BENJAMIN C. JUCO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL HOUSING CORPORATION, respondents.

HERMOSISIMA, JR., J.:

This is a petition for certiorari to set aside the Decision of the National Labor Relations Commission (NLRC) dated
March 14, 1991, which reversed the Decision dated May 21, 1990 of Labor Arbiter Manuel R Caday, on the ground of
lack of jurisdiction.
Petitioner Benjamin C. Juco was hired as a project engineer of respondent National Housing Corporation (NHC) from
November 16, 1970 to May 14, 1975. On May 14, 1975, he was separated from the service for having been implicated
in a crime of theft and/or malversation of public funds.
On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC with the Department of Labor.
On September 17, 1977, the Labor Arbiter rendered a decision dismissing the complaint on the ground that the NLRC
had no jurisdiction over the case. 1
Petitioner then elevated the case to the NLRC which rendered a decision on December 28, 1982, reversing the
decision of the Labor Arbiter. 2
Dissatisfied with the decision of the NLRC, respondent NHC appealed before this Court and on January 17, 1985, we
rendered a decision, the dispositive portion thereof reads as follows:
WHEREFORE, the petition is hereby GRANTED. The questioned decision of the respondent National
Labor Relations Commission is SET ASIDE. The decision of the Labor Arbiter dismissing the case
before it for lack of jurisdiction is REINSTATED. 3
On January 6, 1989, petitioner filed with the Civil Service Commission a complaint for illegal dismissal, with
preliminary mandatory injunction. 4
On February 6, 1989, respondent NHC moved for the dismissal of the complaint on the ground that the Civil Service
Commission has no jurisdiction over the case. 5
On April 11, 1989, the Civil Service Commission issued an order dismissing the complaint for lack of jurisdiction. It
ratiocinated that:
The Board finds the comment and/or motion to dismiss meritorious. It was not disputed that NHC is a
government corporation without an original charter but organized/created under the Corporation
Code.
Article IX, Section 2 (1) of the 1987 Constitution provides:

Page 12 of 191

The civil service embraces all branches, subdivisions, instrumentalities and agencies
of the Government, including government owned and controlled corporations with
original charters. (emphasis supplied)
From the aforequoted constitutional provision, it is clear that respondent NHC is not within the scope
of the civil service and is therefore beyond the jurisdiction of this Board. Moreover, it is pertinent to
state that the 1987 Constitution was ratified and became effective on February 2, 1987.
WHEREFORE, for lack of jurisdiction, the instant complaint is hereby dismissed. 6
On April 28, 1989, petitioner filed with respondent NLRC a complaint for illegal dismissal with preliminary mandatory
injunction against respondent NHC. 7
On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that petitioner was illegally dismissed
from his employment by respondent as there was evidence in the record that the criminal case against him was purely
fabricated, prompting the trial court to dismiss the charges against him. Hence, he concluded that the dismissal was
illegal as it was devoid of basis, legal or factual.
He further ruled that the complaint is not barred by prescription considering that the period from which to reckon the
reglementary period of four years should be from the date of the receipt of the decision of the Civil Service
Commission promulgated on April 11, 1989. He also ratiocinated that:
It appears . . . complainant filed the complaint for illegal dismissal with the Civil Service Commission
on January 6, 1989 and the same was dismissed on April 11, 1989 after which on April 28, 1989, this
case was filed by the complainant. Prior to that, this case was ruled upon by the Supreme Court on
January 17, 1985 which enjoined the complainant to go to the Civil Service Commission which in fact,
complainant did. Under the circumstances, there is merit on the contention that the running of the
reglementary period of four (4) years was suspended with the filing of the complaint with the said
Commission. Verily, it was not the fault of the respondent for failing to file the complaint as alleged by
the respondent but due to, in the words of the complainant, a "legal knot" that has to be untangled. 8
Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of which reads:
Premises considered, judgment is hereby rendered declaring the dismissal of the complainant as
illegal and ordering the respondent to immediately reinstate him to his former position without loss of
seniority rights with full back wages inclusive of allowance and to his other benefits or equivalent
computed from the time it is withheld from him when he was dismissed on March 27, 1977, until
actually reinstated. 9
On June 1, 1990, respondent NHC filed its appeal before the NLRC and on March 14, 1991, the NLRC promulgated a
decision which reversed the decision of Labor Arbiter Manuel R. Caday on the ground of lack of jurisdiction. 10
The primordial issue that confronts us is whether or not public respondent committed grave abuse of discretion in
holding that petitioner is not governed by the Labor Code.
Under the laws then in force, employees of government-owned and/or controlled corporations were governed by the
Civil Service Law and not by the Labor Code. Hence,
Article 277 of the Labor Code (PD 442) then provided:
The terms and conditions of employment of all government employees, including employees of
government-owned and controlled corporations shall be governed by the Civil Service Law, rules and
regulations . . . .
The 1973 Constitution, Article II-B, Section 1(1), on the other hand provided:

Page 13 of 191

The Civil Service embraces every branch, agency, subdivision and instrumentality of the government,
including government-owned or controlled corporations.
Although
we
had
earlier
ruled
in National
Housing
Corporation
v.
Juco, 11 that employees of government-owned and/or controlled corporations, whether created by special law or
formed as subsidiaries under the general Corporation Law, are governed by the Civil Service Law and not by the
Labor Code, this ruling has been supplanted by the 1987 Constitution. Thus, the said Constitution now provides:
The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government owned or controlled corporations with original charter. (Article IXB, Section 2[1])
In National Service Corporation (NASECO) v. National Labor Relations Commission, 12 we had the occasion to apply
the present Constitution in deciding whether or not the employees of NASECO are covered by the Civil Service Law or
the Labor Code notwithstanding that the case arose at the time when the 1973 Constitution was still in effect. We ruled
that the NLRC has jurisdiction over the employees of NASECO on the ground that it is the 1987 Constitution that
governs because it is the Constitution in place at the time of the decision. Furthermore, we ruled that the new phrase
"with original charter" means that government-owned and controlled corporations refer to corporations chartered by
special law as distinguished from corporations organized under the Corporation Code. Thus, NASECO which had
been organized under the general incorporation statute and a subsidiary of the National Investment Development
Corporation, which in turn was a subsidiary of the Philippine National Bank, is exluded from the purview of the Civil
Service Commission.
We see no cogent reason to depart from the ruling in the aforesaid case.
In the case at bench, the National Housing Corporation is a government owned corporation organized in 1959 in
accordance with Executive Order No. 399, otherwise known as the Uniform Charter of Government Corporation, dated
January 1, 1959. Its shares of stock are and have been one hundred percent (100%) owned by the Government from
its incorporation under Act 1459, the former corporation law. The government entities that own its shares of stock are
the Government Service Insurance System, the Social Security System, the Development Bank of the Philippines, the
National Investment and Development Corporation and the People's Homesite and Housing
Corporation. 13 Considering the fact that the NHA had been incorporated under Act 1459, the former corporation law, it
is but correct to say that it is a government-owned or controlled corporation whose employees are subject to the
provisions of the Labor Code. This observation is reiterated in the recent case of Trade Union of the Philippines and
Allied
Services
(TUPAS)
v. National
Housing
Corporation, 14 where we held that the NHA is now within the jurisdiction of the Department of Labor and Employment,
it being a government-owned and/or controlled corporation without an original charter. Furthermore, we also held that
the workers or employees of the NHC (now NHA) undoubtedly have the right to form unions or employee's
organization and that there is no impediment to the holding of a certification election among them as they are covered
by the Labor Code.
Thus, the NLRC erred in dismissing petitioner's complaint for lack of jurisdiction because the rule now is that the Civil
Service now covers only government-owned or controlled corporations with original charters. 15 Having been
incorporated under the Corporation Law, its relations with its personnel are governed by the Labor Code and come
under the jurisdiction of the National Labor Relations Commission.
One final point. Petitioners have been tossed from one forum to another for a simple illegal dismissal case. It is but apt
that we put an end to his dilemna in the interest of justice.
WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March 14, 1991 is hereby REVERSED
and the Decision of the Labor Arbiter dated May 21, 1990 is REINSTATED.
SO ORDERED.
Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.
Footnotes

Page 14 of 191

1 Rollo, pp. 20-21.

2 Id., pp. 22-26.
3 Id., pp. 27-37.
4 Id., pp. 38-42.
5 Id., pp. 43-47.
6 Id., p. 52.
7 Id., pp. 53-58.
8 Id., p. 68.
9 Id., p. 69.
10 Id., pp. 78-86.
11 134 SCRA 172 (1985).
12 168 SCRA 122 [1988].
13 National Housing Corporation vs. Juco, 134 SCRA 172 (1985).
14 173 SCRA 33 (1989).
15 PNOC-Energy Development Corporation v. NLRC, 201 SCRA 487 [1991] The NHC (now NHA).

Page 15 of 191

FIRST DIVISION
[G.R. No. 124382. August 16, 1999]
PASTOR DIONISIO V. AUSTRIA, petitioner, vs. HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth
Division), CEBU CITY, CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY
ADVENTIST, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L. ALOLOR,
WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO
DOBLE, PROFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO
IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO
LOBITANA, respondents.
DECISION
KAPUNAN, J.:
Subject to the instant petition for certiorari under Rule 65 of the Rules of Court is the Resolution [1] of public
respondent National Labor Relations Commission (the NLRC), rendered on 23 January 1996, in NLRC Case No. V0120-93, entitled Pastor Dionisio V. Austria vs. Central Philippine Union Mission Corporation of Seventh Day
Adventists, et. al., which dismissed the case for illegal dismissal filed by the petitioner against private respondents for
lack of jurisdiction.
Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists (hereinafter
referred to as the SDA) is a religious corporation duly organized and existing under Philippine law and is represented
in this case by the other private respondents, officers of the SDA. Petitioner, on the other hand, was a Pastor of the
SDA until 31 October 1991, when his services were terminated.
The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight (28) years from
1963 to 1991.[2] He began his work with the SDA on 15 July 1963 as a literature evangelist, selling literature of the
SDA over the island of Negros. From then on, petitioner worked his way up the ladder and got promoted several
times. In January, 1968, petitioner became the Assistant Publishing Director in the West Visayan Mission of the
SDA. In July, 1972, he was elevated to the position of Pastor in the West Visayan Mission covering the island of
Panay, and the provinces of Romblon and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989,
petitioner was promoted as District Pastor of the Negros Mission of the SDA and was assigned at Sagay, Balintawak
and Toboso, Negros Occidental, with twelve (12) churches under his jurisdiction. In January, 1991, petitioner was
transferred to Bacolod City. He held the position of district pastor until his services were terminated on 31 October
1991.
On various occasions from August up to October, 1991, petitioner received several communications [3] from Mr.
Eufronio Ibesate, the treasurer of the Negros Mission asking him to admit accountability and responsibility for the
church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his district which amounted to P15,078.10,
and to remit the same to the Negros Mission.
In his written explanation dated 11 October 1991, [4] petitioner reasoned out that he should not be made
accountable for the unremitted collections since it was private respondents Pastor Gideon Buhat and Mr. Eufronio
Ibesate who authorized his wife to collect the tithes and offerings since he was very sick to do the collecting at that
time.
Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor Buhat, the president
of the Negros Mission. During said call, petitioner tried to persuade Pastor Buhat to convene the Executive Committee
for the purpose of settling the dispute between him and the private respondent, Pastor David Rodrigo. The dispute
between Pastor Rodrigo and petitioner arose from an incident in which petitioner assisted his friend, Danny Diamada,
to collect from Pastor Rodrigo the unpaid balance for the repair of the latters motor vehicle which he failed to pay to
Diamada.[5] Due to the assistance of petitioner in collecting Pastor Rodrigos debt, the latter harbored ill-feelings
against petitioner. When news reached petitioner that Pastor Rodrigo was about to file a complaint against him with
the Negros Mission, he immediately proceeded to the office of Pastor Buhat on the date abovementioned and asked
the latter to convene the Executive Committee. Pastor Buhat denied the request of petitioner since some committee
members were out of town and there was no quorum. Thereafter, the two exchanged heated arguments. Petitioner
then left the office of Pastor Buhat. While on his way out, petitioner overheard Pastor Buhat saying, Pastor daw inisog
na ina iya (Pastor you are talking tough). [6] Irked by such remark, petitioner returned to the office of Pastor Buhat, and
tried to overturn the latters table, though unsuccessfully, since it was heavy. Thereafter, petitioner banged the attache
case of Pastor Buhat on the table, scattered the books in his office, and threw the phone. [7] Fortunately, private
respondents Pastors Yonilo Leopoldo and Claudio Montao were around and they pacified both Pastor Buhat and
petitioner.
On 17 October 1991, petitioner received a letter [8] inviting him and his wife to attend the Executive Committee
meeting at the Negros Mission Conference Room on 21 October 1991, at nine in the morning. To be discussed in the
meeting were the non-remittance of church collection and the events that transpired on 16 October 1991. A factfinding committee was created to investigate petitioner. For two (2) days, from October 21 and 22, the fact-finding
committee conducted an investigation of petitioner. Sensing that the result of the investigation might be one-sided,
petitioner immediately wrote Pastor Rueben Moralde, president of the SDA and chairman of the fact-finding
committee, requesting that certain members of the fact-finding committee be excluded in the investigation and
resolution of the case.[9] Out of the six (6) members requested to inhibit themselves from the investigation and
decision-making, only two (2) were actually excluded, namely: Pastor Buhat and Pastor Rodrigo. Subsequently, on 29
October 1991, petitioner received a letter of dismissal [10] citing misappropriation of denominational funds, willful breach
of trust, serious misconduct, gross and habitual neglect of duties, and commission of an offense against the person of
employers duly authorized representative, as grounds for the termination of his services.

Page 16 of 191

Reacting against the adverse decision of the SDA, petitioner filed a complaint [11] on 14 November 1991, before
the Labor Arbiter for illegal dismissal against the SDA and its officers and prayed for reinstatement with backwages
and benefits, moral and exemplary damages and other labor law benefits.
On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of petitioner, the dispositive
portion of which reads thus:
WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION MISSION CORPORATION
OF THE SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its officers, respondents herein, are hereby ordered to
immediately reinstate complainant Pastor Dionisio Austria to his former position as Pastor of Brgy. Taculing, Progreso
and Banago, Bacolod City, without loss of seniority and other rights and backwages in the amount of ONE HUNDRED
FIFTEEN THOUSAND EIGHT HUNDRED THIRTY PESOS (P115,830.00) without deductions and qualificatioons.
Respondent CPUMCSDA is further ordered to pay complainant the following:
A. 13th month pay - P21,060.00
B. Allowance - P 4,770.83
C. Service Incentive
Leave Pay - P 3,461.85
D. Moral Damages - P50,000.00
E. Exemplary
Damages - P25,000.00
F. Attorneys Fee - P22,012.27
SO ORDERED.[12]
The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor Relations
Commission, Fourth Division, Cebu City. In a decision, dated 26 August 1994, the NLRC vacated the findings of the
Labor Arbiter. The decretal portion of the NLRC decision states:
WHEREFORE, the Decision appealed from is hereby VACATED and a new one ENTERED dismissing this case for
want of merit.
SO ORDERED.[13]
Petitioner filed a motion for reconsideration of the above-named decision. On 18 July 1995, the NLRC issued a
Resolution reversing its original decision. The dispositive portion of the resolution reads:
WHEREFORE, premises considered, Our decision dated August 26, 1994 is VACATED and the decision of the Labor
Arbiter dated February 15, 1993 is REINSTATED.
SO ORDERED.[14]
In view of the reversal of the original decision of the NLRC, the SDA filed a motion for reconsideration of the
above resolution. Notable in the motion for reconsideration filed by private respondents is their invocation, for the first
time on appeal, that the Labor Arbiter has no jurisdiction over the complaint filed by petitioner due to the constitutional
provision on the separation of church and state since the case allegedly involved and ecclesiastical affair to which the
State cannot interfere.
The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the argument posed by
private respondents and, accordingly, dismissed the complaint of petitioner. The dispositive portion of the NLRC
resolution dated 23 January 1996, subject of the present petition, is as follows:
WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby granted. Accordingly, this
case is hereby DISMISSED for lack of jurisdiction.
SO ORDERED.[15]
Hence, the recourse to this Court by petitioner.
After the filing of the petition, the Court ordered the Office of the Solicitor General (the OSG) to file its comment
on behalf of public respondent NLRC. Interestingly, the OSG filed a manifestation and motion in lieu of
comment[16] setting forth its stand that it cannot sustain the resolution of the NLRC. In its manifestation, the OSG
submits that the termination of petitioner of his employment may be questioned before the NLRC as the same is
secular in nature, not ecclesiastical. After the submission of memoranda of all the parties, the case was submitted for
decision.
The issues to be resolved in this petition are:
1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint filed by petitioner
against the SDA;
2) Whether or not the termination of the services of petitioner is an ecclesiastical affair, and, as such,
involves the separation of church and state; and
3) Whether or not such termination is valid.
The first two issues shall be resolved jointly, since they are related.
Private respondents contend that by virtue of the doctrine of separation of church and state, the Labor Arbiter and
the NLRC have no jurisdiction to entertain the complaint filed by petitioner. Since the matter at bar allegedly involves
the discipline of a religious minister, it is to be considered a purely ecclesiastical affair to which the State has no right
to interfere.
The contention of private respondents deserves scant consideration. The principle of separation of church and
state finds no application in this case.
The rationale of the principle of the separation of church and state is summed up in the familiar saying, Strong
fences make good neighbors.[17] The idea advocated by this principle is to delineate the boundaries between the two
institutions and thus avoid encroachments by one against the other because of a misunderstanding of the limits of
their respective exclusive jurisdictions.[18] The demarcation line calls on the entities to render therefore unto Ceasar the

Page 17 of 191

things that are Ceasars and unto God the things that are Gods. [19] While the State is prohibited from interfering in
purely ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters. [20]
The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from taking
cognizance of the same. An ecclesiastical affair is one that concerns doctrine, creed, or form or worship of the church,
or the adoption and enforcement within a religious association of needful laws and regulations for the government of
the membership, and the power of excluding from such associations those deemed unworthy of membership. [21] Based
on this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to
matters of faith, religious doctrines, worship and governance of the congregation.To be concrete, examples of this socalled ecclesiastical affairs to which the State cannot meddle are proceedings for excommunication, ordinations of
religious ministers, administration of sacraments and other activities with which attached religious significance. The
case at bar does not even remotely concern any of the abovecited examples. While the matter at hand relates to the
church and its religious minister it does not ipso facto give the case a religious significance. Simply stated, what is
involved here is the relationship of the church as an employer and the minister as an employee. It is purely secular
and has no relation whatsoever with the practice of faith, worship or doctrines of the church. In this case, petitioner
was not excommunicated or expelled from the membership of the SDA but was terminated from employment. Indeed,
the matter of terminating an employee, which is purely secular in nature, is different from the ecclesiastical act of
expelling a member from the religious congregation.
As pointed out by the OSG in its memorandum, the grounds invoked for petitioners dismissal, namely:
misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of
duties and commission of an offense against the person of his employers duly authorize representative, are all based
on Article 282 of the Labor Code which enumerates the just causes for termination of employment. [22] By this alone, it
is palpable that the reason for petitioners dismissal from the service is not religious in nature. Coupled with this is the
act of the SDA in furnishing NLRC with a copy of petitioners letter of termination. As aptly stated by the OSG, this
again is an eloquent admission by private respondents that NLRC has jurisdiction over the case. Aside from these,
SDA admitted in a certification[23] issued by its officer, Mr. Ibesate, that petitioner has been its employee for twentyeight (28) years. SDA even registered petitioner with the Social Security System (SSS) as its employee. As a matter of
fact, the workers records of petitioner have been submitted by private respondents as part of their exhibits. From all of
these it is clear that when the SDA terminated the services of petitioner, it was merely exercising its management
prerogative to fire an employee which it believes to be unfit for the job. As such, the State, through the Labor Arbiter
and the NLRC, has the right to take cognizance of the case and to determine whether the SDA, as employer, rightfully
exercised its management prerogative to dismiss an employee. This is in consonance with the mandate of the
Constitution to afford full protection to labor.
Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to
include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on post-employment
states that the provisions of this Title shall apply to all establishments or undertakings, whether for profit or not.
Obviously, the cited article does not make any exception in favor of a religious corporation. This is made more evident
by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of
Employment and Retirement, categorically includes religious institutions in the coverage of the law, to wit:
Section 1. Coverage. This Rule shall apply to all establishments and undertakings, whether operated for profit or not,
including educational, medical, charitable and religious institutions and organizations, in cases of regular
employment with the exception of the Government and its political subdivisions including government-owned or
controlled corporations.[24]
With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of
church and state to avoid its responsibilities as an employer under the Labor Code.
Finally, as correctly pointed out by petitioner, private respondents are estopped from raising the issue of lack of
jurisdiction for the first time on appeal. It is already too late in the day for private respondents to question the
jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully participated in the trials and hearings of the
case from start to finish. The Court has already ruled that the active participation of a party against whom the action
was brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial body where the action is
pending, is tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the case and
will bar said party from later on impugning the court or bodys jurisdiction. [25] Thus, the active participation of private
respondents in the proceedings before the Labor Arbiter and the NLRC mooted the question on jurisdiction.
The jurisdictional question now settled, we shall now proceed to determine whether the dismissal of petitioner
was valid.
At the outset, we note that as a general rule, findings of fact of administrative bodies like the NLRC are binding
upon this Court. A review of such findings is justified, however, in instances when the findings of the NLRC differ from
those of the labor arbiter, as in this case. [26] When the findings of NLRC do not agree with those of the Labor Arbiter,
this Court must of necessity review the records to determine which findings should be preferred as more comformable
to the evidentiary facts.[27]
We turn now to the crux of the matter. In termination cases, the settled rule is that the burden of proving that the
termination was for a valid or authorized cause rests on the employer. [28] Thus, private respondents must not merely
rely on the weaknesses of petitioners evidence but must stand on the merits of their own defense.
The issue being the legality of petitioners dismissal, the same must be measured against the requisites for a valid
dismissal, namely: (a) the employee must be afforded due process, i.e., he must be given an opportunity to be heard
and to defend himself, and; (b) the dismissal must be for a valid cause as provided in Article 282 of the Labor Code.
[29]
Without the concurrence of this twin requirements, the termination would, in the eyes of the law, be illegal. [30]

Page 18 of 191

Before the services of an employee can be validly terminated, Article 277 (b) of the Labor Code and Section 2,
Rule XXIII, Book V of the Rules Implementing the Labor Code further require the employer to furnish the employee
with two (2) written notices, to wit: (a) a written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to explain his side; and, (b) a written
notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds
have been established to justify his termination.
The first notice, which may be considered as the proper charge, serves to apprise the employee of the particular
acts or omissions for which his dismissal is sought. [31] The second notice on the other hand seeks to inform the
employee of the employers decision to dismiss him. [32] This decision, however, must come only after the employee is
given a reasonable period from receipt of the first notice within which to answer the charge and ample opportunity to
be heard and defend himself with the assistance of a representative, if he so desires. [33] This is in consonance with the
express provision of the law on the protection to labor and the broader dictates of procedural due process. [34] Noncompliance therewith is fatal because these requirements are conditions sine quo non before dismissal may be validly
effected.[35]
Private respondent failed to substantially comply with the above requirements. With regard to the first notice, the
letter,[36] dated 17 October 1991, which notified petitioner and his wife to attend the meeting on 21 October 1991,
cannot be construed as the written charge required by law. A perusal of the said letter reveals that it never
categorically stated the particular acts or omissions on which petitioners impending termination was grounded. In fact,
the letter never even mentioned that petitioner would be subject to investigation. The letter merely mentioned that
petitioner and his wife were invited to a meeting wherein what would be discussed were the alleged unremitted church
tithes and the events that transpired on 16 October 1991. Thus, petitioner was surprised to find out that the alleged
meeting turned out to be an investigation. From the tenor of the letter, it cannot be presumed that petitioner was
actually on the verge of dismissal. The alleged grounds for the dismissal of petitioner from the service were only
revealed to him when the actual letter of dismissal was finally issued.For this reason, it cannot be said that petitioner
was given enough opportunity to properly prepare for his defense. While admittedly, private respondents complied with
the second requirement, the notice of termination, this does not cure the initial defect of lack of the proper written
charge required by law.
In the letter of termination, [37] dated 29 October 1991, private respondents enumerated the following as grounds
for the dismissal of petitioner, namely: misappropriation of denominational funds, willful breach of trust, serious
misconduct, gross and habitual neglect of duties, and commission of an offense against the person of employers duly
authorized representative. Breach of trust and misappropriation of denominational funds refer to the alleged failure of
petitioner to remit to the treasurer of the Negros Mission tithes, collections and offerings amounting to P15,078.10
which were collected by his wife, Mrs. Thelma Austria, in the churches under his jurisdiction. On the other hand,
serious misconduct and commission of an offense against the person of the employers duly authorized representative
pertain to the 16 October 1991 incident wherein petitioner allegedly committed an act of violence in the office of Pastor
Gideon Buhat. The final ground invoked by private respondents is gross and habitual neglect of duties allegedly
committed by petitioner.
We cannot sustain the validity of dismissal based on the ground of breach of trust. Private respondents allege
that they have lost their confidence in petitioner for his failure, despite demands, to remit the tithes and offerings
amounting to P15,078.10, which were collected in his district. A careful study of the voluminous records of the case
reveals that there is simply no basis for the alleged loss of confidence and breach of trust.Settled is the rule that under
Article 282 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally,
knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently.[38] It must rest on substantial grounds and not on the employers arbitrariness, whims,
caprices or suspicion; otherwise, the employee would eternally remain at the mercy of the employer. [39] It should be
genuine and not simulated.[40] This ground has never been intended to afford an occasion for abuse, because of its
subjective nature. The records show that there were only six (6) instances when petitioner personally collected and
received from the church treasurers the tithes, collections, and donations for the church. [41] The stenographic notes on
the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a witness for private respondents, show that
Pastor Austria was able to remit all his collections to the treasurer of the Negros Mission. [42]
Though private respondents were able to establish that petitioner collected and received tithes and donations
several times, they were not able to establish that petitioner failed to remit the same to the Negros Mission, and that
he pocketed the amount and used it for his personal purpose. In fact, as admitted by their own witness, Naomi
Geniebla, petitioner remitted the amounts which he collected to the Negros Mission for which corresponding receipts
were issued to him. Thus, the allegations of private respondents that petitioner breached their trust have no leg to
stand on.
In a vain attempt to support their claim of breach of trust, private respondents try to pin on petitioner the alleged
non-remittance of the tithes collected by his wife. This argument deserves little consideration. First of all, as proven by
convincing and substantial evidence consisting of the testimonies of the witnesses for private respondents who are
church treasurers, it was Mrs. Thelma Austria who actually collected the tithes and donations from them, and, who
failed to remit the same to the treasurer of the Negros Mission. The testimony of these church treasurers were
corroborated and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA.Hence, in the absence of conspiracy
and collusion, which private respondents failed to demonstrate, between petitioner and his wife, petitioner cannot be
made accountable for the alleged infraction committed by his wife.After all, they still have separate and distinct
personalities. For this reason, the Labor Arbiter found it difficult to see the basis for the alleged loss of confidence and

Page 19 of 191

breach of trust. The Court does not find any cogent reason, therefore, to digress from the findings of the Labor Arbiter
which is fully supported by the evidence on record.
With respect to the grounds of serious misconduct and commission of an offense against the person of the
employers duly authorized representative, we find the same unmeritorious and, as such, do not warrant petitioners
dismissal from the service.
Misconduct has been defined as improper or wrong conduct. It is the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not
mere error in judgment.[43] For misconduct to be considered serious it must be of such grave and aggravated character
and not merely trivial or unimportant.[44] Based on this standard, we believe that the act of petitioner in banging the
attache case on the table, throwing the telephone and scattering the books in the office of Pastor Buhat, although
improper, cannot be considered as grave enough to be considered as serious misconduct. After all, as correctly
observed by the Labor Arbiter, though petitioner committed damage to property, he did not physically assault Pastor
Buhat or any other pastor present during the incident of 16 October 1991. In fact, the alleged offense committed upon
the person of the employers representatives was never really established or proven by private respondents. Hence,
there is no basis for the allegation that petitioners act constituted serious misconduct or that the same was an offense
against the person of the employers duly authorized representative. As such, the cited actuation of petitioner does not
justify the ultimate penalty of dismissal from employment. While the Constitution does not condone wrongdoing by the
employee, it nevertheless urges a moderation of the sanctions that may be applied to him in light of the many
disadvantages that weigh heavily on him like an albatross on his neck. [45] Where a penalty less punitive would suffice,
whatever missteps may have been committed by the worker ought not be visited with a consequence so severe such
as dismissal from employment.[46] For the foregoing reasons, we believe that the minor infraction committed by
petitioner does not merit the ultimate penalty of dismissal.
The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect of duties,
does not requires an exhaustive discussion. Suffice it to say that all private respondents had were allegations but not
proof. Aside from merely citing the said ground, private respondents failed to prove culpability on the part of
petitioner. In fact, the evidence on record shows otherwise. Petitioners rise from the ranks disclose that he was
actually a hard-worker. Private respondents evidence,[47] which consisted of petitioners Workers Reports, revealed
how petitioner travelled to different churches to attend to the faithful under his care. Indeed, he labored hard for the
SDA, but, in return, he was rewarded with a dismissal from the service for a non-existent cause.
In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated from service
without just or lawful cause. Having been illegally dismissed, petitioner is entitled to reinstatement to his former
position without loss of seniority right[48] and the payment of full backwages without any deduction corresponding to the
period from his illegal dismissal up to actual reinstatement. [49]
WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of public respondent National
Labor Relations Commission, rendered on 23 January 1996, is NULLIFIED and SET ASIDE.The Decision of the Labor
Arbiter, dated 15 February 1993, is reinstated and hereby AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

[1]

Penned by Presiding Commissioner Irenea E. Ceniza and concurred in by Commissioner Amorito V.

Caete. Commissioner Bernabe S. Batuhan dissented. Records, Vol. 1, p. 901.
[2]
Exhibit B for petitioner, Id., at 467.
[3]
Exhibits 5, 6, 7, 8, and 9 for private respondents, Id., at 355 359.
[4]
Exhibit M for petitioner, Id., at 252.
[5]
Decision of the labor arbiter, Id., at 489, 531.
[6]
Id., at 532.
[7]
Ibid.
[8]
Exhibit H for petitioner, Id., at 247.
[9]
Exhibit C for petitioner, Id., at 239.
[10]
Exhibit E for petitioner, Id., at 241.
[11]
Records, Vol. 1, p. 1.
[12]
Decision of the Labor Arbiter, Id., at 489, 536.
[13]
Decision of the NLRC, Id., at 611, 618.
[14]
Resolution of the NLRC, Id., at 789, 796.
[15]
Id., at 901, 903.
[16]
Rollo, p. 188.
[17]
ISAGANI A. CRUZ, PHILIPPINE POLITICAL LAW (1998), p. 68.
[18]
Ibid.
[19]
Id.
[20]
Id.
[21]
BLACKS LAW DICTIONARY, Fifth Edition (1979), p. 460.
[22]
Rollo, p. 233.
[23]
Exhibit B for petitioner, Records, Vol. 1, p. 238.
[24]
Emphasis supplied.

Page 20 of 191

[25]

Maneja vs. NLRC and Manila Midtown Hotel, G.R. No. 124013, June 5, 1998, citing Marquez vs. Secretary of
Labor, 171 SCRA 337 (1989).
[26]
Lim, et al. vs. NLRC, et al., G.R. No. 124630, February 19, 1999.
[27]
Arboleda vs. NLRC and Manila Electric Company, G.R. No. 119509, February 11, 1999, citing Tanala vs. NLRC,
252 SCRA 314 (1996).
[28]
Id., citing Gesulgon vs. NLRC, 219 SCRA 561 (1993).
[29]
Id., citing Pizza Hut/Progressive Devt. Corp. vs. NLRC, 252 SCRA 531 (1996).
[30]
Salaw vs. NLRC, 202 SCRA 7, 12 (1991) citing San Miguel Corporation vs. NLRC, 173 SCRA 314 (1989).
[31]
Tiu v. NLRC, 215 SCRA 540, 551 (1992).
[32]
Ibid.
[33]
Id.
[34]
Id., at 552.
[35]
Id., citing Metro Port Service, Inc. v. NLRC, 171 SCRA 190 (1989).
[36]
Exhibit H for petitioner, Records, Vol. 1, p. 247.
[37]
Exhibit E for petitioner, Id., at 241.
[38]
Atlas Consolidated Mining & Devt. Corp. vs. NLRC and Isabelo O. Villacencio, G.R. No. 122033, May 21, 1998.
[39]
Ibid.
[40]
Id.
[41]
Exhibits 47, 49, 50, 51, 52, and 53 for private respondents, Records, Vol. 1, pp. 398, 400 403.
[42]
TSN, June 22, 1992, pp. 198-199; August 18, 1992, pp. 189-191, 198-201.
[43]
Alma Cosep, et al. vs. NLRC and Premiere Development Bank, G.R. No. 124966, June 16, 1998.
[44]
Ibid.
[45]
Gandara Mill Supply and Milagros Sy vs. NLRC and Silvestre Germano, G.R. No. 126703, December 29, 1998
citing Diosdado de Vera vs. NLRC, 191 SCRA 633 (1990).
[46]
PLDT vs. NLRC and Enrique Gabriel, G.R. No. 106947, February 11, 1999, citing Madlos vs. NLRC, 254 SCRA 248
(1996).
[47]
Exhibits 44 46 for private respondents, Records, Vol. 1, pp. 395 397.
[48]
Salaw vs. NLRC, supra note 30 citing Santos vs. NLRC, 154 SCRA 166 (1987).
[49]
Joaquin Servidad vs. NLRC, 265 SCRA 61, 71 (1996).

Page 21 of 191

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR
FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE
GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.
Tomas A. Reyes for private respondent.

FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl fishing vessel
7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if so, whether or not they
were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing
vessels owned and operated by private respondent De Guzman Fishing Enterprises which is primarily engaged in the
fishing business with port and office at Camaligan, Camarines Sur. Petitioners rendered service aboard said fishing
vessel in various capacities, as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief engineer;
Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip
Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were paid
on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed
upon, they received thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total proceeds exceeded
the cost of crude oil consumed during the fishing trip, otherwise, they received ten percent (10%) of the total proceeds
of the sale. The patron/pilot, chief engineer and master fisherman received a minimum income of P350.00 per week
while the assistant engineer, second fisherman, and fisherman-winchman received a minimum income of P260.00 per
week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of private
respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the report that they sold
some of their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the charge claiming that
the same was a countermove to their having formed a labor union and becoming members of Defender of Industrial
Agricultural Labor Organizations and General Workers Union (DIALOGWU) on September 3, 1983.
During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal
charges were formally filed against them. Notwithstanding, private respondent refused to allow petitioners to return to
the fishing vessel to resume their work on the same day, September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th
month pay, emergency cost of living allowance and service incentive pay, with the then Ministry (now Department) of
Labor and Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83 to

Page 22 of 191

1456-83. 2 They uniformly contended that they were arbitrarily dismissed without being given ample time to look for a
new job.
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its position
paper denying the employer-employee relationship between private respondent and petitioners on the theory that
private respondent and petitioners were engaged in a joint venture. 3
After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint hearing
furnishing the parties with notice and summons. On December 27, 1983, after two (2) previously scheduled joint
hearings were postponed due to the absence of private respondent, one of the petitioners herein, Alipio Ruga, the
pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the fishing operations were conducted,
mode of payment of compensation for services rendered by the fishermen-crew members, and the circumstances
leading to their dismissal. 4
On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a joint
decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing venture" and not one of
employer-employee relationship existed between private respondent and petitioners.
From the adverse decision against them, petitioners appealed to the National Labor Relations Commission.
On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming the decision of the
labor arbiter that a "joint fishing venture" relationship existed between private respondent and petitioners.
Hence, the instant petition.
Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and
petitioners is a joint venture arrangement and not an employer-employee relationship. To stress that there is an
employer-employee relationship between them and private respondent, petitioners invite attention to the following: that
they were directly hired by private respondent through its general manager, Arsenio de Guzman, and its operations
manager, Conrado de Guzman; that, except for Laurente Bautu, they had been employed by private respondent from
8 to 15 years in various capacities; that private respondent, through its operations manager, supervised and controlled
the conduct of their fishing operations as to the fixing of the schedule of the fishing trips, the direction of the fishing
vessel, the volume or number of tubes of the fish-catch the time to return to the fishing port, which were
communicated to the patron/pilot by radio (single side band); that they were not allowed to join other outfits even the
other vessels owned by private respondent without the permission of the operations manager; that they were
compensated on percentage commission basis of the gross sales of the fish-catch which were delivered to them in
cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow company policies, rules and
regulations imposed on them by private respondent.
Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and
petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or abused its discretion when it
added facts not contained in the records when it stated that the pilot-crew members do not receive compensation from
the boat-owners except their share in the catch produced by their own efforts; that public respondent ignored the
evidence of petitioners that private respondent controlled the fishing operations; that public respondent did not take
into account established jurisprudence that the relationship between the fishing boat operators and their crew is one of
direct employer and employee.
Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now final and
executory for failure of petitioners to file their appeal with the NLRC within 10 calendar days from receipt of said
decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347
(1982), the Solicitor General claims that the ruling of public respondent that a "joint fishing venture" exists between
private respondent and petitioners rests on the resolution of the Social Security System (SSS) in a 1968 case, Case
No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent
herein, from compulsory coverage of the SSS on the ground that there is no employer-employee relations between
the boat-owner and the fishermen-crew members following the doctrine laid down in Pajarillo vs. SSS, 17 SCRA 1014
(1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra, that there is no employer-employee
relationship between the boat-owner and the pilot and crew members when the boat-owner supplies the boat and

Page 23 of 191

equipment while the pilot and crew members contribute the corresponding labor and the parties get specific shares in
the catch for their respective contribution to the venture, the Solicitor General pointed out that the boat-owners in
the Pajarillo case, as in the case at bar, did not control the conduct of the fishing operations and the pilot and crew
members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits rather than to
dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to this Court enunciated
in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of the Philippines, Inc., 61
SCRA 340 (1974), thus "the well-settled doctrine is that in labor cases before this Tribunal, no undue sympathy is to
be accorded to any claim of a procedural misstep, the idea being that its power be exercised according to justice and
equity and substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in trawl
fishing, as in the case of petitioners herein, who spend one (1) whole week or more 7 in the open sea performing their
job to earn a living to support their families, convince Us to adopt a more liberal attitude in applying to petitioners the
10-calendar day rule in the filing of appeals with the NLRC from the decision of the labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July 3,1984 by
their non-lawyer representative during the arbitration proceedings, Jose Dialogo who received the decision eight (8)
days earlier, or on June 25, 1984. As adverted to earlier, the circumstances peculiar to petitioners' occupation as
fishermen-crew members, who during the pendency of the case understandably have to earn a living by seeking
employment elsewhere, impress upon Us that in the ordinary course of events, the information as to the adverse
decision against them would not reach them within such time frame as would allow them to faithfully abide by the 10calendar day appeal period. This peculiar circumstance and the fact that their representative is a non-lawyer provide
equitable justification to conclude that there is substantial compliance with the ten-calendar day rule of filing of appeals
with the NLRC when petitioners filed on July 10, 1984, or seven (7) days after receipt of the decision, their appeal with
the NLRC through registered mail.
We have consistently ruled that in determining the existence of an employer-employee relationship, the elements that
are generally considered are the following (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the means
and methods by which the work is to be accomplished. 8 The employment relation arises from contract of hire, express
or implied. 9 In the absence of hiring, no actual employer-employee relation could exist.
From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test 10 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. The test calls merely for the existence of the right to control the manner of
doing the work, not the actual exercise of the right. 11
The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint fishing
venture" existed between private respondent and petitioners is not applicable in the instant case. There is neither light
of control nor actual exercise of such right on the part of the boat-owners in the Pajarillo case, where the Court found
that the pilots therein are not under the order of the boat-owners as regards their employment; that they go out to sea
not upon directions of the boat-owners, but upon their own volition as to when, how long and where to go fishing; that
the boat-owners do not in any way control the crew-members with whom the former have no relationship whatsoever;
that they simply join every trip for which the pilots allow them, without any reference to the owners of the vessel; and
that they only share in their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of the
fishing operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to be
under the control and supervision of private respondent's operations manager. Matters dealing on the fixing of the
schedule of the fishing trip and the time to return to the fishing port were shown to be the prerogative of private
respondent. 12 While performing the fishing operations, petitioners received instructions via a single-side band radio
from private respondent's operations manager who called the patron/pilot in the morning. They are told to report their
activities, their position, and the number of tubes of fish-catch in one day. 13 Clearly thus, the conduct of the fishing

Page 24 of 191

operations was monitored by private respondent thru the patron/pilot of 7/B Sandyman II who is responsible for
disseminating the instructions to the crew members.
The conclusion of public respondent that there had been no change in the situation of the parties since 1968 when De
Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment in Case No. 708 exempting it
from compulsory coverage of the SSS law is not supported by evidence on record. It was erroneous for public
respondent to apply the factual situation of the parties in the 1968 case to the instant case in the light of the changes
in the conditions of employment agreed upon by the private respondent and petitioners as discussed earlier.
Records show that in the instant case, as distinguished from the Pajarillo case where the crew members are under no
obligation to remain in the outfit for any definite period as one can be the crew member of an outfit for one day and be
the member of the crew of another vessel the next day, the herein petitioners, on the other hand, were directly hired by
private respondent, through its general manager, Arsenio de Guzman, and its operations manager, Conrado de
Guzman and have been under the employ of private respondent for a period of 8-15 years in various capacities,
except for Laurente Bautu who was hired on August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was hired on
September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968
until he was promoted as chief engineer of the fishing vessel; Jose Parma was employed on September 29, 1974 as
assistant engineer; Jaime Barbin started as a pilot of the motor boat until he was transferred as a master fisherman to
the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin
was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of
petitioners to perform work which is necessary or desirable in the usual business or trade of private respondent for a
period of 8-15 years since 1968 qualify them as regular employees within the meaning of Article 281 of the Labor
Code as they were indeed engaged to perform activities usually necessary or desirable in the usual fishing business
or occupation of private respondent. 14
Aside from performing activities usually necessary and desirable in the business of private respondent, it must be
noted that petitioners received compensation on a percentage commission based on the gross sale of the fishcatch i.e. 13% of the proceeds of the sale if the total proceeds exceeded the cost of the crude oil consumed during the
fishing trip, otherwise only 10% of the proceeds of the sale. Such compensation falls within the scope and meaning of
the term "wage" as defined under Article 97(f) of the Labor Code, thus:
(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and included the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to
the employee. . . .
The claim of private respondent, which was given credence by public respondent, that petitioners get paid in the form
of share in the fish-catch which the patron/pilot as head of the team distributes to his crew members in accordance
with their own understanding 15 is not supported by recorded evidence. Except that such claim appears as an
allegation in private respondent's position paper, there is nothing in the records showing such a sharing scheme as
preferred by private respondent.
Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch at
midsea without the knowledge and consent of private respondent, petitioners were unjustifiably not allowed to board
the fishing vessel on September 11, 1983 to resume their activities without giving them the opportunity to air their side
on the accusation against them unmistakably reveals the disciplinary power exercised by private respondent over
them and the corresponding sanction imposed in case of violation of any of its rules and regulations. The virtual
dismissal of petitioners from their employment was characterized by undue haste when less extreme measures
consistent with the requirements of due process should have been first exhausted. In that sense, the dismissal of
petitioners was tainted with illegality.

Page 25 of 191

Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent virtually
resulting in their dismissal evidently contradicts private respondent's theory of "joint fishing venture" between the
parties herein. A joint venture, including partnership, presupposes generally a parity of standing between the joint coventurers or partners, in which each party has an equal proprietary interest in the capital or property contributed 16 and
where each party exercises equal lights in the conduct of the business. 17 It would be inconsistent with the principle of
parity of standing between the joint co-venturers as regards the conduct of business, if private respondent would
outrightly exclude petitioners from the conduct of the business without first resorting to other measures consistent with
the nature of a joint venture undertaking, Instead of arbitrary unilateral action, private respondent should have
discussed with an open mind the advantages and disadvantages of petitioners' action with its joint co-venturers if
indeed there is a "joint fishing venture" between the parties. But this was not done in the instant case. Petitioners were
arbitrarily dismissed notwithstanding that no criminal complaints were filed against them. The lame excuse of private
respondent that the non-filing of the criminal complaints against petitioners was for humanitarian reasons will not help
its cause either.
We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand. In Negre
vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were recruited by one master fisherman
locally known as "maestro" in charge of recruiting others to complete the crew members are considered employees,
not industrial partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where
petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not the employer of the fishermen
crew members because of an alleged partnership agreement between him, as financier, and Simplicio Panganiban, as
his team leader in charge of recruiting said fishermen to work for him, we affirmed the finding of the WCC that there
existed an employer-employee relationship between the boat-owner and the fishermen crew members not only
because they worked for and in the interest of the business of the boat-owner but also because they were subject to
the control, supervision and dismissal of the boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of
Dr. Abong; that while these fishermen crew members were paid in kind, or by "pakiao basis" still that fact did not alter
the character of their relationship with Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159 (1982), we
held that the employer-employee relationship between the crew members and the owners of the fishing vessels
engaged in deep sea fishing is merely suspended during the time the vessels are drydocked or undergoing repairs or
being loaded with the necessary provisions for the next fishing trip. The said ruling is premised on the principle that all
these activities i.e., drydock, repairs, loading of necessary provisions, form part of the regular operation of the
company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National Labor
Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered to
reinstate petitioners to their former positions or any equivalent positions with 3-year backwages and other monetary
benefits under the law. No pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin and Corts, JJ., concur.
Feliciano, J., concurs in the result.

Footnotes
1 p. 3, Joint Decision, Labor Arbiter, p. 40, Rollo.
2 pp. 1-8, Records.
3 pp. 28-30, Ibid.
4 pp. 54-101, Ibid.

Page 26 of 191

5 Annex "D" Petition, pp. 40-46, Rollo.

6 pp. 61-65, Rollo.
7 p. 23, T.S.N., p. 78, Records.
8 Hydro-Resources Contractor Corporation vs. Labor Arbiter Pagalilauan G.R. No. 62909, April 18,
1989; Tabas, et al. vs. California Mfg. Co. et. al., G.R. No. 80680, January 26, 1989; Continental
Marble Corporation vs. NLRC, 161 SCRA 151; Bautista vs. Inciong, 158 SCRA 665; Broadway
Motors, Inc. vs. NLRC, 156 SCRA 522; Besa vs. Trajano, 146 SCRA 501; Rosario Brothers, Inc. vs.
Ople, 131 SCRA 72; Shipside Inc. vs. NLRC, 118 SCRA 99; Mafinco Trading Corporation vs. Ople, 70
SCRA 139.
9 Yu Chuck vs. Kong Li Po, 46 Phil. 608 (1924).
10 LVN Pictures, Inc. vs. Philippine Musicians Guild, l SCRA 132, 173 (1961), citing Alabama
Highway Express, Co. vs. Local, 612, 108 S. 2d. 350.
11 Dy Keh Beng vs. International Labor and Marine Union of the Philippines, 90 SCRA 161 (1979).
12 pp. 7-8, T.S.N., pp. 61-62, Records.
13 p. 7. T.S.N., p. 61, Records.
14 Ochoco vs. NLRC., 120 SCRA 774 (1983); Mansol vs. P.P. Gocheco Lumber Co., 96 Phil. 941
(1955).
15 p. 2, Private Respondent's Position Paper, p. 22, Records; p. 2, Memorandum for Private
Respondent, p. 131, Rollo.
16 Sevilla vs. Court of Appeals, 160 SCRA 171 (1988), citing Bautista Treatise on Philippine
Partnership Law, p. 34.
17 Ibid. p. 37.

Page 27 of 191

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 121948
October 8, 2001
PERPETUAL HELP CREDIT COOPERATIVE, INC., petitioner,
vs.
BENEDICTO FABURADA, SISINITA VILLAR, IMELDA TAMAYO, HAROLD CATIPAY, and the NATIONAL LABOR
RELATIONS COMMISSION, Fourth Division, Cebu City, respondents.
SANDOVAL-GUTIERREZ, J.:
On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold Catipay, private respondents, filed
a complaint against the Perpetual Help Credit Cooperative, Inc. (PHCCI), petitioner, with the Arbitration Branch,
Department of Labor and Employment (DOLE), Dumaguete City, for illegal dismissal, premium pay on holidays and
rest days, separation pay, wage differential, moral damages, and attorney's fees.
Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the ground that there is no employer-employee
relationship between them as private respondents are all members and co-owners of the cooperative. Furthermore,
private respondents have not exhausted the remedies provided in the cooperative by-laws.
On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that Article 121 of R.A. No. 6939,
otherwise known as the Cooperative Development Authority Law which took effect on March 26, 1990, requires
conciliation or mediation within the cooperative before a resort to judicial proceeding.
On the same date, the Labor Arbiter denied petitioner's motion to dismiss, holding that the case is impressed with
employer-employee relationship and that the law on cooperatives is subservient to the Labor Code.
On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring complainants illegally dismissed,
thus respondent is directed to pay Complainants backwages computed from the time they were illegally
dismissed up to the actual reinstatement but subject to the three year backwages rule, separation pay for one
month for every year of service since reinstatement is evidently not feasible anymore, to pay complainants
13th month pay, wage differentials and Ten Percent (10%) attorney's fees from the aggregate monetary
award. However, complainant Benedicto Faburada shall only be awarded what are due him in proportion to
the nine and a half months that he had served the respondent, he being a part-time employee. All other claims
are hereby dismissed for lack of merit.
The computation of the foregoing awards is hereto attached and forms an integral part of this decision."
On appeal,1 the NLRC affirmed the Labor Arbiter's decision.
Hence, this petition by the PHCCI.
The issue for our resolution is whether or not respondent judge committed grave abuse of discretion in ruling that
there is an employer-employee relationship between the parties and that private respondents were illegally dismissed.
Petitioner PHCCI contends that private respondents are its members and are working for it as volunteers. Not being
regular employees, they cannot sue petitioner.
In determining the existence of an employer-employee relationship, the following elements are considered: (1 ) the
selection and engagement of the worker or the power to hire; (2) the power to dismiss; (3) the payment of wages by
whatever means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. No particular form of proof is required to prove the existence of an employer-employee relationship. Any
competent and relevant evidence may show the relationship. 2
The above elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca, Jr., its Manager, hired private
respondents to work for it. They worked regularly on regular working hours, were assigned specific duties, were paid
regular wages and made to accomplish daily time records just like any other regular employee. They worked under the
supervision of the cooperative manager. But unfortunately, they were dismissed.
That an employer-employee exists between the parties is shown by the averments of private respondents in their
respective affidavits, carefully considered by respondent NLRC in affirming the Labor Arbiter's decision, thus:
Benedicto Faburada Regular part-time Computer programmer/ operator. Worked with the Cooperative since
June 1, 1988 up to December 29, 1989. Work schedule: Tuesdays and Thursdays, from 1:00 p.m. to 5:30
p.m. and every Saturday from 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m. and for at least three (3) hours during
Sundays. Monthly salary: P1,000.00 from June to December 1988; P1,350.00 - from January to June 1989;
and P1,500.00 from July to December 1989. Duties: Among others, Enter data into the computer; compute
interests on savings deposits, effect mortuary deductions and dividends on fixed deposits; maintain the
masterlist of the cooperative members; perform various forms for mimeographing; and perform such other
duties as may be assigned from time to time.
Sisinita Vilar Clerk. Worked with the Cooperative since December 1, 1987 up to December 29, 1989.Work
schedule: Regular working hours. Monthly salary: P500.00 from December 1, 1987 to December 31, 1988;
P1,000.00 from January 1, 1989 to June 30, 1989; and P1,150.00 from July 1, 1989 to December 31,
1989. Duties: Among others, Prepare summary of salary advances, journal vouchers, daily summary of
disbursements to respective classifications; schedule loans; prepare checks and cash vouchers for regular
and emergency loans; reconcile bank statements to the daily summary of disbursements; post the monthly
balance of fixed and savings deposits in preparation for the computation of interests, dividends, mortuary and
patronage funds; disburse checks during regular and emergency loans; and perform such other bookkeeping
and accounting duties as may be assigned to her from time to time.

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Imelda C. Tamayo Clerk. Worked with the Cooperative since October 19, 1987 up to December 29,
1989. Work schedule: Monday to Friday - 8:00 to 11:30 a.m and 2:00 to 5:30 p.m.; every Saturday 8:00 to
11:30 a.m and 1:00 to 4:00 p.m; and for one Sunday each month - for at least three (3) hours. Monthly salary:
P60.00 from October to November 1987; P250.00 for December 1987; P500.00 from January to
December 1988; P950 from January to June 1989; and P1,000.00 from July to December 1989. Duties:
Among others, pick up balances for the computation of interests on savings deposit, mortuary, dividends and
patronage funds; prepare cash vouchers; check petty cash vouchers; take charge of the preparation of new
passbooks and ledgers for new applicants; fill up members logbook of regular depositors, junior depositors
and special accounts; take charge of loan releases every Monday morning; assist in the posting and
preparation of deposit slips; receive deposits from members; and perform such other bookkeeping and
accounting duties as may be assigned her from time to time.
Harold D. Catipay Clerk. Worked with the Cooperative since March 3 to December 29, 1989. Work
schedule: Monday to Friday 8:00 to 11:30 a.m. and 2:00 to 5:30 p.m.; Saturday 8:00 to 11:30 a.m.
and 1:00 to 4:00 p.m.; and one Sunday each month for at least three (3) hours. Monthly salary: P900.00
from March to June 1989; P1,050.00 - from July to December 1989. Duties: Among others, Bookkeeping,
accounting and collecting duties, such as, post daily collections from the two (2) collectors in the market;
reconcile passbooks and ledgers of members in the market; and assist the other clerks in their duties.
All of them were given a memorandum of termination on January 2, 1990, effective December 29, 1989.
We are not prepared to disregard the findings of both the Labor Arbiter and respondent NLRC, the same being
supported by substantial evidence, that quantum of evidence required in quasi judicial proceedings, like this one.
Necessarily, this leads us to the issue of whether or not private respondents are regular employees. Article 280 of the
Labor Code provides for three kinds of employees: (1) regular employees or those who have been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the employer; (2) project
employees or those whose employment has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the duration of the season; and (3) casual
employees or those who are neither regular nor project employees. 3 The employees who are deemed regular are: (a)
those who have been engaged to perform activities which are usually necessary or desirable in the usual trade or
business of the employer; and (b) those casual employees who have rendered at least one (1 ) year of service,
whether such service is continuous or broken, with respect to the activity in which they are employed. 4 Undeniably,
private respondents were rendering services necessary to the day-to-day operations of petitioner PHCCI. This fact
alone qualified them as regular employees.
All of them, except Harold D. Catipay, worked with petitioner for more than one (1) year: Benedicto Faburada, for one
and a half (1 1/2) years; Sisinita Vilar, for two (2) years; and Imelda C. Tamayo, for two (2) years and two (2) months.
That Benedicto Faburada worked only on a part-time basis, does not mean that he is not a regular employee. One's
regularity of employment is not determined by the number of hours one works but by the nature and by the length of
time one has been in that particular job. 5 Petitioner's contention that private respondents are mere volunteer workers,
not regular employees, must necessarily fail. Its invocation of San Jose City Electric Cooperative vs. Ministry of Labor
and Employment (173 SCRA 697, 703 (1989) is misplaced. The issue in this case is whether or not the employeesmembers of a cooperative can organize themselves for purposes of collective bargaining, not whether or not the
members can be employees. Petitioner missed the point
As regular employees or workers, private respondents are entitled to security of tenure. Thus, their services may be
terminated only for a valid cause, with observance of due process.
The valid causes are categorized into two groups: the just causes under Articles 282 of the Labor Code and the
authorized causes under Articles 283 and 284 of the same Code. The just causes are: (1) serious misconduct or willful
disobedience of lawful orders in connection with the employee's work; (2) gross or habitual neglect of duties; (3) fraud
or willful breach of trust; (4) commission of a crime or an offense against the person of the employer or his immediate
family member or representative; and, analogous cases. The authorized causes are: (1) the installation of labor-saving
devices; (2) redundancy; (3) retrenchment to prevent losses; and (4) closing or cessation of operations of the
establishment or undertaking, unless the closing is for the purpose of circumventing the provisions of law. Article 284
provides that an employer would be authorized to terminate the services of an employee found to be suffering from
any disease if the employee's continued employment is prohibited by law or is prejudicial to his health or to the health
of his fellow employees6
Private respondents were dismissed not for any of the above causes. They were dismissed because petitioner
considered them to be mere voluntary workers, being its members, and as such work at its pleasure. Petitioner thus
vehemently insists that their dismissal is not against the law.
Procedural due process requires that the employer serve the employees to be dismissed two (2) written notices before
the termination of their employment is effected: (a) the first, to apprise them of the particular acts or omissions for
which their dismissal is sought and (b) the second, to inform them of the decision of the employer that they are being
dismissed.7 In this case, only one notice was served upon private respondents by petitioner. It was in the form of a
Memorandum signed by the Manager of the Cooperative dated January 2, 1990 terminating their services effective
December 29, 1989. Clearly, petitioner failed to comply with the twin requisites of a valid notice.
We hold that private respondents have been illegally dismissed.
Petitioner contends that the labor arbiter has no jurisdiction to take cognizance of the complaint of private respondents
considering that they failed to submit their dispute to the grievance machinery as required by P.D. 175 (strengthening
the Cooperative Movement) 8 and its implementing rules and regulations under LOI 23. Likewise, the Cooperative

Page 29 of 191

Development Authority did not issue a Certificate of Non-Resolution pursuant to Section 8 of R.A. 6939 or the
Cooperative Development Authority Law.
As aptly stated by the Solicitor General in his comment, P.D. 175 does not provide for a grievance machinery where a
dispute or claim may first be submitted. LOI 23 refers to instructions to the Secretary of Public Works and
Communications to implement immediately the recommendation of the Postmaster General for the dismissal of some
employees of the Bureau of Post. Obviously, this LOI has no relevance to the instant case.
Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines) provides the procedure how cooperative
disputes are to be resolved, thus:
ART. 121. Settlement of Disputes. Disputes among members, officers, directors, and committee members,
and intra-cooperative disputes shall, as far as practicable, be settled amicably in accordance with the
conciliation or mediation mechanisms embodied in the by-laws of the cooperative, and in applicable laws.
Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent
jurisdiction."
Complementing this Article is Section8 of R.A. No. 6939 (Cooperative Development Authority Law) which reads:
SEC. 8 Mediation and Conciliation. Upon request of either or both parties, the Authority shall mediate and
conciliate disputes within a cooperative or between cooperatives: Provided, That if no mediation or conciliation
succeeds within three (3) months from request thereof, a certificate of non-resolution shall be issued by the
Commission prior to the filing of appropriate action before the proper courts.
The above provisions apply to members, officers and directors of the cooperative involved in disputes within a
cooperative or between cooperatives.
There is no evidence that private respondents are members of petitioner PHCCI and even if they are, the dispute is
about payment of wages, overtime pay, rest day and termination of employment. Under Art. 217 of the Labor Code,
these disputes are within the original and exclusive jurisdiction of the Labor Arbiter.
As illegally dismissed employees, private respondents are therefore entitled to reinstatement without loss of seniority
rights and other privileges and to full backwages, inclusive of allowances, plus other benefits or their monetary
equivalent computed from the time their compensation was withheld from them up to the time of their actual
reinstatement.9 Since they were dismissed after March 21, 1989, the effectivity date of R.A. 6715 10 they are granted
full backwages, meaning, without deducting from their backwages the earnings derived by them elsewhere during the
period of their illegal dismissal.11 If reinstatement is no longer feasible, as when the relationship between petitioner and
private respondents has become strained, payment of their separation pay in lieu of reinstatement is in order. 12
WHEREFORE, the petition is hereby DENIED. The decision of respondent NLRC is AFFIRMED, with modification in
the sense that the backwages due private respondents shall be paid in full, computed from the time they were illegally
dismissed up to the time of the finality of this Decision. 13
SO ORDERED.
Melo, Vitug and Panganiban, JJ., concur.
Footnotes
1
Rollo, p. 8.
2
Opulencia Ice Plant and Storage vs. National Labor Relations Commission, G.R. No. 98368, December 15,
1993, 228 SCRA 473, 478; Curdanetaan Piece Workers Union vs. Laguesma, G.R. No. 113542 and G.R. No.
114911, February 24, 1998, 286 SCRA 401, 420; Vinoya vs. National Labor Relations Commission, G.R. No.
126586, February 2, 2000, 324 SCRA 469, 485.
3
Villa vs. National Labor Relations Commission, G.R. 117043, January 14, 1998, 284 SCRA 105,
127;Philippine Federation of Credit, Inc. vs. National Labor Relations Commission, G.R. No. 121071,
December 11, 1998, 300 SCRA 72, 77.
4
Romares vs. National Labor Relations Commission, G.R. No, 122327. August 19, 1998, 294 SCRA 411,
415; Philippine Fruit and Vegetable Industries, Inc. vs. National Labor Relations Commission, G.R. No.
122122, July 20, 1999, 310 SCRA 673, 681.
5
International Pharmaceuticals, Inc. vs. National Labor Relations Commission (4th Division), G.R. No.
106331, March 9, 1998, 287 SCRA 213, 224.
6
Edge Apparel, Inc. vs. National Labor Relations Commission, G.R. No. 121314, February 12, 1998, 286
SCRA 302, 309-310.
7
Maneja vs. National Labor Relations Commission, G.R. No. 124013, June 5, 1998, 290 SCRA 603, 623624; Tan vs. National Labor Relations Commission, G.R. No. 128290, November 24, 1998, 299 SCRA 169,
185.
8
Repealed by express provision of Art. 127 of R.A. No. 6938 (The Cooperative Code of the Philippines) but
then in force at the time the complaint was filed with the DOLE.
9
Art. 279, Labor Code.
10
Republic Act No. 6715 An Act to extend protection to labor, strengthen the constitutional rights of workers
to self-organization, collective bargaining and peaceful concerted activities, foster industrial peace and
harmony, promote the preferential use of voluntary modes of settling labor disputes, and reorganize the
National Labor Relations Commission, amending for these purposes certain provisions of Presidential Decree
No. 442, as amended, otherwise known as the Labor Code of the Philippines, appropriating funds therefor,
and for other purposes.

Page 30 of 191

11

Bustamante vs. National Labor Relations Commission, G.R. no. 111651, November 28, 1996, 265 SCRA
61, 70-71, cited in Highway Copra Traders vs. NLRC-Cagayan de Oro, 293 SCRA 350, 356-357 and inPepsiCola Products Philippines Incorporated vs. NLRC, 315 SCRA 587, 598.
12
Samillano vs. National Labor Relations Commission, G.R. No. 117582, December 23, 1996, 265 SCRA 788,
798, citing De Vera vs. National Labor Relations Commission, 191 SCRA 632, 634.
13
Samillano vs. NLRC, 265 SCRA 788, 798-799.

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Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
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 Resolution 1 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 companys 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 petitioners 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 P350.00 per trip. This was later adjusted to P480.00 per trip and, at the time of his alleged dismissal, the
petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent companys plant manager, his (the
petitioners) 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 (P300.00) 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 (P350.00) 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 Contractors 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;

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6. This contract shall take effect immediately upon the signing by the parties, subject to renewal on a year-toyear 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 latters
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
petitioners 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 Arbiters 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 P10,800.00 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 .. P248,400.00
b) Separation Pay .... P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorneys 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 petitioners 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 employeremployee 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 petitioners 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 latters business. Further, he had been the respondent companys 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

Page 33 of 191

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 petitioners 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 petitioners 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 employers power to control the
employees conduct.11 The most important element is the employers control of the employees 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 employees 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

Page 34 of 191

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 petitioners services albeit in the guise of
"severance of contractual relation" due allegedly to the latters 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 employers
power to control the means and methods by which the employees 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 companys 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 Osmea 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 Courts 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 petitioners 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.24Obviously, 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 petitioners 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 complainants breach of their contractual relation, i.e., his violation of the terms and conditions of the contract, we
are very much inclined to believe complainants 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

Page 35 of 191

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 petitioners 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.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
Footnotes
1
Penned by Associate Justice Oswaldo D. Agcaoili (retired), with Associate Justices Renato C. Dacudao and
Andres B. Reyes, Jr., concurring.
2
Rollo, pp. 113-114.
3
Id. at 151.
4
Penned by Commissioner Rogelio I. Rayala, with Presiding Commissioner Raul T. Aquino and Commissioner
Victoriano R. Calaycay, concurring; Id. at 177-184.
5
Rollo, pp. 183-184.
6
Penned by Commissioner Angelita A. Gacutan, with Presiding Commissioner Raul T. Aquino and
Commissioner Victoriano R. Calaycay, concurring; Id. at 60-73.
7
181 SCRA 702 (1990).
8
295 SCRA 494 (1998).
9
Rollo, pp. 42-43.
10
Id. at 13-14.
11
Sy v. Court of Appeals , 398 SCRA 301 (2003).
12
Id. at 307-308.
13
LABOR CODE, ART. 97(f).
14
Tan v. Lagrama, 387 SCRA 393 (2002).
15
Book III, Rule X, Sec. 6(a).
16
Tan v. Lagrama, supra.
17
Id. at 399.
18
Id.
19
Annex C of Respondents Position Paper; Rollo, p. 117.
20
Ibid.
21
Annexes A to C of Petitioners Reply to Respondents Position Paper.
22
AZUCENA, I THE LABOR CODE (1999 ed.) 127.
23
Hacienda Fatima v. National Federation of Sugarcane Workers-Food and General Trade, 396 SCRA 518
(2003).
Article 282 of the Labor Code provides: An employer may terminate an employment for any of the
following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative;
(e) Other causes analogous to the foregoing.
24
Buenviaje v. Court of Appeals , 391 SCRA 440 (2002).
25
Globe Telecom, Inc. v. Florendo-Flores , 390 SCRA 201 (2002)
26
Philippine Aeolus Automotive United Corporation v. NLRC , 331 SCRA 237 (2000).
27
Id. at 247.
28
Rollo, pp. 149-150.
29
Cebu Marine Beach Resort v. NLRC , 414 SCRA 173 (2003).

Page 36 of 191

SECOND DIVISION
TELEVISION AND PRODUCTION G.R. No. 167648
EXPONENTS, INC. and/or ANTONIO
P. TUVIERA, Present:
Petitioners,
QUISUMBING, J.,
Chairperson,
CARPIO,
- versus - CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
ROBERTO C. SERVAA,
Respondent. Promulgated:
January 28, 2008
x----------------------------------------------------------------------------x
DECISION
TINGA, J.:
This petition for review under Rule 45 assails the 21 December 2004 Decision[1] and 8 April
2005 Resolution[2] of the Court of Appeals declaring Roberto Servaa (respondent) a regular employee of petitioner
Television and Production Exponents, Inc. (TAPE). The appellate court likewise ordered TAPE to pay nominal
damages for its failure to observe statutory due process in the termination of respondents employment for authorized
cause.
TAPE is a domestic corporation engaged in the production of television programs, such as the long-running
variety program, Eat Bulaga!. Its president is Antonio P. Tuviera (Tuviera). Respondent Roberto C. Servaa had served
as a security guard for TAPE from March 1987 until he was terminated on 3 March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of benefits against TAPE. He alleged that he was
first connected with Agro-Commercial Security Agency but was later on absorbed by TAPE as a regular company
guard. He was detailed at Broadway Centrum in Quezon City where Eat Bulaga! regularly staged its productions. On 2
March 2000, respondent received a memorandum informing him of his impending dismissal on account of TAPEs
decision to contract the services of a professional security agency. At the time of his termination, respondent was
receiving a monthly salary of P6,000.00. He claimed that the holiday pay, unpaid vacation and sick leave benefits and
other monetary considerations were withheld from him. He further contended that his dismissal was undertaken
without due process and violative of existing labor laws, aggravated by nonpayment of separation pay.[3]
In a motion to dismiss which was treated as its position paper, TAPE countered that the labor arbiter had no
jurisdiction over the case in the absence of an employer-employee relationship between the parties. TAPE made the
following assertions: (1) that respondent was initially employed as a security guard for Radio Philippines Network
(RPN-9); (2) that he was tasked to assist TAPE during its live productions, specifically, to control the crowd; (3) that
when RPN-9 severed its relationship with the security agency, TAPE engaged respondents services, as part of the
support group and thus a talent, to provide security service to production staff, stars and guests of Eat Bulaga! as well
as to control the audience during the one-and-a-half hour noontime program; (4) that it was agreed that complainant
would render his services until such time that respondent company shall have engaged the services of a professional
security agency; (5) that in 1995, when his contract with RPN-9 expired, respondent was retained as a talent and a
member of the support group, until such time that TAPE shall have engaged the services of a professional security
agency; (6) that respondent was not prevented from seeking other employment, whether or not related to security
services, before or after attending to his Eat Bulaga! functions; (7) that sometime in late 1999, TAPE started
negotiations for the engagement of a professional security agency, the Sun Shield Security Agency; and (8) that on 2
March 2000, TAPE issued memoranda to all talents, whose functions would be rendered redundant by the
engagement of the security agency, informing them of the managements decision to terminate their services. [4]

TAPE averred that respondent was an independent contractor falling under the talent group category and was
working under a special arrangement which is recognized in the industry.[5]
Respondent for his part insisted that he was a regular employee having been engaged to perform an activity that is
necessary and desirable to TAPEs business for thirteen (13) years. [6]

Page 37 of 191

On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular employee of
TAPE. The Labor Arbiter relied on the nature of the work of respondent, which is securing and maintaining order in the
studio, as necessary and desirable in the usual business activity of TAPE. The Labor Arbiter also ruled that the
termination was valid on the ground of redundancy, and ordered the payment of respondents separation pay
equivalent to one (1)-month pay for every year of service. The dispositive portion of the decision reads:
WHEREFORE, complainants position is hereby declared redundant. Accordingly, respondents are
hereby ordered to pay complainant his separation pay computed at the rate of one (1) month pay for
every year of service or in the total amount of P78,000.00.[7]
On appeal, the National Labor Relations Commission (NLRC) in a Decision [8] dated 22 April 2002 reversed the
Labor Arbiter and considered respondent a mere program employee, thus:
We have scoured the records of this case and we find nothing to support the Labor Arbiters
conclusion that complainant was a regular employee.
xxxx
The primary standard to determine regularity of employment is the reasonable connection between
the particular activity performed by the employee in relation to the usual business or trade of the
employer.This connection can be determined by considering the nature and work performed and its
relation to the scheme of the particular business or trade in its entirety. x x x Respondent company is
engaged in the business of production of television shows. The records of this case also show that
complainant was employed by respondent company beginning 1995 after respondent company
transferred from RPN-9 to GMA-7, a fact which complainant does not dispute. His last salary
was P5,444.44 per month. In such industry, security services may not be deemed necessary and
desirable in the usual business of the employer. Even without the performance of such services on a
regular basis, respondents companys business will not grind to a halt.
xxxx
Complainant was indubitably a program employee of respondent company. Unlike [a] regular
employee, he did not observe working hours x x x. He worked for other companies, such as M-Zet TV
Production, Inc. at the same time that he was working for respondent company. The foregoing
indubitably shows that complainant-appellee was a program employee. Otherwise, he would have two
(2) employers at the same time.[9]

Respondent filed a motion for reconsideration but it was denied in a Resolution [10] dated 28 June 2002.
Respondent filed a petition for certiorari with the Court of Appeals contending that the NLRC acted with grave abuse of
discretion amounting to lack or excess of jurisdiction when it reversed the decision of the Labor Arbiter. Respondent
asserted that he was a regular employee considering the nature and length of service rendered. [11]
Reversing the decision of the NLRC, the Court of Appeals found respondent to be a regular employee. We quote the
dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision dated 22 April 2002
of the public respondent NLRC reversing the Decision of the Labor Arbiter and its Resolution dated 28
June 2002 denying petitioners motion for reconsideration are REVERSED and SET ASIDE. The
Decision dated 29 June 2001 of the Labor Arbiter is REINSTATED withMODIFICATION in that private
respondents are ordered to pay jointly and severally petitioner the amount of P10,000.00 as nominal
damages for non-compliance with the statutory due process.
SO ORDERED.[12]
Finding TAPEs motion for reconsideration without merit, the Court of Appeals issued a Resolution [13] dated 8 April
2005 denying said motion.
TAPE filed the instant petition for review raising substantially the same grounds as those in its petition for certiorari
before the Court of Appeals. These matters may be summed up into one main issue: whether an employer-employee
relationship exists between TAPE and respondent.

Page 38 of 191

On 27 September 2006, the Court gave due course to the petition and considered the case submitted for
decision.[14]
At the outset, it bears emphasis that the existence of employer-employee relationship is ultimately a question of
fact. Generally, only questions of law are entertained in appeals by certiorari to the Supreme Court. This rule,
however, is not absolute. Among the several recognized exceptions is when the findings of the Court of Appeals and
Labor Arbiters, on one hand, and that of the NLRC, on the other, are conflicting, [15] as obtaining in the case at bar.
Jurisprudence is abound with cases that recite the factors to be considered in determining the existence of employeremployee relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee with respect to the means and method by
which the work is to be accomplished. [16] The most important factor involves the control test. Under the control test,
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. [17]
In concluding that respondent was an employee of TAPE, the Court of Appeals applied the four-fold test in this
wise:
First. The selection and hiring of petitioner was done by private respondents. In fact, private
respondents themselves admitted having engaged the services of petitioner only in 1995 after TAPE
severed its relations with RPN Channel 9.
By informing petitioner through the Memorandum dated 2 March 2000, that his services will be
terminated as soon as the services of the newly hired security agency begins, private respondents in
effect acknowledged petitioner to be their employee. For the right to hire and fire is another important
element of the employer-employee relationship.
Second. Payment of wages is one of the four factors to be considered in determining the
existence of employer-employee relation. . . Payment as admitted by private respondents was given
by them on a monthly basis at a rate of P5,444.44.
Third. Of the four elements of the employer-employee relationship, the control test is the most
important. x x x

The bundy cards representing the time petitioner had reported for work are evident proofs of
private respondents control over petitioner more particularly with the time he is required to report for
work during the noontime program of Eat Bulaga! If it were not so, petitioner would be free to report for
work anytime even not during the noontime program of Eat Bulaga! from 11:30 a.m. to 1:00 p.m.and
still gets his compensation for being a talent. Precisely, he is being paid for being the security of Eat
Bulaga! during the above-mentioned period. The daily time cards of petitioner are not just for mere
record purposes as claimed by private respondents. It is a form of control by the management of
private respondent TAPE.[18]
TAPE asseverates that the Court of Appeals erred in applying the four-fold test in determining the existence of
employer-employee relationship between it and respondent. With respect to the elements of selection, wages and
dismissal, TAPE proffers the following arguments: that it never hired respondent, instead it was the latter who offered
his services as a talent to TAPE; that the Memorandum dated 2 March 2000 served on respondent was for the
discontinuance of the contract for security services and not a termination letter; and that the talent fees given to
respondent were the pre-agreed consideration for the services rendered and should not be construed as wages.
Anent the element of control, TAPE insists that it had no control over respondent in that he was free to employ means
and methods by which he is to control and manage the live audiences, as well as the safety of TAPEs stars and
guests.[19]

Page 39 of 191

The position of TAPE is untenable. Respondent was first connected with Agro-Commercial Security Agency, which
assigned him to assist TAPE in its live productions. When the security agencys contract with RPN-9 expired in 1995,
respondent was absorbed by TAPE or, in the latters language, retained as talent. [20] Clearly, respondent was hired by
TAPE. Respondent presented his identification card [21] to prove that he is indeed an employee of TAPE. It has been in
held that in a business establishment, an identification card is usually provided not just as a security measure but to
mainly identify the holder thereof as a bona fide employee of the firm who issues it.[22]
Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE prefers to designate such
amount as talent fees. Wages, as defined in the Labor Code, are 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. It is beyond
dispute that respondent received a fixed amount as monthly compensation for the services he rendered to TAPE.

The Memorandum informing respondent of the discontinuance of his service proves that TAPE had the power to
dismiss respondent.
Control is manifested in the bundy cards submitted by respondent in evidence. He was required to report daily and
observe definite work hours. To negate the element of control, TAPE presented a certification from M-Zet Productions
to prove that respondent also worked as a studio security guard for said company. Notably, the said certificate
categorically stated that respondent reported for work on Thursdays from 1992 to 1995. It can be recalled that during
said period, respondent was still working for RPN-9. As admitted by TAPE, it absorbed respondent in late 1995. [23]
TAPE further denies exercising control over respondent and maintains that the latter is an independent
contractor.[24] Aside from possessing substantial capital or investment, a legitimate job contractor or subcontractor
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, and 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. [25] TAPE failed
to establish that respondent is an independent contractor. As found by the Court of Appeals:
We find the annexes submitted by the private respondents insufficient to prove that herein
petitioner is indeed an independent contractor. None of the above conditions exist in the case at
bar.Private respondents failed to show that petitioner has substantial capital or investment to be
qualified as an independent contractor. They likewise failed to present a written contract which
specifies the performance of a specified piece of work, the nature and extent of the work and the term
and duration of the relationship between herein petitioner and private respondent TAPE. [26]

TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in classifying respondent as a
program employee and equating him to be an independent contractor.
Policy Instruction No. 40 defines program employees as
x x x those whose skills, talents or services are engaged by the station for a particular or
specific program or undertaking and who are not required to observe normal working hours such that
on some days they work for less than eight (8) hours and on other days beyond the normal work
hours observed by station employees and are allowed to enter into employment contracts with other
persons, stations, advertising agencies or sponsoring companies. The engagement of program
employees, including those hired by advertising or sponsoring companies, shall be under a written
contract specifying, among other things, the nature of the work to be performed, rates of pay and the
programs in which they will work. The contract shall be duly registered by the station with the
Broadcast Media Council within three (3) days from its consummation. [27]
TAPE failed to adduce any evidence to prove that it complied with the requirements laid down in the policy
instruction. It did not even present its contract with respondent.Neither did it comply with the contract-registration
requirement.
Even granting arguendo that respondent is a program employee, stills, classifying him as an independent
contractor is misplaced. The Court of Appeals had this to say:

Page 40 of 191

We cannot subscribe to private respondents conflicting theories. The theory of private

respondents that petitioner is an independent contractor runs counter to their very own allegation that
petitioner is a talent or a program employee. An independent contractor is not an employee of the
employer, while a talent or program employee is an employee. The only difference between a talent or
program employee and a regular employee is the fact that a regular employee is entitled to all the
benefits that are being prayed for. This is the reason why private respondents try to seek refuge under
the concept of an independent contractor theory. For if petitioner were indeed an independent
contractor, private respondents will not be liable to pay the benefits prayed for in petitioners complaint.
[28]

More importantly, respondent had been continuously under the employ of TAPE from 1995 until his
termination in March 2000, or for a span of 5 years. Regardless of whether or not respondent had been performing
work that is necessary or desirable to the usual business of TAPE, respondent is still considered a regular employee
under Article 280 of the Labor Code which provides:

Art. 280. Regular and Casual Employment.The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment
has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of engagement of the employee or where the work or service to be performed
is seasonal in nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph.
Provided, that, any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists.
As a regular employee, respondent cannot be terminated except for just cause or when authorized by law. [29] It
is clear from the tenor of the 2 March 2000 Memorandum that respondents termination was due to redundancy. Thus,
the Court of Appeals correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that the employer may also terminate the employment
of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year or service, whichever is higher.
xxxx
We uphold the finding of the Labor Arbiter that complainant [herein petitioner] was terminated
upon [the] managements option to professionalize the security services in its operations. x x
xHowever, [we] find that although petitioners services [sic] was for an authorized cause, i.e.,
redundancy, private respondents failed to prove that it complied with service of written notice to the
Department of Labor and Employment at least one month prior to the intended date of
retrenchment. It bears stressing that although notice was served upon petitioner through a
Memorandum dated 2 March 2000, the effectivity of his dismissal is fifteen days from the start of the
agencys take over which was on 3 March 2000. Petitioners services with private respondents were
severed less than the month requirement by the law.
Under prevailing jurisprudence the termination for an authorized cause requires payment of
separation pay. Procedurally, if the dismissal is based on authorized causes under Articles 283 and
284, the employer must give the employee and the Deparment of Labor and Employment written
notice 30 days prior to the effectivity of his separation. Where the dismissal is for an authorized cause
but due process was not observed, the dismissal should be upheld. While the procedural infirmity
cannot be cured, it should not invalidate the dismissal. However, the employer should be liable for
non-compliance with procedural requirements of due process.
xxxx

Page 41 of 191

Under recent jurisprudence, the Supreme Court fixed the amount of P30,000.00 as nominal
damages. The basis of the violation of petitioners right to statutory due process by the private
respondents warrants the payment of indemnity in the form of nominal damages. The amount of such
damages is addressed to the sound discretion of the court, taking into account the relevant
circumstances. We believe this form of damages would serve to deter employer from future violations
of the statutory due process rights of the employees. At the very least, it provides a vindication or
recognition of this fundamental right granted to the latter under the Labor Code and its Implementing
Rules. Considering the circumstances in the case at bench, we deem it proper to fix it at P10,000.00.
[30]

In sum, we find no reversible error committed by the Court of Appeals in its assailed decision.
However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he
acted with malice or bad faith in terminating respondent, he cannot be held solidarily liable with TAPE. [31] Thus, the
Court of Appeals ruling on this point has to be modified.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with
MODIFICATION in that only petitioner Television and Production Exponents, Inc. is liable to pay respondent the
amount of P10,000.00 as nominal damages for non-compliance with the statutory due process and petitioner Antonio
P. Tuviera is accordingly absolved from liability.
SO ORDERED.

DANTE O. TINGA Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
LEONARDO A. QUISUMBING

Page 42 of 191

Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified
that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice

[1]

Rollo, pp. 47-64. Penned by Associate Justice Japar B. Dimaampao and concurred in by Associate Justices
Renato C. Dacudao and Edgardo F. Sundiam.
[2]

Id. at 66-67.

[3]

Id. at 98.

[4]

Id. at 100-102.

[5]

Id. at 98, 103.

[6]

Id. at 103.

[7]

Id. at 106.

[8]

Id. at 107-118.

[9]

Id. at 115-117.

[10]

[11]

Id. a t 119-120.

Id. at 130.

[12]

Id. at 63.

[13]

Id. at 66-67.

[14]

Id. at 284.

[15]

Molina v. Pacific Plans, Inc., G.R. No. 165476, 10 March 2006, 484 SCRA 498.

[16]
Dumpit-Murillo v. Court of Appeals, G.R. No. 164652, 8 June 2007, 524 SCRA 290, 302 citing Manila Water
Company, Inc. v. Pena, G.R. No. 158255, 8 July 2004, 434 SCRA 53; Coca-Cola Bottlers v. Climaco, G.R. No.
146881, 5 February 2007, 514 SCRA 164, 177; Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng
Manggagawang Promo ng Burlingame v. Burlingame Corporation, G.R. No. 162833, 15 June 2007, 524 SCRA 690,
695.
[17]

Leonardo v. Court of Appeals, G.R. No. 152459, 15 June 2006.

[18]

Rollo, pp. 56-57.

[19]

Id. at 30-34.

[20]

Id. at 101.

[21]

CA rollo, p. 37.

[22]

Villamaria v. Court of Appeals, G.R. No. 165881, 19 April 2006.

Page 43 of 191

[23]

Id. at 16-17.

[24]

Id. at 28.

[25]

Department of Labor and Employment, Department Order No. 10 (1997).

[26]

Rollo, p. 55.

[27]

Department of Labor and Employment Policy Instruction No. 40 (1979).

[28]

Id. at 57-58.

[29]

LABOR CODE, Art. 279.

[30]

Rollo, pp. 60-63.

[31]

Kay Products, Inc. v. Court of Appeals, G.R. No. 162472, 28 July 2005, 464 SCRA 544.

Page 44 of 191

SECOND DIVISION
SAN MIGUEL CORPORATION,
Petitioner,

G.R. No. 147566

Present:

- versus -

PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,
*
CORONA,
AZCUNA, and
GARCIA, JJ.
Promulgated:

NATIONAL
LABOR
RELATIONS December 6, 2006
COMMISSION and RAFAEL MALIKSI,
Respondents.
x------------------------------------------------------------------------------------x

DECISION
GARCIA, J.:
In this petition for review under Rule 45 of the Rules of Court, petitioner San Miguel Corporation (SMC) seeks
the reversal and setting aside of the Decision [1] dated September 30, 1999 of the Court of Appeals (CA) in CA-G.R. SP
No. 50321, as reiterated in its Resolution[2] of March 20, 2001, affirming in toto an earlier decision of the National
Labor Relations Commission (NLRC) in NLRC NCR CA No. 005478-93, entitled Rafael C. Maliksi v. San Miguel
Corporation and/or Philippine Software Services &
Education Center. The affirmed NLRC decision overturned that of the Labor Arbiter and declared the herein private
respondent Rafael Maliksi (Maliksi) a regular employee of the petitioner and ordered the latter to reinstate him with
benefits.
As found by the NLRC and subsequently adopted by the CA, the facts are as follows:
On 16 October 1990, Rafael M. Maliksi filed a complaint against the San Miguel CorporationMagnolia Division, herein referred to as SMC and Philippine Software Services
and Education Centerherein referred to as PHILSSEC to compel the said respondents to recognize
him as a regular employee. He amended the complaint on 12 November 1990 to include the charge
of illegal dismissal because his services were terminated on 31 October 1990.
The complainants employment record indicates that he rendered service with Lipercon
Services from 1 April 1981 to February 1982 as budget head assigned to SMC-Beer Division, then
from July 1983 to April 1985 with Skillpower, Inc., as accounting clerk assigned to SMC-Magnolia
Division, then from October 1988 to 1989 also with Skillpower, Inc. as acting clerk assigned to SMCMagnolia Finance, and from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia
Finance as accounting clerk. The complainant considered himself as an employee of SMC-Magnolia.
Lipercon Services, Skillpower, Inc. and PHILSSEC are labor-only contractors and any one of which
had never been his employer. His dismissal, according to him, was in retaliation for his filing of the
complaint for regularization in service. His dismissal was illegal there being no just cause for the
action. He was not accorded due process neither was his dismissal reported to the Department of
Labor and Employment.
PHILSSEC disclaimed liability. As an entity catering (sic) computer systems and program for
business enterprises, it has contracted with SMC-Magnolia to computerize the latters manual
accounting reporting systems of its provincial sales. PHILSSEC then conducted a three phase
analysis of SMCMagnolia set up: first the computer needs of the firm was (sic) determined; then, the
development of computer systems or program suitable; and, finally, set up the systems and train the
employees to operate the same. In all these phases, PHILSSEC uses its computer system and
technology and provided the necessary manpower to compliment the transfer of the technology to
SMC-Magnolia. Complainant Maliksi was one of those employed by PHILSSEC whose principal
function was the manual control of data needed during the computerization. Like all assigned to the

Page 45 of 191

project, the complainants work was controlled by PHILSSEC supervisors, his salary paid by the
agency and he reported directly to PHILSSEC. The computerization project was completed on 31
October 1990, and so, the complainant was terminated on the said date.
SMC, on the other hand, submitted its position. In the contract SMC entered with PHILSSEC,
the latter undertook to set up the computerization of the provincial sales reporting system of Magnolia
Division. To carry out the task, PHILSSEC utilized 3 computer programmers and the rest were data
encoders. The complainant being one of the compliments (sic) performed the following functions:
xxx xxx xxx
SMC likewise contends that PHILSSEC exercised exclusive managerial prerogative over the
complainant as to hiring, payment of salary, dismissal and most importantly, the control over his work.
SMC was interested only in the result of the work specified in the contract but not as to the means and
methods of accomplishing the same. Moreover, PHILSSEC has substantial capital of its own. It has
an IBM system, 3 computers, 17 IBM or IBM-compatible computers; it has a building where the
computer training center and main office are located. What it markets to clients are computer
programs and training systems on computer technology and not the usual labor or manpower supply
to establishment concerns. Moreover, what PHILSSEC set up employing the complainant, among
others, has no relation to the principal business of SMC, which is food and beverage. It was a single
relationship between the people utilized by PHILSSEC and SMC [3]

The Labor Arbiter declared Maliksi a regular employee of PHILSSEC and absolved SMC from liability.
Dispositively, the Labor Arbiters decision reads:
WHEREFORE, the complainant, Rafael Maliksi, is recognized as a regular employee of
Philippine Software Services and Education Center which respondent is ordered to reinstate him to a
job of the same level as his previous position in any of the projects where there is a vacancy and
without loss of seniority rights. A five months backwages is awarded because the prolonged
suspension from his work was brought about by his refusal to take any job offered by PHILSSEC
earlier in the proceedings of this case. The respondent, SMC-Magnolia Division, is exempted from
any liability as the complaint against the said corporation is dismissed for lack of merit.
SO ORDERED.[4]

Maliksi appealed to the NLRC. In turn, in a decision dated January 26, 1998, the NLRC reversed that of the
Labor Arbiter by declaring Maliksi
a regular employee of the petitioner and ordering the latter to reinstate him without loss of seniority rights and with full
benefits, to wit:
WHEREFORE, as recommended, the decision below is hereby SET ASIDE. Accordingly,
judgment is hereby rendered directing respondent SMC-Magnolia Division to reinstate complainant as
a regular employee without loss of seniority rights and other privileges and to pay complainant full
backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from
the time his compensation was withheld from him up to time of his actual reinstatement, plus 10% of
the total money award for and attorneys fees.
SO ORDERED.[5]
From the aforementioned decision of the NLRC, SMC went on certiorari to the CA in CA-G.R. SP No. 50321.
As stated at the outset, the CA, in the herein assailed Decision [6] dated September 30, 1999, affirmed in
toto that of the NLRC. In so doing, the CA found SMC to have utilized PHILSSEC, Lipercon Services, Inc. (Lipercon)
and Skillpower, Inc. (Skillpower) as conduits to circumvent Article 280 of the Labor Code, employing Maliksi as
contractual or project employee through these entities, thereby undermining his right to gain regular employment
status under the law. The appellate court echoed the NLRCs assessment that Maliksis work was necessary or
desirable in the business of SMC in its Magnolia Division, for more than the required one-year period. It affirmed the
NLRCs finding that the three (3) conduit entities adverted to, Lipercon and Skillpower, are labor-only contractors such
that Maliksis previous employment contracts with SMC, through these two entities, are deemed to have been entered
into in violation of labor laws. Consequently, Maliksis employment with SMC became permanent and regular after the
statutory period of one year of service through these entities. The CA concluded that on account of his past

Page 46 of 191

employment contracts with SMC under Lipercon and Skillpower, Maliksi was already a regular employee of SMC
when he entered into SMCs computerization project as part of the PHILSSEC project complement.
With its motion for reconsideration having been denied by the CA in its Resolution of March 20, 2001, SMC is
now with this Court via the present recourse on the following assigned errors:
I
The Court of Appeals gravely erred in declaring private respondent a regular employee of
petitioner SMC despite its findings that PHILSSEC, the contractor that employed private respondent,
is an independent job contractor.
Corollarily, the declaration of the Honorable Court of Appeals that private respondent is a
regular employee of petitioner SMC proceeds from the erroneous premise that private respondent
was already a regular employee of SMC when he was hired by the independent contractor
PHILSSEC. Having been placed in petitioner SMC by a supposed labor-only contractor, for just five
months and for a different job, three years after his last assignment therein, private respondent had
not thereby become a regular employee of petitioner SMC.
II
The Court of Appeals gravely erred in ultimately resolving the case upon the principle that all
doubts must be resolved in favor of labor; certainly, protection to labor does not imply sanctioning a
plain injustice to the employer, particularly where private respondent was shown to have stated
falsehoods and committed malicious intercalations and misrepresentations.
III
The Court of Appeals gravely erred in declaring that private respondent was not part of the of
the personnel group in the computerization program of petitioner SMC under PHILSSEC.
We DENY.
SMC concedes that Maliksi, before his employment with PHILSSEC, worked in SMC from November 1988 to
April 1990, but as employee of Skillpower [7] and that he was previously assigned to SMC between 1981 up to
February 1985, for periods spread apart.[8] The Labor Arbiter found, as earlier stated, that Maliksi rendered service
with Lipercon from 1 April 1981 to February 1982 as budget head assigned to SMC-Beer Division; from July 1983
to April 1985 with Skillpower as accounting clerkassigned to SMC-Magnolia Division, then from October 1988 to
1989[9] also with Skillpower as acting clerk assigned to SMC-Magnolia Finance, and from October 1989 to 31
October 1990 with PHILSSEC assigned to Magnolia Finance as accounting clerk. In all, it appears that, while under
the employ of either Lipercon or Skillpower, Maliksi has undisputedly rendered service with SMC for at least three
years and seven months.[10]
The Court takes judicial notice of the fact that Lipercon and Skillpower were declared to be labor-only
contractors,[11] providing as they do manpower services to the public for a fee. The existence of an employer-employee
relationship is factual and we give due deference to the factual findings of both the NLRC and the CA that an
employer-employee relationship existed between SMC (or its subsidiaries) and Maliksi. Indeed, having served SMC
for an aggregate period of more than three (3) years through employment contracts with these two labor contractors,
Maliksi should be considered as SMCs regular employee. The hard fact is that he was hired and re-hired by SMC to
perform administrative and clerical work that was necessary to SMCs business on a daily basis. In Bustamante v.
National Labor Relations Commission, [12] we ruled:
In the case at bar, petitioners were employed at various periods from 1985 to 1989 for the
same kind of work they were hired to perform in September 1989. Both the labor arbiter and
the respondent NLRC agree that petitioners were employees engaged to perform activities
necessary in the usual business of the employer. As laborers, harvesters or sprayers in an
agricultural establishment which produces high grade bananas, petitioners tasks are indispensable to
the year-round operations of respondent company. This belies the theory of respondent company that
the employment of petitioners was terminated due to the expiration of their probationary period in
June 1990. If at all significant, the contract for probationary employment was utilized by respondent
company as a chicanery to deny petitioners their status as regular employees and to evade paying
them the benefits attached to such status. Some of the petitioners were hired as far back as 1985,
although the hiring was not continuous. They were hired and re-hired in a span of from two to four
years to do the same type of work which conclusively shows the necessity of petitioners
service to the respondent companys business. Petitioners have, therefore, become regular

Page 47 of 191

employees after performing activities which are necessary in the usual business of their
employer. But, even assuming that the activities of petitioners in respondent companys plantation
were not necessary or desirable to its business, we affirm the public respondents finding that all of the
complainants (petitioners) have rendered non-continuous or broken service for more than one (1) year
and are consequently considered regular employees.
We do not sustain public respondents theory that private respondent should not be made to
compensate petitioners for backwages because its termination of their employment was not made in
bad faith. The act of hiring and re-hiring the petitioners over a period of time without
considering them as regular employees evidences bad faith on the part of private
respondent. The public respondent made a finding to this effect when it stated that the subsequent
re-hiring of petitioners on a probationary status clearly appears to be a convenient subterfuge on the
part of management to prevent complainants (petitioners) from becoming regular employees.
(Emphasis supplied)
It is worth noting that, except for the computerization project of PHILSSEC, petitioner did not make any
insinuation at all that the services of Maliksi with SMC was project-related such that an employment contract with
Lipercon and Skillpower was necessary.
In Madriaga v. Court of Appeals,[13] the Court, confronted with the same issue now being addressed, declared
that regularization of employment
in SMC should extend to those whose situation is similar to the complainants in said case. We wrote:
This is the third time that the parties have invoked the power of this Court to decide the labor
dispute involved in this case. The generative facts of the case are as follows:
On 04 March 1988, the NOWM and a number of workers-complainants filed
with the Arbitration Branch of the NCR, NLRC, Manila, against San Miguel
Corporation,
Philippine
Dairy
Products
Corporation,
Magnolia
Dairy
Products, Skillpower Corporation and Lipercon Services, Inc. for illegal dismissal.
xxx xxx xxx
The Voluntary Arbitrator rendered a decision on 29 July 1988, the dispositive
of which states:
WHEREFORE, it is hereby declared that complainants are regular
employees of SMC and PDPC. Accordingly, SMC and PDPC are hereby ordered to
reinstate the dismissed 85 complainants to their former positions as their regular
employees effective from the date of the filing of their complaints with full backwages
less the daily financial assistance of P30.00 per day each, extended to them by
Lipercon and Skillpower.
Aggrieved by the said decision of the Voluntary Arbitrator, SMC and PDPC filed a petition for
certiorari before the Supreme Court.
It was upon the filing of the said petition for certiorari that the Court had the first opportunity to
pass upon the controversies involved in this case. In a Resolution dated 30 August 1989, the Court
dismissed G.R. No. 85577 entitled, Philippine Dairy Products Corporation and San Miguel Corporation
Magnolia Dairy Products Division v. Voluntary Arbitrator Tito F. Genilo of the Department of Labor and
Employment (DOLE) and the National Organization of Workingmen (NOWM) for lack of merit. The
Court held in full:
Individual private respondents are xxx [SMC, et al.] laborers supplied to
petitioners by Skillpower Corporation and Lipercon Services, Inc., on the basis of
contracts of services. Upon expiration of the said contracts, individual private
respondents were denied entry to petitioners' premises. Individual private
respondents and respondent union thus filed separate complaints for illegal dismissal
against petitioners San Miguel Corp., Skillpower Corporation and Lipercon Services,
Inc., in the [NLRC, NCR] After consolidation and voluntary arbitration, respondent
Labor Arbiter Tito F. Genilo rendered a decision xxx declaring individual private
respondents regular employees of petitioners and ordering the latter to reinstate the
former and to pay them backwages. On motion for execution filed by private
respondents, Labor Arbiter Genilo issued on October 20, 1988 an order directing,
among others, the regularization of all the complainants which include those still
working and those already terminated. Hence, this petition for certiorari with
injunction.
Petitioners contend that prior to reinstatement, individual private respondents
should first comply with certain requirements, like submission of NBI and police
clearances and submission to physical and medical examinations, since petitioners
are deemed to be direct employers and have the right to ascertain the physical fitness
and moral uprightness of its employees by requiring the latter to undergo periodic
examinations, and that petitioners may not be ordered to employ on regular

Page 48 of 191

basis the other workers rendering services to petitioners by virtue of a similar

contract of services between petitioners and Skillpower Corporation and
Lipercon Services, Inc. because such other workers were not parties to or were
not impleaded in the voluntary arbitration case.
Considering that the clearances and examinations sought by petitioners from
private respondents are not 'periodic' in nature but are made preconditions for
reinstatement, as in fact the petition filed alleged that reinstatement shall be effective
upon compliance with such requirements, (pp. 5-6 thereof) which should not be the
case because this is not a case of initial hiring, the workers concerned having
rendered years of service to petitioners who are considered direct employers,
and that regularization is a labor benefit that should apply to all qualified
employees similarly situated and may not be denied merely because some
employees were allegedly not parties to or were not impleaded in the voluntary
arbitration case, even as the finding of Labor Arbiter Genilo is to the contrary,
this Court finds no grave abuse of discretion committed by Labor Arbiter
Genilo in issuing the questioned order of October 20, 1988.
ACCORDINGLY, the Court Resolved to Dismiss the petition for lack of merit.
In fine, the Court affirmed the ruling of the Voluntary Arbitrator and declared that therein
complainants are regular employees of San Miguel Corporation (SMC) and PDPC. It must be noted
that in the abovequoted Resolution, the Court extended the benefit of regularization not only
to the original complainants but also to those workers who are similarly situated to therein
complainants. Herein petitioners are among those who are similarly situated. [14] (Emphasis supplied)
We find respondent Maliksi to be similarly situated with those of the complainants in Madriaga. Indeed,
Lipercon and Skillpower have figured in not just a few of our decisions, [15] so much so that we are inclined to believe
that these two were involved in labor-only contracting with respect to Maliksi. We hold that the finding of the NLRC and
the CA as to SMCs resorting to labor-only contracting is entitled to consideration in its full weight.
With respect to PHILSSEC, there was no need for Maliksi to be employed under the formers computerization
program to be considered a regular employee of SMC at the time. Moreover, SMC itself admits that Maliksis work
under the computerization program did not require the operation of a computer system, such as the software program
being developed by PHILSSEC.[16] Given this admission, we are simply at a loss to understand why Maliksi should be
included in the computerization project as a project employee. Not being a computer expert, Maliksis inclusion in the
project was uncalled for. To our mind, his placement in the project was for the purpose of circumventing labor laws.
The evidence shows that immediately before he entered the PHILSSEC project in October 1989, Maliksi was fresh out
of his employment with SMC (through Skillpower) as acting clerk assigned to SMC-Magnolia Finance (from October
1988 to 1989).
Maliksis work under the PHILSSEC project was mainly administrative in nature and necessary to the
development of SMCs business. These were:
a.

posting manually the daily account balances in the workset;

b.

fitting the daily totals into the monthly totals;

c.

comparing the manual totals with the computer generated totals;

d.

locating the differences between the totals; and,

e.

adjusting and correcting errors.

Simply put, the data gathered by SMC on a daily basis through Maliksis work would be submitted for analysis and
evaluation, thereby allowing SMC to make the necessary business decisions that would enable it to market its
products better, or monitor its sales and collection with efficiency. Without the data gatherer or encoder, no analysis
could occur. SMC would then, for the most part, be kept in the dark.
As to the petitioners second assigned error, we hold that there is no need to resolve the present case under
the principle that all doubts should be resolved in favor of the workingman. The perceived doubt does not obtain in the
first place.
We understand Maliksis desperation in making his point clear to SMC, which unduly refuses to acknowledge
his status as a regular employee. Instead, he was juggled from one employment contract to another in a continuous
bid to circumvent labor laws. The act of hiring and re-hiring workers over a period of time without considering them as
regular employees evidences bad faith on the part of the employer. [17] Where, from the circumstances, it is apparent
that periods have been imposed to preclude the acquisition of tenurial security by the employee, the policy, agreement
or practice should be struck down as contrary to public policy, morals, good customs or public order. [18] In point oflaw,

Page 49 of 191

any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public
policy shall be liable for the damage.[19]
Ways and means contrived by employers to countermand labor laws granting regular employment status to
their workers are numerous and long. For instance, they toss the poor workers from one job contractor to
another, make them go through endless applications, lining up, paperwork, documentation, and physical
examinations; make them sign five- or ten-month-only job contracts, yet re-hire them after brief rest periods, but not
after requiring them to go through the whole application and selection process once again; prepare and have them
sign waivers, quitclaims, and the like; refuse to issue them identification cards, receipts or any other concrete proof of
employment or documentary proof of payment of their salaries; fail to enroll them for entitlement to social security and
other benefits; give them positions, titles or designations that connote short-term employment.
Others are more creative: they set up distributors or dealers which are, in reality, shell or dummy companies.
In this manner, the mother company avoids the employer-employee relations, and is thus shielded from liability from
employee claims in case of illegal dismissal, closure, unfair labor practices and the like. In those instances, the poor
employees, finding the shell or dummy company to be without assets, often end up confused and without recourse as
to whom to run after. They sue the mother company which conveniently sets up the defense of absence of employeremployee relations. In San Miguel Corporation v. MAERC Integrated Services, Inc., [20] we took note of the practice of
hiring employees through labor contractors that catered exclusively to the employment needs of SMC or its divisions
or other specific business interests, such that after the specific SMC business or division ceases to do business, the
labor contractor likewise ceases its operations.
The contrivances may be many and the schemes ingenious and imaginative. But this Court will not hesitate to
put pen to a line and defend the workers right to be secure in his (or her) proprietary right to regular employment and
his right to a secure employment, viz, one that is free from fear and doubt, that anytime he could be removed,
retrenched, his contract not renewed or he might not be re-hired. The ramifications may seem trivial, but we cannot
allow the ordinary Filipino workers right to tenurial security to be put in jeopardy by recurrent but abhorrent practices
that threaten the very lives of those that depend on him.
Considering, however, the supervening event that SMCs Magnolia Division has been acquired by another
entity, it appears that private respondents reinstatement is no longer feasible. Instead, he should be awarded
separation pay as an alternative. [21] Likewise, owing to petitioners bad faith, it should be held liable to pay damages for
causing undue injury and inconvenience to the private respondent in its contractual hiring-firing-rehiring scheme.
WHEREFORE, the instant petition is DENIED and the assailed CA decision dated September 30, 1999
is AFFIRMED, with the MODIFICATION that if the reinstatement of private respondent is no longer practicable or
feasible, then petitioner SMC is ordered to pay him, in addition to the other monetary awards, separation pay for the
period from October 31, 1990 when he was dismissed until he shall have been actually paid at the rate of one (1)
month salary for every year of his employment, with a fraction of at least six (6) months being considered as one (1)
year, or the rate of separation pay awarded by petitioner to its other regular employees as provided by written
agreement, policy or practice, whichever is higher or most beneficial to private respondent.
In addition, petitioner is hereby suffered to indemnify private respondent the amount of P50,000.00 as nominal
damages for its bad faith in juggling the latter from one labor contractor to another and causing him unnecessary injury
and inconvenience, and for denying him his proprietary right to regular employment.
Let this case be REMANDED to the Labor Arbiter for the computation of private respondents backwages,
proportionate 13th month pay, separation pay, attorneys fees and other monetary awards; and for immediate
execution.
Costs against the petitioner.
SO ORDERED.

CANCIO C. GARCIA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice

Page 50 of 191

Chairperson

(ON LEAVE)
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

RENATO C. CORONA
Associate Justice

ADOLFO S. AZCUNA
Associate Justice
ATTESTATION
I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

REYNATO S. PUNO
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified
that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of
the opinion of the Court.

ARTEMIO V. PANGANIBAN
Chief Justice

On Leave.
Penned by Associate Justice Presbitero J. Velasco, Jr. (now a member of this Court) with Associate Justices Fermin
Martin, Jr. (ret.) and B.A. Adefuin-de la Cruz (ret.), concurring; Rollo, pp. 63-74.
[2]
Id. at 76-77.
[3]
Id. at 2-3.
[4]
Id. at 11.
[5]
Supra note 4.
[6]
Supra note 1.
[1]

[7]

Petition for Review on Certiorari, Id. at 36, 42-43.

Id. at 41, 125.
[9]
As to what month of the year the record does not disclose.
[10]
Disregarding his October 1988 to 1989 employment, since the period covered remains unclear.
[11]
Madriaga v. Court of Appeals, G.R. No. 142001, July 14, 2005, 463 SCRA 298; Palmeria v. National Labor
Relations Commission, G.R. Nos. 113290-91, August 3, 1995, 247 SCRA 57; Shoppers Gain Supermart v.
National Labor Relations Commission, G.R. No. 110731, July 26, 1996, 259 SCRA 411; Guarin v. Lipercon,
G.R. No. 86010, October 3, 1989, 178 SCRA 267; Magnolia Dairy Products v. National Labor Relations
Commission, G.R. No. 114952, January 29, 1996, 252 SCRA 483; Philippine Fuji Xerox Corporation v.
National Labor Relations Commission, G.R. No. 111501, March 5, 1996, 254 SCRA 294; Bantolino v. CocaCola Bottlers Phils., G.R. No. 153660, June 10, 2003, 403 SCRA 699.
[12]
G.R. No. 111651, March 15, 1996, 255 SCRA 145, 149-150.
[13]
Supra.
[14]
Id. at 301-304.
[8]

Page 51 of 191

[15]

Supra note 8.
Rollo, p.52.
[17]
Bustamante v. National Labor Relations Commission, supra.
[18]
Palomares v. National Labor Relations Commission, G.R. No. 120064, August 15, 1997, 277 SCRA 439.
[19]
Article 21, Civil Code of the Philippines.
[16]

[20]
[21]

G.R. No. 149011, June 28, 2005, 405 SCRA 579.

Alfante v. NLRC, G.R. No. 122655, December 15, 1997, 283 SCRA 340.

Page 52 of 191

SECOND DIVISION
LAKAS SA INDUSTRIYA NG KAPATIRANG
HALIGI NG ALYANSA-PINAGBUKLOD NG
MANGGAGAWANG
PROMO
NGBURLINGAME,
Petitioner,
- versus -

BURLINGAME CORPORATION,
Respondent.

G.R. No. 162833

Present:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,*
TINGA, and
VELASCO, JR., JJ.
Promulgated:

June 15, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
This is an appeal to reverse and set aside both the Decision [1] dated August 29, 2003 of the Court of Appeals
and its Resolution[2] dated March 15, 2004 in CA-G.R. SP No. 69639. The appellate court had reversed the
decision[3] dated December 29, 2000 of the Secretary of Labor and Employment which ordered the holding of a
certification election among the rank-and-file promo employees of respondent Burlingame Corporation.
The facts are undisputed.
On January 17, 2000, the petitioner Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng
Manggagawang Promo ng Burlingame (LIKHA-PMPB) filed a petition for certification election before the Department
of Labor and Employment (DOLE). LIKHA-PMPB sought to represent all rank-and-file promo employees of
respondent numbering about 70 in all. The petitioner claimed that there was no existing union in the aforementioned
establishment representing the regular rank-and-file promo employees. It prayed that it be voluntarily recognized by
the respondent to be the collective bargaining agent, or, in the alternative, that a certification/consent election be held
among said regular rank-and-file promo employees.
The respondent filed a motion to dismiss the petition. It argued that there exists no employer-employee
relationship between it and the petitioners members. It further alleged that the petitioners members are actually
employees of F. Garil Manpower Services (F. Garil), a duly licensed local employment agency. To prove such
contention, respondent presented a copy of its contract for manpower services with F. Garil.
On June 29, 2000, Med-Arbiter Renato D. Parungo dismissed [4] the petition for lack of employer-employee
relationship, prompting the petitioner to file an appeal[5] before the Secretary of Labor and Employment.
On December 29, 2000, the Secretary of Labor and Employment ordered the immediate conduct of a
certification election.[6]
A motion for reconsideration of the said decision was filed by the respondent on January 19, 2001, but the
same was denied in the Resolution[7] of February 19, 2002 of the Secretary of Labor and Employment.
Respondent then filed a complaint with the Court of Appeals, which then reversed [8] the decision of the
Secretary. The petitioner then filed a motion for reconsideration, [9]which the Court of Appeals denied [10] on March 15,
2004.
Hence the instant petition for review on certiorari.
The issue raised in the petition is:
WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
DECLARING THAT THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
PETITIONERS MEMBERS AND BURLINGAME BECAUSE F. GARIL MANPOWER SERVICES IS AN
INDEPENDENT CONTRACTOR.[11]
Respondent contends that there is no employer-employee relationship between the parties. [12] Petitioner, on the other
hand, insists that there is.[13]
The resolution of this issue boils down to a determination of the true status of F. Garil, i.e., whether it is an
independent contractor or a labor-only contractor.
The case of De Los Santos v. NLRC[14] succinctly enunciates the statutory criteria:
Job contracting is permissible only if the following conditions are met: 1) the contractor carries
on an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the
results thereof; and 2) the contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in the conduct of
the business.[15]

Page 53 of 191

According to Section 5 of DOLE Department Order No. 18-02, Series of 2002: [16]
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal, and any of the following elements are [is] present:
i)
The contractor or sub-contractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied
or placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or
ii)
The contractor does not exercise the right to control over the performance of the work
of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248(C) of the
Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed capitalization in the
case of corporations, tools, equipment, implements, machineries and work premises, actually and
directly used by the contractor or subcontractor in the performance or completion of the job, work or
service contracted out.
The right to control shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.
Given the above criteria, we agree with the Secretary that F. Garil is not an independent contractor.
First, F. Garil does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, and other materials, to qualify as an independent contractor. No proof was adduced to
show F. Garils capitalization.
Second, the work of the promo-girls was directly related to the principal business or operation
of Burlingame. Marketing and selling of products is an essential activity to the main business of the principal.
Lastly, F. Garil did not carry on an independent business or undertake the performance of its service contract
according to its own manner and method, free from the control and supervision of its principal, Burlingame.
The four-fold test will show that respondent is the employer of petitioners members. The elements to determine the
existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employers power to control the employees conduct. The most important element is the
employers control of the employees conduct, not only as to the result of the work to be done, but also as to the means and
methods to accomplish it.[17]
A perusal of the contractual stipulations between Burlingame and F. Garil shows the following:
1. The AGENCY shall provide Burlingame Corporation or the CLIENT, with sufficient number of
screened, tested and pre-selected personnel (professionals, highly-skilled, skilled, semi-skilled and
unskilled) who will be deployed in establishment selling products manufactured by the CLIENT.
2. The AGENCY shall be responsible in paying its workers under this contract in accordance with the
new minimum wage including the daily living allowances and shall pay them overtime or remuneration
that which is authorized by law.
3. It is expressly understood and agreed that the worker(s) supplied shall be considered or treated as
employee(s) of the AGENCY. Consequently, there shall be no employer-employee relationship
between the worker(s) and the CLIENT and as such, the AGENCY shall be responsible to the benefits
mandated by law.
4. For and in consideration of the service to be rendered by the AGENCY to the CLIENT, the latter
shall during the terms of agreement pay to the AGENCY the sum of Seven Thousand Five Hundred
Pesos Only (P7,500.00) per month per worker on the basis of Eight (8) hours work payable up-todate, semi-monthly, every 15th and 30th of each calendar month. However, these rates may be subject
to change proportionately in the event that there will be revisions in the Minimum Wage Law or any
law related to salaries and wages.
5. The CLIENT shall report to the AGENCY any of its personnel assigned to it if those personnel are
found to be inefficient, troublesome, uncooperative and not observing the rules and regulations set
forth by the CLIENT. It is understood and agreed that the CLIENT may request any time the
immediate replacement of any personnel(s) assigned to them. [18]
It is patent that the involvement of F. Garil in the hiring process was only with respect to the recruitment
aspect, i.e. the screening, testing and pre-selection of the personnel it provided to Burlingame. The actual hiring itself
was done through the deployment of personnel to establishments by Burlingame.
The contract states that Burlingame would pay the workers through F. Garil, stipulating that Burlingame shall
pay F. Garil a certain sum per worker on the basis of eight-hour work every 15 th and 30th of each calendar month. This

Page 54 of 191

evinces the fact that F. Garil merely served as conduit in the payment of wages to the deployed personnel. The
interpretation would have been different if the payment was for the job, project, or services rendered during the month
and not on a per worker basis. In Vinoya v. National Labor Relations Commission,[19] we held:
The Court takes judicial notice of the practice of employers who, in order to evade the
liabilities under the Labor Code, do not issue payslips directly to their employees. Under the current
practice, a third person, usually the purported contractor (service or manpower placement agency),
assumes the act of paying the wage. For this reason, the lowly worker is unable to show proof that it
was directly paid by the true employer. Nevertheless, for the workers, it is enough that they actually
receive their pay, oblivious of the need for payslips, unaware of its legal implications. Applying this
principle to the case at bar, even though the wages were coursed through PMCI, we note that the
funds actually came from the pockets of RFC. Thus, in the end, RFC is still the one who paid the
wages of petitioner albeit indirectly.[20]
The contract also provides that any personnel found to be inefficient, troublesome, uncooperative and not
observing the rules and regulations set forth by Burlingame shall be reported to F. Garil and may be replaced upon
request. Corollary to this circumstance would be the exercise of control and supervision by Burlingame over workers
supplied by F. Garil in order to establish the inefficient, troublesome, and uncooperative nature of undesirable
personnel. Also implied in the provision on replacement of personnel carried upon request by Burlingame is the power
to fire personnel.
These are indications that F. Garil was not left alone in the supervision and control of its alleged
employees. Consequently, it can be concluded that F. Garil was not an independent contractor since it did not carry a
distinct business free from the control and supervision of Burlingame.
It goes without saying that the contractual stipulation on the nonexistence of an employer-employee relationship
between Burlingame and the personnel provided by F. Garil has no legal effect. While the parties may freely stipulate terms
and conditions of a contract, such contractual stipulations should not be contrary to law, morals, good customs, public order
or public policy. A contractual stipulation to the contrary cannot override factual circumstances firmly establishing the legal
existence of an employer-employee relationship.
Under this circumstance, there is no doubt that F. Garil was engaged in labor-only contracting, and as such, is
considered merely an agent of Burlingame. In labor-only contracting, the law creates an employer-employee
relationship to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal
employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been
directly employed by the principal employer.[21] Since F. Garil is a labor-only contractor, the workers it supplied should
be considered as employees of Burlingame in the eyes of the law.
WHEREFORE, the challenged Decision of the Court of Appeals dated August 29, 2003 and the Resolution
dated March 15, 2004 denying the motion for reconsideration areREVERSED and SET ASIDE. The decision of the
Secretary of Labor and Employment ordering the holding of a certification election among the rank-and-file promo
employees of Burlingame is reinstated.
Costs against respondent.
SO ORDERED.
LEONARDO A. QUISUMBING
Associate Justice
WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
(On official leave)
CONCHITA CARPIO MORALES
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice

DANTE O. TINGA
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

Page 55 of 191

LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

On official leave.

[1]

Rollo, pp. 27-35. Penned by Associate Justice Delilah Vidallon-Magtolis, with Associate Justices Andres B. Reyes,
Jr. and Regalado E. Maambong concurring.

[2]

Id. at 37.

[3]

Id. at 38-44.

[4]

Id. at 53-57.

[5]

Id. at 58-60.

[6]

Id. at 43.

[7]

Id. at 45-51.

[8]

Id. at 35.

[9]

Id. at 62-78.

[10]

Id. at 37.

[11]

Id. at 235.

[12]

Id. at 215.

[13]

Id. at 229-243.

[14]

423 Phil. 1020 (2001), citing Tiu v. NLRC, 324 Phil. 202 (1996).

[15]

Id. at 1032.

[16]

Rules Implementing Articles 106 to 109 of the Labor Code, As Amended. Superseded Rule VIII-A, Book III of the
Rules Implementing the Labor Code.

Page 56 of 191

[17]

Sy v. Court of Appeals, G.R. No. 142293, February 27, 2003, 398 SCRA 301, 307-308.

[18]

Rollo, p. 49.

[19]

G.R. No. 126586, February 2, 2000, 324 SCRA 469.

[20]

Id. at 486.

[21]

San Miguel Corporation v. MAERC Integrated Services, Inc., G.R. No. 144672, July 10, 2003, 405 SCRA 579, 596.

Page 57 of 191

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 160506
June 6, 2011
JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO, ABRAHAM BASMAYOR,
JONATHAN MATEO, LORENZO PLATON, JOSE FERNANDO GUTIERREZ, ESTANISLAO BUENAVENTURA,
LOPE SALONGA, FRANZ DAVID, NESTOR IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO
PASCUAL, ERNESTO CALANAO, ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO
SORIANO, JR., ARNEL ENDAYA, ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS
BACALSO, SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA, ARMANDO VILLAR, EMIL TAWAT,
MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO MACABENTE, MELECIO CASAPAO, REYNALDO
JACABAN, FERDINAND SALVO, ALSTANDO MONTOS, RAINER N. SALVADOR, RAMIL REYES, PEDRO G.
ROY, LEONARDO P. TALLEDO, ENRIQUE F. TALLEDO, WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ,
JOEL BILLONES, ALLAN BALTAZAR, NOLI GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL DULAY,
TADEO DURAN, JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA, RENATO DELA CRUZ, ROMEO
VIERNES, JR., ELAIS BASEO, WILFREDO TORRES, MELCHOR CARDANO, MARIANO NARANIAN, JOHN
SUMERGIDO, ROBERTO ROSALES, GERRY C. GATPO, GERMAN N. GUEVARRA, GILBERT Y. MIRANDA,
RODOLFO C. TOLEDO, ARNOLD D. LASTONA, PHILIP M. LOZA, MARIO N. CULDAYON, ORLANDO P.
JIMENEZ, FRED P. JIMENEZ, RESTITUTO C. PAMINTUAN, JR., ROLANDO J. DE ANDRES, ARTUZ
BUSTENERA, ROBERTO B. CRUZ, ROSEDY O. YORDAN, DENNIS DACASIN, ALEJANDRINO ABATON, and
ORLANDO S. BALANGUE, Petitioners,
vs.
PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents.
DECISION
DEL CASTILLO, J.:
Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code establishes an
employer-employee relationship between the employer and the employees of the labor-only contractor.
The instant petition for review assails the March 21, 2003 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No.
52082 and its October 20, 2003 Resolution 2 denying the motions for reconsideration separately filed by petitioners and
respondent Procter & Gamble Phils. Inc. (P&G). The appellate court affirmed the July 27, 1998 Decision of the
National Labor Relations Commission (NLRC), which in turn affirmed the November 29, 1996 Decision 3 of the Labor
Arbiter. All these decisions found Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS) to be
legitimate independent contractors and the employers of the petitioners.
Factual Antecedents
Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as June
1991, to either May 5, 1992 or March 11, 1993, more specifically as follows:
Name

Date Employed

Date Dismissed

1. Joeb M. Aliviado

November, 1985

May 5, 1992

2. Arthur Corpuz

1988

March 11, 1993

3. Eric Aliviado

1985

March 11, 1993

4. Monchito Ampeloquio

September, 1988

March 11, 1993

5. Abraham Basmayor[, Jr.]

1987

March 11, 1993

6. Jonathan Mateo May,

1988

March 11, 1993

7. Lorenzo Platon

1985

March 11, 1993

8. Jose Fernando Gutierrez

1988

May 5, 1992

9. Estanislao Buenaventura

June, 1988

March 11, 1993

10. Lope Salonga

1982

March 11, 1993

11. Franz David

1989

March 11, 1993

12. Nestor Ignacio

1982

March 11, 1993

13. Julio Rey

1989

May 5, 1992

14. Ruben [Vasquez], Jr.

1985

May 5, 1992

15. Maximino Pascual

1990

May 5, 1992

16. Ernesto Calanao[, Jr.]

1987

May 5, 1992

17. Rolando Romasanta

1983

March 11, 1993

Page 58 of 191

18. [Roehl] Agoo

1988

March 11, 1993

19. Bonifacio Ortega

1988

March 11, 1993

20. Arsenio Soriano, Jr.

1985

March 11, 1993

21. Arnel Endaya

1983

March 11, 1993

22. Roberto Enriquez December,

1988

March 11, 1993

23. Nestor [Es]quila

1983

May 5, 1992

24. Ed[g]ardo Quiambao

1989

March 11, 1993

25. Santos Bacalso

1990

March 11, 1993

26. Samson Basco

1984

March 11, 1993

27. Aladino Gregor[e], Jr.

1980

May 5, 1992

28. Edwin Garcia

1987

May 5, 1992

29. Armando Villar

1990

May 5, 1992

30. Emil Tawat

1988

March 11, 1993

31. Mario P. Liongson

1991

May 5, 1992

32. Cresente J. Garcia

1984

March 11, 1993

33. Fernando Macabent[a]

1990

May 5, 1992

34. Melecio Casapao

1987

March 11, 1993

35. Reynaldo Jacaban

1990

May 5, 1992

36. Ferdinand Salvo

1985

May 5, 1992

37. Alstando Montos

1984

March 11, 1993

38. Rainer N. Salvador

1984

May 5, 1992

39. Ramil Reyes

1984

March 11, 1993

40. Pedro G. Roy

1987

41. Leonardo [F]. Talledo

1985

March 11, 1993

42. Enrique [F]. Talledo

1988

March 11, 1993

43. Willie Ortiz

1987

May 5, 1992

44. Ernesto Soyosa

1988

May 5, 1992

45. Romeo Vasquez

1985

March 11, 1993

46. Joel Billones

1987

March 11, 1993

47. Allan Baltazar

1989

March 11, 1993

48. Noli Gabuyo

1991

March 11, 1993

49. Emmanuel E. Laban

1987

May 5, 1992

50. Ramir[o] E. [Pita]

1990

May 5, 1992

51. Raul Dulay

1988

May 5, 1992

52. Tadeo Duran[o]

1988

May 5, 1992

53. Joseph Banico

1988

March 11, 1993

54. Albert Leynes

1990

May 5, 1992

55. Antonio Dacu[m]a

1990

May 5, 1992

56. Renato dela Cruz

1982

57. Romeo Viernes, Jr.

1986

Page 59 of 191

58. El[ia]s Bas[c]o

1989

59. Wilfredo Torres

1986

May 5, 1992

60. Melchor Carda[]o

1991

May 5, 1992

61. [Marino] [Maranion]

1989

May 5, 1992

62. John Sumergido

1987

May 5, 1992

63. Roberto Rosales

May, 1987

May 5, 1992

64. Gerry [G]. Gatpo

November, 1990

March 11, 1993

65. German N. Guevara

May, 1990

March 11, 1993

66. Gilbert Y. Miranda

June, 1991

March 11, 1993

67. Rodolfo C. Toledo[, Jr.]

May 14, 1991

March 11, 1993

68. Arnold D. [Laspoa]

June 1991

March 11, 1993

69. Philip M. Loza

March 5, 1992

March 11, 1993

70. Mario N. C[o]ldayon

May 14, 1991

March 11, 1993

71. Orlando P. Jimenez

November 6, 1992

March 11, 1993

72. Fred P. Jimenez

September, 1991

March 11, 1993

73. Restituto C. Pamintuan, Jr.

March 5, 1992

March 11, 1993

74. Rolando J. de Andres

June, 1991

March 11, 1993

75. Artuz Bustenera[, Jr.]

December, 1989

March 11, 1993

76. Roberto B. Cruz

May 4, 1990

March 11, 1993

77. Rosedy O. Yordan

June, 1991

May 5, 1992

78. Dennis Dacasin

May. 1990

May 5, 1992

79. Alejandrino Abaton

1988

May 5, 1992

80. Orlando S. Balangue

March, 1989

March 11, 19934

They all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five
months at a time.5 They were assigned at different outlets, supermarkets and stores where they handled all the
products of P&G. They received their wages from Promm-Gem or SAPS. 6
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual
absenteeism, dishonesty or changing day-off without prior notice. 7
P&G is principally engaged in the manufacture and production of different consumer and health products, which it sells
on a wholesale basis to various supermarkets and distributors. 8 To enhance consumer awareness and acceptance of
the products, P&G entered into contracts with Promm-Gem and SAPS for the promotion and merchandising of its
products.9
In December 1991, petitioners filed a complaint 10 against P&G for regularization, service incentive leave pay and other
benefits with damages. The complaint was later amended 11 to include the matter of their subsequent dismissal.
Ruling of the Labor Arbiter
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no
employer-employee relationship between petitioners and P&G. He found that the selection and engagement of the
petitioners, the payment of their wages, the power of dismissal and control with respect to the means and methods by
which their work was accomplished, were all done and exercised by Promm-Gem/SAPS. He further found that
Promm-Gem and SAPS were legitimate independent job contractors. The dispositive portion of his Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered Dismissing the above-entitled cases against
respondent Procter & Gamble (Phils.), Inc. for lack of merit.
SO ORDERED.12
Ruling of the NLRC
Appealing to the NLRC, petitioners disputed the Labor Arbiters findings. On July 27, 1998, the NLRC rendered a
Decision13 disposing as follows:
WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED and the decision appealed
from AFFIRMED.
SO ORDERED.14
Petitioners filed a motion for reconsideration but the motion was denied in the November 19, 1998 Resolution. 15
Ruling of the Court of Appeals

Page 60 of 191

Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However, said petition was also denied by the CA
which disposed as follows:
WHEREFORE, the decision of the National Labor Relations Commission dated July 27, 1998 is AFFIRMED with the
MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay service incentive leave pay to
petitioners.
SO ORDERED.16
Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition.
Issues
Petitioners now come before us raising the following issues:
I.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR
WHEN IT DID NOT FIND THE PUBLIC RESPONDENTS TO HAVE ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN RENDERING THE
QUESTIONED JUDGMENT WHEN, OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND
ESTABLISH THAT RESPONDENT PROCTER & GAMBLE PHILS., INC. IS THEIR EMPLOYER AND THAT
THEY WERE ILLEGALLY DISMISSED BY THE FORMER.
II.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR
WHEN IT DID NOT DECLARE THAT THE PUBLIC RESPONDENTS HAD ACTED WITH GRAVE ABUSE OF
DISCRETION WHEN THE LATTER DID NOT FIND THE PRIVATE RESPONDENTS LIABLE TO THE
PETITIONERS FOR PAYMENT OF ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS
LITIGATION COSTS AND ATTORNEYS FEES.17
Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether petitioners were illegally
dismissed; and (3) whether petitioners are entitled for payment of actual, moral and exemplary damages as well as
litigation costs and attorneys fees.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They claim that they were recruited by the salesmen of P&G and
were engaged to undertake merchandising chores for P&G long before the existence of Promm-Gem and/or SAPS.
They further claim that when the latter had its so-called re-alignment program, petitioners were instructed to fill up
application forms and report to the agencies which P&G created. 18
Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its letter 19 to SAPS
dated February 24, 1993, informing the latter that their Merchandising Services Contract will no longer be renewed.
Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services of manpower to
their client. They claim that the contractors have neither substantial capital nor tools and equipment to undertake
independent labor contracting. Petitioners insist that since they had been engaged to perform activities which are
necessary or desirable in the usual business or trade of P&G, then they are its regular employees. 20
Respondents Arguments
On the other hand, P&G points out that the instant petition raises only questions of fact and should thus be thrown out
as the Court is not a trier of facts. It argues that findings of facts of the NLRC, particularly where the NLRC and the
Labor Arbiter are in agreement, are deemed binding and conclusive on the Supreme Court.
P&G further argues that there is no employment relationship between it and petitioners. It was Promm-Gem or SAPS
that (1) selected petitioners and engaged their services; (2) paid their salaries; (3) wielded the power of dismissal; and
(4) had the power of control over their conduct of work.
P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly
outsourced. Thus, an employer can farm out any of its activities to an independent contractor, regardless of whether
such activity is peripheral or core in nature. It insists that the determination of whether to engage the services of a job
contractor or to engage in direct hiring is within the ambit of management prerogative.
At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived the filing of the Comment of
Promm-Gem on the petition.21 Also, although SAPS was impleaded as a party in the proceedings before the Labor
Arbiter and the NLRC, it was no longer impleaded as a party in the proceedings before the CA. 22 Hence, our
pronouncements with regard to SAPS are only for the purpose of determining the obligations of P&G, if any.
Our Ruling
The petition has merit.
As a rule, the Court refrains from reviewing factual assessments of lower courts and agencies exercising adjudicative
functions, such as the NLRC. Occasionally, however, the Court is constrained to wade into factual matters when there
is insufficient or insubstantial evidence on record to support those factual findings; or when too much is concluded,
inferred or deduced from the bare or incomplete facts appearing on record. 23 In the present case, we find the need to
review the records to ascertain the facts.
Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first determine whether
Promm-Gem and SAPS are labor-only contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

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In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
(Emphasis and underscoring supplied.)
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 1802,24 distinguishes between legitimate and labor-only contracting:
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or service between the principal and the contractor
or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there
are three parties involved in these arrangements, the principal which decides to farm out a job or service to a
contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the
performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to
accomplish the job[,] work or service.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal, and any of the following elements are
present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or
ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual
employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as
amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching
that end.
x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs, works
or services. Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity is
peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to an independent
contractor because the current labor rules expressly prohibit labor-only contracting.
To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places
workers to perform a job, work or service for a principal 25 and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of
the contractualemployee. (Underscoring supplied)
In the instant case, the financial statements26 of Promm-Gem show that it
has authorized capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of
1990.27 It also has long term assets worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also
proven that it maintained its own warehouse and office space with a floor area of 870 square meters. 28 It also had
under its name three registered vehicles which were used for its promotional/merchandising business. 29Promm-Gem
also has other clients30 aside from P&G.31 Under the circumstances, we find that Promm-Gem has substantial
investment which relates to the work to be performed. These factors negate the existence of the element specified in
Section 5(i) of DOLE Department Order No. 18-02.
The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as
markers, tapes, liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to
them. It is also relevant to mention that Promm-Gem already considered the complainants working under it as its

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regular, not merely contractual or project, employees. 32 This circumstance negates the existence of element (ii) as
stated in Section 5 of DOLE Department Order No. 18-02, which speaks of contractual employees. This, furthermore,
negates on the part of Promm-Gem bad faith and intent to circumvent labor laws which factors have often been
tipping points that lead the Court to strike down the employment practice or agreement concerned as contrary to
public policy, morals, good customs or public order.33
Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate
independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,250.00. There
is no other evidence presented to show how much its working capital and assets are. Furthermore, there is no
showing of substantial investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the current economic atmosphere in
the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be considered as substantial capital
and, as such, PMCI cannot qualify as an independent contractor." 35 Applying the same rationale to the present case, it
is clear that SAPS having a paid-in capital of only P31,250 - has no substantial capital. SAPS lack of substantial
capital is underlined by the records36 which show that its payroll for its merchandisers alone for one month would
already total P44,561.00. It had 6-month contracts with P&G. 37 Yet SAPS failed to show that it could complete the 6month contracts using its own capital and investment. Its capital is not even sufficient for one months payroll. SAPS
failed to show that its paid-in capital of P31,250.00 is sufficient for the period required for it to generate its needed
revenue to sustain its operations independently. Substantial capital refers to capitalization used in the performance or
completion of the job, work or service contracted out. In the present case, SAPS has failed to show substantial capital.
Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an
activity that has already been considered by the Court as doubtlessly directly related to the manufacturing
business,38 which is the principal business of P&G. Considering that SAPS has no substantial capital or investment
and the workers it recruited are performing activities which are directly related to the principal business of P&G, we
find that the former is engaged in "labor-only contracting".
"Where labor-only contracting exists, the Labor Code itself establishes an employer-employee relationship between
the employer and the employees of the labor-only contractor." 39 The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the
principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had
been directly employed by the principal employer.40
Consequently, the following petitioners, having been recruited and supplied
by SAPS41 -- which engaged in labor-only contracting -- are considered as the employees of P&G: Arthur Corpuz, Eric
Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura,
Lope Salonga, Franz David, Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano,
Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer
N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry
Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N.
Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera,
Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao,
Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin.
The following petitioners, having worked under, and been dismissed by Promm-Gem, are considered the employees
of Promm-Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin Garcia, Mario P. Liongson, Jr., Ferdinand Salvo,
Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr., Ramil Reyes, Ruben Vasquez, Jr.,
Maximino Pascual, Willie Ortiz, Armando Villar, Jose Fernando Gutierrez, Ramiro Pita, Fernando Macabenta, Nestor
Esquila, Julio Rey, Albert Leynes, Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay,
Marino Maranion, Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and Joeb Aliviado. 42
Termination of services
We now discuss the issue of whether petitioners were illegally dismissed. In cases of regular employment, the
employer shall not terminate the services of an employee except for a just 43 or authorized44 cause.
In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified the cause of
dismissal as grave misconduct and breach of trust, as follows:
xxxx
This informs you that effective May 5, 1992, your employment with our company, Promm-Gem, Inc. has been
terminated. We find your expressed admission, that you considered yourself as an employee of Procter & Gamble
Phils., Inc. and assailing the integrity of the Company as legitimate and independent promotion firm, is deemed as
an act of disloyalty prejudicial to the interests of our Company: serious misconduct and breach of trust reposed upon
you as employee of our Company which [co]nstitute just cause for the termination of your employment.
x x x x45
Misconduct has been defined as improper or wrong conduct; the transgression of some established and definite rule
of action, a forbidden act, a dereliction of duty, unlawful in character implying wrongful intent and not mere error of
judgment. The misconduct to be serious must be of such grave and aggravated character and not merely trivial and
unimportant.46 To be a just cause for dismissal, such misconduct (a) must be serious; (b) must relate to the
performance of the employees duties; and (c) must show that the employee has become unfit to continue working for
the employer.47
In other words, in order to constitute serious misconduct which will warrant the dismissal of an employee under
paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained of has violated

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some established rules or policies. It is equally important and required that the act or conduct must have been
performed with wrongful intent. 48 In the instant case, petitioners-employees of Promm-Gem may have committed an
error of judgment in claiming to be employees of P&G, but it cannot be said that they were motivated by any wrongful
intent in doing so. As such, we find them guilty of only simple misconduct for assailing the integrity of Promm-Gem as
a legitimate and independent promotion firm. A misconduct which is not serious or grave, as that existing in the instant
case, cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust
reposed in the employee by his employer. Ordinary breach will not suffice. A breach of trust is willful if it is done
intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.49
Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that the employee
concerned holds a position of responsibility or of trust and confidence. As such, he must be invested with confidence
on delicate matters, such as custody, handling or care and protection of the property and assets of the employer. And,
in order to constitute a just cause for dismissal, the act complained of must be work-related and must show that the
employee is unfit to continue to work for the employer. 50 In the instant case, the petitioners-employees of Promm-Gem
have not been shown to be occupying positions of responsibility or of trust and confidence. Neither is there any
evidence to show that they are unfit to continue to work as merchandisers for Promm-Gem.
All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem.
While Promm-Gem had complied with the procedural aspect of due process in terminating the employment of
petitioners-employees, i.e., giving two notices and in between such notices, an opportunity for the employees to
answer and rebut the charges against them, it failed to comply with the substantive aspect of due process as the acts
complained of neither constitute serious misconduct nor breach of trust. Hence, the dismissal is illegal.
With regard to the petitioners placed with P&G by SAPS, they were given no written notice of dismissal. The records
show that upon receipt by SAPS of P&Gs letter terminating their "Merchandising Services Contact" effective March
11, 1993, they in turn verbally informed the concerned petitioners not to report for work anymore. The concerned
petitioners related their dismissal as follows:
xxxx
5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr. Saturnino A. Ponce that we
should already stop working immediately because that was the order of Procter and Gamble. According to him he
could not do otherwise because Procter and Gamble was the one paying us. To prove that Procter and Gamble was
the one responsible in our dismissal, he showed to us the letter 51 dated February 24, 1993, x x x
February 24, 1993
Sales
and
Promotions
Services
Armons
Bldg.,
142
Kamias
Road,
Quezon City
Attention:
Mr.
Saturnino
A.
Ponce
President & General Manager
Gentlemen:
Based on our discussions last 5 and 19 February 1993, this formally informs you that we will not be renewing our
Merchandising Services Contract with your agency.
Please immediately undertake efforts to ensure that your services to the Company will terminate effective close of
business hours of 11 March 1993.
This is without prejudice to whatever obligations you may have to the company under the abovementioned contract.
Very truly yours,
(Sgd.)
EMMANUEL
M.
NON
Sales Merchandising III
6. On March 12, 1993, we reported to our respective outlet assignments. But, we were no longer allowed to work and
we were refused entrance by the security guards posted. According to the security guards, all merchandisers of
Procter and Gamble under S[APS] who filed a case in the Dept. of Labor are already dismissed as per letter of Procter
and Gamble dated February 25, 1993. x x x52
Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically, unlike Promm-Gem which
dismissed its employees for grave misconduct and breach of trust due to disloyalty, SAPS dismissed its employees
upon the initiation of P&G. It is evident that SAPS does not carry on its own business because the termination of its
contract with P&G automatically meant for it also the termination of its employees services. It is obvious from its act
that SAPS had no other clients and had no intention of seeking other clients in order to further its merchandising
business. From all indications SAPS, existed to cater solely to the need of P&G for the supply of employees in the
latters merchandising concerns only. Under the circumstances prevailing in the instant case, we cannot consider
SAPS as an independent contractor.
Going back to the matter of dismissal, it must be emphasized that the onus probandi to prove the lawfulness of the
dismissal rests with the employer.53 In termination cases, the burden of proof rests upon the employer to show that the
dismissal is for just and valid cause. 54 In the instant case, P&G failed to discharge the burden of proving the legality
and validity of the dismissals of those petitioners who are considered its employees. Hence, the dismissals
necessarily were not justified and are therefore illegal.
Damages
We now go to the issue of whether petitioners are entitled to damages. Moral

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and exemplary damages are recoverable where the dismissal of an employee was attended by bad faith or fraud or
constituted an act oppressive to labor or was done in a manner contrary to morals, good customs or public policy.55
With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any oppressive act on the
part of the latter, we find no support for the award of damages.
As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive to labor. The
sudden and peremptory barring of the concerned petitioners from work, and from admission to the work place, after
just a one-day verbal notice, and for no valid cause bellows oppression and utter disregard of the right to due process
of the concerned petitioners. Hence, an award of moral damages is called for.
Attorneys fees may likewise be awarded to the concerned petitioners who were illegally dismissed in bad faith and
were compelled to litigate or incur expenses to protect their rights by reason of the oppressive acts 56 of P&G.
Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges, inclusive of allowances, and other benefits or their
monetary equivalent from the time the compensation was withheld up to the time of actual reinstatement. 57Hence, all
the petitioners, having been illegally dismissed are entitled to reinstatement without loss of seniority rights and with full
back wages and other benefits from the time of their illegal dismissal up to the time of their actual
reinstatement.1avvphi1
WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the Court of Appeals in CA-G.R. SP
No. 52082 and the Resolution dated October 20, 2003 are REVERSED and SET ASIDE. Procter & Gamble Phils.,
Inc. and Promm-Gem, Inc. are ORDERED to reinstate their respective employees immediately without loss of
seniority rights and with full backwages and other benefits from the time of their illegal dismissal up to the time of their
actual reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of those petitioners considered
as its employees, namely Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan
Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Rolando Romasanta,
Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos
Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo,
Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo, Jr.,
Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan,
Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil
Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco
and Dennis Dacasin, P25,000.00 as moral damages plus ten percent of the total sum as and for attorneys fees.
Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days from receipt of this Decision, of
petitioners backwages and other benefits; and ten percent of the total sum as and for attorneys fees as stated above;
and for immediate execution.
SO ORDERED.
MARIANO
C.
DEL
CASTILLO
Associate Justice
WE CONCUR:
ANTONIO
T.
CARPIO
Associate
Justice
Chairperson
ARTURO
D.
BRION ROBERTO
A.
ABAD
Associate Justice
Associate Justice
JOSE
P.
PEREZ
Associate Justice
AT T E S TAT I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
ANTONIO
T.
CARPIO
Associate
Justice
Chairperson, Second Division
C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons attestation, it is hereby certified
that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.
REYNATO
S.
PUNO
Chief Justice
Footnotes
1
Rollo, pp. 86-95; penned by Associate Justice Edgardo P. Cruz and concurred in by Associate Justices
Salvador J. Valdez, Jr. and Mario L. Guaria III.
2
Id. at 97-98.
3
Id. at 298-312.
4
Id. at 30-31.
5
Id. at 434-435.
6
Id. at 438-440.

Page 65 of 191

Id. at 441-442.
Id. at 105.
9
Id. at 406-414.
10
Id. at 158-164.
11
Records, Vol. I, pp. 345-346, 373-392; Records, Vol. II, pp. 396-412.
12
Rollo, pp. 112-113.
13
Id. at 115-135.
14
Id. at 135.
15
Id. at 137-157.
16
Id. at 94-95.
17
Id. at 668.
18
Id. at 679.
19
Id. at 192.
20
Id. at 693-697.
21
Id. at 652.
22
Id. at 89.
23
Pascua v. National Labor Relations Commission (Third Division), 351 Phil 48, 61 (1998).
24
Rules Implementing Articles 106 to 109 of the Labor Code, As Amended, approved February 21, 2002.
25
Escario v. National Labor Relations Commission, 388 Phil. 929, 938 (2000).
26
Records, Vol. I, p. 208.
27
Id. at 211.
28
Rollo, p. 453; TSN, February 22, 1994, p. 9.
29
Rollo, pp 580-582.
30
a. Adidas Division, Rubberworld Phil., Inc.; b. CFC Corporation; c. Focus Enterprise, Inc., d. Procter &
Gamble Phil., Inc., e. Roche Phil., Inc.; f. Sterling Products Intl., Inc.; g. Southeast Asia Foods, Inc.; h. Pepsi
Co., Inc.; i. Kraft General Foods Phil., Inc.; j. Universal Robina Corp.; k. Wrigley Phil., Inc.; l. Asia Brewery,
Inc.; m. Ayala Land, Inc.; n. Citibank, N.A.; o. S.C. Johnson, Inc.; p. Glaxo Phil., Inc.; q. Bank of the Phil.
Island-Loyola Branch; r. Republic Chemical, Inc.; s. Metrolab, Inc.; and, t. First Pacific Metro Corp. Records,
Vol. I, p. 192.
31
Id.
32
Records, Vol. II, pp. 599-623.
33
The act of hiring and re-hiring workers over a period of time without considering them as regular employees
evinces bad faith on the part of the employer. San Miguel Corporation v. National Labor Relations
Commission, G.R. No. 147566, December 6, 2006, 510 SCRA 181, 189; Bustamante v. National Labor
Relations Commission, G. R. No. 111651, March 15, 1996, 255 SCRA 145, 150.
34
381 Phil. 460 (2000). This case involved an employee who was dismissed and filed a labor case in 1991,
about the same time frame as that involved in this case for purposes of taking judicial notice of the economic
atmosphere in the country.
35
Id. at 476.
36
Records, Vol. I, p. 556.
37
Rollo, p. 412.
38
Tabas v. California Manufacturing Co., Inc., 251 Phil. 448, 454 (1989).
39
Neri v. National Labor Relations Commission, G.R. Nos. 97008-09, July 23, 1993, 224 SCRA 717, 720,
citing Philippine Bank of Communications v. National Labor Relations Commission, 230 Phil. 430, 440 (1986).
40
San Miguel Corporation v. Aballa, G.R. No. 149011, June 28, 2005, 461 SCRA 392, 422.
41
Records, Vol. I, p. 340. SAPS has admitted that the complainants are its employees.
42
Records, Vol. I, p. 193; Vol. II, pp. 666-692.
43
Labor Code of the Philippines,
ART. 282. Termination by employer. - An employer may terminate an employment for any of the
following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
44
ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date thereof x x x
ART. 284. Disease as ground for termination. An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as to the health of his co-employees: x x x
8

Page 66 of 191

45

Records, Vol. II, p. 447.

National Labor Relations Commission v. Salgarino, G.R. No. 164376, July 31, 2006, 497 SCRA 361,
375;Molina v. Pacific Plans, Inc., G.R. No.165476, March 10, 2006, 484 SCRA 498, 518; Samson v. National
Labor Relations Commission, 386 Phil. 669, 682 (2000).
47
Baez v. De La Salle University, G.R. No. 167177, September 27, 2006, 503 SCRA 691, 700; Phil. Aeolus
Automotive United Corp. v. National Labor Relations Commission, 387 Phil. 250, 261 (2000).
48
National Labor Relations Commission v. Salgarino, supra at 376.
49
Velez v. Shangri-Las Edsa Plaza Hotel, G.R. No. 148261, October 9, 2006, 504 SCRA 13, 25.
50
Id. at 26.
51
Rollo, p. 192.
52
Records, Vol. II, p. 413.
53
National Labor Relations Commission v. Salgarino, supra note 46 at 383.
54
Royal Crown Internationale v. National Labor Relations Commission, G.R. No. 78085, October 16, 1989,
178 SCRA 569, 578.
Labor Code of the Philippines,
ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.
55
Pascua v. National Labor Relations Commission (Third Division), supra note 23 at 72; Acua v. Court of
Appeals, G.R. No.159832, May 5, 2006, 489 SCRA 658, 668; Quadra v. Court of Appeals, G.R. No. 147593,
July 31, 2006, 497 SCRA 221, 227.
56
See Pascua v. National Labor Relations Commission (Third Division), supra note 23 at 74. In the instant
case, P&Gs act of taking an unconscionable and unscrupulous advantage of the utter powerlessness of the
individual concerned petitioners to prevent the trampling of their rights to due process and security of tenure
constitutes bad faith.
57
Premier Development Bank v. Mantal, G.R. No. 167716, March 23, 2006, 485 SCRA 234, 242243;Philippine Amusement and Gaming Corporation v. Angara, G.R. No. 142937, July 25, 2006, 496 SCRA
453, 457.
46

Page 67 of 191

SECOND DIVISION
[G.R. No. 120466. May 17, 1999]
COCA COLA BOTTLERS PHILS., INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and
RAMON B. CANONICATO, respondents.
DECISION
BELLOSILLO, J.:
This petition for certiorari under Rule 65 of the Revised Rules of Court assails the 3 January 1995 decision [1] of
the National Labor Relations Commission (NLRC) holding that private respondent Ramon B. Canonicato is a regular
employee of petitioner Coca Cola Bottlers Phils. Inc. (COCA COLA) entitled to reinstatement and back wages. The
NLRC reversed the decision of the Labor Arbiter of 28 April 1994 [2] which declared that no employer-employee
relationship existed between COCA COLA and Canonicato thereby foreclosing entitlement to reinstatement and back
wages.
On 7 April 1986 COCA COLA entered into a contract of janitorial services with Bacolod Janitorial Services (BJS)
stipulating[3] among others That the First Party (COCA COLA) desires to engage the services of the Second Party (BJS), as an Independent
Contractor, to perform and provide for the maintenance, sanitation and cleaning services for the areas hereinbelow
mentioned, all located within the aforesaid building of the First Party x x x x
1. The scope of work of the Second Party includes all floors, walls, doors, vertical and horizontal areas, ceiling, all
windows, glass surfaces, partitions, furniture, fixtures and other interiors within the aforestated covered areas.
2. Except holidays which are rest days, the Second Party will undertake daily the following: 1) Sweeping, dampmopping, spot scrubbing and polishing of floors; 2) Cleaning, sanitizing and disinfecting agents to be used on
commodes, urinals and washbasins, water spots on chrome and other fixtures to be checked; 3) Cleaning of glass
surfaces, windows and glass partitions that require daily attention; 4) Cleaning and dusting of horizontal and vertical
surfaces; 5) Cleaning of fixtures, counters, panels and sills; 6) Clean, pick-up cigarette butts from sandburns and
ashtrays and trash receptacles; 7) Trash and rubbish disposal and burning.
In addition, the Second Party will also do the following once a week, to wit: 1) Cleaning, waxing and polishing of
lobbies and offices; 2) Washing of windows, glasses that require cleaning; 3) Thorough disinfecting and cleaning of
toilets and washrooms.
3. The Second Party shall supply the necessary utensils, equipment and supervision, and it shall only employ the
services of fifteen (15) honest, reliable, carefully screened, cooperative and trained personnel, who are in good faith,
in the performance of its herein undertaking x x x x
4. The Second Party hereby guarantees against unsatisfactory workmanship. Minor repair of comfort rooms are free of
charge provided the First Party will supply the necessary materials for such repairs at its expense. As may be
necessary, the Second Party shall also report on such part or areas of the premises covered by this contract which
may require repairs from time to time x x x (italics supplied).
Every year thereafter a service contract was entered into between the parties under similar terms and conditions
until about May 1994.[4]
On 26 October 1989 COCA COLA hired private respondent Ramon Canonicato as a casual employee and
assigned him to the bottling crew as a substitute for absent employees. In April 1990 COCA COLA terminated
Canonicato's casual employment. Later that year COCA COLA availed of Canonicato's services, this time as a painter
in contractual projects which lasted from fifteen (15) to thirty (30) days. [5]
On 1 April 1991 Canonicato was hired as a janitor by BJS [6] which assigned him to COCA COLA considering his
familiarity with its premises. On 5 and 7 March 1992 Canonicato started painting the facilities of COCA COLA and
continued doing so several months thereafter or so for a few days every time until 6 to 25 June 1993. [7]
Goaded by information that COCA COLA employed previous BJS employees who filed a complaint against the
company for regularization pursuant to a compromise agreement, [8] Canonicato submitted a similar complaint against
COCA COLA to the Labor Arbiter on 8 June 1993.[9] The complaint was docketed as RAB Case No. 06-06-10337-93.
Without notifying BJS, Canonicato no longer reported to his COCA COLA assignment starting 29 June 1993. On
15 July 1993 he sent his sister Rowena to collect his salary from BJS. [10] BJS released his salary but advised Rowena
to tell Canonicato to report for work. Claiming that he was barred from entering the premises of COCA COLA on either
14 or 15 July 1993, Canonicato met with the proprietress of BJS, Gloria Lacson, who offered him assignments in other
firms which he however refused.[11]
On 23 July 1993 Canonicato amended his complaint against COCA COLA by citing instead as grounds therefor
illegal dismissal and underpayment of wages. He included BJS therein as a co-respondent. [12] On 28 September 1993
BJS sent him a letter advising him to report for work within three (3) days from receipt, otherwise, he would be
considered to have abandoned his job.[13]
On 28 April 1994 the Labor Arbiter ruled that: (a) there was no employer-employee relationship between COCA
COLA and Ramon Canonicato because BJS was Canonicato's real employer; (b) BJS was a legitimate job contractor,
hence, any liability of COCA COLA as to Canonicato's salary or wage differentials was solidary with BJS in
accordance with pars. 1 and 2 of Art. 106, Labor Code; (c) COCA COLA and BJS must jointly and severally pay
Canonicato his wage differentials amounting to P2,776.80 and his 13th month salary of P1,068.00, including ten (10%)
percent attorney's fees in the sum of P384.48. The Labor Arbiter also ordered that all other claims by Canonicato
against COCA COLA be dismissed for lack of employer-employee relationship; that the complaint for illegal dismissal
as well as all the other claims be likewise dismissed for lack of merit; and that COCA COLA and BJS
deposit P4,429.28 with the Department of Labor Regional Arbitration Branch Office within ten (10) days from receipt of
the decision.[14]

Page 68 of 191

The NLRC rejected on appeal the decision of the Labor Arbiter on the ground that the janitorial services of
Canonicato were found to be necessary or desirable in the usual business or trade of COCA COLA. The NLRC
accepted Canonicato's proposition that his work with the BJS was the same as what he did while still a casual
employee of COCA COLA. In so holding the NLRC applied Art. 280 of the Labor Code and declared that Canonicato
was a regular employee of COCA COLA and entitled to reinstatement and payment of P18,105.10 in back wages.[15]
On 26 May 1995 the NLRC denied COCA COLA's motion for reconsideration for lack of merit. [16] Hence, this
petition, assigning as errors: (a) NLRC's finding that janitorial services were necessary and desirable in COCA COLA's
trade and business; (b) NLRC's application of Art. 280 of the Labor Code in resolving the issue of whether an
employment relationship existed between the parties; (c) NLRC's ruling that there was an employer-employee
relationship between petitioner and Canonicato despite its virtual affirmance that BJS was a legitimate job contractor;
(d) NLRC's declaration that Canonicato was a regular employee of petitioner although he had rendered the company
only five (5) months of casual employment; and, (e) NLRC's order directing the reinstatement of Canonicato and the
payment to him of six (6) months back wages.[17]
We find good cause to sustain petitioner. Findings of fact of administrative offices are generally accorded respect
by us and no longer reviewed for the reason that such factual findings are considered to be within their field of
expertise. Exception however is made, as in this case, when the NLRC and the Labor Arbiter made contradictory
findings.
We perceive at the outset the disposition of the NLRC that janitorial services are necessary and desirable to the
trade or business of petitioner COCA COLA. But this is inconsistent with our pronouncement inKimberly Independent
Labor Union v. Drilon[18] where the Court took judicial notice of the practice adopted in several government and private
institutions and industries of hiring janitorial services on an "independent contractor basis." In this respect, although
janitorial services may be considered directly related to the principal business of an employer, as with every business,
we deemed them unnecessary in the conduct of the employer's principal business. [19]
This judicial notice, of course, rests on the assumption that the independent contractor is a legitimate job
contractor so that there can be no doubt as to the existence of an employer-employee relationship between contractor
and the worker. In this situation, the only pertinent question that may arise will no longer deal with whether there exists
an employment bond but whether the employee may be considered regular or casual as to deserve the application of
Art. 280 of the Labor Code.
It is an altogether different matter when the very existence of an employment relationship is in question. This was
the issue generated by Canonicato's application for regularization of his employment with COCA COLA and the
subsequent denial by the latter of an employer-employee relationship with the applicant. It was error therefore for the
NLRC to apply Art. 280 of the Labor Code in determining the existence of an employment relationship of the parties
herein, especially in light of our explicit holding in Singer Sewing Machine Company v. Drilon[20] that x x x x [t]he definition 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. Any agreement may provide that one party shall render
services for and in behalf of another for a consideration (no matter how necessary for the latter's business) even
without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in
an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for
determining the existence of an employment relationship because it merely distinguishes between two kinds of
employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to
certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an
employment relationship is in dispute.
In determining the existence of an employer-employee relationship it is necessary to determine whether the
following factors are present: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power to dismiss; and, (d) the power to control the employee's conduct. [21] Notably, these are all found in the
relationship between BJS and Canonicato and not between Canonicato and petitioner COCA COLA.As the SolicitorGeneral manifested[22]In the instant case, the selection and engagement of the janitors for petitioner were done by BJS. The application form
and letter submitted by private respondent (Canonicato) to BJS show that he acknowledged the fact that it was BJS
who did the hiring and not petitioner x x x x
BJS paid the wages of private respondent, as evidenced by the fact that on July 15, 1993, private respondent sent his
sister to BJS with a note authorizing her to receive his pay.
Power of dismissal is also exercised by BJS and not petitioner. BJS is the one that assigns the janitors to its clients
and transfers them when it sees fit. Since BJS is the one who engages their services, then it only follows that it also
has the power to dismiss them when justified under the circumstances.
Lastly, BJS has the power to control the conduct of the janitors. The supervisors of petitioner, being interested in the
result of the work of the janitors, also gives suggestions as to the performance of the janitors, but this does not mean
that BJS has no control over them. The interest of petitioner is only with respect to the result of their work. On the
other hand, BJS oversees the totality of their performance.
The power of the employer to control the work of the employee is said to be the most the most significant
determinant. Canonicato disputed this power of BJS over him by asserting that his employment with COCA COLA was
not interrupted by his application with BJS since his duties before and after he applied for regularization were the
same, involving as they did, working in the maintenance department and doing painting tasks within its
facilities. Canonicato cited the Labor Utilization Reports of COCA COLA showing his painting assignments. These
reports, however, are not expressive of the true nature of the relationship between Canonicato and COCA COLA;
neither do they detract from the fact that BJS exercised real authority over Canonicato as its employee.

Page 69 of 191

Moreover, a closer scrutiny of the reports reveals that the painting jobs were performed by Canonicato
sporadically, either in a few days within a month and only for a few months in a year. [23] This infrequency or irregularity
of assignments countervails Canonicatos submission that he was assigned specifically to undertake the task of
painting the whole year round. If anything, it hews closely to the assertion of BJS that it assigned Canonicato to these
jobs to maintain and sanitize the premises of petitioner COCA COLA pursuant to its contract of services with the
company.[24]
It is clear from these established circumstances that NLRC should have recognized BJS as the employer of
Canonicato and not COCA COLA. This is demanded by the fact that it did not disturb, and therefore it upheld, the
finding of the Labor Arbiter that BJS was truly a legitimate job-contractor and could by itself hire its own
employees. The Commission could not have reached any other legitimate conclusion considering that BJS satisfied all
the requirements of a job-contractor under the law, namely, (a) the ability to carry on an independent business and
undertake the contract work on its own account under its own responsibility according to its manner and method, free
from the control and direction of its principal or client in all matters connected with the performance of the work except
as to the results thereof; and, (b) the substantial capital or investment in the form of tools, equipment, machinery, work
premises, and other materials which are necessary in the conduct of its business. [25]
It is to be noted that COCA COLA is not the only client of BJS which has its roster of clients like San Miguel
Corporation, Distileria Bago Incorporated, University of Negros Occidental-Recolletos, University of St. La Salle,
Riverside College, College Assurance Plan Phil., Inc., and Negros Consolidated Farmers Association, Inc. [26] This is
proof enough that BJS has the capability to carry on its business of janitorial services with big establishments aside
from petitioner and has sufficient capital or materials necessary therefor. [27] All told, there being no employer-employee
relationship between Canonicato and COCA COLA, the latter cannot be validly ordered to reinstate the former and
pay him back wages.
WHEREFORE, the petition is GRANTED. The NLRC decision of 3 January 1995 declaring Ramon B. Canonicato
a regular employee of petitioner Coca Cola Bottlers Phils., Inc., entitled to reinstatement and back wages is
REVERSED and SET ASIDE. The decision of the Labor Arbiter of 28 April 1994 finding no employer-employee
relationship between petitioner and private respondent but directing petitioner Coca Cola Bottlers Phils., Inc., instead
and Bacolod Janitorial Services to pay jointly and severally Ramon B. Canonicato P2,776.80 as wage
differentials, P1,068.00 as 13th month pay and P384.48 as attorney's fees, is REINSTATED.
SO ORDERED.
Puno, Mendoza, and Quisumbing, JJ., concur.
Buena, J., on leave.

[1]

Decision penned by Commissioner Amorito Canete, concurred in by Presiding Commissioner Irenea E. Ceniza and
Commissioner Bernabe S. Batuhan, NLRC-Cebu City, Fourth Division, Rollo, pp. 54-58.
[2]
Decision penned by Labor Arbiter Ray Allan T. Drilon, NLRC Regional Arbitration Branch No. VI, Bacolod City, id.,
pp. 28-51.
[3]
Records, pp. 334-336.
[4]
Id., pp. 35-37, 331-333.
[5]
Projects were contracted on 3 August 16-31, 1990, September 1-15 & 15-30, 1990, October 1-15 & 16-31, 1990,
Records, pp. 182-184.
[6]
Records, pp. 38-39.
[7]
Painting jobs were done on 27-29 March 1992; 19, 22 and 29 August 1992; 5, 12, 28 and 29 September 1992; 3, 11
and 31 October 1992; 14 December 1992; 10, 17-20 January 1993; 1-6, 20 and 27 February 1993; 6, 10, 15-17, 19
and 20 March 1995; and 1, 9 and 14 May 1993; Records, pp. 185-232.
[8]
Records, pp. 38-39.
[9]
Id., p. 1.
[10]
Id. p. 54.
[11]
Id., p. 71.
[12]
Id., p. 5.
[13]
Id., p. 56.
[14]
See Note 2, pp. 50-51.
[15]
See Note 1.
[16]
NLRC Resolution issued by same Division, Rollo, pp. 68-72.
[17]
Petition, pp. 12-21, id., pp. 13-22.
[18]
G.R. No. 78791, 9 May 1990, 185 SCRA 191; see also Rhone-Poulenc Agrochemicals Phils., Inc. v. NLRC, G.R.
Nos. 102633-35, 19 January 1993, 217 SCRA 249.
[19]
Neri v. NLRC, G.R. Nos. 97008-09, 23 July 1993, 224 SCRA 717.
[20]
G.R. No. 91307, 24 January 1991, 193 SCRA 270, 279.
[21]
Philippine Airlines, Inc. v. NLRC, G.R. No. 120506, 28 October 1996, 263 SCRA 638.
[22]
Manifestation and Motion In Lieu of Comment, Rollo, pp. 112-114.
[23]
See Note 7.
[24]
See Note 3.
[25]
Nagusara v. NLRC, G.R. Nos. 117936-37, 20 May 1998.
[26]
BJS Advertisement on the Occasion of its 29th Anniversary, Rollo, p. 220.

Page 70 of 191

[27]

Records, pp. 100-110.

Page 71 of 191

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 158255
July 8, 2004
MANILA WATER COMPANY, INC., petitioner,
vs.
HERMINIO D. PENA, ESTEBAN B. BALDOZA, JORGE D. CANONIGO, JR., IKE S. DELFIN, RIZALINO M. INTAL,
REY T. MANLEGRO, JOHN L. MARTEJA, MARLON B. MORADA, ALLAN D. ESPINA, EDUARDO ONG, AGNESIO
D. QUEBRAL, EDMUNDO B. VICTA, VICTOR C. ZAFARALLA, EDILBERTO C. PINGUL and FEDERICO M.
RIVERA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition assails the decision 1 of the Court of Appeals dated November 29, 2002, in CA-G.R. SP No. 67134, which
reversed the decision of the National Labor Relations Commission and reinstated the decision of the Labor Arbiter
with modification.
Petitioner Manila Water Company, Inc. is one of the two private concessionaires contracted by the Metropolitan
Waterworks and Sewerage System (MWSS) to manage the water distribution system in the East Zone of Metro
Manila, pursuant to Republic Act No. 8041, otherwise known as the National Water Crisis Act of 1995. Under the
Concession Agreement, petitioner undertook to absorb former employees of the MWSS whose names and positions
were in the list furnished by the latter, while the employment of those not in the list was terminated on the day
petitioner took over the operation of the East Zone, which was on August 1, 1997. Private respondents, being
contractual collectors of the MWSS, were among the 121 employees not included in the list; nevertheless, petitioner
engaged their services without written contract from August 1, 1997 to August 31, 1997. Thereafter, on September 1,
1997, they signed a three-month contract to perform collection services for eight branches of petitioner in the East
Zone.2
Before the end of the three-month contract, the 121 collectors incorporated the Association Collectors Group, Inc.
(ACGI),3 which was contracted by petitioner to collect charges for the Balara Branch. Subsequently, most of the 121
collectors were asked by the petitioner to transfer to the First Classic Courier Services, a newly registered corporation.
Only private respondents herein remained with ACGI. Petitioner continued to transact with ACGI to do its collection
needs until February 8, 1999, when petitioner terminated its contract with ACGI. 4
Private respondents filed a complaint for illegal dismissal and money claims against petitioner, contending that they
were petitioners employees as all the methods and procedures of their collections were controlled by the latter.
On the other hand, petitioner asserts that private respondents were employees of ACGI, an independent contractor. It
maintained that it had no control and supervision over private respondents manner of performing their work except as
to the results. Thus, petitioner did not have an employer-employee relationship with the private respondents, but only
a service contractor-client relationship with ACGI.
On May 31, 2000, Labor Arbiter Eduardo J. Carpio rendered a decision finding the dismissal of private respondents
illegal. He held that private respondents were regular employees of petitioner not only because the tasks performed by
them were controlled by it but, also, the tasks were obviously necessary and desirable to petitioners principal
business. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered, finding that complainants were
employees of respondent [petitioner herein], that they were illegally dismissed, and respondent [petitioner
herein] is hereby ordered to pay their separation pay based on the following computed amounts:
HERMINIO D. PENA

P15,000.00

ESTEBAN BALDOZA

P12,000.00

JORGE D. CANONIGO, JR.

P16,000.00

IKE S. DELFIN

P12,000.00

RIZALINO M. INTAL

P16,000.00

REY T. MANLEGRO

P16,000.00

JOHN L. MARTEJA

P12,000.00

MARLON B. MORADA

P16,000.00

ALLAN D. ESPINA

P14,000.00

Page 72 of 191

EDUARDO ONG

P15,000.00

AGNESIO D. QUEBRAL

P16,000.00

EDMUNDO B. VICTA

P13,000.00

VICTOR P. ZAFARALLA

P15,000.00

EDILBERTO C. PINGUL

P19,500.00

FEDERICO M. RIVERA
TOTAL

P15,000.00
P222,500.00

Respondent [petitioner herein] is further directed to pay ten (10%) percent of the total award as attorneys fee
or the sum of P22,250.00.
SO ORDERED.5
Both parties appealed to the NLRC, which reversed the decision of the Labor Arbiter and ruled that the documentary
evidence, e.g., letters and memoranda by the petitioner to ACGI regarding the poor performance of the collectors, did
not constitute proof of control since these documents merely identified the erring collectors; the appropriate
disciplinary actions were left to the corporation to impose. 6 Further, there was no evidence showing that the
incorporation of ACGI was irregular.
Private respondents filed a petition for certiorari with the Court of Appeals, contending that the NLRC acted with grave
abuse of discretion amounting to lack or excess of jurisdiction when it reversed the decision of the Labor Arbiter.
The Court of Appeals reversed the decision of the NLRC and reinstated with modification the decision of the Labor
Arbiter.7 It held that petitioner deliberately prevented the creation of an employment relationship with the private
respondents; and that ACGI was not an independent contractor. It likewise denied petitioners motion for
reconsideration.8
Hence, this petition for review raising the following errors:
THE HONORABLE COURT OF APPEALS IN RENDERING THE ASSAILED DECISION AND RESOLUTION
COMMITTED GRAVE REVERSIBLE ERRORS:
A. IN GOING BEYOND ITS JURISDICTION AND PROCEEDING TO GIVE DUE COURSE TO
RESPONDENTS PETITION FOR CERTIORARI UNDER RULE 65 OF THE RULES OF COURT,
NOTWITHSTANDING THE ABSENCE OF ANY PROOF OF GRAVE ABUSE OF DISCRETION ON THE
PART OF THE NATIONAL LABOR RELATIONS COMMISSION WHEN IT RENDERED THE DECISION
ASSAILED BY HEREIN RESPONDENTS.
B. WHEN IT MANIFESTLY OVERLOOKED THE EVIDENCE PRESENTED BY THE PETITIONER COMPANY
AND RULING THAT THE PETITIONERS DEFENSE OF LACK OF EMPLOYER-EMPLOYEE RELATIONS IS
WITHOUT MERIT.
C. IN CONCLUDING THAT PETITIONER COMPANY REQUIRED RESPONDENTS TO INCORPORATE THE
ASSOCIATED COLLECTORS GROUP, INC. ["ACGI"] NOTWITHSTANDING ABSENCE OF ANY SPECIFIC
EVIDENCE IN SUPPORT OF THE SAME.
D. IN FINDING PETITIONER COMPANY GUILTY OF BAD FAITH NOTWITHSTANDING ABSENCE OF ANY
SPECIFIC EVIDENCE IN SUPPORT OF THE SAME, AND AWARDING MORAL AND EXEMPLARY
DAMAGES TO HEREIN RESPONDENTS.9
The pivotal issue to be resolved in this petition is whether or not there exists an employer-employee relationship
between petitioner and private respondents. Corollary thereto is the issue of whether or not private respondents were
illegally dismissed by petitioner.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of
fact.10 As a rule, the Supreme Court is not a trier of facts, and this applies with greater force in labor cases. Hence,
factual findings of quasi-judicial bodies like the NLRC, particularly when they coincide with those of the Labor Arbiter
and if supported by substantial evidence, are accorded respect and even finality by this Court. 11However, a
disharmony between the factual findings of the Labor Arbiter and the National Labor Relations Commission opens the
door to a review thereof by this Court. Factual findings of administrative agencies are not infallible and will be set
aside when they fail the test of arbitrariness. Moreover, when the findings of the National Labor Relations Commission
contradict with those of the labor arbiter, this Court, in the exercise of its equity jurisdiction, may look into the records
of the case and reexamine the questioned findings.12
The resolution of the foregoing issues initially boils down to a determination of the true status of ACGI, i.e., whether it
is an independent contractor or a labor-only contractor.
Petitioner asserts that ACGI, a duly organized corporation primarily engaged in collection services, is an independent
contractor which entered into a service contract for the collection of petitioners accounts starting November 30, 1997
until the early part of February 1999. Thus, it has no employment relationship with private respondents, being
employees of ACGI.
The existence of an employment relationship between petitioner and private respondents cannot be negated by simply
alleging that the latter are employees of ACGI as an independent contractor, it being crucial that ACGIs status,
whether as "labor-only contractor" or "independent contractor", be measured in terms of and determined by the criteria
set by statute.

Page 73 of 191

The case of De los Santos v. NLRC13 succinctly enunciates this statutory criteria
Job contracting is permissible only if the following conditions are met: 1) the contractor carries on an
independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof; and 2) the contractor has
substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of the business.
"Labor-only contracting" as defined in Section 5, Department Order No. 18-02, Rules Implementing Articles 106-109
of the Labor Code14 refers to an arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform job, work or service for a principal, and any of the following elements is present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.
Given the above criteria, we agree with the Labor Arbiter that ACGI was not an independent contractor.
First, ACGI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work
premises, and other materials, to qualify as an independent contractor. While it has an authorized capital stock of
P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be considered substantial capitalization. The 121
collectors subscribed to four shares each and paid only the amount of P625.00 in order to comply with the
incorporation requirements.15 Further, private respondents reported daily to the branch office of the petitioner because
ACGI has no office or work premises. In fact, the corporate address of ACGI was the residence of its president, Mr.
Herminio D. Pea.16 Moreover, in dealing with the consumers, private respondents used the receipts and identification
cards issued by petitioner.17
Second, the work of the private respondents was directly related to the principal business or operation of the
petitioner. Being in the business of providing water to the consumers in the East Zone, the collection of the charges
therefor by private respondents for the petitioner can only be categorized as clearly related to, and in the pursuit of the
latters business.
Lastly, ACGI did not carry on an independent business or undertake the performance of its service contract according
to its own manner and method, free from the control and supervision of its principal, petitioner. Prior to private
respondents alleged employment with ACGI, they were already working for petitioner, subject to its rules and
regulations in regard to the manner and method of performing their tasks. This form of control and supervision never
changed although they were already under the seeming employ of ACGI. Petitioner issued memoranda regarding the
billing methods and distribution of books to the collectors; 18 it required private respondents to report daily and to remit
their collections on the same day to the branch office or to deposit them with Bank of the Philippine Islands; it
monitored strictly their attendance as when a collector cannot perform his daily collection, he must notify petitioner or
the branch office in the morning of the day that he will be absent; and although it was ACGI which ultimately
disciplined private respondents, the penalty to be imposed was dictated by petitioner as shown in the letters it sent to
ACGI specifying the penalties to be meted on the erring private respondents. 19 These are indications that ACGI was
not left alone in the supervision and control of its alleged employees. Consequently, it can be concluded that ACGI
was not an independent contractor since it did not carry a distinct business free from the control and supervision of
petitioner.
Under this factual milieu, there is no doubt that ACGI was engaged in labor-only contracting, and as such, is
considered merely an agent of the petitioner. In labor-only contracting, the statute creates an employer-employee
relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as
if such employees had been directly employed by the principal employer.20 Since ACGI is only a labor-only contractor,
the workers it supplied should be considered as employees of the petitioner.
Even the "four-fold test" will show that petitioner is the employer of private respondents. The elements to determine
the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. The most
important element is the employers control of the employees conduct, not only as to the result of the work to be done,
but also as to the means and methods to accomplish it. 21
We agree with the Labor Arbiter that in the three stages of private respondents services with the petitioner, i.e., (1)
from August 1, 1997 to August 31, 1997; (2) from September 1, 1997 to November 30, 1997; and (3) from December
1, 1997 to February 8, 1999, the latter exercised control and supervision over the formers conduct.
Petitioner contends that the employment of private respondents from August 1, 1997 to August 30, 1997 was only
temporary and done to accommodate their request to be absorbed since petitioner was still undergoing a transition
period. It was only when its business became settled that petitioner employed private respondents for a fixed term of
three months.
Although petitioner was not obliged to absorb the private respondents, by engaging their services, paying their wages
in the form of commission, subjecting them to its rules and imposing punishment in case of breach thereof, and
controlling not only the end result but the manner of achieving the same as well, an employment relationship existed
between them.

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Notably, private respondents performed activities which were necessary or desirable to its principal trade or business.
Thus, they were regular employees of petitioner, regardless of whether the engagement was merely an
accommodation of their request, pursuant to Article 280 of the Labor Code which reads:
The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work
or services to be performed is seasonal in nature and the employment is for the duration of the season.
As such regular employees, private respondents are entitled to security of tenure which may not be circumvented by
mere stipulation in a subsequent contract that their employment is one with a fixed period. While this Court has upheld
the legality of fixed-term employment, where from the circumstances it is apparent that the periods have been
imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as
contrary to public policy and morals.22
In the case at bar, we find that the term fixed in the subsequent contract was used to defeat the tenurial security which
private respondents already enjoy. Thus, we concur with the Labor Arbiter, as affirmed by the Court of Appeals, when
it held that:
The next question if whether, with respect to the period, the individual contracts are valid. Not all contracts of
employment fixing a period are invalid. Under Article 280, the evil sought to be prevented is singled out:
agreements entered into precisely to circumvent security of tenure. It has no application where a fixed period
of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or
improper pressure being brought upon the employee and absent any circumstances vitiating his consent, or
where it satisfactorily appears that the employer and employee dealt with each other on more or less terms
with no moral dominance whatever being exercised by the former over the latter. That is the doctrine in Brent
School, Inc. v. Zamora, 181 SCRA 702. The individual contracts in question were prepared by MWC in the
form of the letter addressed to complainants. The letter-contract is dated September 1, 1997, when
complainants were already working for MWC as collectors. With their employment as their means of survival,
there was no room then for complainants to disagree with the presented letter-contracts. Their choice then
was not to negotiate for the terms of the contract but to lose or not to lose their employment employment
which they already had at that time. The choice is obvious, as what they did, to sign the ready made lettercontract to retain their employment, and survive. It is a defiance of the teaching in Brent School, Inc. v.
Zamora if this Office rules that the individual contracts in question are valid, so, in deference to Brent School
ruling, this Office rules they are null and void.23
In view of the foregoing, we hold that an employment relationship exists between petitioner and private respondents.
We now proceed to ascertain whether private respondents were dismissed in accordance with law.
As private respondents employer, petitioner has the burden of proving that the dismissal was for a cause allowed
under the law and that they were afforded procedural due process. 24 Petitioner failed to discharge this burden by
substantial evidence as it maintained the defense that it was not the employer of private respondents. Having
established that the schemes employed by petitioner were devious attempts to defeat the tenurial rights of private
respondents and that it failed to comply with the requirements of termination under the Labor Code, the dismissal of
the private respondent is tainted with illegality.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work is entitled to reinstatement
without loss of seniority rights and other privileges, and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement. However, if reinstatement is no longer possible, the employer has the alternative of paying
the employee his separation pay in lieu of reinstatement. 25
This Court however cannot sustain the award of moral and exemplary damages in favor of private respondents. Such
an award cannot be justified solely upon the premise that the employer dismissed his employee without just cause or
due process. Additional facts must be pleaded and proved to warrant the grant of moral damages under the Civil
Code. The act of dismissal must be attended with bad faith, or fraud, or was oppressive to labor or done in a manner
contrary to morals, good customs or public policy and, of course, that social humiliation, wounded feelings, or grave
anxiety resulted therefrom. Similarly, exemplary damages are recoverable only when the dismissal was effected in a
wanton, oppressive or malevolent manner.26 Those circumstances have not been adequately established.
However, private respondents are entitled to attorneys fees as they were compelled to litigate with petitioners and
incur expenses to enforce and protect their interests. 27 The award by the Labor Arbiter of P22,250.00 as attorneys
fees to private respondents, being reasonable, is sustained.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated November 29, 2002, in CA-G.R.
SP No. 67134, reversing the decision of the National Labor Relations Commission and reinstating the decision of the
Labor Arbiter is AFFIRMED with the MODIFICATION that the awards of P10,000.00 as moral damages and P5,000.00
as exemplary damages are DELETED for lack of evidentiary basis.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Carpio, and Azcuna, JJ., concur.
Footnotes

Page 75 of 191

Penned by Associate Justice Renato C. Dacudao and concurred in by Associate Justices Eugenio S.
Labitoria and Danilo B. Pine.
2
Rollo, pp. 5-8.
3
Incorporated on November 21, 1997.
4
Rollo, pp. 87-88.
5
Id., p. 189.
6
Id., p. 247.
7
Id., pp. 49-50.
8
Id., p. 53.
9
Id., p. 9.
10
Fleischer Company, Inc. v. NLRC, G.R. No. 121608, 26 March 2001, 355 SCRA 105, 111.
11
Tres Reyes v. Maxims Tea House, G.R. No. 140853, 27 February 2003.
12
Diamond Motors Corporation v. Court of Appeals, G.R. No. 151981, 1 December 2003.
13
423 Phil. 1020, 1032 [2001], citing Tiu v. NLRC, 324 Phil. 202 [1996].
14
Superseded Rule VIII-A, Book III of the Rules Implementing the Labor Code.
15
Rollo, pp. 266-271.
16
Id., pp. 61, 92.
17
Id., p. 93.
18
Id., pp. 277-278.
19
Id., pp. 102-113.
20
San Miguel Corporation v. MAERC Integrated Services, Inc., G.R. No. 144672, 10 July 2003.
21
Sy v. Court of Appeals, G.R. No. 142293, 27 February 2003.
22
Magsalin v. National Organization of Working Men, G.R. No. 148492, 9 May 2003.
23
Rollo, pp. 183-184, 37-38.
24
Solidbank Corporation (now Metrobank) v. Court of Appeals, G.R. No. 151026, 25 August 2003.
25
De Leon v. NLRC, G.R. No. 112661, 30 May 2001, 358 SCRA 274, 283.
26
PSBA-Manila v. NLRC, 329 Phil. 932, 940 [1996].
27
National Bookstore, Inc. v. Court of Appeals, G.R. No. 146741, 27 February 2002, 378 SCRA 194, 204.

Page 76 of 191

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149011
June 28, 2005
SAN MIGUEL CORPORATION, petitioner
vs.
PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M. ADLA-ON, ALVIN C. ALCALDE, CELANIO D.
ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA, JOEL D. BALATERIA,
JOSEPH D. BALATERIA, JOSE JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO, SONNY V.
BERONDO, CHRISTOPHER D. BRIONES, MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE CABALIDA,
DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD, RENANTE S. CAHINOD, RUDERICK R. CALIXTON, RONILO
C. CALVEZ, PANCHO CAETE, JUNNY CASTEL, JUDY S. CELESTE, ROMEO CHUA, DANILO COBRA,
ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN D. DELFIN, RENELITO P. DEON, ARNEL C. DE PEDRO,
ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A. DESPI, ROLANDO L. DINGLE,
ANTONIO D. DOLORFINO, LARRY DUMA-OP, NOEL DUMOL, CHITO L. DUNGOG, RODERICK C. DUQUEZA,
ROMMEL ESTREBOR, RIC E. GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ,
ROBERTLY Y. HOFILEA, ROBERTO HOFILEA, VICENTE INDENCIO, JONATHAN T. INVENTOR, PETER PAUL
T. INVENTOR, JOEBERT G. LAGARTO, RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES,
LEONARD LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO E. MARTIL, HERNANDO
MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM P. NAVARRO, WILSON P. NAVARRO,
LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C. PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY
PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA, EDWIN G. RIBON, RAUL A. RUBIO,
HENRY S. SAMILLANO, EDGAR SANTIAGO, ROLAND B. SANTILLANA, ROLDAN V. SAYAM, JOSEPH S.
SAYSON, RENE SUARNABA, ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE, WINIFREDO TALITE,
CAMILO N. TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA, TRISTAN A. TINGSON, ROGELIO TOMESA,
DIONISE A. TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E. VISTA, JOAN C. VIYO and JOSE JOFER
C. VIYO and the COURT OF APPEALS, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and Visayas Area Manager for
Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi-Purpose Cooperative (Sunflower), represented by
the Chairman of its Board of Directors Roy G. Asong, entered into a one-year Contract of Services 1 commencing on
January 1, 1993, to be renewed on a month to month basis until terminated by either party. The pertinent provisions of
the contract read:
1. The cooperative agrees and undertakes to perform and/or provide for the company, on a non-exclusive
basis for a period of one year the following services for the Bacolod Shrimp Processing Plant:
A. Messengerial/Janitorial
B. Shrimp Harvesting/Receiving
C. Sanitation/Washing/Cold Storage2
2. To carry out the undertaking specified in the immediately preceding paragraph, the cooperative shall
employ the necessary personnel and provide adequate equipment, materials, tools and apparatus, to
efficiently, fully and speedily accomplish the work and services undertaken by the cooperative. xxx
3. In consideration of the above undertaking the company expressly agrees to pay the cooperative the
following rates per activity:
A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred Pesos
Only (P19,500.00)
B. Harvesting/Shrimp Receiving. Piece rate of P0.34/kg. Or P100.00 minimum per person/activity
whichever is higher, with provisions as follows:
P25.00 Fixed Fee per person
Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal.
This will be pre-set every harvest based on harvest plan approved by the Senior Buyer.
C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.
One-half of the payment for all services rendered shall be payable on the fifteenth and the other half,
on the end of each month. The cooperative shall pay taxes, fees, dues and other impositions that
shall become due as a result of this contract.
The cooperative shall have the entire charge, control and supervision of the work and services herein
agreed upon. xxx
4. There is no employer-employee relationship between the company and the cooperative, or the cooperative
and any of its members, or the company and any members of the cooperative. The cooperative is an
association of self-employed members, an independent contractor, and an entrepreneur. It is subject to the
control and direction of the company only as to the result to be accomplished by the work or services herein
specified, and not as to the work herein contracted. The cooperative and its members recognize that it is
taking a business risk in accepting a fixed service fee to provide the services contracted for and its realization
of profit or loss from its undertaking, in relation to all its other undertakings, will depend on how efficiently it
deploys and fields its members and how they perform the work and manage its operations.

Page 77 of 191

5. The cooperative shall, whenever possible, maintain and keep under its control the premises where the work
under this contract shall be performed.
6. The cooperative shall have exclusive discretion in the selection, engagement and discharge of its memberworkers or otherwise in the direction and control thereof. The determination of the wages, salaries and
compensation of the member-workers of the cooperative shall be within its full control. It is further understood
that the cooperative is an independent contractor, and as such, the cooperative agrees to comply with all the
requirements of all pertinent laws and ordinances, rules and regulations. Although it is understood and agreed
between the parties hereto that the cooperative, in the performance of its obligations, is subject to the control
or direction of the company merely as a (sic) result to be accomplished by the work or services herein
specified, and not as to the means and methods of accomplishing such result, the cooperative hereby
warrants that it will perform such work or services in such manner as will be consistent with the achievement
of the result herein contracted for.
xxx
8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as all benefits,
premiums and protection in accordance with the provisions of the labor code, cooperative code and other
applicable laws and decrees and the rules and regulations promulgated by competent authorities, assuming
all responsibility therefor.
The cooperative further undertakes to submit to the company within the first ten (10) days of every month, a
statement made, signed and sworn to by its duly authorized representative before a notary public or other
officer authorized by law to administer oaths, to the effect that the cooperative has paid all wages or salaries
due to its employees or personnel for services rendered by them during the month immediately preceding,
including overtime, if any, and that such payments were all in accordance with the requirements of law.
xxx
12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a period of one
(1) year commencing on January 1, 1993. Thereafter, this Contract will be deemed renewed on a month-tomonth basis until terminated by either party by sending a written notice to the other at least thirty (30) days
prior to the intended date of termination.
xxx3 (Underscoring supplied)
Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMCs Bacolod
Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract was deemed renewed by the parties every month after
its expiration on January 1, 1994 and private respondents continued to perform their tasks until September 11, 1995.
In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI, Bacolod City,
praying to be declared as regular employees of SMC, with claims for recovery of all benefits and privileges enjoyed by
SMC rank and file employees.
Private respondents subsequently filed on September 25, 1995 an Amended Complaint 4 to include illegal dismissal as
additional cause of action following SMCs closure of its Bacolod Shrimp Processing Plant on September 15,
19955 which resulted in the termination of their services.
SMC filed a Motion for Leave to File Attached Third Party Complaint 6 dated November 27, 1995 to implead Sunflower
as Third Party Defendant which was, by Order7 of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon.
In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the Department of
Labor and Employment (DOLE) a Notice of Closure 8 of its aquaculture operations effective on even date, citing
serious business losses.
By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents complaint for lack of merit,
ratiocinating as follows:
We sustain the stand of the respondent SMC that it could properly exercise its management prerogative to contract
out the preparation and processing aspects of its aquaculture operations. Judicial notice has already been taken
regarding the general practice adopted in government and private institutions and industries of hiring independent
contractors to perform special services. xxx
xxx
Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code under specific conditions
and we do not see how this activity could not be legally undertaken by an independent service cooperative like the
third-party respondent herein.
There is no basis to the demand for regularization simply on the theory that complainants performed activities which
are necessary and desirable in the business of respondent. It has been held that the definition of regular employees
as those who perform activities which are necessary and desirable for the business of the employer is not always
determinative because any agreement may provide for one (1) party to render services for and in behalf of another for
a consideration even without being hired as an employee.
The charge of the complainants that third-party respondent is a mere labor-only contractor is a sweeping
generalization and completely unsubstantiated. xxx In the absence of clear and convincing evidence showing that
third-party respondent acted merely as a labor only contractor, we are firmly convinced of the legitimacy and the
integrity of its service contract with respondent SMC.
In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management decision purely dictated by
economic factors which was (sic) mainly serious business losses. The law recognizes the right of the employer to
close his business or cease his operations for bonafide reasons, as much as it recognizes the right of the employer to
terminate the employment of any employee due to closure or cessation of business operations, unless the closing is
for the purpose of circumventing the provisions of the law on security of tenure. The decision of respondent SMC to

Page 78 of 191

close its Bacolod Shrimp Processing Plant, due to serious business losses which has (sic) clearly been established, is
a management prerogative which could hardly be interfered with.
xxx The closure did affect the regular employees and workers of the Bacolod Processing Plant, who were accordingly
terminated following the legal requisites prescribed by law. The closure, however, in so far as the complainants are
concerned, resulted in the termination of SMCs service contract with their cooperative xxx9(Underscoring supplied)
Private respondents appealed to the NLRC.
By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding that third party
respondent Sunflower was an independent contractor in light of its observation that "[i]n all the activities of private
respondents, they were under the actual direction, control and supervision of third party respondent Sunflower, as well
as the payment of wages, and power of dismissal." 10
Private respondents Motion for Reconsideration 11 having been denied by the NLRC for lack of merit by Resolution of
September 10, 1999, they filed a petition for certiorari12 before the Court of Appeals (CA).
Before the CA, SMC filed a Motion to Dismiss 13 private respondents petition for non-compliance with the Rules on
Civil Procedure and failure to show grave abuse of discretion on the part of the NLRC.
SMC subsequently filed its Comment14 to the petition on March 30, 2000.
By Decision of February 7, 2001, the appellate court reversed the NLRC decision and accordingly found for private
respondents, disposing as follows:
WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1) REVERSING and
SETTING ASIDE both the 29 December 1998 decision and 10 September 1999 resolution of the National Labor
Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as well as the 23 September
1997 decision of the labor arbiter in RAB Case No. 06-07-10316-95; (2) ORDERING the respondent, San Miguel
Corporation, to GRANT petitioners: (a) separation pay in accordance with the computation given to the regular SMC
employees working at its Bacolod Shrimp Processing Plant with full backwages, inclusive of allowances and other
benefits or their monetary equivalent, from 11 September 1995, the time their actual compensation was withheld from
them, up to the time of the finality of this decision; (b) differentials pays (sic) effective as of and from the time
petitioners acquired regular employment status pursuant to the disquisition mentioned above, and all such other and
further benefits as provided by applicable collective bargaining agreement(s) or other relations, or by law , beginning
such time up to their termination from employment on 11 September 1995; and ORDERING private respondent SMC
to PAY unto the petitioners attorneys fees equivalent to ten (10%) percent of the total award.
No pronouncement as to costs.
SO ORDERED.15 (Underscoring supplied)
Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court reasoned:
Although the terms of the non-exclusive contract of service between SMC and [Sunflower] showed a clear intent to
abstain from establishing an employer-employee relationship between SMC and [Sunflower] or the latters
members, the extent to which the parties successfully realized this intent in the light of the applicable law is the
controlling factor in determining the real and actual relationship between or among the parties.
xxx
With respect to the power to control petitioners conduct, it appears that petitioners were under the direct control and
supervision of SMC supervisors both as to the manner they performed their functions and as to the end results
thereof. It was only after petitioners lodged a complaint to have their status declared as regular employees of SMC
that certain members of [Sunflower] began to countersign petitioners daily time records to make it appear that they
(petitioners) were under the control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx
Even without these instances indicative of control by SMC over the petitioners, it is safe to assume that SMC would
never have allowed the petitioners to work within its premises, using its own facilities, equipment and tools, alongside
SMC employees discharging similar or identical activities unless it exercised a substantial degree of control and
supervision over the petitioners not only as to the manner they performed their functions but also as to the end results
of such functions.
xxx
xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as independent contractors. [Sunflower]
and the petitioners did not have substantial capital or investment in the form of tools, equipment, implements, work
premises, et cetera necessary to actually perform the service under their own account, responsibility, and method. The
only "work premises" maintained by [Sunflower] was a small office within the confines of a small "carinderia" or
refreshment parlor owned by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter (rollo,
pp. 525-525) and, the only assets it provided SMC were the bare bodies of its members, the petitioners herein (rollo,
p. 523).
In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under the control and
supervision of SMC both as to the manner and method in discharging their functions and as to the resultsthereof.
Besides, it should be taken into account that the activities undertaken by the petitioners as cleaners, janitors,
messengers and shrimp harvesters, packers and handlers were directly related to the aquaculture business of
SMC (See Guarin vs. NLRC, 198 SCRA 267, 273). This is confirmed by the renewal of the service contract from
January 1993 to September 1995, a period of close to three (3) years.
Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable workforce and raises the
suspicion that the non-exclusive service contract between SMC and [Sunflower] was "designed to evade the
obligations inherent in an employer-employee relationship" (See Rhone-Poulenc Agrochemicals Philippines, Inc. vs.
NLRC, 217 SCRA 249, 259).

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Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower] and its [Sunflower]
retained counsel are both partners of the local counsel of SMC (rollo, p. 9).
xxx
With these observations, no other logical conclusion can be reached except that [Sunflower] acted as an agent of
SMC, facilitating the manpower requirements of the latter, the real employer of the petitioners. We simply cannot allow
these two entities through the convenience of a non-exclusive service contract to stipulate on the existence of
employer-employee relation. Such existence is a question of law which cannot be made the subject of agreement to
the detriment of the petitioners (Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500).
xxx
There being a finding of "labor-only" contracting, liability must be shouldered either by SMC or [Sunflower] or shared
by both (See Tabas vs. California Manufacturing, Inc. , supra, p. 502). SMC however should be held solelyliable for
[Sunflower] became non-existent with the closure of the aquaculture business of SMC.
Furthermore, since the closure of the aquaculture operations of SMC appears to be valid, reinstatement is no longer
feasible. Consistent with the pronouncement in Bustamante, et al., vs. NLRC, G.R. No. 111651, 28 November 1996,
petitioners are thus entitled to separation pay (in the computation similar to those given to regular SMC employees at
its Bacolod Shrimp Processing Plant) "with full backwages, inclusive of allowances and other benefits or their
monetary equivalent, from the time their actual compensation was withheld from them" up to the time of the finality of
this decision. This is without prejudice to differentials pays (sic) effective as of and from the time petitioners acquired
regular employment status pursuant to the discussion mentioned above, and all such other and further benefits as
provided by applicable collective bargaining agreement(s) or other relations, or by law, beginning such time up to their
termination from employment on 11 September 1995. 16 (Emphasis and underscoring supplied)
SMCs Motion for Reconsideration17 having been denied for lack of merit by Resolution of July 11, 2001, it comes
before this Court via the present petition for review on certiorari assigning to the CA the following errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING RESPONDENTS
PATENTLY DEFECTIVE PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS
COMPLAINANTS IN THE CASE BEFORE THE LABOR ARBITER. IN DOING SO, THE COURT OF APPEALS
DECIDED THIS CASE IN A MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF
THE SUPREME COURT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF SMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT ENTITLED
TO ANY RELIEF. THE CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS
BUSINESS LOSSES.18 (Underscoring supplied)
SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari as only three out of the
ninety seven named petitioners signed the verification and certification against forum-shopping.
While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in
a case and the signature of only one of them is insufficient, 19 this Court has stressed that the rules on forum shopping,
which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such
absolute literalness as to subvert its own ultimate and legitimate objective. 20 Strict compliance with the provisions
regarding the certificate of non-forum shopping merely underscores its mandatory nature in that the certification
cannot be altogether dispensed with or its requirements completely disregarded. 21 It does not, however, thereby
interdict substantial compliance with its provisions under justifiable circumstances. 22
Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners
Association,23 this Court held:
Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as a group, represented by
their homeowners association president who was likewise one of the plaintiffs, Mr. Samaon M. Buat.Respondents
raised one cause of action which was the breach of contractual obligations and payment of damages. They shared a
common interest in the subject matter of the case, being the aggrieved residents of the poorly constructed and
developed Emily Homes Subdivision. Due to the collective nature of the case, there was no doubt that Mr. Samaon M.
Buat could validly sign the certificate of non-forum shopping in behalf of all his co-plaintiffs. In cases therefore where it
is highly impractical to require all the plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order not
to defeat the ends of justice, for one of the plaintiffs, acting as representative, to sign the certificate provided that xxx
the plaintiffs share a common interest in the subject matter of the case or filed the case as a "collective,"
raising only one common cause of action or defense.24 (Emphasis and underscoring supplied)
Given the collective nature of the petition filed before the appellate court by herein private respondents, raising one
common cause of action against SMC, the execution by private respondents Winifredo Talite, Renelito Deon and Jose
Temporosa in behalf of all the other private respondents of the certificate of non-forum shopping constitutes
substantial compliance with the Rules. 25 That the three indeed represented their co-petitioners before the appellate
court is, as it correctly found, "subsequently proven to be true as shown by the signatures of the majority of the
petitioners appearing in their memorandum filed before Us." 26

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Additionally, the merits of the substantive aspects of the case may also be deemed as "special circumstance" or
"compelling reason" to take cognizance of a petition although the certification against forum shopping was not
executed and signed by all of the petitioners.27
SMC goes on to argue that the petition filed before the CA is fatally defective as it was not accompanied by "copies of
all pleadings and documents relevant and pertinent thereto" in contravention of Section 1, Rule 65 of the Rules of
Court.28
This Court is not persuaded. The records show that private respondents appended the following documents to their
petition before the appellate court: the September 23, 1997 Decision of the Labor Arbiter,29 their Notice of Appeal with
Appeal Memorandum dated October 16, 1997 filed before the NLRC, 30 the December 29, 1998 NLRCD E C I S I O
N,31 their Motion for Reconsideration dated March 26, 1999 filed with the NLRC 32 and the September 10,
1999 NLRC Resolution.33
It bears stressing at any rate that it is the appellate court which ultimately determines if the supporting documents are
sufficient to make out a prima facie case.34 It discerns whether on the basis of what have been submitted it could
already judiciously determine the merits of the petition. 35 In the case at bar, the CA found that the petition was
adequately supported by relevant and pertinent documents.
At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a certificate of nonforum shopping in the following cases: (1) where a rigid application will result in manifest failure or miscarriage of
justice; (2) where the interest of substantial justice will be served; (3) where the resolution of the motion is addressed
solely to the sound and judicious discretion of the court; and (4) where the injustice to the adverse party is not
commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed. 36
Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice. Their strict
and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice,
must always be eschewed.37
SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions of the labor arbiter and
the NLRC as "findings of facts of quasi-judicial bodies like the NLRC are accorded great respect and finality," and that
this principle acquires greater weight and application in the case at bar as the labor arbiter and the NLRC have the
same factual findings.
The general rule, no doubt, is that findings of facts of an administrative agency which has acquired expertise in the
particular field of its endeavor are accorded great weight on appeal. 38 The rule is not absolute and admits of certain
well-recognized exceptions, however. Thus, when the findings of fact of the labor arbiter and the NLRC are not
supported by substantial evidence or their judgment was based on a misapprehension of facts, the appellate court
may make an independent evaluation of the facts of the case. 39
SMC further faults the appellate court in giving due course to private respondents petition despite the fact that the
complaint filed before the labor arbiter was signed and verified only by private respondent Winifredo Talite; that private
respondents position paper40 was verified by only six41 out of the ninety seven complainants; and that their JointAffidavit42 was executed only by twelve43 of the complainants.
Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it should not have been
considered by the appellate court in establishing the claims of those who did not sign the same, citing this Courts
ruling in Southern Cotabato Development and Construction, Inc. v. NLRC.44
SMCs position does not lie.
A perusal of the complaint shows that the ninety seven complainants were being represented by their counsel of
choice. Thus the first sentence of their complaint alleges: "xxx complainants, by counsel and unto this Honorable
Office respectfully state xxx." And the complaint was signed by Atty. Jose Max S. Ortiz as "counsel for the
complainants." Following Section 6, Rule III of the 1990 Rules of Procedure of the NLRC, now Section 7, Rule III of
the 1999 NLRC Rules, Atty. Ortiz is presumed to be properly authorized by private respondents in filing the complaint.
That the verification wherein it is manifested that private respondent Talite was one of the complainants and was
causing the preparation of the complaint "with the authority of my co-complainants" indubitably shows that Talite was
representing the rest of his co-complainants in signing the verification in accordance with Section 7, Rule III of the
1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules, which states:
Section 7. Authority to bind party. Attorneys and other representatives of parties shall have authority to bind their
clients in all matters of procedure; but they cannot, without a special power of attorney or express consent, enter into a
compromise agreement with the opposing party in full or partial discharge of a clients claim. (Underscoring supplied)
As regards private respondents position paper which bore the signatures of only six of them, appended to it was an
Authority/Confirmation of Authority45 signed by the ninety one others conferring authority to their counsel "to file RAB
Case No. 06-07-10316-95, entitled Winifredo Talite et al. v. San Miguel Corporation presently pending before the sala
of Labor Arbiter Ray Alan Drilon at the NLRC Regional Arbitration Branch No. VI in Bacolod City" and appointing him
as their retained counsel to represent them in the said case.
That there has been substantial compliance with the requirement on verification of position papers under Section 3,
Rule V of the 1990 NLRC Rules of Procedure 46 is not difficult to appreciate in light of the provision of Section 7, Rule V
of the 1990 NLRC Rules, now Section 9, Rule V of the 1999 NLRC Rules which reads:
Section 7. Nature of Proceedings. The proceedings before a Labor Arbiter shall be non-litigious in nature. Subject to
the requirements of due process, the technicalities of law and procedure and the rules obtaining in the courts of law
shall not strictly apply thereto. The Labor Arbiter may avail himself of all reasonable means to ascertain the facts of the
controversy speedily, including ocular inspection and examination of well-informed persons. (underscoring supplied)
As regards private respondents Joint-Affidavit which is being assailed in view of the failure of some complainants to
affix their signatures thereon, this Court quotes with approval the appellate courts ratiocinations:

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A perusal of the Southern Cotabato Development Case would reveal that movant did not quote the whole text of
paragraph 5 on page 865 of 280 SCRA. The whole paragraph reads:
"Clearly then, as to those who opted to move for the dismissal of their complaints, or did not submit their affidavits nor
appear during trial and in whose favor no other independent evidence was adduced, no award for back wages could
have been validly and properly made for want of factual basis. There is no showing at all that any of the affidavits of
the thirty-four (34) complainants were offered as evidence for those who did not submit their affidavits, or that such
affidavits had any bearing at all on the rights and interest of the latter. In the same vein, private respondents position
paper was not of any help to these delinquent complainants.
The implication is that as long as the affidavits of the complainants were offered as evidence for those who did
not submit theirs, or the affidavits were material and relevant to the rights and interest of the latter, such
affidavits may be sufficient to establish the claims of those who did not give their affidavits.
Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97) complainants (petitioners herein)
would readily reveal that the affidavit was offered as evidence not only for the signatories therein but for all of the
complainants. (These ninety-seven (97) individuals were previously identified during the mandatory conference as the
only complainants in the proceedings before the labor arbiter) Moreover, the affidavit touched on the common interest
of all of the complainants as it supported their claim of the existence of an employer-employee relationship between
them and respondent SMC. Thus, the said affidavit was enough to prove the claims of the rest of the
complainants.47 (Emphasis supplied, underscoring in the original)
In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity do not control
proceedings before the Labor Arbiter. So Article 221 of the Labor Code enjoins:
ART. 221. Technical rules not binding and prior resort to amicable settlement. In any proceeding before the
Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be
controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters
shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of due process. xxx
As such, their application may be relaxed to serve the demands of substantial justice. 48
On the merits, the petition just the same fails.
SMC insists that private respondents are the employees of Sunflower, an independent contractor. On the other hand,
private respondents assert that Sunflower is a labor-only contractor.
Article 106 of the Labor Code provides:
ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any shall be paid
in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the
rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18,
distinguishes between legitimate and labor-only contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or service between the principal and the contractor
or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there
are three parties involved in these arrangements, the principal which decides to farm out a job or service to a
contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the
performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to
accomplish the job, work or service.
Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby declared prohibited. For
this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements
are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal, or
ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.

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The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as
amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching
that end.
The test to determine the existence of independent contractorship is whether one claiming to be an independent
contractor has contracted to do the work according to his own methods and without being subject to the
control of the employer, except only as to the results of the work.49
In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure
that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job
contractor, only for the payment of the employees wages whenever the contractor fails to pay the same. Other than
that, the principal employer is not responsible for any claim made by the employees. 50
In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to
prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by
the principal employer.51
The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an
employer-employee relationship between SMC and private respondents. The language of a contract is not, however,
determinative of the parties relationship; rather it is the totality of the facts and surrounding circumstances of the
case.52 A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its
business, i.e., whether as labor-only contractor or job contractor, it being crucial that its character be measured in
terms of and determined by the criteria set by statute. 53
SMC argues that Sunflower could not have been issued a certificate of registration as a cooperative if it had no
substantial capital.54
While indeed Sunflower was issued Certificate of Registration No. IL0-875 55 on February 10, 1992 by the Cooperative
Development Authority, this merely shows that it had at least P2,000.00 in paid-up share capital as mandated by
Section 5 of Article 1456 of Republic Act No. 6938, otherwise known as the Cooperative Code, which amount cannot be
considered substantial capitalization.
What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises and other materials to qualify it as an independent contractor.
On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized by private
respondents in carrying out their tasks were owned and provided by SMC. Consider the following uncontroverted
allegations of private respondents in the Joint Affidavit:
[Sunflower], during the existence of its service contract with respondent SMC, did not own a single machinery,
equipment, or working tool used in the processing plant. Everything was owned and provided by respondent SMC.
The lot, the building, and working facilities are owned by respondent SMC. The machineries and equipments (sic) like
washer machine, oven or cooking machine, sizer machine, freezer, storage, and chilling tanks, push carts, hydrolic
(sic) jack, tables, and chairs were all owned by respondent SMC. All the boxes, trays, molding pan used in the
processing are also owned by respondent SMC. The gloves and boots used by the complainants were also owned by
respondent SMC. Even the mops, electric floor cleaners, brush, hoose (sic), soaps, floor waxes, chlorine, liquid stain
removers, lysol and the like used by the complainants assigned as cleaners were all owned and provided by
respondent SMC.
Simply stated, third-party respondent did not own even a small capital in the form of tools, machineries, or facilities
used in said prawn processing
xxx
The alleged office of [Sunflower] is found within the confines of a small "carinderia" or "refreshment" (sic) owned by
the mother of the Cooperative Chairman Roy Asong.
xxx In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter. 57
And from the job description provided by SMC itself, the work assigned to private respondents was directly relatedto
the aquaculture operations of SMC. Undoubtedly, the nature of the work performed by private respondents in shrimp
harvesting, receiving and packing formed an integral part of the shrimp processing operations of SMC. As for janitorial
and messengerial services, that they are considered directly related to the principal business of the employer 58 has
been jurisprudentially recognized.
Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract
according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role
having been merely to recruit persons to work for SMC.
Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that their daily time
records were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison
Arguello, and Stephen Palabrica, which fact shows that SMC exercised the power of control and supervision over its
employees.59 And control of the premises in which private respondents worked was by SMC. These tend to disprove
the independence of the contractor.60

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More. Private respondents had been working in the aqua processing plant inside the SMC compound alongside
regular SMC shrimp processing workers performing identical jobs under the same SMC supervisors. 61 This
circumstance is another indicium of the existence of a labor-only contractorship. 62
And as private respondents alleged in their Joint Affidavit which did not escape the observation of the CA, no showing
to the contrary having been proffered by SMC, Sunflower did not cater to clients other than SMC, 63 and with the
closure of SMCs Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. This Courts ruling in San
Miguel Corporation v. MAERC Integrated Services, Inc.64 is thus instructive.
xxx Nor do we believe MAERC to have an independent business. Not only was it set up to specifically meet the
pressing needs of SMC which was then having labor problems in its segregation division, none of its workers was also
ever assigned to any other establishment, thus convincing us that it was created solely to service the needs of SMC.
Naturally, with the severance of relationship between MAERC and SMC followed MAERCs cessation of operations,
the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the workers. 65(Underscoring
supplied)
All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee
relationship between SMC and private respondents.
Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in
the aquaculture business of SMC, they should be deemed regular employees of the latter 66 and as such are entitled to
all the benefits and rights appurtenant to regular employment. 67 They should thus be awarded differential pay
corresponding to the difference between the wages and benefits given them and those accorded SMCs other regular
employees.1awphi1.zw+
Respecting the private respondents who were tasked with janitorial and messengerial duties, this Court quotes with
approval the appellate courts ruling thereon:
Those performing janitorial and messengerial services however acquired regular status only after rendering one-year
service pursuant to Article 280 of the Labor Code. Although janitorial and messengerial services are considered
directly related to the aquaculture business of SMC, they are deemed unnecessary in the conduct of its principal
business; hence, the distinction (See Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137 and Philippine
Bank of Communications v. NLRC, supra, p. 359).68
The law of course provides for two kinds of regular employees, namely: (1) those who are engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who
have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are
employed.69
As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second
category and are thus entitled to differential pay and benefits extended to other SMC regular employees from the day
immediately following their first year of service.70
Regarding the closure of SMCs aquaculture operations and the consequent termination of private respondents, Article
283 of the Labor Code provides:
ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the
installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment
or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one
(1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year. (Underscoring supplied)
In the case at bar, a particular department under the SMC group of companies was closed allegedly due to serious
business reverses. This constitutes retrenchment by, and not closure of, the enterprise or the company itself as SMC
has not totally ceased operations but is still very much an on-going and highly viable business concern. 71
Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject
to faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence. 72
For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected
should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably
imminent such as can be perceived objectively and in good faith by the employer; (c) the retrenchment must be
reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already
incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing
evidence.73
In the discharge of these requirements, it is the employer who has the onus, being in the nature of an affirmative
defense.74
Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit
and loss statements and annual income tax returns. The financial statements must be prepared and signed by
independent auditors failing which they can be assailed as self-serving documents. 75
In the case at bar, company losses were duly established by financial documents audited by Joaquin Cunanan & Co.
showing that the aquaculture operations of SMCs Agribusiness Division accumulated losses amounting
toP145,848,172.00 in 1992 resulting in the closure of its Calatrava Aquaculture Center in Negros

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Occidental,P11,393,071.00 in 1993 and P80,325,608.00 in 1994 which led to the closure of its San Fernando Shrimp
Processing Plant in Pampanga and the Bacolod Shrimp Processing Plant in 1995.
SMC has thus proven substantial business reverses justifying retrenchment of its employees.
For termination due to retrenchment to be valid, however, the law requires that written notices of the intended
retrenchment be served by the employer on the worker and on the DOLE at least one (1) month before the actual date
of the retrenchment,76 in order to give employees some time to prepare for the eventual loss of their jobs, as well as to
give DOLE the opportunity to ascertain the verity of the alleged cause of termination. 77
Private respondents, however, were merely verbally informed on September 10, 1995 by SMC Prawn Manager
Ponciano Capay that effective the following day or on September 11, 1995, they were no longer to report for work as
SMC would be closing its operations.78
Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to
comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the
employers exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article
282 with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as
the dismissal process was, in effect, initiated by an act imputable to the employee. 79
In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each private respondent as
nominal damages.
The grant of separation pay as an incidence of termination of employment due to retrenchment to prevent losses is a
statutory obligation on the part of the employer and a demandable right on the part of the employee. Private
respondents should thus be awarded separation pay equivalent to at least one (1) month pay or to at least one-half
month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the
separation pay awarded by SMC to other regular SMC employees that were terminated as a result of the
retrenchment, depending on which is most beneficial to private respondents.
Considering that private respondents were not illegally dismissed, however, no backwages need be awarded. It is well
settled that backwages may be granted only when there is a finding of illegal dismissal. 80 The appellate court thus
erred in awarding backwages to private respondents upon the authority of Bustamante v. NLRC,81 what was involved
in that case being one of illegal dismissal.
With respect to attorneys fees, in actions for recovery of wages or where an employee was forced to litigate and thus
incurred expenses to protect his rights and interests, 82 a maximum of ten percent (10%) of the total monetary
award83 by way of attorneys fees is justifiable under Article 111 of the Labor Code, 84 Section 8, Rule VIII, Book III of its
Implementing Rules,85 and paragraph 7, Article 2208 of the Civil Code. 86 Although an express finding of facts and law
is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously
or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not paid
accordingly, as in this case.87
Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to Rule VIII-A,
Section 1988 of the Omnibus Rules Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all
the rightful claims of private respondents.
WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and Resolution dated July 11,
2001 of the Court of Appeals are AFFIRMED with MODIFICATION.
Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are hereby ORDERED to jointly and
severally pay each private respondent differential pay from the time they became regular employees up to the date of
their termination; separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every
year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by
SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is
most beneficial to private respondents; and ten percent (10%) attorneys fees based on the herein modified award.
Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the amount of P50,000.00,
representing nominal damages for non-compliance with statutory due process.
The award of backwages is DELETED.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.
Footnotes
1
Rollo at 278-286.
2
Annexed to the Service Contract is a detailed listing of the scope of the services to be provided to SMC:
A. Shrimp Receiving/Harvesting
- Assist in the crushing and loading of ice;
- Receive the raw materials and put them into the chilling tanks;
- Sort the shrimp according to standard quality specifications;
- Pack the raw materials into styropor boxes/containers and assist on the delivery of the
harvested raw materials to the processing plant;
- Prepare harvest materials and equipment and clean them after use and
- Perform other duties that the company may assign from time to time.
B. Janitorial and Messengerial Services
1. Maintain, sanitize and clean the following:
- Streets cemented and otherwise

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- Canals and floor area

- Administration building offices and comfort rooms
- Logistics/materials/warehouse building
- Clinic and comfort room
- Plant grounds/lawn
2. Maintain and Water the plants and trees
3. Haul and dispose garbage daily from designated waste containers within the compound to
an area outside and far from the compound.
4. Perform messengerial activities within Bacolod City and other duties that may be assigned
during office hours.
C. Sanitation/Washing Services
1. Wash and sanitize boxes, chilling tanks, trays and other harvesting materials.
2. Store harvesting materials in the designated area after washing.
3. Load and unload boxes, trays, chilling tanks and other harvesting materials to be used
during harvest schedule.
3
Rollo at 279-283.
4
Id. at 114-117.
5
Id. at 502.
6
Id. at 118-120.
7
Id. at 121.
8
Id. at 340.
9
Id. at 504-507.
10
Id. at 553-557.
11
Id. at 559-563.
12
Id. at 574-587.
13
CA Rollo at 74-82.
14
Id. at 108-142.
15
Rollo at 22.
16
Id. at 15-21-a.
17
Id. at 623-637.
18
Id. at 57-58.
19
Docena v. Lapesura, 355 SCRA 658, 667 (2001).
20
Cavile v. Heirs of Clarita Cavile, 400 SCRA 255, 261-262 (2003) (citations omitted).
21
HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners Association, 411
SCRA 504, 508 (2003).
22
Cavile v. Heirs of Clarita Cavile, 400 SCRA 255, 262 (2003) (citation omitted).
23
411 SCRA 504 (2003).
24
Id. at 509-510.
25
Vide: Cavile v. Heirs of Clarita Cavile, 400 SCRA 255 (2003) where this Court found:
We find that the execution by Thomas George Cavile, Sr. in behalf of all the other petitioners of the
certificate of non-forum shopping constitutes substantial compliance with the Rules. All the petitioners,
being relatives and co-owners of the properties in dispute, share a common interest thereon. They
also share a common defense in the complaint for partition filed by the respondents. Thus, when they
filed the instant petition, they filed it as a collective, raising only one argument to defend their rights
over the properties in question. There is sufficient basis, therefore, for Thomas George Cavili, Sr. to
speak for and in behalf of his co-petitioners that they have not filed any action or claim involving the
same issues in another court or tribunal, nor is there other pending action or claim in another court or
tribunal involving the same issues.
26
Rollo at 28.
27
Torres v. Specialized Packaging Development Corporation, 433 SCRA 455, 467 (2004), Cavile v. Heirs of
Clarita Cavile, 400 SCRA 255, 262 (2003) (citation omitted).
28
SECTION 1. Petition for Certiorari. When any tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting
to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such
tribunal, board or officer, and granting such incidental reliefs as law and justice may require.
The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject
thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn
certification of non-forum shopping as provided in the third paragraph of section 3, Rule 46.
29
CA Rollo at 16-31.
30
Id. at 33-47.
31
Id. at 48-61.
32
Id. at 63-67.
33
Id. at 68-69.
34
Atillo v. Bombay, 351 SCRA 361, 369 (2001).

Page 86 of 191

35

Ibid.
Manila Hotel Corporation v. Court of Appeals, 384 SCRA 520, 524 (2002) (citation omitted).
37
Serrano v. Galant Maritime Services, Inc., 408 SCRA 523, 528 (2003) (citations omitted).
38
Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, 272 SCRA 267, 276 (1997), Trendline Employees
Association-Southern Philippines Federation of Labor v. NLRC, 272 SCRA 172, 179 (1997) (citation omitted).
39
EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 515-516 (2004) (citations omitted), Villar v. NLRC,
331 SCRA 686, 692 (2000) (citation omitted).
40
Rollo at 124-136.
41
Winifredo Talite, Camilo Temporosa, Arnel De Pedro, Jonathan Inventor, Ramie Despi and Roderick
Duquesa.
42
Rollo at 483-489.
43
Winifredo Talite, Jerry Talite, Clifford Despi, Joey de la Cruz, Jonathan Inventor, Ramie Despi, Arnel De
Pedro, Leonardo Lemoncito, Camilo Temporosa, Renelito Deon, Jose Temporosa and Victor Despi.
44
280 SCRA 853 (1997).
45
Rollo at 133-135.
46
Section 3. Submission of Position Papers/Memorandum. Should the parties fail to agree upon an
amicable settlement, either in whole or in part, during the conferences, the Labor Arbiter shall issue an order
stating therein the matters taken up and agreed upon during the conferences and directing the parties to
simultaneously file their respective verified position papers.
These verified position papers shall cover only those claims and causes of action raised in the
complaint excluding those that may have been amicably settled, and shall be accompanied by all
supporting documents including the affidavits of their respective witnesses which shall take the place
of the latters direct testimony. The parties shall thereafter not be allowed to allege facts, or present
evidence to prove facts, not referred to and any cause or causes of action not included in the
complaint or position papers, affidavits and other documents. Unless otherwise requested in writing by
both parties, the Labor Arbiter shall direct both parties to submit simultaneously their position
papers/memorandum with the supporting documents and affidavits within fifteen (15) calendar days
from the date of the last conference, with proof of having furnished each other with copies thereof.
47
Rollo at 26.
48
Havtor Management Phils., Inc. v. NLRC, 372 SCRA 271, 274 (2001) (citation omitted), Samahan ng
Manggagawa sa Moldex Products, Inc. v. NLRC, 324 SCRA 237, 252 (2000) (citation omitted).
49
New Golden City Builders & Development Corporation v. Court of Appeals, 418 SCRA 411, 417
(2003),Vinoya v. NLRC, 324 SCRA 469, 487 (2000) (citation omitted), Philippine Airlines, Inc. v. NLRC, 298
SCRA 430, 444 (1998) (citation omitted).
50
New Golden City Builders & Development Corporation v. Court of Appeals, 418 SCRA 411, 419 (2003)
(citation omitted), San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579, 596 (2003)
(citation omitted).
51
Manila Water Company, Inc. v. Pea, 434 SCRA 53, 61 (2004) (citation omitted), San Miguel
Corporationv. MAERC Integrated Services, Inc., 405 SCRA 579, 596 (2003), Philippine Airlines, Inc. v. NLRC,
298 SCRA 430, 447 (1998) (citation omitted), Ponce v. NLRC, 293 SCRA 366, 375-376, (1998) (citations
omitted), Tiuv. NLRC, 254 SCRA 1, 9 (1996) (citations omitted), Ecal v. NLRC, 195 SCRA 224, 231 (1991)
(citation omitted), Philippine Bank of Communications v. NLRC, 146 SCRA 347, 356 (1986).
52
San Miguel Corporation v. MAERC Integrated Services, Inc, 405 SCRA 579, 589 (2003) (citation
omitted),Bernardo v. NLRC, 310 SCRA 186, 205 (1999) (citation omitted).
53
De los Santos v. NLRC, 372 SCRA 723, 734 (2001).
54
Rollo at 76.
55
Id. at 287.
56
(5) No cooperative shall be registered unless the articles of cooperation is accompanied with the bonds of
the accountable officers and a sworn statement of the treasurer elected by the subscribers showing that at
least twenty-five per centum (25%) of the authorized share capital has been subscribed and at least twentyfive per centum (25%) of the total subscription has been paid: Provided, That in no case shall the paid-up
share capital shall be less than Two thousand pesos (P2,000.00).
57
Rollo at 483-486.
58
Coca Cola Bottlers Phils, Inc. v. NLRC, 307 SCRA 131, 137 (1999) (citation omitted), Neri v. NLRC, 224
SCRA 717, 722 (1993) (citation omitted), Guarin v. NLRC, 178 SCRA 267, 273 (1989) (citation omitted).
59
De los Santos v. NLRC, 372 SCRA 723, 732 (2001).
60
San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579, 590 (2003) (citation omitted).
61
Rollo at 485.
62
Vide: Philippine Bank of Communications v. NLRC (146 SCRA 347, 354) where this Court found:
Turning to the power to control Orpiadas conduct, it should be noted immediately that Orpiada
performed his functions within the banks premises, and not within the office premises of CESI. As
such, Orpiada must have been subject to at least the same control and supervision that the bank
exercises over any other person physically within its premises and rendering services to or for the
bank, in other words, any employee or staff member of the bank. It seems unreasonable to suppose
that the bank would have allowed Orpiada and the other persons assigned to the bank by CESI to
36

Page 87 of 191

remain within the banks premises and there render services to the bank, without subjecting them to a
substantial measure of control and supervision xxx
63
Vide: Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 140 (1999).
64
405 SCRA 579 (2003).
65
Id. at 595-596.
66
Manila Water Company, Inc. v. Pena, 434 SCRA 53, 62 (2004).
67
Ecal v. NLRC, 195 SCRA 224, 234 (1991) (citations omitted).
68
Rollo at 21.
69
Kimberly Independent Union v. Drilon, 185 SCRA 190, 203 (1990).
70
Id. at 205.
71
Catatista v. NLRC, 247 SCRA 46, 51 (1995), Construction & Development Corporation of the
Philippinesv. Leogardo, Jr., 125 SCRA 863, 867 (1983).
72
EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 511 (2004) (citation omitted).
73
EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 508 (2004) (citation omitted), Philippine Tobacco
Flue-Curing & Redrying Corporation v. NLRC, 300 SCRA 37, 55-56 (1998) (citation omitted), Somerville
Stainless Steel Corporation v. NLRC, 287 SCRA 420, 430 (1998) (citation omitted), Edge Apparel, Inc., v.
NLRC, 286 SCRA 302, 313 (1998) (citation omitted), San Miguel Jeepney Service v. NLRC, 265 SCRA 35, 44
(1996) (citation omitted), Catatista v. NLRC, 247 SCRA 46, 52 (1995) (citation omitted).
74
Somerville Stainless Steel Corporation v. NLRC, 287 SCRA 420, 432 (1998) (citation omitted), San Miguel
Jeepney Service v. NLRC, 265 SCRA 35, 45 (1996) (citation omitted), Guerrero v. NLRC, 261 SCRA 301, 306
(1996) (citation omitted).
75
Asian Alcohol Corporation v. NLRC, 305 SCRA 417 (1999) (citations omitted).
76
EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 511-512 (2004) (citation omitted), San Miguel
Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579, 596 (2003) (citations
omitted), Guerrero v.NLRC, 261 SCRA 301, 307 (1996).
77
EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 512 (2004) (citation omitted), Sebuguero v.NLRC,
248 SCRA 532, 545 (1995).
78
Rollo at 126.
79
JAKA Food Processing Corporation v. Pacot, G.R. No. 151378, March 28, 2005.
80
J.A.T. General Services v. NLRC, 421 SCRA 78, 91 (2004) (citation omitted).
81
265 SCRA 61, 71 (1996).
82
Manila Water v. Pena, 434 SCRA 53, 64-65 (2004) (citation omitted), Rasonable v. NLRC, 253 SCRA 815,
819 (1996) (citations omitted).
83
Reyes v. Court of Appeals, 409 SCRA 267, 284 (2003) (citations omitted), Marsaman Manning Agency, Inc.
v. NLRC, 313 SCRA 88, 99 (1999).
84
ART. 111. Attorneys fees. (a) In cases of unlawful withholding of wages the culpable party may be
assessed attorneys fees equivalent to ten percent of the amount of wages recovered. (b) It shall be unlawful
for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the
wages, attorneys fees which exceed ten percent of the amount of wages recovered.
85
SEC. 8. Attorneys fees. Attorneys fees in any judicial or administrative proceedings for the recovery of
wages shall not exceed 10% of the amount awarded. The fees may be deducted from the total amount due
the winning party.
86
ART. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs,
cannot be recovered, except: xxx (7) In actions for the recovery of wages of household helpers, laborers and
skilled workers.
87
Reyes v. Court of Appeals, 409 SCRA 267, 283 (2003) (citations omitted).
88
SEC. 19. Solidary Liability. The principal shall be deemed as the direct employer of the contractual
employees and therefore, solidarily liable with the contractor or subcontractor for whatever monetary claims
the contractual employees may have against the former in the case of violations as provided for in Sections 5
(Labor-Only contracting), 6 (Prohibitions), 8 (Rights of Contractual Employees) and 16 (Delisting) of these
Rules. In addition, the principal shall also be solidarily liable in case the contract between the principal and
contractor or subcontractor is preterminated for reasons not attributed to the fault of the contractor or
subcontractor.

Page 88 of 191

THIRD DIVISION
EPARWA SECURITY AND JANITORIAL SERVICES,
INC.,
Petitioner,

- versus -

G.R. No. 150402

Present:
QUISUMBING, J.,
Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

LICEO DE CAGAYAN UNIVERSITY,

Respondent.
Promulgated:
November 28, 2006
x--------------------------------------------------x
DECISION
CARPIO, J.:
The Case
This is a petition for certiorari[1] of the Decision[2] dated 20 April 2001 and the Resolution dated 21 September 2001 of
the Court of Appeals (appellate court) in CA-G.R. SP No. 59120, Liceo de Cagayan University v. The Hon. National
Labor Relations Commission, Fifth Division, Eparwa Security and Janitorial Services, Inc., et al. The appellate court
reinstated the 18 August 1999 decision[3] of the Labor Arbiter and remanded the case to the Regional
Arbitration Board, Branch No. 10 of Cagayan de Oro City to compute what is due to Liceo de Cagayan University
(LDCU) from Eparwa Security and Janitorial Services, Inc. (Eparwa).
The Facts
On 1 December 1997, Eparwa and LDCU, through their representatives, entered into a Contract for Security
Services. The pertinent portion of the contract provides that:
5. For and in consideration of this security, protective and safety services, [LDCU] agrees to pay
[Eparwa] FIVE THOUSAND PESOS ONLY (P5,000.00), Philippine Currency per guard a month
payable within fifteen (15) days after [Eparwa] presents its service invoice. [Eparwa] shall furnish
[LDCU] a monthly copy of SSS contribution of guards and monthly payroll of each guard assigned at
[LDCUs] premises on a monthly basis[.][4]
Eparwa allocated the contracted amount of P5,000 per security guard per month in the following manner:
Basic Pay (P104.50 x 391.5/12)
Night Diff. Pay
13th mo. Pay
5 day incentive leave
Uniform allowance
Employers SSS, Medicare, ECC contribution
Agency share
VAT
CONTRACT RATE
(rounded off to P5,000.00)[5]

P3,409.31
113.64
284.10
43.54
50.00
224.80
420.53
454.59
P5,000.50

On 21 December 1998, 11 security guards (security guards) whom Eparwa assigned to LDCU from 1 December
1997 to 30 November 1998 filed a complaint before the National Labor Relations Commissions (NLRC) Regional
Arbitration Branch No. 10 in Cagayan de Oro City. Docketed as NLRC-RABX Case No. 10-01-00102-99, the
complaint was filed against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13 th month pay, rest
day, service incentive leave, night shift differential, overtime pay, and payment for attorneys fees.

Page 89 of 191

LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any payment to the security guards.
The Ruling of the Labor Arbiter
In its decision dated 18 August 1999, the Labor Arbiter found that the security guards are entitled to wage differentials
and premium for holiday and rest day work. The Labor Arbiter held Eparwa and LDCU solidarily liable pursuant to
Article 109 of the Labor Code. The dispositive portion of the Labor Arbiters decision reads:
WHEREFORE, judgment is rendered[:]
1.

Ordering respondents [LDCU] and [Eparwa] solidarily liable to pay [the security guards]
for underpayment, holiday and rest day, as follows:
Name

Amount

1.

Casiero

Jovencio

P 46,819.95

2.

Villarino

Leonardo

46,819.95

3.

Lumbab

Adriano

46,819.95

4.

Caballero

Gregorio, Jr.

46,819.95

5.

Cajilla

Delfin, Jr.

37,918.95

6.

Paduanga

Arnold

20,321.10

7.

Dungog

Achimedes

46,819.95

8.

Magallanes

Eduardo

46,819.95

9.

Dungog

Luigi

46,819.95

10. Dungog

Telford

46,819.95

11. Bahian

Wilfredo

30,741.30
P 463,540.95

2.

Denying the claim of unpaid 13 th month pay, service incentive leave and night shift
premium pay for lack of merit;

3.

Ordering respondent [Eparwa] to reimburse respondent [LDCU] for whatever amount the
latter may be required to pay [the security guards];

4.

Ordering respondent [Eparwa] to pay respondent [LDCU] P20,000.00 and P5,000.00

each of the [security guards], moral and exemplary damages;

5.

Ordering [Eparwa] to pay 10% of attorneys fee[s][;]

6.

The rest of the claims are denied for lack of merit.

So Ordered.[6]
LDCU filed an appeal before the NLRC. LDCU agreed with the Labor Arbiters decision on the security guards
entitlement to salary differential but challenged the propriety of the amount of the award. LDCU alleged that security
guards not similarly situated were granted uniform monetary awards and that the decision did not include the basis of
the computation of the amount of the award.
Eparwa also filed an appeal before the NLRC. For its part, Eparwa questioned its liability for the security guards
claims and the awarded cross-claim amounts.

The Ruling of the NLRC

Page 90 of 191

The Fifth Division of the NLRC resolved Eparwa and LDCUs separate appeals in its Resolution [7] dated 19 January
2000. The NLRC found that the security guards are entitled to wage differentials and premium for holiday and rest day
work. Although the NLRC held Eparwa and LDCU solidarily liable for the wage differentials and premium for holiday
and rest day work, the NLRC did not require Eparwa to reimburse LDCU for its payments to the security guards. The
NLRC also ordered the recomputation of the monetary awards according to the dates actually worked by each
security guard. The dispositive portion of the NLRC Resolution reads thus:
WHEREFORE, the appealed decision is AFFIRMED, subject to the modification that the portions
thereof directing respondent EPARWA Security Agency and Janitorial Services, Inc. to reimburse
respondent Liceo de Cagayan University for whatever amount the latter may have paid complainants
and to pay respondent Liceo de Cagayan University the sum [sic] [of] P20,000.00 and P5,000.00,
representing moral and exemplary damages, respectively, of each complainants [sic], are deleted for
lack of legal basis. Further the monetary awards for wage differential and premiums for holiday and
rest day works shall be recomputed by the Regional Arbitration Branch of origin at the execution stage
of the proceedings.
Co[n]formably, the award of Attorneys fee[s] is equivalent to ten (10%) percent of the aggregate
monetary award as finally adjusted.
SO ORDERED.[8]
Eparwa and LDCU again filed separate motions for partial reconsideration of the 19 January 2000 NLRC
Resolution. LDCU questioned the NLRCs deletion of LDCUsentitlement to reimbursement by Eparwa. Eparwa, on the
other hand, prayed that LDCU be made to reimburse Eparwa for whatever amount it may pay to the security guards.
In its Resolution dated 14 March 2000, the NLRC declared that although Eparwa and LDCU are solidarily liable to the
security guards for the monetary award, LDCU alone is ultimately liable. The NLRC resolved the issue thus:
WHEREFORE, the assailed resolution, dated 19 January 2000, is MODIFIED in that
respondent Liceo de Cagayan University
(LICEO)
is
ordered
to
reimburse
respondent Eparwa Security and Janitorial Services, Inc. (EPARWA) for whatever amount the latter
may have paid to complainants arising from this case.
SO ORDERED.[9]
LDCU filed a petition for certiorari[10] before the appellate court assailing the NLRCs decision. LDCU took issue with
the NLRCs order that LDCU should reimburse Eparwa.LDCU stated that this would free Eparwa from any liability for
payment of the security guards money claims.
The Ruling of the Appellate Court
In its Decision promulgated on 20 April 2001, the appellate court granted LDCUs petition and reinstated the Labor
Arbiters decision. The appellate court also allowed LDCU to claim reimbursement from Eparwa. The appellate courts
decision reads thus:
WHEREFORE, foregoing considered, the petition is hereby GRANTED. The decision dated August
18, 1999 of Labor Arbiter Celenito N. Daing is REINSTATED. The case is herebyREMANDED to the
Regional Arbitration Board, Branch No. 10 of Cagayan de Oro City to compute what is due to LDCU
from EPARWA.
SO ORDERED.[11]
Eparwa filed a motion for reconsideration of the appellate courts decision. Eparwa stressed that jurisprudence is
consistent in ruling that the ultimate liability for the payment of the monetary award rests with LDCU alone.
The appellate court denied Eparwas motion for reconsideration for lack of merit.
Hence, this petition.
The Issue
The petition raises this sole legal issue: Is LDCU alone ultimately liable to the security guards for the wage differentials
and premium for holiday and rest day pay?
The Ruling of the Court
The petition has merit.
Eparwa and LDCUs Solidary Liability and
LDCUs Ultimate Liability

Page 91 of 191

Articles 106, 107 and 109 of the Labor Code read:

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor
to protect the rights of workers established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.
There is labor-only contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing activities which are
directly related to the principal business of the employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.
Article 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply
to any person, partnership, association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.
Article 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability
under this Chapter, they shall be considered as direct employers.
This Courts ruling in Eagle Security Agency, Inc. v. NLRC[12] squarely applies to the present case. In Eagle, we ruled
that:
This joint and several liability of the contractor and the principal is mandated by the Labor Code to
assure compliance of the provisions therein including the statutory minimum wage [Article 99, Labor
Code]. The contractor is made liable by virtue of his status as direct employer. The principal, on the
other hand, is made the indirect employer of the contractors employees for purposes of paying the
employees their wages should the contractor be unable to pay them. This joint and several liability
facilitates, if not guarantees, payment of the workers performance of any work, task, job or project,
thus giving the workers ample protection as mandated by the 1987 Constitution [See Article II Sec. 18
and Article XIII Sec. 3].
In the case at bar, it is beyond dispute that the security guards are the employees of EAGLE [See
Article VII Sec. 2 of the Contract for Security Services; G.R. No. 81447, Rollo, p. 34]. That they were
assigned to guard the premises of PTSI pursuant to the latters contract with EAGLE and that neither
of these two entities paid their wage and allowance increases under the subject wage orders are also
admitted [See Labor Arbiters Decision, p. 2; G.R. No. 81447, Rollo, p. 75]. Thus, the application of
the aforecited provisions of the Labor Code on joint and several liability of the principal and contractor
is appropriate [See Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, G.R. No. 64204, May 31,
1985, 136 SCRA 669].
The solidary liability of PTSI and EAGLE, however, does not preclude the right of reimbursement from
his co-debtor by the one who paid [See Article 1217, Civil Code]. It is with respect to this right of
reimbursement that petitioners can find support in the aforecited contractual stipulation and Wage
Order provision.
The Wage Orders are explicit that payment of the increases are to be borne by the principal or client.
To be borne, however, does not mean that the principal, PTSI in this case, would directly pay the
security guards the wage and allowance increases because there is no privity of contract between
them. The security guards contractual relationship is with their immediate employer, EAGLE. As an
employer, EAGLE is tasked, among others, with the payment of their wages [See Article VII Sec. 3 of
the Contract for Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988,
158 SCRA 665].
On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the
former availed of the security services provided by the latter. In return, the security agency collects
from its client payment for its security services. This payment covers the wages for the security
guards and also expenses for their supervision and training, the guards bonds, firearms with

Page 92 of 191

ammunitions, uniforms and other equipments, accessories, tools, materials and supplies necessary
for the maintenance of a security force.
Premises considered, the security guards immediate recourse for the payment of the increases
is with their direct employer, EAGLE. However, in order for the security agency to comply with the
new wage and allowance rates it has to pay the security guards, the Wage Orders made specific
provision to amend existing contracts for security services by allowing the adjustment of the
consideration paid by the principal to the security agency concerned. What the Wage Orders require,
therefore, is the amendment of the contract as to the consideration to cover the service contractors
payment of the increases mandated. In the end, therefore, ultimate liability for the payment of the
increases rests with the principal.
In view of the foregoing, the security guards should claim the amount of the increases from EAGLE.
Under the Labor Code, in case the agency fails to pay them the amounts claimed, PTSI should be
heldsolidarily liable with EAGLE [Articles 106,107 and 109]. Should EAGLE pay, it can claim an
adjustment from PTSI for an increase in consideration to cover the increases payable to the security
guards.
However, in the instant case, the contract for security services had already expired without being
amended consonant with the Wage Orders. It is also apparent from a reading of a record that EAGLE
does not now demand from PTSI any adjustment in the contract price and its main concern is freeing
itself from liability. Given these peculiar circumstances, if PTSI pays the security guards, it cannot
claim reimbursement from EAGLE. But in case it is EAGLE that pays them, the latter can claim
reimbursement from PTSI in lieu of an adjustment, considering that the contract, [sic] had
expired and had not been renewed.[13] (Emphasis added)
We repeatedly upheld our ruling in Eagle regarding reimbursement in the subsequent cases of Spartan Security &
Detective Agency, Inc. v. NLRC,[14] Development Bank of the Philippines v. NLRC, [15] Alpha Investigation and Security
Agency, Inc. v. NLRC,[16] Helpmate, Inc. v. NLRC, et al.,[17] and Lapanday Agricultural Development Corporation v.
Court of Appeals.[18]
For the security guards, the actual source of the payment of their wage differentials and premium for holiday and rest
day
work
does
not
matter
as
long
as
they
are
paid. This
is
the
import
of Eparwa and LDCUs solidary liability. Creditors, such as the security guards, may collect from anyone of
the solidary debtors. Solidary liability does not mean that, as between themselves, two solidary debtors are liable for
only half of the payment.
LDCUs ultimate liability comes into play because of the expiration of the Contract for Security Services. There is
no privity of contract between the security guards and LDCU, but LDCUs liability to the security guards remains
because of Articles 106, 107 and 109 of the Labor Code. Eparwa is already precluded from asking LDCU for an
adjustment in the contract price because of the expiration of the contract, but Eparwas liability to the security guards
remains because of their employer-employee relationship. In lieu of an adjustment in the contract price, Eparwa may
claim reimbursement from LDCU for any payment it may make to the security guards. However, LDCU cannot claim
any reimbursement from Eparwa for any payment it may make to the security guards.
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 20 April 2001 and the Resolution
dated 21 September 2001 of the Court of Appeals. WeREINSTATE the Resolutions dated 19 January 2000 and 14
March 2000 of the National Labor Relations Commission.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

Page 93 of 191

CONCHITA CARPIO MORALES

Associate Justice

DANTE O. TINGA
Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

[1]

Under Rule 45 of the 1997 Rules of Civil Procedure.

Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Eloy R. Bello, Jr. and Mercedes GozoDadole, concurring.
[3]
Penned by Labor Arbiter Celenito N. Daing.
[4]
Rollo, p. 92.
[5]
Id. at 5.
[6]
CA rollo, pp. 41-42.
[7]
Penned by Presiding Commissioner Salic B. Dumarpa with Commissioners Oscar N. Abella and Leon G. Gonzaga,
Jr., concurring.
[8]
CA rollo, pp. 66-67.
[9]
Id. at 77-78.
[10]
Under Rule 65 of the 1997 Rules of Civil Procedure.
[11]
CA rollo, p. 99.
[12]
G.R. No. 81314, 18 May 1989, 173 SCRA 479.
[13]
Id. at 485-487.
[14]
G.R. No. 90693, 3 September 1992, 213 SCRA 528.
[15]
G.R. Nos. 100376-77, 17 June 1994, 233 SCRA 250.
[16]
339 Phil. 40 (1997).
[17]
342 Phil. 277 (1997).
[18]
381 Phil. 41 (2000).
[2]

Page 94 of 191

THIRD DIVISION
[G.R. No. 149440. January 28, 2003]
HACIENDA FATIMA and/or PATRICIO VILLEGAS, ALFONSO VILLEGAS and CRISTINE SEGURA, petitioners,
vs. NATIONAL FEDERATION OF SUGARCANE WORKERS-FOOD AND GENERAL TRADE, respondents.
DECISION
PANGANIBAN, J.:
Although the employers have shown that respondents performed work that was seasonal in nature, they failed to
prove that the latter worked only for the duration of one particular season. In fact, petitioners do not deny that these
workers have served them for several years already. Hence, they are regular -- not seasonal -- employees.
The Case
Before the Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to set aside the February
20, 2001 Decision of the Court of Appeals[1] (CA) in CA-GR SP No. 51033.The dispositive part of the Decision reads:
WHEREFORE, premises considered, the instant special civil action for certiorari is hereby DENIED. [2]
On the other hand, the National Labor Relations Commission (NLRC) Decision, [3] upheld by the CA, disposed in
this wise:
WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and VACATED and a
new one entered declaring complainants to have been illegally dismissed. Respondents are herebyORDERED to
reinstate complainants except Luisa Rombo, Ramona Rombo, Bobong Abriga and Boboy Silva to their previous
position and to pay full backwages from September 1991 until reinstated. Respondents being guilty of unfair labor
practice are further ordered to pay complainant union the sum of P10,000.00 as moral damages and P5,000.00 as
exemplary damages.[4]
The Facts
The facts are summarized in the NLRC Decision as follows:
Contrary to the findings of the Labor Arbiter that complainants [herein respondents] refused to work and/or were
choosy in the kind of jobs they wanted to perform, the records is replete with complainants persistence and dogged
determination in going back to work.
Indeed, it would appear that respondents did not look with favor workers having organized themselves into a
union. Thus, when complainant union was certified as the collective bargaining representative in the certification
elections, respondents under the pretext that the result was on appeal, refused to sit down with the union for the
purpose of entering into a collective bargaining agreement. Moreover, the workers including complainants herein were
not given work for more than one month. In protest, complainants staged a strike which was however settled upon the
signing of a Memorandum of Agreement which stipulated among others that:
a) The parties will initially meet for CBA negotiations on the 11th day of January 1991 and will endeavor to conclude
the same within thirty (30) days.
b) The management will give priority to the women workers who are members of the union in case work relative x x x
or amount[ing] to gahit and [dipol] arises.
c) Ariston Eruela Jr. will be given back his normal work load which is six (6) days in a week.
d) The management will provide fifteen (15) wagons for the workers and that existing workforce prior to the actual
strike will be given priority. However, in case the said workforce would not be enough, the management can hire
additional workers to supplement them.
e) The management will not anymore allow the scabs, numbering about eighteen (18) workers[,] to work in the
hacienda; and
f) The union will immediately lift the picket upon signing of this agreement.
However, alleging that complainants failed to load the fifteen wagons, respondents reneged on its commitment to sit
down and bargain collectively. Instead, respondent employed all means including the use of private armed guards to
prevent the organizers from entering the premises.
Moreover, starting September 1991, respondents did not any more give work assignments to the complainants forcing
the union to stage a strike on January 2, 1992. But due to the conciliation efforts by the DOLE, another Memorandum
of Agreement was signed by the complainants and respondents which provides:
Whereas the union staged a strike against management on January 2, 1992 grounded on the dismissal of the union
officials and members;
Whereas parties to the present dispute agree to settle the case amicably once and for all;
Now therefore, in the interest of both labor and management, parties herein agree as follows:
1. That the list of the names of affected union members hereto attached and made part of this agreement shall be
referred to the Hacienda payroll of 1990 and determine whether or not this concerned Union members are hacienda
workers;
2. That in addition to the payroll of 1990 as reference, herein parties will use as guide the subjects of a Memorandum
of Agreement entered into by and between the parties last January 4, 1990;
3. That herein parties can use other employment references in support of their respective claims whether or not any or
all of the listed 36 union members are employees or hacienda workers or not as the case may be;
4. That in case conflict or disagreement arises in the determination of the status of the particular hacienda workers
subject of this agreement herein parties further agree to submit the same to voluntary arbitration;
5. To effect the above, a Committee to be chaired by Rose Mengaling is hereby created to be composed of three
representatives each and is given five working days starting Jan. 23, 1992 to resolve the status of the subject 36
hacienda workers. (Union representatives: Bernardo Torres, Martin Alas-as, Ariston Arulea Jr.)
Pursuant thereto, the parties subsequently met and the Minutes of the Conciliation Meeting showed as follows:

Page 95 of 191

The meeting started at 10:00 A.M. A list of employees was submitted by Atty. Tayko based on who received their
13th month pay. The following are deemed not considered employees:
1. Luisa Rombo
2. Ramona Rombo
3. Bobong Abrega
4. Boboy Silva
The name Orencio Rombo shall be verified in the 1990 payroll.
The following employees shall be reinstated immediately upon availability of work:
1. Jose Dagle 7. Alejandro Tejares
2. Rico Dagle 8. Gaudioso Rombo
3. Ricardo Dagle 9. Martin Alas-as Jr.
4. Jesus Silva 10. Cresensio Abrega
5. Fernando Silva 11. Ariston Eruela Sr.
6. Ernesto Tejares 12. Ariston Eruela Jr.
When respondents again reneged on its commitment, complainants filed the present complaint.
But for all their persistence, the risk they had to undergo in conducting a strike in the face of overwhelming odds,
complainants in an ironic twist of fate now find themselves being accused of refusing to work and being choosy in the
kind of work they have to perform.[5] (Citations omitted)
Ruling of the Court of Appeals
The CA affirmed that while the work of respondents was seasonal in nature, they were considered to be merely
on leave during the off-season and were therefore still employed by petitioners. Moreover, the workers enjoyed
security of tenure. Any infringement upon this right was deemed by the CA to be tantamount to illegal dismissal.
The appellate court found neither rhyme nor reason in petitioners argument that it was the workers themselves
who refused to or were choosy in their work. As found by the NLRC, the record of this case is replete with
complainants persistence and dogged determination in going back to work. [6]
The CA likewise concurred with the NLRCs finding that petitioners were guilty of unfair labor practice.
Hence this Petition.[7]
Issues
Petitioners raise the following issues for the Courts consideration:
A. Whether or not the Court of Appeals erred in holding that respondents, admittedly seasonal workers, were
regular employees, contrary to the clear provisions of Article 280 of the Labor Code, which categorically
state that seasonal employees are not covered by the definition of regular employees under paragraph 1,
nor covered under paragraph 2 which refers exclusively to casual employees who have served for at
least one year.
B. Whether or not the Court of Appeals erred in rejecting the ruling in Mercado, xxx, and relying instead on
rulings which are not directly applicable to the case at bench, viz, Philippine Tobacco,Bacolod-Murcia,
and Gaco, xxx.
C. Whether or not the Court of Appeals committed grave abuse of discretion in upholding the NLRCs
conclusion that private respondents were illegally dismissed, that petitioner[s were] guilty of unfair labor
practice, and that the union be awarded moral and exemplary damages. [8]
Consistent with the discussion in petitioners Memorandum, we shall take up Items A and B as the first issue and
Item C as the second.
The Courts Ruling
The Petition has no merit.
First Issue:
Regular Employment
At the outset, we must stress that only errors of law are generally reviewed by this Court in petitions for review on
certiorari of CA decisions.[9] Questions of fact are not entertained.[10] The Court is not a trier of facts and, in labor
cases, this doctrine applies with greater force. [11] Factual questions are for labor tribunals to resolve. [12] In the present
case, these have already been threshed out by the NLRC. Its findings were affirmed by the appellate court.
Contrary to petitioners contention, the CA did not err when it held that respondents were regular employees.
Article 280 of the Labor Code, as amended, states:
Art. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exist. (Italics supplied)
For respondents to be excluded from those classified as regular employees, it is not enough that they perform
work or services that are seasonal in nature. They must have also been employed only for the duration of one
season. The evidence proves the existence of the first, but not of the second, condition. The fact that respondents -with the exception of Luisa Rombo, Ramona Rombo, Bobong Abriga and Boboy Silva -- repeatedly worked as

Page 96 of 191

sugarcane workers for petitioners for several years is not denied by the latter. Evidently, petitioners employed
respondents for more than one season. Therefore, the general rule of regular employment is applicable.
In Abasolo v. National Labor Relations Commission,[13] the Court issued this clarification:
[T]he test of whether or not an employee is a regular employee has been laid down in De Leon v. NLRC, in which this
Court held:
The primary standard, therefore, of determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the employer. The test is
whether the former is usually necessary or desirable in the usual trade or business of the employer. The connection
can be determined by considering the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. Also if the employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while such activity exists.
xxxxxxxxx
x x x [T]he fact that [respondents] do not work continuously for one whole year but only for the duration of the x x x
season does not detract from considering them in regular employment since in a litany of cases this Court has already
settled that seasonal workers who are called to work from time to time and are temporarily laid off during off-season
are not separated from service in said period, but merely considered on leave until re-employed. [14]
The CA did not err when it ruled that Mercado v. NLRC[15] was not applicable to the case at bar. In the earlier
case, the workers were required to perform phases of agricultural work for a definite period of time, after which their
services would be available to any other farm owner. They were not hired regularly and repeatedly for the same
phase/s of agricultural work, but on and off for any single phase thereof. On the other hand, herein respondents,
having performed the same tasks for petitioners every season for several years, are considered the latters regular
employees for their respective tasks. Petitioners eventual refusal to use their services -- even if they were ready, able
and willing to perform their usual duties whenever these were available -- and hiring of other workers to perform the
tasks originally assigned to respondents amounted to illegal dismissal of the latter.
The Court finds no reason to disturb the CAs dismissal of what petitioners claim was their valid exercise of a
management prerogative. The sudden changes in work assignments reeked of bad faith. These changes were
implemented immediately after respondents had organized themselves into a union and started demanding collective
bargaining. Those who were union members were effectively deprived of their jobs. Petitioners move actually
amounted to unjustified dismissal of respondents, in violation of the Labor Code.
Where there is no showing of clear, valid and legal cause for the termination of employment, the law considers
the matter a case of illegal dismissal and the burden is on the employer to prove that the termination was for a valid
and authorized cause.[16] In the case at bar, petitioners failed to prove any such cause for the dismissal of respondents
who, as discussed above, are regular employees.
Second Issue:
Unfair Labor Practice
The NLRC also found herein petitioners guilty of unfair labor practice. It ruled as follows:
Indeed, from respondents refusal to bargain, to their acts of economic inducements resulting in the promotion of those
who withdrew from the union, the use of armed guards to prevent the organizers to come in, and the dismissal of
union officials and members, one cannot but conclude that respondents did not want a union in their haciendaa clear
interference in the right of the workers to self-organization. [17]
We uphold the CAs affirmation of the above findings. Indeed, factual findings of labor officials, who are deemed
to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but
even finality. Their findings are binding on the Supreme Court. [18] Verily, their conclusions are accorded great weight
upon appeal, especially when supported by substantial evidence. [19] Consequently, the Court is not duty-bound to
delve into the accuracy of their factual findings, in the absence of a clear showing that these were arbitrary and bereft
of any rational basis.[20]
The finding of unfair labor practice done in bad faith carries with it the sanction of moral and exemplary damages.
[21]

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioners.
SO ORDERED.
Puno, J., (Chairman), Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur.

[1]

Eighth Division, composed of Justices Ramon A. Barcelona (chairman and ponente), Rodrigo V. Cosico and Alicia L.
Santos (members).
[2]
Assailed CA Decision, p. 7; rollo, p. 36.
[3]
Fourth Division, composed of Commissioner Bernabe S. Batuhan (ponente), Presiding Commissioner Irenea E.
Ceniza and Commissioner Amorito V. Canete.
[4]
NLRC Decision, pp. 9-10; rollo, pp. 63-64; records, pp. 28-29.
[5]
NLRC Decision, pp. 5-9; rollo, pp. 59-63; records, pp. 24-28. Italics provided.
[6]
Assailed CA Decision, p. 6; rollo, p. 35.

Page 97 of 191

[7]

This case was deemed submitted for resolution on April 30, 2002, upon receipt by the Court of petitioners
Memorandum, which was signed by Atty. Teodoro V. Cortes. Respondents Memorandum, signed by Attys.
Francisco D. Yap and Whelma F. Siton-Yap, was received by the Court on March 7, 2002.
[8]
Petitioners Memorandum, p. 6; rollo, p. 275.
[9]
Viloria v. Court of Appeals, 309 SCRA 529, June 30, 1999.
[10]
Cebu Shipyard and Engineering Works, Inc. v. William Lines, Inc., 306 SCRA 762, May 5, 1999; Villarico v. Court of
Appeals, 309 SCRA 193, June 28, 1999; Alipoon v. Court of Appeals, 305 SCRA 118, March 22,
1999;Baguio v. Republic, 301 SCRA 450, January 21, 1999.
[11]
Ropali Trading Corporation v. National Labor Relations Commission, 296 SCRA 309, September 25, 1998.
[12]
Chua v. National Labor Relations Commission, 267 SCRA 196, January 30, 1997.
[13]
346 SCRA 293, November 29, 2000.
[14]
Id., pp. 304-305, per De Leon Jr., J.
[15]
201 SCRA 332, September 5, 1991.
[16]
Valiant Machinery and Metal Corp. v. National Labor Relations Commission, 252 SCRA 369, January 25, 1996, per
Mendoza, J.
[17]
NLRC Decision, p. 9; rollo, p. 63; records, p. 28.
[18]
C. Planas Commercial v. National Labor Relations Commission, 303 SCRA 49, February 11, 1999.
[19]
Barros v. National Labor Relations Commission, 315 SCRA 23, September 22, 1999.
[20]
Tan v. National Labor Relations Commission, supra.
[21]
Nueva Ecija I Electric Cooperative, Inc. v. National Labor Relations Commission, 323 SCRA 86, January 24, 2000.

Page 98 of 191

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 100518
January 24, 2000
ASSOCIATION OF TRADE UNIONS (ATU), RODOLFO MONTECLARO and EDGAR JUESAN, petitioners,
vs.
HON. COMMISSIONERS OSCAR N. ABELLA, MUSIB N. BUAT, LEON GONZAGA JR., ALGON ENGINEERING
CONSTRUCTION CORP., ALEX GONZALES and EDITHA YAP, respondents.
QUISUMBING, J.:
This special civil action for certiorari under Rule 65 of the Rules of Court assails the resolution of the National Labor
Relations Commission promulgated on May 17, 1991, which modified the decision of the labor arbiter.
Respondent company is a domestic corporation engaged in road construction projects of the government. From 1968
to 1989, it engaged the services of the following workers to work on various projects on different dates: Rodolfo
Monteclaro (mechanic), Edgar Juesan 1 (painter), Victorio Lunzaga (tanker driver), Alfredo Jalet (batteryman), Julito
Macabodbod (trailer helper), Ramon Tabada (carpenter), Remsy 2 Asensi (machinist), Armand Acero (helper
mechanic), Lordito Tatad (painter helper), Rogelio Tantuan (painter), Teodoro Tabio (checker), Gemudo 3 Asejo
(electrician), Roland Olivar (latheman), Valeriano Mijas 4 (driver), Jose Noval (welder), Felimon Lagbao (mechanic),
Pedro Roche (head welder), and Justiniano Sollano (carpenter). Their contracts indicate the particular project they are
assigned, the duration of their employment and their daily wage.1wphi1.nt
In February 1989, the above-named workers joined petitioner union as members. Accordingly, petitioner union filed a
petition for certification election with the regional office of the labor department. Respondent company opposed the
petition on the ground that the workers were project employees and therefore not qualified to form part of the rank and
file collective bargaining unit. Not for long, the Med-Arbiter dismissed the petition for certification election. On appeal,
the Secretary of Labor and Employment reversed the Med-Arbiter's decision and ordered the immediate holding of a
certification election.
Meanwhile, the national president of petitioner union sent a demand letter to respondent company seeking the
payment of wage differentials to some affected union members. As said demand was unheeded, petitioner union and
the concerned workers filed a complaint for payment of wage differentials and other benefits before the Regional
Office of the Department of Labor and Employment.
Shortly thereafter, respondent company terminated the employment of aforementioned workers owing to the
completion of its projects or the expiration of workers' contracts. Respondent company explained the circumstances
surrounding the separation of the workers from the service as follows:
(1) The Contract No. 2AIPD-C-10 Second Agusan Irrigation Project of NIA wherein some of the herein
complainants were assigned was already 98% completed when complaints were filed. With the near
completion of the contract, services of the following complainants were no longer needed:
(a) Gerundio Asejo
(b) Victorio Lunzaga
(c) Ramon R. Tabada
(d) Alfredo E. Julet (sic)
(e) Julito C. Macabodbod
(2) In the case of Contract No. 2AIPD-C-11-second Agusan Irrigation Project of NIA, the following
complainants were terminated because of the 95% completion of the phase of the project and expiration of
their contract of employment:
(a) Remsy B. Asensi
(b) Rolando G. Olivar
(c) Edgar A. Juezan
(d) Rodolfo G. Monteclaro
(e) Valeriano S. Meyas (sic)
(f) Jose F. Noval
(g) Pedro M. Roche
(3) In Contract Package R11 1/209, Davao del Norte, the contracts of employment of Armand T. Acero and
Felimon J. Dagbao (sic) Jr. expired.
(4) In the Widening and Improvement of Rafael Castillo St., Davao City Project, where complainant Teodoro
Tabio was assigned, he was terminated because he went on absent without leave (AWOL) while Lordito
Tatad's contract of employment expired.5
However, the affected workers claim that they were dismissed because of their union activities. In view of the alleged
illegal dismissals and harassment by their employer, the workers staged a strike on May 17, 1989. Upon complaint of
respondent company, Labor Arbiter Newton Sancho declared said strike illegal and decreed further that Victorio
Lunzaga, Alfred Jalet, Julito Macabodbod, Ramon Tabada and Remsy Asensi, who had participated in the strike, were
deemed to have lost their employment status.
On appeal, the National Labor Relations Commission affirmed said decision. Petitioner union then elevated the matter
to this Court by way of petition for certiorari which was eventually dismissed.6
Meanwhile, the aggrieved workers filed with the Regional Arbitration Branch of the NLRC their individual complaints
against private respondent company for illegal dismissal, unfair labor practice, underpayment of wages, 13th month
pay, holiday pay and overtime pay. They also sought reinstatement with back wages. The cases were consolidated

Page 99 of 191

and assigned to Labor Arbiter Nicolas Sayon for arbitration. However, noting that a similar case had been filed before
the regional office of the labor department, the labor arbiter refrained from resolving the issue of underpayment of
monetary benefits. He also found the charge of unfair labor practice untenable. But, on the charge of illegal dismissal,
he ruled on October 31, 1989, as follows:
WHEREFORE in view of the foregoing, judgment is hereby rendered declaring the dismissal of the following
complainants illegal; namely:
1. Victorio C. Lunzaga
2. Julito C. Macabodbod
3. Alfredo E. Jalet
4. Gerundio F. Asejo
5. Ramon R. Tabada
Respondent ALGON Engineering Construction Corporation and Alex Gonzales and Edith Yap, are hereby
ordered to reinstate the above-named complainants to their former positions without loss of seniority rights
plus six months backwages based on their latest salary rate at the time of their dismissal, which is P65.00 per
day equivalent to monthly rate of P1,700.83, a total of P10,204.99 per complainant or in the total amount of
P51,024.95.
The case of illegal dismissal filed by Armand Acero, Lordito Tatad, Teodoro Tabio, Ramon Olivar, Valeriano
Miyas, Jose Noval, Felimon Lagbao, Pedro Roche, Remsy Asensi, Rodolfo Monteclaro, Edgar Juesan and
Justiniano Sollano are hereby ordered dismissed for lack of merit.
SO ORDERED.7
Petitioners and private respondents separately appealed the Labor Arbiter's ruling to the National Labor Relations
Commission. Pending appeal, Edgar Juesan, Lordito Tatad and Ramon Tabada filed their respective duly sworn
affidavits of desistance and motions to withdraw their complaints and money claims against private respondents. Said
motions were seasonably granted.
On May 17, 1991, the NLRC promulgated its resolution modifying the decision of Labor Arbiter Nicolas Sayon. It held
that the labor arbiter erred in not resolving the issue of underpayment of wages because not all of the original
complainants filed the same money claims with the labor department. 8 Thus, it awarded monetary benefits to qualified
workers. The NLRC disposed of the case as follows:
Accordingly, the appealed decision is hereby modified as follows:
1. Respondent ALGON Engineering Construction Corporation is hereby ordered to pay the complainants
hereinafter enumerated, the following sums:
WAGE DIFFERENTIALS:
1.

VALERIANO MIJAS
December 14, 1987 to April 15, 1989
419 days x P64.00/day

P26,816.00

P25,559.00

Less:
December 14, 1987 to April 15, 1989
419 days x P61.00/day
TOTAL

P 1,257.00

SERVICE INCENTIVE LEAVE PAY:

1)

RAMSI ASENSI
5 days x P64.00

2)

3)

4)

5)

P320.00

10 days x P64.00

640.00

5 days x 53.00

265.00

10 days x P64.00

P640.00

5 days x 53.00

265.00

10 days x P64.00

640.00

5 days x 53.00

265.00

640.00

VICTORIO LUNZAGA

P905.00

JULIETO MACABODBOD

P905.00

GERONIMO ASEJO

P905.00

ALFREDO JALET
10 days x P64.00

Page 100 of 191

5 days x 53.00
6)

7)

265.00

10 days x P64.00

640.00

5 days x 53.00

265.00

320.00

320.00

VALERIANO MIJAS

P905.00

PEDRO ROCHE
5 days x P64.00

8)

P905.00

RODOLFO MONTECLARO
5 days x P64.00

13th MONTH PAY:

1)

2)

3)

4)

5)

6)

7)

8)

9)

RAMSI ASENSI
26 days x P64.00 x 10 mos.

P16,640.00 x 1/12

P1,386.67

VICTORIO LUNZAGA
26 days x P64.00 x 12 mos.

P19,968.00 x 1/12

P1,664.00

JULIETO MACABODBOD
26 days x P64.00 x 12 mos.

P19,968.00 x 1/12

P1,664.00

GERONIMO ASEJO
26 days x P64.00 x 12 mos.

P19,968.00 x 1/12

P1,664.00

ALFREDO JALET
26 days x P64.00 x 12 mos.

P19,968.00 x 1/12

P1,664.00

VALERIANO MIJAS
26 days x P64.00 x 12 mos.

P19,968.00 x 1/12

P1,664.00

PEDRO ROCHE
26 days x P64.00 x 12 mos.

P19,968.00 x 1/12

P1,664.00

RODOLFO MONTECLARO
26 days x P64.00 x 12 mos.

P19,968.00 x 1/12

P1,664.00

JOSE NAVAL
26 days x P64.00 x 3 mos.

P4,992.00 x 1/12

P416.00

2. The complaints of Edgar Juezon (sic), Lordito Tadtad and Ramon Tabada are hereby dismissed as prayed
for by said complainants.
3. The complainants for illegal dismissal filed by Victorio Lunzaga (Lonzaga) and Alfredo Jalet (Jalit) are
hereby dismissed for having been rendered moot and academic by Our decision in Case No. RAB-11-0500352-89.
4. The complaints of Macabodbod and Asejo for illegal dismissal are hereby DISMISSED for lack of merit.
5. The charge of unfair labor practice is hereby dismissed for lack of merit.
SO ORDERED.9

Page 101 of 191

As noted by the Solicitor General, private respondents filed their motion for reconsideration, which was denied. 10We
find, however, that herein petitioners did not move for reconsideration, as the petition did not so indicate and none
appears on the records before us.
Filing a petition for certiorari under Rule 65 without first moving for reconsideration of the assailed resolution generally
warrants the petition's outright dismissal. As we consistently held in numerous cases, 11 a motion for reconsideration by
a concerned party is indispensable for it affords the NLRC an opportunity to rectify errors or mistakes it might have
committed before resort to the courts can be had.
It is settled that certiorari will lie only if there is no appeal or any other plain, speedy and adequate remedy in the
ordinary course of law against acts of public respondents. 12 Here, the plain and adequate remedy expressly provided
by law was a motion for reconsideration of the impugned resolution, based on palpable or patent errors, to be made
under oath and filed within ten (10) days from receipt of the questioned resolution of the NLRC, a procedure which is
jurisdictional.13 Further, it should be stressed that without a motion for reconsideration seasonably filed within the tenday reglementary period, the questioned order, resolution or decision of NLRC, becomes final and executory after ten
(10) calendar days from receipt thereof.14 Moreover, even if procedural lapses were to be set aside, we find no cogent
reason sufficient to justify a departure from public respondent's decision, as hereafter elucidated.
In this recourse, petitioners impute the following errors on the part of public respondent:
[I]
THAT THE HONORABLE COMMISSION ERRED IN HOLDING THAT THE DISMISSAL OF FIVE COMPLAINANTS
WERE JUSTIFIED IN VIEW OF THE FACT THAT THEIR COMPLAINT HAVE BEEN RENDERED MOOT AND
ACADEMIC BY ITS DECISION IN CASE NO. RAB-05-00353-89.
[II]
THAT HONORABLE COMMISSION AGAIN ERRED IN DISMISSING THE COMPLAINT OF THE COMPLAINANTS
MACABODBOD AND ASEJO FOR LACK OF MERIT.
[III]
THE HONORABLE COMMISSION SERIOUSLY ERRED IN AFFIRMING THE DECISION OF THE LABOR ARBITER
DISMISSING PETITIONER'S CHARGE OF UNFAIR LABOR PRACTICE AGAINST THE RESPONDENT
CORPORATION.
[IV]
QUESTION OF LAW.15
In petitions for certiorari under Rule 65 of the Rules of Court, it may be noted that "want of jurisdiction" and "grave
abuse of discretion,"16 and not merely reversible error, are the proper grounds for review. The respondent acts without
jurisdiction if he does not have the legal authority to decide a case. There is excess of jurisdiction if the respondent,
having the power to determine the case, oversteps his lawful authority. And there is grave abuse of discretion where
the respondent acts in a capricious, whimsical, arbitrary or despotic manner, in effect equivalent to lack of
jurisdiction.17 Here, petitioners neither assail the jurisdiction of public respondent nor attribute any grave abuse of
discretion on the part of the labor tribunal. Necessarily, this petition must fail, for lack of substantial requisites under
Rule 65.
Nevertheless, if only to cast aside all doubts for the benefit of the concerned workers, we assayed into the merits of
the case. As properly stated by the Solicitor General, the point of inquiry here is whether petitioners
are regularor project employees of respondent company.
The Labor Code defines regular, project and casual employees as follows:
Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities which are usually necessary or desirable
in the usual business or trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
And employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That,
any employee who has rendered at least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists. (Emphasis supplied.)
Thus, regular employees are those who have been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer even if the parties enter into an agreement stating
otherwise.18 In contrast, project employees are those whose employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the engagement of the
employee, or where the work or services to be performed is seasonal in nature and the employment is for the duration
of the season.19
Furthermore, Policy Instruction No. 20,20 which was in force during the period of petitioners' employment, stated:
Project employees are those employed in connection with a particular construction project. Non-project
(regular) employees are those employed by a construction company without reference to any particular
project.
Project employees are not entitled to termination pay if they are terminated as a result of the completion of the
project or any phase thereof in which they are employed, regardless of the number of projects in which they
have been employed by a particular construction company. Moreover, the company is not required to obtain

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clearance from the Secretary of Labor in connection with such termination. What is required of the company is
report to the nearest Public Employment Office for statistical purposes.
In the case at bar, the contracts of employment of the petitioners attest to the fact that they had been hired for specific
projects, and their employment was coterminous with the completion of the project for which they had been hired. Said
contracts expressly provide that the workers' tenure of employment would depend on the duration of any phase of the
project or the completion of the awarded government construction projects in any of their planned phases. Further,
petitioners were informed in advance that said project or undertaking for which they were hired would end on a stated
or determinable date. Besides, public respondent noted that respondent company regularly submitted reports of
termination of services of project workers to the regional office of the labor department as required under Policy
Instruction No. 20. This compliance with the reportorial requirement confirms that petitioners were project employees.
Considering that petitioners were project employees, whose nature of employment they were fully informed about, at
the time of their engagement, related to a specific project, work or undertaking, their employment legally ended upon
completion of said project. The termination of their employment could not be regarded as illegal dismissal.
WHEREFORE, the instant petition is DISMISSED, and the assailed RESOLUTION of respondent NLRC dated May
17, 1991, is AFFIRMED.1wphi1.nt
No pronouncement as to costs.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.
Footnotes
1
Sometimes spelled as Juezan in the records.
2
Sometimes spelled as Ramsi in the records.
3
Sometimes spelled as Gerundio in the records.
4
Sometimes spelled as Miyas in the records.
5
Rollo, pp. 26-27.
6
ATU-TUCP vs. Hon. Musib Buat, GR-101357, September 23, 1991.
7
Supra, note 1 at 31-32. One worker, Rogelio Tantuan, had earlier withdrawn his complaint.
8
Id. at 50.
9
Id. at 56-58.
10
Id. at 126.
11
Veloso vs. China Airlines, G.R. No. 104302, July 14, 1999, p. 4; Escorpizo vs. University of Baguio, et al.,
G.R. No. 121962, April 30, 1999, p. 3; Manila Midtown Hotel & Land Corp. vs. NLRC, 288 SCRA 259, 264
(1998); ABS-CBN Employees Union vs. NLRC, 276 SCRA 123, 129 (1997); Gonpu Services Corporation vs.
NLRC, 266 SCRA 657, 600 (1997).
12
Rules of Court, Rule 65, Sec. 1.
13
Rule VII, Section 14, NLRC Rules of Procedure, promulgated August 31, 1990 and took effect on October 9,
1990.
14
Rule VIII, Section 2(a) NLRC Rules of Procedure.
15
Rollo, p. 11.
16
Rule 65, Section 1, Rules of Court.
17
I F. Regalado, Remedial Law Compendium, p. 707 (1997).
18
San Miguel Corporation vs. NLRC, GR-125606, October 7, 1998, p. 5.
19
Villa vs. NLRC, 284 SCRA 105, 127 (1998).
20
DOLE Department Order No. 19 issued on April 1, 1993 now governs the employment of project employees
in the construction industry.

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ABS CBN VS NAZARENO

CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582
and the Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of
the National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-16612001) which likewise affirmed, with modification, the decision of the Labor Arbiter declaring the respondents Marlyn
Nazareno, Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a
network of television and radio stations, whose operations revolve around the broadcast, transmission, and relay of
telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio and
television operations. It has a franchise as a broadcasting company, and was likewise issued a license and authority to
operate by the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on
different dates. They were assigned at the news and public affairs, for various radio programs in the Cebu
Broadcasting Station, with a monthly compensation ofP4,000. They were issued ABS-CBN employees identification
cards and were required to work for a minimum of eight hours a day, including Sundays and holidays. They were
made to perform the following tasks and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of respondent
ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager
Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from December 11, 1996 to December 11, 1999. However, since
petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included to the CBA.6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1,
2000, they would be assigned to non-drama programs, and that the DYAB studio operations would be handled by the
studio technician. Thus, their revised schedule and other assignments would be as follows:
Monday Saturday
4:30 A.M. 8:00 A.M. Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. 12:00 MN Jennifer Deiparine
Sunday
5:00 A.M. 1:00 P.M. Jennifer Deiparine
1:00 P.M. 10:00 P.M. Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of
Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages
against the petitioner before the NLRC. The Labor Arbiter directed the parties to submit their respective position
papers. Upon respondents failure to file their position papers within the reglementary period, Labor Arbiter Jose G.
Gutierrez issued an Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to
pursue the case. Respondents received a copy of the Order on May 16, 2001.7 Instead of re-filing their complaint with
the NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with
Motion to Admit Position Paper and Motion to Submit Case For Resolution.8 The Labor Arbiter granted this motion in
an Order dated June 18, 2001, and forthwith admitted the position paper of the complainants. Respondents made the
following allegations:
1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous period of
more than five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the
filing of this complaint on November 20, 2000.
Machine copies of complainants ABS-CBN Employees Identification Card and salary vouchers are hereto attached
as follows, thus:

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I. Jennifer Deiparine:
Exhibit "A" - ABS-CBN Employees Identification Card
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1"& 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon - ABS-CBN Employees Identification Card
Exhibit "C"
Exhibit "D"
Exhibit "D-1"&
Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months
III. Marlene Nazareno
Exhibit "E" - ABS-CBN Employees Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1"& 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employees Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2"& 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific
assignments at its discretion, and were thus under its direct supervision and control regardless of nomenclature. They
prayed that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling
defendants to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN
as a condition precedent for their admission into the existing union and collective bargaining unit of respondent
company where they may as such acquire or otherwise perform their obligations thereto or enjoy the benefits due
therefrom.
Complainants pray for such other reliefs as are just and equitable under the premises.10
For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct
of a particular program ran by an anchor or talent. Among their duties include monitoring and receiving incoming calls
from listeners and field reporters and calls of news sources; generally, they perform leg work for the anchors during a
program or a particular production. They are considered in the industry as "program employees" in that, as
distinguished from regular or station employees, they are basically engaged by the station for a particular or specific
program broadcasted by the radio station. Petitioner asserted that as PAs, the complainants were issued talent
information sheets which are updated from time to time, and are thus made the basis to determine the programs to
which they shall later be called on to assist. The program assignments of complainants were as follows:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)

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4) Nagbagang Balita (mid-day edition)

b. Complainant Deiparine assists in the programs:
1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu
6) Pangutana Lang
c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan11
Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce,
such as drama talents in other productions. As program employees, a PAs engagement is coterminous with the
completion of the program, and may be extended/renewed provided that the program is on-going; a PA may also be
assigned to new programs upon the cancellation of one program and the commencement of another. As such program
employees, their compensation is computed on a program basis, a fixed amount for performance services irrespective
of the time consumed. At any rate, petitioner claimed, as the payroll will show, respondents were paid all salaries and
benefits due them under the law.12
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially
since respondents were not covered by the bargaining unit.
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were
regular employees of petitioner; as such, they were awarded monetary benefits. The fallo of the decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular
employees of the respondent ABS-CBN Broadcasting Corporation and directing the same respondent to pay
complainants as follows:
I - Merlou A. Gerzon P12,025.00
II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
_________
P48,100.00
plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE
HUNDRED TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED.13
However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no
jurisdiction to interpret and apply the agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as
provided in Article 261 of the Labor Code.
Respondents counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy
on August 27, 2001, while the other respondents received theirs on September 8, 2001. Respondents signed and filed
their Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal,
conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the
NLRC, while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for
more than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;

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3. That the Labor Arbiter erred in denying respondents Motion for Reconsideration on an interlocutory order on the
ground that the same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive
leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorneys fees.14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the
decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET
ASIDE and VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as
follows:
1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in
the aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing
their rice subsidy in the CBA, broken down as follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents
motion to refile the complaint and admit their position paper. Although respondents were not parties to the CBA
between petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and computed
respondents monetary benefits based on the 1999 CBA, which was effective until September 2002. The NLRC also
ruled that the Labor Arbiter had jurisdiction over the complaint of respondents because they acted in their individual
capacities and not as members of the union. Their claim for monetary benefits was within the context of Article 217(6)
of the Labor Code. The validity of respondents claim does not depend upon the interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees
who contributed to the profits of petitioner through their labor. The NLRC cited the ruling of this Court in New Pacific
Timber & Supply Company v. National Labor Relations Commission.16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural
and substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in admitting the appeal of
respondents; (b) whether the NLRC committed palpable error in scrutinizing the reopening and revival of the complaint
of respondents with the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30,
2001 Order of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted
without jurisdiction in entertaining and resolving the claim of the respondents under the CBA instead of referring the
same to the Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave abuse of
discretion when it awarded monetary benefits to respondents under the CBA although they are not members of the
appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall
be upon the expiration of the last day to appeal by all parties, should there be several parties to a case. Since
respondents received their copies of the decision on September 8, 2001 (except respondent Nazareno who received
her copy of the decision on August 27, 2001), they had until September 18, 2001 within which to file their Appeal
Memorandum. Moreover, the CA declared that respondents failure to submit their position paper on time is not a
ground to strike out the paper from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular
employees who perform tasks necessary and desirable in the usual trade and business of petitioner and not just its
project employees. Moreover, the CA added, the award of benefits accorded to rank-and-file employees under the
1996-1999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular employees.
Finding no merit in petitioners motion for reconsideration, the CA denied the same in a Resolution17 dated June 16,
2004.
Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN
UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF
THE LATTERS DECISION AND RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC
FINDING RESPONDENTS REGULAR EMPLOYEES.

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3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC
AWARDING CBA BENEFITS TO RESPONDENTS.18
Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of
the NLRC, and entertained respondents appeal from the decision of the Labor Arbiter despite the admitted lapse of
the reglementary period within which to perfect the same. Petitioner likewise maintains that the 10-day period to
appeal must be reckoned from receipt of a partys counsel, not from the time the party learns of the decision, that is,
notice to counsel is notice to party and not the other way around. Finally, petitioner argues that the reopening of a
complaint which the Labor Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC
Rules; such order of dismissal had already attained finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioners own timely
appeal that empowered the NLRC to reopen the case. They assert that although the appeal was filed 10 days late, it
may still be given due course in the interest of substantial justice as an exception to the general rule that the
negligence of a counsel binds the client. On the issue of the late filing of their position paper, they maintain that this is
not a ground to strike it out from the records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioners contention that the perfection of an appeal within the statutory or reglementary period is not
only mandatory, but also jurisdictional; failure to do so renders the assailed decision final and executory and deprives
the appellate court or body of the legal authority to alter the final judgment, much less entertain the appeal. However,
this Court has time and again ruled that in exceptional cases, a belated appeal may be given due course if greater
injustice may occur if an appeal is not given due course than if the reglementary period to appeal were strictly
followed.19 The Court resorted to this extraordinary measure even at the expense of sacrificing order and efficiency if
only to serve the greater principles of substantial justice and equity.20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 22321 of the Labor Code a
liberal application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties.22 We have held in a catena of cases that
technical rules are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the
workingman.23
Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary
period therefor. However, petitioner perfected its appeal within the period, and since petitioner had filed a timely
appeal, the NLRC acquired jurisdiction over the case to give due course to its appeal and render the decision of
November 14, 2002. Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the NLRC
can still participate in a separate appeal timely filed by the adverse party as the situation is considered to be of greater
benefit to both parties.24
We find no merit in petitioners contention that the Labor Arbiter abused his discretion when he admitted respondents
position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use every
reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or
procedure, all in the interest of due process.25 Indeed, as stressed by the appellate court, respondents failure to
submit a position paper on time is not a ground for striking out the paper from the records, much less for dismissing a
complaint.26 Likewise, there is simply no truth to petitioners assertion that it was denied due process when the Labor
Arbiter admitted respondents position paper without requiring it to file a comment before admitting said position paper.
The essence of due process in administrative proceedings is simply an opportunity to explain ones side or an
opportunity to seek reconsideration of the action or ruling complained of. Obviously, there is nothing in the records that
would suggest that petitioner had absolute lack of opportunity to be heard.27 Petitioner had the right to file a motion
for reconsideration of the Labor Arbiters admission of respondents position paper, and even file a Reply thereto. In
fact, petitioner filed its position paper on April 2, 2001. It must be stressed that Article 280 of the Labor Code was
encoded in our statute books to hinder the circumvention by unscrupulous employers of the employees right to
security of tenure by indiscriminately and absolutely ruling out all written and oral agreements inharmonious with the
concept of regular employment defined therein.28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor Arbiters order dated 18 June 2001
as violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process. That
while suggesting that an Order be instead issued by the Labor Arbiter for complainants to refile this case, respondents
impliedly submit that there is not any substantial damage or prejudice upon the refiling, even so, respondents
suggestion acknowledges complainants right to prosecute this case, albeit with the burden of repeating the same
procedure, thus, entailing additional time, efforts, litigation cost and precious time for the Arbiter to repeat the same
process twice. Respondents suggestion, betrays its notion of prolonging, rather than promoting the early resolution of
the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without
prejudice beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule V, Rules
Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from
receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in the
arbitration branch of origin."
the same is not a serious flaw that had prejudiced the respondents right to due process. The case can still be refiled
because it has not yet prescribed. Anyway, Article 221 of the Labor Code provides:

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"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of
law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members
and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the interest of due process."
The admission by the Labor Arbiter of the complainants Position Paper and Supplemental Manifestation which were
belatedly filed just only shows that he acted within his discretion as he is enjoined by law to use every reasonable
means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure,
all in the interest of due process. Indeed, the failure to submit a position paper on time is not a ground for striking out
the paper from the records, much less for dismissing a complaint in the case of the complainant. (University of
Immaculate Conception vs. UIC Teaching and Non-Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is
enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without
technicalities of law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had
filed their position paper on 2 April 2001. What is material in the compliance of due process is the fact that the parties
are given the opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the opportunities to submit position papers".
(Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of law.29
We reject, as barren of factual basis, petitioners contention that respondents are considered as its talents, hence, not
regular employees of the broadcasting company. Petitioners claim that the functions performed by the respondents
are not at all necessary, desirable, or even vital to its trade or business is belied by the evidence on record.
Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they
coincide with those of the Labor Arbiter and the National Labor Relations Commission, when supported by substantial
evidence.30 The question of whether respondents are regular or project employees or independent contractors is
essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous effects to the
legions of production assistants working in the Philippine broadcasting industry.
We agree with respondents contention that where a person has rendered at least one year of service, regardless of
the nature of the activity performed, or where the work is continuous or intermittent, the employment is considered
regular as long as the activity exists, the reason being that a customary appointment is not indispensable before one
may be formally declared as having attained regular status. Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer except where the employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of the engagement of the employee or where
the work or services to be performed is seasonal in nature and the employment is for the duration of the season.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is a regular
employee:
The primary standard, therefore, of determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the employer. The test is
whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection
can be determined by considering the nature of work performed and its relation to the scheme of the particular
business or trade in its entirety. Also, if the employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while such activity exists.32
As elaborated by this Court in Magsalin v. National Organization of Working Men:33
Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a
"regular" workers security of tenure, however, can hardly be doubted. In determining whether an employment should
be considered regular or non-regular, the applicable test is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the
law itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a
fact that can be assessed by looking into the nature of the services rendered and its relation to the general scheme
under which the business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is
divorced from the normal activities required in carrying on the particular business or trade. But, although the work to
be performed is only for a specific project or seasonal, where a person thus engaged has been performing the job for
at least one year, even if the performance is not continuous or is merely intermittent, the law deems the repeated and
continuing need for its performance as being sufficient to indicate the necessity or desirability of that activity to the
business or trade of the employer. The employment of such person is also then deemed to be regular with respect to
such activity and while such activity exists.34
Not considered regular employees are "project employees," the completion or termination of which is more or less
determinable at the time of employment, such as those employed in connection with a particular construction project,
and "seasonal employees" whose employment by its nature is only desirable for a limited period of time. Even then,
any employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular
with respect to the activity performed and while such activity actually exists.

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It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent
fees" instead of salaries, that they did not observe the required office hours, and that they were permitted to join other
productions during their free time are not conclusive of the nature of their employment. Respondents cannot be
considered "talents" because they are not actors or actresses or radio specialists or mere clerks or utility employees.
They are regular employees who perform several different duties under the control and direction of ABS-CBN
executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are
necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have
rendered at least one year of service, whether continuous or broken, with respect to the activities in which they are
employed.35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation
necessitates the succor of the State. What determines whether a certain employment is regular or otherwise is not the
will or word of the employer, to which the worker oftentimes acquiesces, much less the procedure of hiring the
employee or the manner of paying the salary or the actual time spent at work. It is the character of the activities
performed in relation to the particular trade or business taking into account all the circumstances, and in some cases
the length of time of its performance and its continued existence.36 It is obvious that one year after they were
employed by petitioner, respondents became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees because no evidence was presented
to show that the duration and scope of the project were determined or specified at the time of their engagement.
Under existing jurisprudence, project could refer to two distinguishable types of activities. First, a project may refer to a
particular job or undertaking that is within the regular or usual business of the employer, but which is distinct and
separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and
ends at determined or determinable times. Second, the term project may also refer to a particular job or undertaking
that is not within the regular business of the employer. Such a job or undertaking must also be identifiably separate
and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and
ends at determined or determinable times.38
The principal test is whether or not the project employees were assigned to carry out a specific project or undertaking,
the duration and scope of which were specified at the time the employees were engaged for that project.39
In this case, it is undisputed that respondents had continuously performed the same activities for an average of five
years. Their assigned tasks are necessary or desirable in the usual business or trade of the petitioner. The persisting
need for their services is sufficient evidence of the necessity and indispensability of such services to petitioners
business or trade.40 While length of time may not be a sole controlling test for project employment, it can be a strong
factor to determine whether the employee was hired for a specific undertaking or in fact tasked to perform functions
which are vital, necessary and indispensable to the usual trade or business of the employer.41 We note further that
petitioner did not report the termination of respondents employment in the particular "project" to the Department of
Labor and Employment Regional Office having jurisdiction over the workplace within 30 days following the date of their
separation from work, using the prescribed form on employees termination/ dismissals/suspensions.42
As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier
pleadings, petitioner classified respondents as program employees, and in later pleadings, independent contractors.
Program employees, or project employees, are different from independent contractors because in the case of the
latter, no employer-employee relationship exists.
Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation43 is misplaced. In that
case, the Court explained why Jose Sonza, a well-known television and radio personality, was an independent
contractor and not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAS services to co-host its television and radio programs because of SONZAS peculiar
skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and
hiring complainant over other broadcasters of possibly similar experience and qualification as complainant belies
respondents claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them
from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not
have entered into the Agreement with SONZA but would have hired him through its personnel department just like any
other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that
this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN
granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job
contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA
were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x
x x and 13th month pay which the law automatically incorporates into every employer-employee contract. Whatever
benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.

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SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary
that they indicate more an independent contractual relationship rather than an employer-employee relationship. ABSCBN agreed to pay SONZA such huge talent fees precisely because of SONZAS unique skills, talent and celebrity
status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to
demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary
scales of ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual
relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the
AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.44
In the case at bar, however, the employer-employee relationship between petitioner and respondents has been
proven.
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was
required from them because they were merely hired through petitioners personnel department just like any ordinary
employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee
relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance negating
independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are
highly dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors
negates the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer and when the
worker, relative to the employer, does not furnish an independent business or professional service, such work is a
regular employment of such employee and not an independent contractor.45 The Court will peruse beyond any such
agreement to examine the facts that typify the parties actual relationship.46
It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its
rank-and-file employees. As regular employees, respondents are entitled to the benefits granted to all other regular
employees of petitioner under the CBA.47We quote with approval the ruling of the appellate court, that the reason why
production assistants were excluded from the CBA is precisely because they were erroneously classified and treated
as project employees by petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN
under the 1996-1999 CBA is a necessary consequence of public respondents ruling that private respondents as
production assistants of petitioner are regular employees. The monetary award is not considered as claims involving
the interpretation or implementation of the collective bargaining agreement. The reason why production assistants
were excluded from the said agreement is precisely because they were classified and treated as project employees by
petitioner.
As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee
but the nature of the activities performed by such employee in relation to the particular business or trade of the
employer. Considering that We have clearly found that private respondents are regular employees of petitioner, their
exclusion from the said CBA on the misplaced belief of the parties to the said agreement that they are project
employees, is therefore not proper. Finding said private respondents as regular employees and not as mere project
employees, they must be accorded the benefits due under the said Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the union representing the employees and the
employer. However, even the non-member employees are entitled to the benefits of the contract. To accord its benefits
only to members of the union without any valid reason would constitute undue discrimination against non-members. A
collective bargaining agreement is binding on all employees of the company. Therefore, whatever benefits are given to
the other employees of ABS-CBN must likewise be accorded to private respondents who were regular employees of
petitioner.48
Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of
the respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and all
labor contracts shall be construed in favor of the safety and decent living of the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution
of the Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.
Wwwwwwwwwwwwwwwwwwwwwwwwww
brent school inc vs zamora

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BRENT
SCHOOL,
INC.,
and
REV.
GABRIEL
DIMACHE, petitioners,
vs.
RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the President, and DOROTEO R.
ALEGRE, respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioners.
Mauricio G. Domogon for respondent Alegre.
NARVASA, J.:
The question presented by the proceedings at bar 1 is whether or not the provisions of the Labor Code, 2 as
amended, 3 have anathematized "fixed period employment" or employment for a term.
The root of the controversy at bar is an employment contract in virtue of which Doroteo R. Alegre was engaged as
athletic director by Brent School, Inc. at a yearly compensation of P20,000.00. 4 The contract fixed a specific term for
its existence, five (5) years, i.e., from July 18, 1971, the date of execution of the agreement, to July 17, 1976.
Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973, and September 14, 1974 reiterated the
same terms and conditions, including the expiry date, as those contained in the original contract of July 18, 1971. 5
Some three months before the expiration of the stipulated period, or more precisely on April 20,1976, Alegre was
given a copy of the report filed by Brent School with the Department of Labor advising of the termination of his
services effective on July 16, 1976. The stated ground for the termination was "completion of contract, expiration of
the definite period of employment." And a month or so later, on May 26, 1976, Alegre accepted the amount of
P3,177.71, and signed a receipt therefor containing the phrase, "in full payment of services for the period May 16, to
July 17, 1976 as full payment of contract."
However, at the investigation conducted by a Labor Conciliator of said report of termination of his services, Alegre
protested the announced termination of his employment. He argued that although his contract did stipulate that the
same would terminate on July 17, 1976, since his services were necessary and desirable in the usual business of his
employer, and his employment had lasted for five years, he had acquired the status of a regular employee and could
not be removed except for valid cause. 6 The Regional Director considered Brent School's report as anapplication for
clearance to terminate employment (not a report of termination), and accepting the recommendation of the Labor
Conciliator, refused to give such clearance and instead required the reinstatement of Alegre, as a "permanent
employee," to his former position without loss of seniority rights and with full back wages. The Director pronounced
"the ground relied upon by the respondent (Brent) in terminating the services of the complainant (Alegre) . . . (as) not
sanctioned by P.D. 442," and, quite oddly, as prohibited by Circular No. 8, series of 1969, of the Bureau of Private
Schools. 7
Brent School filed a motion for reconsideration. The Regional Director denied the motion and forwarded the case to
the Secretary of Labor for review. 8 The latter sustained the Regional Director. 9 Brent appealed to the Office of the
President. Again it was rebuffed. That Office dismissed its appeal for lack of merit and affirmed the Labor Secretary's
decision, ruling that Alegre was a permanent employee who could not be dismissed except for just cause, and
expiration of the employment contract was not one of the just causes provided in the Labor Code for termination of
services. 10
The School is now before this Court in a last attempt at vindication. That it will get here.
The employment contract between Brent School and Alegre was executed on July 18, 1971, at a time when the Labor
Code of the Philippines (P.D. 442) had not yet been promulgated. Indeed, the Code did not come into effect until
November 1, 1974, some three years after the perfection of the employment contract, and rights and obligations
thereunder had arisen and been mutually observed and enforced.
At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the validity of term
employment. It was impliedly but nonetheless clearly recognized by the Termination Pay Law, R.A. 1052, 11 as
amended by R.A. 1787. 12 Basically, this statute provided that
In cases of employment, without a definite period, in a commercial, industrial, or agricultural
establishment or enterprise, the employer or the employee may terminate at any time the employment
with just cause; or without just cause in the case of an employee by serving written notice on the
employer at least one month in advance, or in the case of an employer, by serving such notice to the
employee at least one month in advance or one-half month for every year of service of the employee,
whichever is longer, a fraction of at least six months being considered as one whole year.
The employer, upon whom no such notice was served in case of termination of employment without
just cause, may hold the employee liable for damages.
The employee, upon whom no such notice was served in case of termination of employment without
just cause, shall be entitled to compensation from the date of termination of his employment in an
amount equivalent to his salaries or wages corresponding to the required period of notice.
There was, to repeat, clear albeit implied recognition of the licitness of term employment. RA 1787 also enumerated
what it considered to be just causes for terminating an employmentwithout a definite period, either by the employer or
by the employee without incurring any liability therefor.
Prior, thereto, it was the Code of Commerce which governed employment without a fixed period, and also implicitly
acknowledged the propriety of employment with a fixed period. Its Article 302 provided that
In cases in which the contract of employment does not have a fixed period, any of the parties may
terminate it, notifying the other thereof one month in advance.
The factor or shop clerk shall have a right, in this case, to the salary corresponding to said month.

Page 112 of 191

The salary for the month directed to be given by the said Article 302 of the Code of Commerce to the factor or
shop clerk, was known as the mesada (from mes, Spanish for "month"). When Article 302 (together with many
other provisions of the Code of Commerce) was repealed by the Civil Code of the Philippines, Republic Act
No. 1052 was enacted avowedly for the precise purpose of reinstating the mesada.
Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and became effective on August
30,1950, itself deals with obligations with a period in section 2, Chapter 3, Title I, Book IV; and with contracts of labor
and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII, respectively, of Book IV. No prohibition against termor fixed-period employment is contained in any of its articles or is otherwise deducible therefrom.
It is plain then that when the employment contract was signed between Brent School and Alegre on July 18, 1971, it
was perfectly legitimate for them to include in it a stipulation fixing the duration thereof Stipulations for a term were
explicitly recognized as valid by this Court, for instance, in Biboso v. Victorias Milling Co., Inc., promulgated on March
31,
1977, 13 and J.Walter Thompson
Co.
(Phil.) v. NLRC,
promulgated
on
December
29,
1983. 14 The Thompson case involved an executive who had been engaged for a fixed period of three (3)
years. Biboso involved teachers in a private school as regards whom, the following pronouncement was made:
What is decisive is that petitioners (teachers) were well aware an the time that their tenure was for a
limited duration. Upon its termination, both parties to the employment relationship were free to renew it
or to let it lapse. (p. 254)
Under American law 15 the principle is the same. "Where a contract specifies the period of its duration, it terminates
on the expiration of such period." 16 "A contract of employment for a definite period terminates by its own terms at the
end of such period." 17
The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor Code
(Presidential Decree No. 442), which went into effect on November 1, 1974. The Code contained explicit references
to fixed period employment, or employment with a fixed ordefinite period. Nevertheless, obscuration of the principle of
licitness of term employment began to take place at about this time
Article 320, entitled "Probationary and fixed period employment," originally stated that the "termination of employment
of probationary employees and those employed WITH A FIXED PERIODshall be subject to such regulations as the
Secretary of Labor may prescribe." The asserted objective to was "prevent the circumvention of the right of the
employee to be secured in their employment as provided . . . (in the Code)."
Article 321 prescribed the just causes for which an employer could terminate "an employment without a definite
period."
And Article 319 undertook to define "employment without a fixed period" in the following manner: 18
An employment shall be deemed to be without a definite period for purposes of this Chapter where the
employee has been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.
The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement on a fixed
term or period would be valid where the employee "has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer." The definition seems a non sequitur. From the
premise that the duties of an employee entail "activities which are usually necessary or desirable in the usual
business or trade of the employer the" conclusion does not necessarily follow that the employer and employee
should be forbidden to stipulate any period of time for the performance of those activities. There is nothing essentially
contradictory between a definite period of an employment contract and the nature of the employee's duties set down in
that contract as being "usually necessary or desirable in the usual business or trade of the employer." The concept of
the employee's duties as being "usually necessary or desirable in the usual business or trade of the employer" is not
synonymous with or identical to employment with a fixed term. Logically, the decisive determinant in term employment
should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties
for the commencement and termination of their employment relationship, a day certainbeing understood to be "that
which must necessarily come, although it may not be known when." 19 Seasonal employment, and employment for a
particular project are merely instances employment in which a period, where not expressly set down, necessarily
implied.
Of course, the term period has a definite and settled signification. It means, "Length of existence; duration. A point
of time marking a termination as of a cause or an activity; an end, a limit, a bound; conclusion; termination. A series of
years, months or days in which something is completed. A time of definite length. . . . the period from one fixed date to
another fixed date . . ." 20 It connotes a "space of time which has an influence on an obligation as a result of a juridical
act, and either suspends its demandableness or produces its extinguishment." 21It should be apparent that this settled
and familiar notion of a period, in the context of a contract of employment, takes no account at all of the nature of the
duties of the employee; it has absolutely no relevance to the character of his duties as being "usually necessary or
desirable to the usual business of the employer," or not.
Subsequently, the foregoing articles regarding employment with "a definite period" and "regular" employment were
amended by Presidential Decree No. 850, effective December 16, 1975.
Article 320, dealing with "Probationary and fixed period employment," was altered byeliminating the reference to
persons "employed with a fixed period," and was renumbered (becoming Article 271). The article 22 now reads:
. . . Probationary employment.Probationary employment shall not exceed six months from the date
the employee started working, unless it is covered by an apprenticeship agreement stipulating a

Page 113 of 191

longer period. The services of an employee who has been engaged in a probationary basis may be
terminated for a just cause or when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at the time of his engagement.
An employee who is allowed to work after a probationary period shall be considered a regular
employee.
Also amended by PD 850 was Article 319 (entitled "Employment with a fixed period," supra) by (a) deleting mention of
employment with a fixed or definite period, (b) adding a general exclusion clause declaring irrelevant written or oral
agreements "to the contrary," and (c) making the provision treat exclusively of "regular" and "casual" employment. As
revised, said article, renumbered 270, 23 now reads:
. . . Regular and Casual Employment.The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed
to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer except where the employment has been
fixed for a specific project or undertaking the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or service to be employed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to he casual if it is not covered by the preceding
paragraph: provided, that, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while such actually exists.
The first paragraph is identical to Article 319 except that, as just mentioned, a clause has been added, to wit:
"The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of
the parties . . ." The clause would appear to be addressed inter alia to agreements fixing a definite period for
employment. There is withal no clear indication of the intent to deny validity to employment for a definite
period. Indeed, not only is the concept of regular employment not essentially inconsistent with employment for
a fixed term, as above pointed out,Article 272 of the Labor Code, as amended by said PD 850, still impliedly
acknowledged the propriety of term employment: it listed the "just causes" for which "an employer may
terminate employment without a definite period," thus giving rise to the inference that if the employment be
with a definite period, there need be no just cause for termination thereof if the ground be precisely the
expiration of the term agreed upon by the parties for the duration of such employment.
Still later, however, said Article 272 (formerly Article 321) was further amended by Batas Pambansa Bilang 130, 24 to
eliminate altogether reference to employment without a definite period. As lastly amended, the opening lines of the
article (renumbered 283), now pertinently read: "An employer may terminate an employment for any of the following
just causes: . . . " BP 130 thus completed the elimination of every reference in the Labor Code, express or implied, to
employment with a fixed or definite period or term.
It is in the light of the foregoing description of the development of the provisions of the Labor Code bearing on term or
fixed-period employment that the question posed in the opening paragraph of this opinion should now be addressed.
Is it then the legislative intention to outlaw stipulations in employment contracts laying down a definite period therefor?
Are such stipulations in essence contrary to public policy and should not on this account be accorded legitimacy?
On the one hand, there is the gradual and progressive elimination of references to term or fixed-period employment in
the Labor Code, and the specific statement of the rule 25 that
. . . Regular and Casual Employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed
to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer except where the employment has been
fixed for a specific project or undertaking the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or service to be employed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: provided, that, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while such actually exists.
There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the validity and
propriety of contracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the
parties to fix the duration of a contract, whatever its object, be it specie, goods or services, except the general
admonition against stipulations contrary to law, morals, good customs, public order or public policy. 26Under the Civil
Code, therefore, and as a general proposition, fixed-term employment contracts are not limited, as they are under the
present Labor Code, to those by nature seasonal or for specific projects with pre-determined dates of completion; they
also include those to which the parties by free choice have assigned a specific date of termination.
Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor for
specific projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts,
for one, to which, whatever the nature of the engagement, the concept of regular employment will all that it implies
does not appear ever to have been applied, Article 280 of the Labor Code not withstanding; also appointments to the
positions of dean, assistant dean, college secretary, principal, and other administrative offices in educational
institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a
necessity, without which no reasonable rotation would be possible. Similarly, despite the provisions of Article 280,

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Policy, Instructions No. 8 of the Minister of Labor 27 implicitly recognize that certain company officials may be elected
for what would amount to fixed periods, at the expiration of which they would have to stand down, in providing that
these officials," . . . may lose their jobs as president, executive vice-president or vice-president, etc. because the
stockholders or the board of directors for one reason or another did not re-elect them."
There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods
have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or
disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or
stated otherwise, where the reason for the law does not exist, e.g., where it is indeed the employee himself who
insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific
project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit,
therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted
"to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?"
As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow
and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed
period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an
employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal
interpretation should be eschewed or avoided. The law must be given a reasonable interpretation, to preclude
absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of
freedom of contract to remedy the evil of employer's using it as a means to prevent their employees from obtaining
security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the
head.
It is a salutary principle in statutory construction that there exists a valid presumption that undesirable
consequences were never intended by a legislative measure, and that a construction of which the
statute is fairly susceptible is favored, which will avoid all objecionable mischievous, undefensible,
wrongful, evil and injurious consequences. 28
Nothing is better settled than that courts are not to give words a meaning which would lead to absurd
or unreasonable consequences. That s a principle that does back to In re Allen decided oil October
27, 1903, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to
absurd results. That is a strong argument against its adoption. The words of Justice Laurel are
particularly apt. Thus: "The fact that the construction placed upon the statute by the appellants would
lead to an absurdity is another argument for rejecting it. . . ." 29
. . . We have, here, then a case where the true intent of the law is clear that calls for the application of
the cardinal rule of statutory construction that such intent of spirit must prevail over the letter thereof,
for whatever is within the spirit of a statute is within the statute, since adherence to the letter would
result in absurdity, injustice and contradictions and would defeat the plain and vital purpose of the
statute. 30
Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280
of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's
right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral
agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the
substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of
tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly
and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the
employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes
other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to
lead to absurd and unintended consequences.
Such interpretation puts the seal on Bibiso 31 upon the effect of the expiry of an agreed period of employment as still
good rulea rule reaffirmed in the recent case of Escudero vs. Office of the President(G.R. No. 57822, April 26, 1989)
where, in the fairly analogous case of a teacher being served by her school a notice of termination following the
expiration of the last of three successive fixed-term employment contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her employment was
probationary, contractual in nature, and one with a definitive period. At the expiration of the period
stipulated in the contract, her appointment was deemed terminated and the letter informing her of the
non-renewal of her contract is not a condition sine qua non before Reyes may be deemed to have
ceased in the employ of petitioner UST. The notice is a mere reminder that Reyes' contract of
employment was due to expire and that the contract would no longer be renewed. It is not a letter of
termination. The interpretation that the notice is only a reminder is consistent with the court's finding
in Labajo supra. ... 32
Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of his last contract with
Brent School on July 16, 1976 without the necessity of any notice. The advance written advice given the Department
of Labor with copy to said petitioner was a mere reminder of the impending expiration of his contract, not a letter of
termination, nor an application for clearance to terminate which needed the approval of the Department of Labor to
make the termination of his services effective. In any case, such clearance should properly have been given, not
denied.

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WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE. Respondent Alegre's
contract of employment with Brent School having lawfully terminated with and by reason of the expiration of the
agreed term of period thereof, he is declared not entitled to reinstatement and the other relief awarded and confirmed
on appeal in the proceedings below. No pronouncement as to costs.
SO ORDERED.
Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Corts, Grio-Aquino, Medialdea
and Regalado, JJ., concur.
Fernan, C.J., took no part.

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COLUMBUS PHILIPPINES BUS CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
ZENAIDA DOMASIG and ROMAN DOMASIG, respondents.
DECISION
DE LEON, JR., J.:
This is a petition for certiorari[1] which seeks to nullify the Resolution[2] dated October 29, 1993 of the National
Labor Relations Commission (NLRC) affirming the Decision[3] dated September 8, 1992 of the Labor Arbiter Ceferina
J. Diosana who found and adjudged that private respondents Roman and Zenaida Domasig were illegally dismissed
by petitioner Columbus Philippines Bus Corporation from their positions as driver and bus conductress, respectively.
Petitioner Columbus Philippines Bus Corporation is engaged in the business of operating passenger
buses. Since the start of its operations in 1990, it has maintained a list of drivers and conductors who rendered service
in its bus units allegedly on a first come first served basis and compensated purely on commission. The drivers and
conductors/conductress worked for about ten (10) to fifteen (15) days a month and were allegedly not required to work
everyday.
Private respondent Roman Domasig started working as a driver with the petitioner on August 30, 1990 with a
daily income ranging from Three Hundred Fifty Pesos (P350.00) to Six Hundred Fifty Pesos (P650.00), while his wife
and co-respondent, Zenaida Domasig, was employed as a bus conductress on October 1, 1990 with a daily income of
Two Hundred Fifty Pesos (P250.00) to Five Hundred Pesos (P500.00). The employment of private respondents
Roman and Zenaida Domasig with the petitioner was abruptly terminated on January 21 and 22, 1992, respectively,
for their having allegedly formed a labor union.
Thus, these two (2) related cases of unfair labor practice, illegal dismissal, illegal deductions from salary, and
non-payment of service incentive leave pay and 13 thmonth pay were instituted by private respondents against
petitioner Columbus Philippines Bus Corporation and its officers, Atty. Ferdinand Catabian and Mrs. Amelia de Dios,
before the Department of Labor and Employment (DOLE), Arbitration Branch in Manila, National Capital Region. The
said related cases were assigned to Labor Arbiter Ceferina J. Diosa.
In his Sinumpaang Salaysay private respondent Roman Domasig alleged, among others, the following in his
affidavit-complaint, to wit:
xxx xxx xxx
3. Sa tindi ng galit ng pangasiwaan at upang hindi mabuo ang itinatayo naming unyon, akoy basta na lamang
pinababa mula sa aking regular na bus na may numerong 109 nuong ika-21 ng Enero 1992, bandang alas 4:30 ng
madaling araw nang akoy papalabas na sa garahe at bumiyahe na sana. Simula na noon hindi na ako pinalabas sa
biyahe. Ibinigay na sa iba ang aking regular na bus.
4. Kamiy napilitang magtayo ng unyon dahil sa mahirap na kalagayan namin sa trabaho. Hinaharap namin ang
sumusunod:
(a) Mahabang oras sa trabaho. Umaabot sa higit kumulang 19 hanggang 20 oras ang ginugugol namin sa
trabaho. Kailangang nasa garahe na kami at lumabas ng alas-4 ng madaling araw at makaalis lamang pagkatapos
makapag-engreso ng collection bandang hatinggabi na.
(b) Illegal deductions. Tuwing may labas kami, sapilitang kinakaltasan ang aming sahod para daw sa pulis. Hindi na
nga kami binibigyan ng mga benepisyong itinatakda ng batas gaya ng 13 th month pay at service incentive leave,
kinakaltasan pa kami para daw sa pulis.
(k) Wala kaming kaseguruhan sa trabaho. Kapag kamiy nagreklamo, kami agad nilang tatanggalin. Napakadali nilang
gawin. Hindi ka lang bibigyan ng bus assignment, wala ka ng magagawa.
5. Tulad ng ganitong kalagayan namin sa trabaho, inumpisahan naming mangumbinsi sa kapwa naming empleyado
noong Disyembre pa ng nakaraang taon. Ang ilan sa mga kasama ko ay sina Leon Agarao, Santiago Tagum,
Alejandro Bayroon at Zenaida Domasig. Silay tinanggal din sa trabaho. Kumuha kami ng Sama-Samang Pahayag
mula sa National Federation of Labor para papirmahan sa mga nais sumapi sa Unyon. Columbus Workers Union ang
aming lokal at itoy isinapi namin sa National Federation of Labor (NFL).
6. Pagpasok ng bagong taon, 1992, mayroon na kaming napapirma na higit sa limampu (50). Mahigit tatlong daan
kami, drayber at konduktor. Sa unang linggo pa lamang ng Enero 1992. Natutunan ng kompanya ang kilos
namin. Tinawag na ako ni Atty. Ferdinand Catabian, General Manager ng CPBC bago akoy tuluyan niyang tinanggal
noong ika-21 ng Enero 1992 at tinanong kung totoo na mayroon kaming itinatatag na unyon. Tinanggihan ko noon at
akoy kanyang binigyan ng babala ng ganito: Domasig, ayaw ko ng unyon. Kapag mayroon akong
mapapanghawakang ebidensiya na kayoy nagtatayo ng unyon at ikaw ay kasama, titiyakin ko sa iyo na tanggal ka
agad.
7. Dumating ang araw namin noong ika-21 ng Enero. Noong araw na iyon, humigit kumulang alas 4:30 ng madaling
araw, akoy papalabas ng garahe. Dala-Dala ko ang aking regular bus No. 109. Pinahinto ako ni Legorio Vellesar,
dating dispatcher at ngayon ay traffic supervisor at sinabihan na itabi ko ang bus dahil kakausapin daw ako ni Atty.
Catabian. Kinabahan na ako nang ibigay sa iba ang aking minamanehong bus.
8. Pagpasok ko sa opisina ni Atty. Catabian, sinabihan agad ako ni Atty. Catabian ng ganito: Domasig, Hindi ka na
makakalusot pa. Tingnan mo ito. Mayroon siyang ipinakitang xerox copy ng aming pinapipirmahan Sama-Samang
Pahayag. Sa xerox na ito nakita ko ang pirma ni Zenaida Domasig. Domasig, ito ang ebidensiya na ikaw ay kasama
sa unyon. Alam mo Domasig, akoy , mabuting kaibigan ngunit masamang kaaway. Sinabi ko sa iyo noon na kapag
may mahawakan akong ebidensiya na nagtatayo kayo ng unyon maghihiwalay tayo. Ayaw na ayaw ko ng unyon.
Pagkasabi nito ni Atty. Catabian, akoy kanyang pinalabas na dahil marami pang driver at konductor na nakapila sa
labas.

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9. Katunayan, bago kinausap ni Atty. Catabian, marami na sa mga kapwa ko employado ang kinausap ni Atty.
Catabian. Pinapipirma sila sa isang kasulatan na kung saan binabawi nila ang kanilang pirma sa Sama-Samang
Pahayag. Ang hindi pumirma ay hindi na pinalabas sa biyahe.
10. Ganon man ang nangyari, pinagpasiyahan pa rin ng mga kasama kong namumuno, kasama ako, na ipagpatuloy
pa rin ang pagtatayo ng unyon. Dahil dito, ipinasiya ng mga namumuno, kasama ako at si Zenaida Domasig, na
huwag pumirma sa kasulatan at ihain na ang petition for certification election.
11. Nagdulot na matinding pagkabalisa at takot sa amin ni Zenaida Domasig ang biglang pagtanggal nila sa amin.
Wala na kaming aasahan para sa araw-araw na pangangailangan ng aming pamilya. Nabaon kami sa utang at
malaking kahihiyan sa mga kapit-bahay at kaibigan namin. Tuloy hating-gabi na kung minsan, pinag-iisipan pa rin
namin ang kinabukasan ng mga bata: ano kaya ang kanilang kinabukasan. Kung kami o isa sa amin ay tatalikod sa
aming pinirmahan, mapapahamak din ang kapwa naming empleyado at tuluyang mawasak ang unyon.
12. Sadyang napakalupit at hindi makatao ang ginawa ng kompanya sa aming mag-asawa at sa kapwa
namin empleyado. Wala man lamang notice sa amin. Hindi man lang kami pinagpaliwanag. Wala naman anumang
violations na nagawa namin kundi ang pagtatayo ng unyon.
13. Dahil dito, hinihingi ko sa Tanggapan ito na ibalik sa akin, para sa pamilya, ang nawalang sahod ko sa panahon na
akoy tanggal sa trabaho. Tuwing labas kumikita ako mula P350 hanggang P650.00 sa loob ng 20 oras humigit
kumulang. Hinihingi ko rin na ibalik ako sa trabaho at pagbayarin ang kompanya ng damages bunga ng pinsalang
tinamasa namin.
Private respondent Zenaida Domasig also made the following allegations in her affidavit-complaint, to wit:
3. Kami'y nagtayo ng unyon dahil sa api naming kalagayan sa trabaho. Napakahaba ang oras ng trabaho
namin. Kailangan pumasok kami ng alas-4 ng madaling araw at makakuwi kami ng alas-12 ng hatinggabi. Salitan ng
trabaho at pahinga ang aming pagtatarabaho: dalawang (2) araw na labas at dalawang (2) araw na
pahinga.Maraming sapilitang kaltas mula sa sahod namin. Tuwing labas namin kinakaltasan kami ng halagang P18.50
ngunit hindi maliwanag kung para saan ito. Mayroon P300 namang resibong ibinibigay. Kapag magreklamo kami,
hindi naman kami pasasampahin sa bus.
4. Ang benepisyong itinatakda ng batas ay hindi pa ibinibigay. Akoy nagkasakit mula ika-15 ng Nobyembre 1991
hanggang ika-14 ng Disyembre1991. Gumawa ako ng sick leave application: isa para sa SSS at isa para sa
Employees Compensation Commission. Si Ginoong Roman Domasig ang nagpapirma ng aking applications sa
kompanya.Ngunit, hindi nila ibinalik kay Ginoong Domasig and aking applications. Noong lamang ika-12 ng Enero
1992 nila ibinigay sa SSS ang aking sick leave application. Hindi nila ibinigay sa ECC ang isang application ko at
ibinalik na lang basta sa akin.
5. Ang hindi nila pagfile agad ng aking sick leave ay ginawa ng kompanya upang magipit kaming mga nangungunang
kasapi ng unyon.
6. Sa layuning mapabuti ang aming kalagayan, inumpisahan naming buuin ang unyon noong mga huling buwan ng
1991. Kumuha kami ng application for membership sa National Federation of Labor (NFL). Itoy ang Sama-samang
Pahayag. Bago matapos ang taong 1991, kamiy nakapagpapirma ng hindi kukulangin sa tatlumpu. Sa una o
pangalawang linggong Enero 1992, umabot na malamang sa 70 ang nakapirma. Ngunit sa unang linggo pa lamang
ng Enero 1992, mukhang natutunogan ng pangasiwaan na mayroong nagtatayo ng unyon. Inumpisahan na ni Atty.
Ferdinand Catabian na isa-isang pagtatanungin ang kanilang pinaghihinalaang lider ng unyon.
Isa sa aking asawa sa mga tinatawag at pinagtatanong ni Atty. Catabian. Silay binigyan ng mahigpit na
babala. Tinawag uli si Ginoong Domasig noong ika-21 ng Enero 1992. Bago siya tinawag marami ng drayber at
konduktor/konduktora na pinatawag ni Atty. Catabian at silay naghihintay na kausapin ni Atty. Catabian. Ang mga
kinausap ay hindi pinalalabas hanggang hindi sila pumirma sa kasulatan na kanilang binabawi ang kanilang pagsapi
sa unyon, ang Columbus Workers Union. Hindi na pinalabas si Ginoong Domasig mula ng araw na iyon dahil hindi
siya pumirma sa kasulatan.
7. Kinabukasan, ika-22 ng Enero 1992, akoy hindi na rin binigyan ng bus assignment. Wala namang ibinibintang na
violation laban sa akin. Gaya ng nasabi ko na, wala namang memorandum na ibinigay sa akin. Basta na lamang hindi
ako binibigyan ng bus assignment mula noon magpahanggang ngayon. Ang tanging dahilan ng pagtanggal nila sa
akin ay ang aking pagsapi sa unyon. Akoy isa sa mga naunang pumirma sa Sama-Samang Pahayag ng pagsapi sa
unyon na kinuha namin mula sa National Federation.
8. Agad agad na pinag-usapan ng liderato ng unyon ang panggigipit ng isinagawa ng pangasiwaan. Nagpasiya and
iba na para makalabas sila at may makain ang pamilya nila na pumirma sa kasulatan ng pagbawi ng pagiging kasapi
nila ng CWU. Silay pinalabas. Si Felipe Madrid, isa sa lider namin, ay inilipat pa nga sa Air Conditioned bus
pagkatapos niyang pumirma sa kasulatan. Ang dati niyang bus ay No. 109. Hindi ito Air Con. Ngayon, ang kanyang
minamaneho ay Bus No. 17 isang Air Con Bus. Ang mga hindi pumirma ay hindi na pinalabas.
9. Ganon paman, pinagpasiyahan na ituloy namin ang pagtatayo ng unyon. Kayat naghain na kami ng isang petition
for certification election sa Department of Labor and Employment.
10. Ang ginawang pagtanggal sa aming mag-asawa ay nagdulot ng malaking pinsala sa aming pamilya. Nabalisa
kaming mag-asawa dahil wala na kaming maasahang trabaho. Napilitan kami umutang na sa mga kaibigan at kapitbahay. Dahil hindi kami makapagbayad sa takdang araw, malaking kahihiyan ang inaabot namin.Naguguluhan din ang
pag-iisip namin lalung-lalo na kapag gutom ang mga anak namin at wala man lang kaming pambili ng panawidgutom. Hindi naman namin maaaring talikuran ang unyon. Kami ang nauna sa pagpapirma sa unyon.
In support of their respective allegations, private respondents submitted documentary evidence such as the
Petition for Certification Election, Sama-samang Pahayag ng Pagsapi, Payroll Slips and Parking Fee Slip Receipt.

Page 118 of 191

On the other hand, the petitioner failed to attend the scheduled hearings of the said cases on the alleged ground
that it was not notified. It was only after an adverse judgment of the Labor Arbiter that petitioner finally filed its position
papers.
In her Decision dated September 8, 1992, the Labor Arbiter found for the complainants, herein private
respondents, and ordered the petitioner to reinstate private respondents Roman and Zenaida Domasig to their former
positions as driver and bus conductress, respectively, without loss of seniority rights and with backpay accruing from
January 21, 1992 and January 22, 1992 up to their actual reinstatement. However, private respondents other money
claims were dismissed for lack of merit.
Aggrieved by the adverse judgment of the Labor Arbiter, petitioner appealed to public respondent National Labor
Relations Commission (NLRC) where it was assigned to the First Division. On October 29, 1993, the NLRC
affirmed in toto the Labor Arbiters decision, and in its Order[4] dated January 7, 1994 denied the petitioners motion for
reconsideration. The petitioner now challenges the correctness of the NLRCs decision via the instant petition.
The petitioner Columbus Philippines Bus Corporation alleges that the private respondents like its other drivers
and conductors are not regular employees, that the services of private respondents were rendered on a first come first
served basis and compensated purely on commission basis; that they worked for only about ten (10) to fifteen (15)
days a month, and only when they felt like doing so.
To determine whether the employment of an employee is regular or casual, Article 280[5] of the Labor Code is
definitive; and whether such employment is regular or casual has nothing to do with the manner of computing and
paying the employees wages or compensation. Rather the said provision of the Labor Code provides that:
The primary standard, x x x of determining a regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the
former is usually necessary or desirable in the usual business or trade of the employer. The connection can be
determined by considering the nature of the work performed and its relation to the scheme of the particular business
or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance
is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is
also consider regular, but only with respect to such activity and while such activity exists.[6]
Considering the above-quoted standard for determining a regular employment, it appears that the employment of
private respondents is regular. They perform work necessary and desirable in the business of the petitioner. Without
the services of the bus drivers and conductors, like the private respondents, the petitioner could not have operated
and managed its business of providing transportation services to the public. However, not all employees paid on
commission basis can legally be considered as regular employees. In the case of Singer Sewing Machine Company v.
Drilon,[7] it was held that while certain individuals were hired to work as collectors or collecting agents of the company,
nevertheless, per a certain written agreement they were considered as independent contractors and not employees of
the company.
As its principal contention, petitioner ascribes grave abuse of discretion on the part of public respondent NLRC in
affirming the decision of the Labor Arbiter for being violative of due process and in not ordering the latter to conduct a
formal hearing of the case.
Petitioner argues that it did not receive any notice for the hearing scheduled on April 14, 1992. It stressed that the
registered mail supposedly containing the notice for the aforesaid hearing was returned unclaimed
and that no registry notice from the post office was ever delivered to it so that it could claim the same. Petitioner
likewise contends that public respondent NLRC disregarded the pronouncement of this Court in the case of Johnson
& Johnson (Phils.) Inc. v. Court of Appeals,[8] where we held that:
The general rule is that service by registered mail is complete upon actual receipt thereof by the addressee. The
exception is where the addressee does not claim his mail within 5 days from the date of the first notice of the
postmaster, in which case the service takes effect upon the expiration of such period.
Inasmuch as the exception refers to only constructive and not actual service, such exception must be applied only
upon conclusive proof that a first notice was duly sent by the postmaster to the addressee. The presumption that
official duty has been regularly performed is not applicable where there is evidence to the contrary, as in the case at
bar.
A certification from the postmaster would be the best evidence to prove that the notice has been validly sent. The
mailman may also testify that the notice was actually delivered, as we held in Aldecoa vs. Hon. Arellano and
Siquenza. The postmaster should certify not only that the notice was issued or sent but also as to how, when and to
whom the delivery thereof was made.
In the light of the record and the evidence adduced in these two (2) related cases, petitioners argument appears
to be without basis. Hence, the petition must be dismissed.
Sections 4 and 5 of the Revised Rules of Procedure of the NLRC, provides the rule for the service of summons
and notices in NLRC cases, to wit:
Sec. 4. Service of notices and resolutions. a) Notices or summons and copies of orders, resolutions or decisions shall
be served personally by the bailiff or the duly authorized public officer or by registered mail on the parties to the case
within five (5) days from receipt thereof by the serving officer; Provided, that where a party is represented by counsel
or authorized representative, service shall be made on the latter.
xxx xxx xxx
Sec. 5. Proof and completeness of service. The return is prima facie proof of the facts indicated therein. Service by
registered mail is complete upon receipt by the addressee or his agent.[9]

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Considering the above-quoted provisions of the Revised Rules of Procedure of the NLRC, service by registered
mail is complete after five (5) days from the date of first notice of the postmaster in the event that the addressee fails
to claim his registered mail from the post office. In the instant cases, petitioner merely stressed that the registered mail
containing the notice for the aforesaid scheduled hearing was returned unclaimed and that it did not allegedly receive
any registry notice from the post office. However, it is a fundamental rule that unless the contrary is proven, official
duty is presumed to have been performed regularly and judicial proceedings regularly conducted. This presumption of
the regularity of the quasi-judicial proceedings before DOLE includes the presumption of regularity of service of
summons and other notices. It was therefore incumbent upon herein petitioner to rebut that legal presumption with
competent and proper evidence, for the return of the registered mail as unclaimed is prima facie proof of the facts
indicated therein.[10] But petitioner failed to do so.
A thorough review of the record of this case discloses the following facts and circumstances, to wit:
1. Petitioner was notified of the hearing on March 12, 1992, at 10:30 oclock in the morning, with the following
warning:
Failure to appear and submit position paper with affidavit of witness or witnesses and other
documentary evidence, if any, will be construed as a waiver of the opportunity to be heard and case
will be heard ex-parte.
2. Since there was no proof of service to petitioner of this scheduled hearing, another hearing was set on
March 26, 1992 at 1:30 oclock in the afternoon.
3. However, on March 16, 1992, petitioner through its liason officer, Mr. Napoleon Pandes, filed a
Manifestation and Motion to Reset Schedule Hearing, stating, among other things, that the hearing be
reset to April 9, 1992 at 9:30 oclock in the morning or at a later date and time convenient to this
Honorable Commission.
4. Thus another hearing was set on April 14, 1992 at 10:00 oclock in the morning again with the same
warning as above quoted.
5. In the April 14, 1992 hearing, private respondents appeared as scheduled and waited up to 11:05 a.m.,
but petitioner failed to appear and submit the required position paper, hence, upon motion of private
respondents the case was submitted for decision.
As clearly gleaned from the foregoing facts, petitioner was afforded more than an adequate opportunity to present
its evidence. In fact, on March 16, 1992, petitioner through its Liason Officer, Mr. Napoleon Pandes, even filed a
Manifestation and Motion, praying that the hearing set on March 26, 1992 be reset to April 9, 1992 or at a later date
and time convenient to the Commission. But on the re-scheduled hearing on April 14, 1992, petitioner again failed to
appear nor did it file its position paper. If petitioner were really concerned with the outcome of the instant cases,
petitioner should have verified, at the very least whether its Manifestation and Motion was acted upon. As correctly
stated by the NLRC in its Resolution:
Obviously, respondents were not so inclined as they must have found the same as an excuse to delay the
proceedings in the instant cases. For how else can one explain respondents failure to show up or follow up on their
motions requesting for resetting, and their filing of a position paper five (5) long months after filing their motions and
only after a Decision not to their liking was rendered by the Labor Arbiter.
Likewise, notwithstanding petitioners allegation that it has not received the notices of the Labor Arbiter, it,
however, admittedly received a copy of the decision of the Labor Arbiter, and then seasonably pleaded its case by way
of appeal before the NLRC. In the interest of justice, the NLRC considered petitioners position paper, even if it was
filed late.
As to the question whether the Labor Arbiter should have conducted a formal hearing, Section 4 of Rule V of the
New Rules of Procedure of the NLRC, clearly provides that:
Determination of Necessity of Hearing. Immediately after the submission by the parties of their position
papers/memorandum, the Labor Arbiter shall motu proprio determine whether there is need for a formal trial or
hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory
questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary
evidence, if any from any party or witness.
It is clear from the above-quoted procedural rule that the Labor Arbiter has the authority to determine whether or not
there is a necessity for conducting formal hearings in cases brought before him for adjudication. In other words, the
holding of a formal hearing or trial is discretionary with the Labor Arbiter and is something that the parties cannot
demand as a matter of right.[11] It is entirely within the authority of the Labor Arbiter to decide a labor case before him,
based on the position papers and supporting documents of the parties, without a trial or formal hearing. The
requirement of due process in labor cases before a Labor Arbiter is satisfied when the parties are given the
opportunity to submit their position papers to which they are supposed to attach all the supporting documents or
documentary evidence that would prove their respective claims, in the event the Labor Arbiter determines that no
formal hearing would be conducted or that such hearing was not necessary.[12]
Equally without merit is petitioners contention that public respondent NLRC committed grave abuse of discretion
amounting to lack of jurisdiction in holding that private respondents were illegally dismissed. Petitioners contention
that the Labor Arbiter ruled in favor of private respondents not because of the evidence submitted by the private
respondents but because of petitioners failure to appear in the scheduled hearing on April 14, 1992 is without factual
basis as shown by the record.
The NLRC, in arriving at its decision regarding the illegal dismissal of private respondents, considered the
position papers of the parties and the evidence on record.The NLRC in its decision agreed with the Labor Arbiters
findings and conclusions and found nothing substantial in petitioners position paper to warrant a reversal thereof, thus:

Page 120 of 191

At any rate, and in the interest of justice, We have considered respondents Position Paper, although filed belatedly,
and We find that the allegations therein and the evidence introduced in support thereof (See annexes A to D-12 of
respondents Position Paper; pp. 62-73 of the Records) do not suffice to support respondents claim that complainants
were not dismissed from their employment.
We, therefore, find that the Labor Arbiter did not commit any error in holding that:
Complainants claim that due to their union activities, as they were the ones instrumental in the formation of the union
in the respondents premises, enlisted employees to be members of the local union, coupled with the fact that a
petition for certification of an election was filed before the Department of Labor and Employment, in view of which they
were not given any bus assignments, which is tantamount to their dismissal from the service, appears to be credible
and with basis. As above stated, respondents miserably failed to controvert this fact, thus, complainants should be
reinstated to their former positions, Roman Domasig as driver, and Zenaida Domasig as conductress, with full
backwages and other benefits and without loss of seniority rights.
Well-settled is the jurisprudential rule that factual findings of quasi-judicial agencies, such as the NLRC, which
have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only
respect but even finality. They are binding upon this Court which is not a trier of facts. Only upon clear showing of
grave abuse of discretion, or that such factual findings were arrived at arbitrarily or in disregard of the evidence on
record will this Court step in and proceed to make its own independent evaluation of the facts.[13] No cogent reason
exists in the instant cases to deviate from this settled rule.
In termination cases, like the ones before us, the burden of proving that the dismissal of the employees was for a
valid and authorized cause rests on the employer. It was incumbent upon petitioner Columbus Philippines Bus
Corporation to show by substantial evidence that the termination of the employment of private respondents was validly
made and failure to discharge that duty would mean that the dismissal is not justified and therefore illegal. [14] On the
other hand, abandonment as a just and valid ground for dismissal requires the deliberate, unjustified refusal of the
employee to resume his employment. Mere absence or failure to report for work, after notice to return, is not enough
to amount to such abandonment.
For a valid finding of abandonment, two (2) factors must be present, viz: (a) the failure to report for work or
absence without valid or justifiable reason; and (b) a clear intention to sever employer-employee relationship, with the
second element as the more determinative factor being manifested by some overt acts.[15] The herein petitioner failed
to present evidence to justify the dismissal of the private respondents. The position paper of petitioner merely contains
bare allegations that the hiring of private respondents was purely on commission basis; that they have no working
hours; that they are not required to work everyday and that they work only when they wish to earn.It also alleged that
private respondents were not dismissed nor suspended, but that they allegedly abandoned their jobs by simply failing
to work.
From the factual findings of the Labor Arbiter, the absence of private respondents from work was not without valid
or justifiable reason. First, on January 21 and 22, 1992, private respondents were asked to relinquish their assigned
buses and from that date forward, they were not given bus assignments. Thus, under the circumstances, we find
private respondents absences supported with valid reason. Second, it appeared that private respondents never
intended to sever their working relationship with petitioner. Two weeks after private respondents were not given bus
assignments, they filed their subject complaint for illegal dismissal with the DOLE. An employee who forthwith takes
steps to protest his layoff cannot be said to have abandoned his work.
It is our view and we hold that the finding and conclusion of the Labor Arbiter and the respondent NLRC that
private respondents were illegally dismissed are correct and not arbitrary. We find no cogent reason to reverse the
same.
However, the amount of backwages must be properly computed inasmuch as in their respective complaints,
private respondents Roman and Zenaida Domasig alleged that they received a daily income ranging from Three
Hundred Fifty Pesos (P350.00) to Six Hundred Fifty Pesos (P650.00), and Two Hundred Fifty Pesos (P250.00) to Five
Hundred Pesos (P500.00) respectively. The pronouncement of this Court in the case of Icawat v. NLRC,[16] is
relevant and instructive, to wit:
x x x, the dismissal of private respondent being illegal, he is entitled to the payment of backwages. We do not,
however, agree with the amount awarded to herein private respondent in the absence of any factual basis thereof.
Private respondent has not presented any evidence to warrant such award. The statement in his complaint that he is
earning P800.00 to P1,000.00 when he is driving petitioners' jeepney on a "straight" basis, or P500.00 when driving on
"half shift" basis, is purely self-serving and speculative.
WHEREFORE, the petition is hereby DISMISSED, and the challenged Resolution of public respondent NLRC is
AFFIRMED. The computation of the amount of backwages to which private respondents Roman Domasig and
Zenaida Domasig are entitled is hereby REMANDED to the Labor Arbiter for appropriate action.
SO ORDERED.

Page 121 of 191

SINGER
SEWING
MACHINE
COMPANY, petitioner
vs.
HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. CHAGUILE, JR., and SINGER MACHINE COLLECTORS
UNION-BAGUIO (SIMACUB), respondents.
Misa,
Castro,
Villanueva,
Oposa,
Narvasa
&
Pesigan
for
petitioner.
Domogan, Lockey, Orate & Dao-ayan Law Office for private respondent.
GUTIERREZ, JR., J.:
This is a petition for certiorari assailing the order of Med-Arbiter Designate Felix B. Chaguile, Jr., the resolution of then
Labor Secretary Franklin M. Drilon affirming said order on appeal and the order denying the motion for reconsideration
in the case entitled "In Re: Petition for Direct Certification as the Sole and Exclusive Collective Bargaining Agent of
Collectors of Singer Sewing Machine Company-Singer Machine Collectors Union-Baguio (SIMACUB)" docketed as
OS-MA-A-7-119-89 (IRD Case No. 02-89 MED).
On February 15, 1989, the respondent union filed a petition for direct certification as the sole and exclusive bargaining
agent of all collectors of the Singer Sewing Machine Company, Baguio City branch (hereinafter referred to as "the
Company").
The Company opposed the petition mainly on the ground that the union members are actually not employees but are
independent contractors as evidenced by the collection agency agreement which they signed.
The respondent Med-Arbiter, finding that there exists an employer-employee relationship between the union members
and the Company, granted the petition for certification election. On appeal, Secretary of Labor Franklin M. Drilon
affirmed it. The motion for reconsideration of the Secretary's resolution was denied. Hence, this petition in which the
Company alleges that public respondents acted in excess of jurisdiction and/or committed grave abuse of discretion in
that:
a) the Department of Labor and Employment (DOLE) has no jurisdiction over the case since the existence of
employer-employee relationship is at issue;
b) the right of petitioner to due process was denied when the evidence of the union members' being
commission agents was disregarded by the Labor Secretary;
c) the public respondents patently erred in finding that there exists an employer-employee relationship;
d) the public respondents whimsically disregarded the well-settled rule that commission agents are not
employees but are independent contractors.
The respondents, on the other hand, insist that the provisions of the Collection Agency Agreement belie the
Company's position that the union members are independent contractors. To prove that union members are
employees, it is asserted that they "perform the most desirable and necessary activities for the continuous and
effective operations of the business of the petitioner Company" (citing Article 280 of the Labor Code). They add that
the termination of the agreement by the petitioner pending the resolution of the case before the DOLE "only shows the
weakness of petitioner's stand" and was "for the purpose of frustrating the constitutionally mandated rights of the
members of private respondent union to self-organization and collective organization." They also contend that under
Section 8, Rule 8, Book No. III of the Omnibus Rules Implementing the Labor Code, which defines job-contracting,
they cannot legally qualify as independent contractors who must be free from control of the alleged employer, who
carry independent businesses and who have substantial capital or investment in the form of equipment, tools, and the
like necessary in the conduct of the business.
The present case mainly calls for the application of the control test, which if not satisfied, would lead us to conclude
that no employer-employee relationship exists. Hence, if the union members are not employees, no right to organize
for purposes of bargaining, nor to be certified as such bargaining agent can ever be recognized. The following
elements are generally considered in the determination of the employer-employee relationship; "(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 although the latter is the most important element" (Mafinco Trading Corporation v. Ople, 70
SCRA 139 [1976]; Development Bank of the Philippines v. National Labor Relations Commission, 175 SCRA 537
[1989]; Rosario Brothers, Inc. v. Ople, 131 SCRA 72 [1984]; Broadway Motors Inc. v. NLRC, 156 SCRA 522 [1987];
Brotherhood Labor Unity Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]).
The Collection Agency Agreement defines the relationship between the Company and each of the union members
who signed a contract. The petitioner relies on the following stipulations in the agreements: (a) a collector is
designated as a collecting agent" who is to be considered at all times as an independent contractor and not employee
of the Company; (b) collection of all payments on installment accounts are to be made monthly or oftener; (c) an agent
is paid his compensation for service in the form of a commission of 6% of all collections made and turned over plus a
bonus on said collections; (d) an agent is required to post a cash bond of three thousand pesos (P3,000.00) to assure
the faithful performance and observance of the terms and conditions under the agreement; (e) he is subject to all the
terms and conditions in the agreement; (f) the agreement is effective for one year from the date of its execution and
renewable on a yearly basis; and (g) his services shall be terminated in case of failure to satisfy the minimum monthly
collection performance required, failure to post a cash bond, or cancellation of the agreement at the instance of either
party unless the agent has a pending obligation or indebtedness in favor of the Company.
Meanwhile, the respondents rely on other features to strengthen their position that the collectors are employees. They
quote paragraph 2 which states that an agent shall utilize only receipt forms authorized and issued by the Company.
They also note paragraph 3 which states that an agent has to submit and deliver at least once a week or as often as
required a report of all collections made using report forms furnished by the Company. Paragraph 4 on the monthly

Page 122 of 191

collection quota required by the Company is deemed by respondents as a control measure over the means by which
an agent is to perform his services.
The nature of the relationship between a company and its collecting agents depends on the circumstances of each
particular relationship. Not all collecting agents are employees and neither are all collecting agents independent
contractors. The collectors could fall under either category depending on the facts of each case.
The Agreement confirms the status of the collecting agent in this case as an independent contractor not only because
he is explicitly described as such but also because the provisions permit him to perform collection services for the
company without being subject to the control of the latter except only as to the result of his work. After a careful
analysis of the contents of the agreement, we rule in favor of the petitioner.
The requirement that collection agents utilize only receipt forms and report forms issued by the Company and that
reports shall be submitted at least once a week is not necessarily an indication of control over the means by which the
job of collection is to be performed. The agreement itself specifically explains that receipt forms shall be used for the
purpose of avoiding a co-mingling of personal funds of the agent with the money collected on behalf of the Company.
Likewise, the use of standard report forms as well as the regular time within which to submit a report of collection are
intended to facilitate order in office procedures. Even if the report requirements are to be called control measures, any
control is only with respect to the end result of the collection since the requirements regulate the things to be done
after the performance of the collection job or the rendition of the service.
The monthly collection quota is a normal requirement found in similar contractual agreements and is so stipulated to
encourage a collecting agent to report at least the minimum amount of proceeds. In fact, paragraph 5, section b gives
a bonus, aside from the regular commission every time the quota is reached. As a requirement for the fulfillment of the
contract, it is subject to agreement by both parties. Hence, if the other contracting party does not accede to it, he can
choose not to sign it. From the records, it is clear that the Company and each collecting agent intended that the former
take control only over the amount of collection, which is a result of the job performed.
The respondents' contention that the union members are employees of the Company is based on selected provisions
of the Agreement but ignores the following circumstances which respondents never refuted either in the trial
proceedings before the labor officials nor in its pleadings filed before this Court.
1. The collection agents are not required to observe office hours or report to Singer's office everyday except,
naturally and necessarily, for the purpose of remitting their collections.
2. The collection agents do not have to devote their time exclusively for SINGER. There is no prohibition on
the part of the collection agents from working elsewhere. Nor are these agents required to account for their
time and submit a record of their activity.
3. The manner and method of effecting collections are left solely to the discretion of the collection agents
without any interference on the part of Singer.
4. The collection agents shoulder their transportation expenses incurred in the collections of the accounts
assigned to them.
5. The collection agents are paid strictly on commission basis. The amounts paid to them are based solely on
the amounts of collection each of them make. They do not receive any commission if they do not effect any
collection even if they put a lot of effort in collecting. They are paid commission on the basis of actual
collections.
6. The commissions earned by the collection agents are directly deducted by them from the amount of
collections they are able to effect. The net amount is what is then remitted to Singer." (Rollo, pp. 7-8)
If indeed the union members are controlled as to the manner by which they are supposed to perform their collections,
they should have explicitly said so in detail by specifically denying each of the facts asserted by the petitioner. As there
seems to be no objections on the part of the respondents, the Court finds that they miserably failed to defend their
position.
A thorough examination of the facts of the case leads us to the conclusion that the existence of an employer-employee
relationship between the Company and the collection agents cannot be sustained.
The plain language of the agreement reveals that the designation as collection agent does not create an employment
relationship and that the applicant is to be considered at all times as an independent contractor. This is consistent with
the first rule of interpretation that the literal meaning of the stipulations in the contract controls (Article 1370, Civil
Code; La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor, Relations, 123 SCRA 679 [1983]). No
such words as "to hire and employ" are present. Moreover, the agreement did not fix an amount for wages nor the
required working hours. Compensation is earned only on the basis of the tangible results produced, i.e., total
collections made (Sarra v. Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. of the Philippines v. Social
Security System, 21 SCRA 924 [1967] which involved commission agents, this Court had the occasion to rule, thus:
We are convinced from the facts that the work of petitioner's agents or registered representatives more nearly
approximates that of an independent contractor than that of an employee. The latter is paid for the labor he
performs, that is, for the acts of which such labor consists the former is paid for the result thereof . . . .
xxx
xxx
xxx
Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans he
would not necessarily be entitled to compensation therefor. His right to compensation depends upon and is
measured by the tangible results he produces."
Moreover, the collection agent does his work "more or less at his own pleasure" without a regular daily time frame
imposed on him (Investment Planning Corporation of the Philippines v. Social Security System, supra; See also Social
Security System v. Court of Appeals, 30 SCRA 210 [1969]).

Page 123 of 191

The grounds specified in the contract for termination of the relationship do not support the view that control exists "for
the causes of termination thus specified have no relation to the means and methods of work that are ordinarily
required of or imposed upon employees." (Investment Planning Corp. of the Phil. v. Social Security System, supra)
The last and most important element of the control test is not satisfied by the terms and conditions of the contracts.
There is nothing in the agreement which implies control by the Company not only over the end to be achieved but also
over the means and methods in achieving the end (LVN Pictures, Inc. v. Philippine Musicians Guild, 1 SCRA 132
[1961]).
The Court finds the contention of the respondents that the union members are employees under Article 280 of the
Labor Code to have no basis. The definition 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. Any agreement may
provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary
for the latter's business) even without being hired as an employee. This is precisely true in the case of an independent
contractorship as well as in an agency agreement. The Court agrees with the petitioner's argument that Article 280 is
not the yardstick for determining the existence of an employment relationship because it merely distinguishes between
two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an
employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the
existence of an employment relationship is in dispute.
Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code does not apply to this
case.1wphi1 Respondents assert that the said provision on job contracting requires that for one to be considered an
independent contractor, he must have "substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of his business." There is no showing that a
collection agent needs tools and machineries. Moreover, the provision must be viewed in relation to Article 106 of the
Labor Code which provides:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for
the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any,
shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.
xxx
xxx
xxx
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among others,
and the workers recruited and placed by such persons are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him." (p. 20)
It can readily be seen that Section 8, Rule 8, Book Ill and Article 106 are relevant in determining whether the employer
is solidarily liable to the employees of an alleged contractor and/or sub-contractor for unpaid wages in case it is
proven that there is a job-contracting situation.
The assumption of jurisdiction by the DOLE over the case is justified as the case was brought on appeal by the
petitioner itself which prayed for the reversal of the Order of the Med-Arbiter on the ground that the union members
are not its employees. Hence, the petitioner submitted itself as well as the issue of existence of an employment
relationship to the jurisdiction of the DOLE which was faced with a dispute on an application for certification election.
The Court finds that since private respondents are not employees of the Company, they are not entitled to the
constitutional right to join or form a labor organization for purposes of collective bargaining. Accordingly, there is no
constitutional and legal basis for their "union" to be granted their petition for direct certification. This Court made this
pronouncement in La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, supra:
. . . The question of whether employer-employee relationship exists is a primordial consideration before
extending labor benefits under the workmen's compensation, social security, medicare, termination pay and
labor relations law. It is important in the determination of who shall be included in a proposed bargaining unit
because, it is thesine qua non, the fundamental and essential condition that a bargaining unit be composed of
employees. Failure to establish this juridical relationship between the union members and the employer affects
the legality of the union itself. It means the ineligibility of the union members to present a petition for
certification election as well as to vote therein . . . . (At p. 689)
WHEREFORE, the Order dated June 14,1989 of Med-Arbiter Designate Felix B. Chaguile, Jr., the Resolution and
Order of Secretary Franklin M. Drilon dated November 2, 1989 and December 14, 1989, respectively are hereby
REVERSED and SET ASIDE. The petition for certification election is ordered dismissed and the temporary restraining
order issued by the Court on December 21, 1989 is made permanent.
SO ORDERED.

Page 124 of 191

THELMA DUMPIT-MURILLO,
Petitioner,
- versus -

G.R. No. 164652

Present:
QUISUMBING, J.,* Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
COURT
OF
APPEALS,
ASSOCIATEDPromulgated:
BROADCASTING COMPANY, JOSE JAVIER ANDJune 8, 2007
EDWARD TAN,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
This petition seeks to reverse and set aside both the Decision[1] dated January 30, 2004 of the Court of Appeals in
CA-G.R. SP No. 63125 and its Resolution[2] dated June 23, 2004 denying the motion for reconsideration. The Court
of Appeals had overturned the Resolution[3] datedAugust 30, 2000 of the National Labor Relations Commission
(NLRC) ruling that petitioner was illegally dismissed.
The facts of the case are as follows:
On October 2, 1995, under Talent Contract No. NT95-1805,[4] private respondent Associated Broadcasting Company
(ABC) hired petitioner Thelma Dumpit-Murillo as a newscaster and co-anchor for Balitang-Balita, an early evening
news program. The contract was for a period of three months. It was renewed under Talent Contracts Nos. NT951915, NT96-3002, NT98-4984 and NT99-5649.[5] In addition, petitioners services were engaged for the program Live
on Five. On September 30, 1999, after four years of repeated renewals, petitioners talent contract expired. Two weeks
after the expiration of the last contract, petitioner sent a letter to Mr. Jose Javier, Vice President for News and Public
Affairs of ABC, informing the latter that she was still interested in renewing her contract subject to a salary
increase. Thereafter, petitioner stopped reporting for work. On November 5, 1999, she wrote Mr. Javier another letter,
[6] which we quote verbatim:
xxxx
Dear Mr. Javier:
On , I wrote you a letter in answer to your query by way of a marginal note what terms and conditions
in response to my first letter dated. To date, or for more than fifteen (15) days since then, I have not
received any formal written reply. xxx
In view hereof, should I not receive any formal response from you until , I will deem it as a
constructive dismissal of my services.
xxxx
A month later, petitioner sent a demand letter[7] to ABC, demanding: (a) reinstatement to her former position; (b)
payment of unpaid wages for services rendered from September 1 to October 20, 1999 and full backwages; (c)
payment of 13th month pay, vacation/sick/service incentive leaves and other monetary benefits due to a regular
employee starting March 31, 1996. ABC replied that a check covering petitioners talent fees for September 16
to October 20, 1999 had been processed and prepared, but that the other claims of petitioner had no basis in fact or in
law.
On December 20, 1999, petitioner filed a complaint[8] against ABC, Mr. Javier and Mr. Edward Tan, for illegal
constructive dismissal, nonpayment of salaries, overtime pay, premium pay, separation pay, holiday pay, service
incentive leave pay, vacation/sick leaves and 13 th month pay in NLRC-NCR Case No. 30-12-00985-99. She likewise
demanded payment for moral, exemplary and actual damages, as well as for attorneys fees.
The parties agreed to submit the case for resolution after settlement failed during the mandatory
conference/conciliation. On March 29, 2000, the Labor Arbiter dismissed the complaint.[9]
On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000. The NLRC held that an employeremployee relationship existed between petitioner and ABC; that the subject talent contract was void; that the petitioner was
a regular employee illegally dismissed; and that she was entitled to reinstatement and backwages or separation pay, aside
from 13th month pay and service incentive leave pay, moral and exemplary damages and attorneys fees. It held as
follows:
WHEREFORE, the Decision of the Arbiter dated is hereby REVERSED/SET ASIDE and a NEW
ONE promulgated:
1)
declaring respondents to have illegally dismissed complainant from her regular work therein and
thus, ordering them to reinstate her in her former position without loss of seniority right[s] and other
privileges and to pay her full backwages, inclusive of allowances and other benefits, including
13th month pay based on her said latest rate of P28,000.00/mo. from the date of her illegal dismissal
on 21 October 1999 up to finality hereof, or at complainants option, to pay her separation pay of one
(1) month pay per year of service based on said latest monthly rate, reckoned from date of hire on 30
September 1995 until finality hereof;
2)
to pay complainants accrued SILP [Service Incentive Leave Pay] of 5 days pay per year and
13th month pay for the years 1999, 1998 and 1997 ofP19,236.00 and P84,000.00, respectively and

Page 125 of 191

her accrued salary from 16 September 1999 to 20 October 1999 of P32,760.00 plus legal interest at
12% from date of judicial demand on 20 December 1999 until finality hereof;
3)
to pay complainant moral damages of P500,000.00, exemplary damages of P350,000.00 and
10% of the total of the adjudged monetary awards as attorneys fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.[10]
After its motion for reconsideration was denied, ABC elevated the case to the Court of Appeals in a petition for
certiorari under Rule 65. The petition was first dismissed for failure to attach particular documents,[11] but was
reinstated on grounds of the higher interest of justice.[12]
Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion, and reversed the decision of
the NLRC.[13] The appellate court reasoned that petitioner should not be allowed to renege from the stipulations she
had voluntarily and knowingly executed by invoking the security of tenure under the Labor Code. According to the
appellate court, petitioner was a fixed-term employee and not a regular employee within the ambit of Article 280[14] of
the Labor Code because her job, as anticipated and agreed upon, was only for a specified time.[15]
Aggrieved, petitioner now comes to this Court on a petition for review, raising issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF
APPEALS, THE DECISION OF WHICH IS NOT IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC FIRST
DIVISION, ARE ANTI-REGULARIZATION DEVICESWHICH MUST BE STRUCK DOWN FOR
REASONS OF PUBLIC POLICY[;]
III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-MONTH
TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP WAS CREATED AS
PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR EMPLOYEE,
THERE WAS A DENIAL OF PETITIONERS RIGHT TO DUE PROCESS THUS ENTITLING HER TO
THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.][16]
The issues for our disposition are: (1) whether or not this Court can review the findings of the Court of Appeals; and
(2) whether or not under Rule 45 of the Rules of Court the Court of Appeals committed a reversible error in its
Decision.
On the first issue, private respondents contend that the issues raised in the instant petition are mainly factual and that
there is no showing that the said issues have been resolved arbitrarily and without basis. They add that the findings of
the Court of Appeals are supported by overwhelming wealth of evidence on record as well as prevailing jurisprudence
on the matter.[17]
Petitioner however contends that this Court can review the findings of the Court of Appeals, since the appellate court
erred in deciding a question of substance in a way which is not in accord with law or with applicable decisions of this
Court.[18]
We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals in any case regardless of the
nature of the action or proceeding involved may be appealed to this Court through a petition for review. This remedy
is a continuation of the appellate process over the original case,[19] and considering there is no congruence in the
findings of the NLRC and the Court of Appeals regarding the status of employment of petitioner, an exception to the
general rule that this Court is bound by the findings of facts of the appellate court,[20] we can review such findings.
On the second issue, private respondents contend that the Court of Appeals did not err when it upheld the validity of
the talent contracts voluntarily entered into by petitioner. It further stated that prevailing jurisprudence has recognized
and sustained the absence of employer-employee relationship between a talent and the media entity which engaged
the talents services on a per talent contract basis, citing the case ofSonza v. ABS-CBN Broadcasting Corporation.[21]
Petitioner avers however that an employer-employee relationship was created when the private respondents started to
merely renew the contracts repeatedly fifteen times or for four consecutive years.[22]
Again, we agree with petitioner. The Court of Appeals committed reversible error when it held that petitioner was a fixedterm employee. Petitioner was a regular employee under contemplation of law. The practice of having fixed-term
contracts in the industry does not automatically make all talent contracts valid and compliant with labor law. The assertion
that a talent contract exists does not necessarily prevent a regular employment status.[23]
Further, the Sonza case is not applicable. In Sonza, the television station did not instruct Sonza how to perform his
job. How Sonza delivered his lines, appeared on television, and sounded on radio were outside the television stations
control. Sonza had a free hand on what to say or discuss in his shows provided he did not attack the television station
or its interests. Clearly, the television station did not exercise control over the means and methods of the performance
of Sonzas work.[24] In the case at bar, ABC had control over the performance of petitioners work. Noteworthy too, is
the comparatively low P28,000 monthly pay of petitioner[25] vis the P300,000 a month salary of Sonza,[26] that all the
more bolsters the conclusion that petitioner was not in the same situation as Sonza.
The contract of employment of petitioner with ABC had the following stipulations:
xxxx

Page 126 of 191

1. SCOPE OF SERVICES TALENT agrees to devote his/her talent, time, attention and best efforts in the
performance of his/her duties and responsibilities as Anchor/Program Host/Newscaster of the Program,
in accordance with the direction of ABC and/or its authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES TALENT shall:
a.
Render his/her services as a newscaster on the Program;
b.
Be involved in news-gathering operations by conducting interviews on- and off-theair;
c.
Participate in live remote coverages when called upon;
d.
Be available for any other news assignment, such as writing, research or camera
work;
e.
Attend production meetings;
f.
On assigned days, be at the studios at least one (1) hour before the live telecasts;
g.
Be present promptly at the studios and/or other place of assignment at the time
designated by ABC;
h.
Keep abreast of the news;
i.
Give his/her full cooperation to ABC and its duly authorized representatives in the
production and promotion of the Program; and
j.
Perform such other functions as may be assigned to him/her from time to time.
xxxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND
REGULATIONS TALENT agrees that he/she will promptly and faithfully comply with the
requests and instructions, as well as the program standards, policies, rules and regulations of
ABC, the KBP and the government or any of its agencies and instrumentalities.[27]
xxxx
In Manila Water Company, Inc. v. Pena,[28] we said that the elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the employee, (b) the payment of wages, (c) the power of dismissal,
and (d) the employers power to control. The most important element is the employers control of the employees conduct, not
only as to the result of the work to be done, but also as to the means and methods to accomplish it.[29]
The duties of petitioner as enumerated in her employment contract indicate that ABC had control over the work of
petitioner. Aside from control, ABC also dictated the work assignments and payment of petitioners wages. ABC also
had power to dismiss her. All these being present, clearly, there existed an employment relationship between
petitioner and ABC.
Concerning regular employment, the law provides for two kinds of employees, namely: (1) those who are engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2)
those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in
which they are employed.[30] In other words, regular status arises from either the nature of work of the employee or
the duration of his employment.[31] In Benares v. Pancho,[32] we very succinctly said:
[T]he primary standard for determining regular employment is the reasonable connection between the
particular activity performed by the employee vis--visthe usual trade or business of the employer. This
connection can be determined by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety. If the employee has been performing the job
for at least a year, even if the performance is not continuous and merely intermittent, the law deems
repeated and continuing need for its performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment is considered regular, but only
with respect to such activity and while such activity exists.[33]
In our view, the requisites for regularity of employment have been met in the instant case. Gleaned from the
description of the scope of services aforementioned, petitioners work was necessary or desirable in the usual
business or trade of the employer which includes, as a pre-condition for its enfranchisement, its participation in the
governments news and public information dissemination. In addition, her work was continuous for a period of four
years. This repeated engagement under contract of hire is indicative of the necessity and desirability of the petitioners
work in private respondent ABCs business.[34]
The contention of the appellate court that the contract was characterized by a valid fixed-period employment is
untenable. For such contract to be valid, it should be shown that the fixed period was knowingly and voluntarily agreed upon
by the parties. There should have been no force, duress or improper pressure brought to bear upon the employee; neither
should there be any other circumstance that vitiates the employees consent.[35] It should satisfactorily appear that the
employer and the employee dealt with each other on more or less equal terms with no moral dominance being exercised by
the employer over the employee.[36] Moreover, fixed-term employment will not be considered valid where, from the
circumstances, it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee.
[37]
In the case at bar, it does not appear that the employer and employee dealt with each other on equal terms. Understandably,
the petitioner could not object to the terms of her employment contract because she did not want to lose the job that she loved
and the workplace that she had grown accustomed to,[38] which is exactly what happened when she finally manifested her
intention to negotiate. Being one of the numerous newscasters/broadcasters of ABC and desiring to keep her job as a
broadcasting practitioner, petitioner was left with no choice but to affix her signature of conformity on each renewal of her
contract as already prepared by private respondents; otherwise, private respondents would have simply refused to renew her
contract. Patently, the petitioner occupied a position of weakness vis--vis the employer. Moreover, private respondents

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practice of repeatedly extending petitioners 3-month contract for four years is a circumvention of the acquisition of regular
status. Hence, there was no valid fixed-term employment between petitioner and private respondents.
While this Court has recognized the validity of fixed-term employment contracts in a number of cases, it has
consistently emphasized that when the circumstances of a case show that the periods were imposed to block the
acquisition of security of tenure, they should be struck down for being contrary to law, morals, good customs, public
order or public policy.[39]
As a regular employee, petitioner is entitled to security of tenure and can be dismissed only for just cause and after due
compliance with procedural due process. Since private respondents did not observe due process in constructively dismissing
the petitioner, we hold that there was an illegal dismissal.
WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated June 23, 2004 of the Court of
Appeals in CA-G.R. SP No. 63125, which held that the petitioner was a fixed-term employee,
are REVERSED and SET ASIDE. The NLRC decision is AFFIRMED.
Costs against private respondents.
SO ORDERED.

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G.R. No. 167638 (ABS-CBN Broadcasting Corporation vs. Henrie Marquez, et al.)
Sirs/Mesdames:
Quoted hereunder, for your information, is a resolution of this Court dated JUN 22 2005.
Before us is this petition for review on certiorari assailing the December 20, 2004 decision [1]cralaw of the Court of
Appeals in CA-G.R. SP No. 81750, reversing and setting aside an earlier decision [2]cralaw of National Labor Relations
Commission (NLRC), 4th Division, Cebu City in Case No. V-000967-00 which, in turn, reversed the decision [3]cralaw of
the Labor Arbiter in a complaint for illegal dismissal commenced by the herein respondents against petitioner ABSCBN Broadcasting Corporation.
Petitioner hired the services of respondents on various dates starting December, 1994 to undertake the production in
the Cebuano dialect of television serial programs for petitioner's week-day afternoon time slots in Cebu. Respondents
were assigned among three (3) production groups, each with its own set of directors, writers, videographers,
lightsmen, editors, actors and utility personnel. Each production group was given a weekly budget, initially
at P30,000.00, which was later increased to P40,000.00 a week.
The television-series did so well that several more were subsequently produced. The production groups were
continuously engaged to film succeeding programs to replace the concluded ones.
On June 15, 1999, respondents addressed a letter to petitioner asking for a 25% increase in their weekly budget, but
the same was denied by petitioner's AVP for the Visayas Cluster, Ma. Luisa L. Ascalon. Instead, respondents were
informed of the termination of their services effective August 13, 1999.
On August 27, 1999, respondents filed with the Regional Arbitration Branch (RAB) at Region VII of the Department of
Labor and Employment their consolidated complaint for illegal dismissal; illegal deduction; non-payment of overtime
and holiday pay; premium pay for holiday, rest day and night shift differential; non-payment of 13 th month pay, service
incentive leave, separation pay, backwages; and attorney's fees.
On June 15, 2000, the Executive Labor Arbiter of RAB VII rendered a decision [4]cralaw in favor of respondents and
ordered petitioner to pay to them their money claims.
However, on petitioner's appeal, the NLRC'S 4th Division at Cebu City reversed the decision of the Labor Arbiter, thus:
WHEREFORE, premises considered, judgment is hereby rendered granting the appeal of [petitioner], reversing and
setting aside the Decision of the Executive Labor Arbiter dated 15 June 2000 and promulgating a new one dismissing
all the consolidated complaints for lack of merit.
SO ORDERED.
Respondents moved for a reconsideration but their motion was denied by the NLRC's 4 th Division in its resolution of
July 30, 2003.
From there, respondents went to the Court of Appeals via a petition for certiorari, thereat docketed as CA-G.R. SP No.
81750, imputing grave abuse of discretion on the part of the NLRC's 4 th Division in setting aside the Labor Arbiter's
findings and in ruling that they were hired as contractual or project employees, i.e. as "talents" engaged for specific
projects, under the special work arrangements with the petitioner, and in upholding the legality of their dismissal.
Respondents asserted that they are petitioner's regular employees and emphasized the fact of their continuous work
after each tele-series program and the very nature of their work, which is "necessary and desirable" to the business or
trade of their employer[5]cralaw. They also asseverated that the application of the "four-fold test" in labor laws clearly
shows the existence of an employer-employee relationship between the parties.
For its part, petitioner insisted that respondents were hired as program employees in the nature of contractual or
project employment; that respondents were mere "talents", i.e. they were contracted because of their expertise or

Page 129 of 191

talents as program employees; and that respondents were, in effect, mere program employees under Policy
Instruction No. 40, series of 1979 whom petitioner contracted due to their expertise for particular projects, in this case
the production of the Visayan tele-series programs.
In the herein assailed decision [6]cralaw dated December 20, 2004, the Court of Appeals reversed that of the NLRC
and reinstated the earlier decision of the Labor Arbiter, to wit:
WHEREFORE, the Petition for Certiorari is GRANTED, and the assailed Decision and Resolution of the National
Labor Relation Commission (NLRC), 4th Division, Cebu City, in Case No. V-000050-02, are hereby REVERSED and
SET ASIDE. The Decision of Executive Labor Arbiter of 15 June 2000 finding an employer-employee relationship
between [respondents] and [petitioner] ABS-CBN Broadcasting Corporation and ordering the latter to pay
[respondents'] money claims is REINSTATED in toto except that the computation of the backwages thereof should be
reckoned until the finality of this decision. No pronouncement as to costs.
SO ORDERED.
Applying the "four-fold test" to determine the existence of an employer-employee relationship between the parties, the
Court of Appeals viewed respondents as regular employees of petitioner and not independent contractors.
Respondents' employment with petitioner passed the "four-fold test" on employer-employee relations, namely: (1) the
selection and engagement of the employee, or the power to hire; (2) the payment of wages; (3) the power to dismiss;
and (4) the power to control the employee[7]cralaw.
Petitioner never denied having engaged the services of respondents. Neither did it controvert the fact that
respondents received their pay from petitioner twice a month thru automated teller machines (ATM) and respondents
were issued payslips bearing petitioner's corporate name on the heading. The payment of wages clearly rests upon
petitioner. While a weekly budget is given and the directors are ostensibly given a free hand on how to spend the
same subject only to petitioner's budgetary limitation, the hard reality is that such payments were done by the
petitioner itself.
As correctly observed by the Labor Arbiter, the elements of control and supervision over the respondents were
evident. Petitioner employed production supervisors who monitored and saw to it that the filming of the series shall be
finished within a time-frame and the production output to conform to petitioner's standards. These were bolstered by
various memoranda issued by petitioner relative to production work-approval of filming and editing schedule, new
assignments of production crew and reminders to tele-series directors and editors regarding the standard policy on
editing services. Respondents have to follow company rules in the work done in company premises. An overseer, in
the person of an executive producer, is assigned by petitioner over each production crew to make sure that the end
result is acceptable to petitioner, and the executive producer can dictate the work to be re-done. Petitioner also has
control in the assignments of crew members and can thus re-assign or transfer any of them to another production
group, thereby belying petitioner's contention that the directors are the ones that control the whole production. All
these, taken together, unmistakably show petitioner's power of control over respondents' work.
Anent the power of dismissal and suspension, it cannot be denied that petitioner exercised such. The records clearly
show that petitioner sanctioned disciplinary measures on some of the respondents for some infraction of company
rules thru disciplinary measures on erring employees. For sure, respondent Orlando Carillo was suspended for one
week by his production head on January 25, 1999 for failure to edit an episode which was to be sent to petitioner's
Zamboanga station for airing.
Additionally, the fact that petitioner itself provided the production equipment such as video cameras, lights,
microphone and TV monitors, largely discounts petitioner's claim that respondents were independent contractors.
It may be so that respondents were assigned to a particular tele-series. However, petitioner can and did immediately
reassign them to a new production upon completion of a previous one. Hence, they were continuously employed, the
tele-series being a regular feature in petitioner's network programs. Petitioner's continuous engagement of
respondents from one production after another, for more than five years, made the latter part of petitioner's workpool
who cannot be separated from the service without cause as they are considered regular. A project employee or a
member of a workpool may acquire the status of a regular employee when the following concur: there is continuous

Page 130 of 191

rehiring of project employees even after the cessation of the project; [8]cralaw and the tasks performed by the alleged
"project employee" are vital, necessary, and indispensable to the usual business or trade of his employer. [9]cralaw It
cannot be denied that the services of respondents as members of a crew in the production of a tele-series are
undoubtedly connected with the business of the petitioner. This Court has held that the primary standard in
determining regular employment is the reasonable connection between the particular activity performed by the
employee in relation to the business or trade of his employer. [10]cralaw Here, the activity performed by respondents is,
without doubt, vital to petitioner's trade or business.
We agree with the Court of Appeals when it upheld the conclusion of the Labor Arbiter that petitioner broadcasts and
produces its own television series and other programs, whether in Cebu or in Manila; and that there is no distinction
between its Cebu station and the mother station because they are one and the same, more so due to lack of showing
by the petitioner that its Cebu station is independent from its mother station. It cannot thus be said that petitioner is
primarily just involved in mere broadcasting from satellite feeds or other sources. That the production of the television
series is vital, necessary and desirable to petitioner's usual business is beyond question.
It is a matter of record that respondents have rendered almost five (5) years of continuous service to petitioner, doing
work that is necessary and desirable to the usual business of the latter. Hence, even granting on the extreme that
respondents were not performing work that is vital, necessary and indispensable to the usual business of petitioner,
nonetheless the second paragraph of Article 280 of the Labor Code still applies. It reads:
ART. 280. REGULAR AND CASUAL EMPLOYMENT
xxx

xxx

xxx

An employment shall be deemed to be casual if it is not covered by the preceding paragraph. Provided, That, any
employee who has rendered at least one year of service whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists. (Emphasis supplied).
We thus rule and so hold that respondents are petitioner's regular employees, at least with respect to the production of
petitioner's Visayan tele-series programs and until such activity exists.
Petitioner relied upon and took undue advantage of Policy Instruction No. 40, by treating herein respondents as
talents and classifying them as independent contractors and freelancers.
Policy Instruction No. 40 pertinently provides:
Program employees are those whose skills, talents or services are engaged by the station for a particular or specific
program or undertaking and who are not required to observe normal working hours such that on some days they work
for less than eight (8) hours and on other days beyond the normal work hours observed by station employees and are
allowed to enter into employment contracts with other persons, stations, advertising agencies or sponsoring
companies. Theengagement of program employees, including those hired by advertising or sponsoring companies,
shall be under a written contract specifying, among other things, the nature of the work to be performed, rates
of pay, and the programs in which they will work. The contract shall be duly registered by the station with the
Broadcast Media Council within three days from its consummation. (Emphasis supplied)
Ironically, however, petitioner failed to adduce an iota proof that the requirements for program employment were even
complied with by it. It is basic that project or contractual employees are appraised of the project they will work under a
written contract, specifying, inter alia, the nature of work to be performed and the rates of pay and the program in
which they will work. Sadly, however, no such written contract was ever presented by the petitioner. Petitioner is in the
best of position to present these documents. And because none was presented, we have every reason to surmise that
no such written contract was ever accomplished by the parties, thereby belying petitioner's posture.
Worse, there was no showing of compliance with the requirement that after every engagement or production of a
particular television series, the required reports were filed with the proper government agency, as provided no less
under the very Policy Instruction invoked by the petitioner, nor under the Omnibus Implementing Rules of the Labor

Page 131 of 191

Code for project employees. This alone bolsters respondents' contention that they were indeed petitioner's regular
employees since their employment was not only for a particular program.
To recapitulate, respondents, due to their length of service, had already attained the status of regular employment and
are thus entitled to security of tenure provided for under our labor laws. Consequently, they may only be validly
dismissed from service upon petitioner's compliance with the legal requisites for termination, both in their substantive
and procedural aspects. In this connection, it bears emphasis that under the Labor Code and its Omnibus
Implementing Rules, not only must the dismissal be for a just or authorized cause [11]cralaw, but that the rudimentary
requirements of due process: notice and hearing, [12]cralaw must likewise be observed before a regular employee may
be dismissed. Without the concurrence of these two requisites, the termination would be, in the eyes of the law,
illegal[13]cralaw.
It is incumbent upon petitioner to prove that its dismissal of respondents was for a valid cause and that they were
afforded procedural due process before termination. As it is, petitioner failed to discharge this burden. Its only
assertion is that the dismissal was due to the expiration or completion of contract, which is not even a ground for
termination allowed by law. Worse, petitioner failed to establish that respondents were given ample opportunity to
contest the legality of their dismissal. All that petitioner did was simply to furnish them with their walking papers.
Inarguably, petitioner denied them of due process. In fine, with petitioner's failure to establish compliance with the
legal requirements on termination of employment under the Labor Code, the appellate court was correct in declaring
respondents' dismissal as tainted with illegality.
WHEREFORE, the instant petition is hereby DENIED.
SO ORDERED.

Page 132 of 191

CONSOLIDATED BROADCASTING G.R. No. 168424

SYSTEM, INC.,
Petitioner, Present:
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review is the July 30, 2004 Decision[1] of the Court of Appeals in CA-G.R. SP No. 77098,
which affirmed the December 5, 2001 Decision[2] of the National Labor Relations Commission (NLRC) holding that
respondents were regular employees of petitioner and that they were illegally dismissed.
Respondents alleged that they were employed as drama talents by DYWB-Bombo Radyo, a radio station owned and
operated by petitioner Consolidated Broadcasting System, Inc. They reported for work daily for six days in a week and
were required to record their drama production in advance. Some of them were employed by petitioner since 1974,
while the latest one was hired in 1997.[3] Their drama programs were aired not only in Bacolod City but also in the
sister stations of DYWB in the Visayas and Mindanao areas.[4]
Sometime in August 1998, petitioner reduced the number of its drama productions from 14 to 11, but was opposed by
respondents. After the negotiations failed, the latter sought the intervention of the Department of Labor and
Employment (DOLE), which on November 12, 1998, conducted through its Regional Office, an inspection of DWYB
station. The results thereof revealed that petitioner is guilty of violation of labor standard laws, such as underpayment
of wages, 13th month pay, non-payment of service incentive leave pay, and non-coverage of respondents under the
Social Security System.
Petitioner contended that respondents are not its employees and refused to submit the payroll and daily time records
despite the subpoena duces tecum issued by the DOLE Regional Director. Petitioner further argued that the case
should be referred to the NLRC because the Regional Director has no jurisdiction over the determination of the
existence of employer-employee relationship which involves evidentiary matters that are not verifiable in the normal
course of inspection.
Vexed by the respondents complaint, petitioner allegedly pressured and intimidated respondents. Respondents Oberio
and Delta were suspended for minor lapses and the payment of their salaries were purportedly delayed. Eventually, on
February 3, 1999, pending the outcome of the inspection case with the Regional Director, respondents were barred by
petitioner from reporting for work; thus, the former claimed constructive dismissal.[5]
On
April
8,
1999,
the
DOLE
Regional
Director
issued
an
order
directing petitioner to pay respondents a total of P318,986.74 representing non-payment/underpayment of the salary
and benefits due them.[6] However, on July 8, 1999, the Regional Director reconsidered the April 8, 1999order and
certified the records of the case to the NLRC, Regional Arbitration Branch VI, for determination of employer-employee
relationship.[7]Respondents appealed said order to the Secretary of Labor.
On October 12, 1999, respondents filed a case for illegal dismissal, underpayment/non-payment of wages and
benefits plus damages against petitioner. On April 10, 2000, the Labor Arbiter dismissed the case without prejudice
while waiting for the decision of the Secretary of Labor on the same issue of the existence of an employer-employee
relationship between petitioner and respondents.
On appeal to the NLRC, respondents raised the issue of employer-employee relationship and submitted the following
to prove the existence of such relationship, to wit: time cards, identification cards, payroll, a show cause order of the
station manager to respondent Danny Oberio and memoranda either noted or issued by said manager. Petitioner, on
the other hand, did not present any documentary evidence in its behalf and merely denied the allegations of
respondents. It claimed that the radio station pays for the drama recorded by piece and that it has no control over the
conduct of respondents.
On December 5, 2001, the NLRC rendered a decision holding that respondents were regular employees of petitioner
who were illegally dismissed by the latter. It further held that respondents complied with the requirements of the rule
on forum shopping. The decretal portion thereof, provides:
WHEREFORE, premises considered, the decision of Labor Arbiter Ray Alan T. Drilon dated is SET
ASIDE and VACATED and a new one entered.
Ordering respondent Consolidated Broadcasting System, Inc. (Bombo Radyo Philippines), DYWB to
reinstate the complainants without loss of seniority rights wi[th] full back wages computed from
February 1999 up to the time of actual reinstatement.
SO ORDERED.[8]
Hence, petitioner filed the instant recourse.
The issues for resolution are as follows: (1) Did respondents violate the rule on forum shopping; (2) whether the NLRC
correctly ruled on the merits of the case instead of remanding the case to the Labor Arbiter; (3) whether respondents
were employees of petitioner; and (4) whether their dismissal was illegal.
Respondents complaint in the inspection case before the DOLE Regional Director alleged that they were under the
employ of petitioner at the time of the filing of said complaint. Pending the resolution thereof, they claimed to have
been dismissed; hence, the filing of the present illegal dismissal case before the Labor Arbiter. The causes of action in
these two complaints are different, i.e., one for violation of labor standard laws, and the other, for illegal dismissal, but
the entitlement of respondents to the reliefs prayed for hinges on the same issue of the existence of an employeremployee relationship. While the decision on the said issue by one tribunal may operate as res judicata on the other,
dismissal of the present illegal dismissal case on the ground of forum shopping, would work injustice to respondents
because it is the law itself which provides for two separate remedies for their distinct causes of action.

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Under Article 217[9] of the Labor Code, termination cases fall under the jurisdiction of Labor Arbiters. Whereas, Article
128[10] of the same Code vests the Secretary of Labor or his duly authorized representatives with the power to
inspect the employers records to determine and compel compliance with labor standard laws. The exercise of the said
power by the Secretary or his duly authorized representatives is exclusive to cases where employer-employee
relationship still exists. Thus, in cases where the complaint for violation of labor standard laws preceded the
termination of the employee and the filing of the illegal dismissal case, it would not be in consonance with justice to
charge the complainants with engaging in forum shopping when the remedy available to them at the time their causes
of action arose was to file separate cases before differentfora. Besides, in the instant case, respondent Danny Oberio
disclosed in the verification the pendency of the case regarding wage differential.[11]In addition, said case was
discussed in detail in the position paper,[12] evincing the absence of any intention on the part of respondents to
mislead the Labor Arbiter.
Similarly, in Benguet Management Corporation v. Court of Appeals,[13] petitioner filed separate actions to enjoin the
foreclosure of real estate mortgages before the Regional Trial Courts of San Pablo City and Zambales which has
jurisdiction over the place where the properties were located. In both cases, petitioner contended, among others, that
the loan secured by said mortgages imposed unauthorized penalties, interest and charges. The Court did not find the
mortgagors guilty of forum shopping considering that since injunction is enforceable only within the territorial limits of
the trial court, the mortgagor is left without remedy as to the properties located outside the jurisdiction of the issuing
court, unless an application for injunction is made with another court which has jurisdiction over the latter properties.
By parity of reasoning, it would be unfair to hold respondents in the instant case guilty of forum shopping because the
recourse available to them after their termination, but pending resolution of the inspection case before the DOLE, was
to file a case for illegal dismissal before the Labor Arbiter who has jurisdiction over termination disputes.
More importantly, substantial justice dictates that this case be resolved on the merits considering that the NLRC and
the Court of Appeals correctly found that there existed an employer-employee relationship between petitioner and
respondents and that the latters dismissal was illegal, as will be discussed hereunder.
In the same vein, the NLRC correctly ruled on the merits instead of remanding the case to the Labor
Arbiter. Respondents specifically raised the issue of the existence of employer-employee relationship but petitioner
refused to submit evidence to disprove such relationship on the erroneous contention that to do so would constitute a
waiver of the right to question the jurisdiction of the NLRC to resolve the case on the merits. [14] This is rather odd
because it was the stand of petitioner in the inspection case before the DOLE that the case should be certified to the
NLRC for the resolution of the issue of employer-employee relationship. But when the same issue was proffered
before the NLRC, it refused to present evidence and instead sought the dismissal of the case invoking the pendency
of the inspection case before the DOLE. Petitioner refused to meet head on the substantial aspect of this controversy
and resorted to technicalities to delay its disposition. It must be stressed that labor tribunals are not bound by technical
rules and the Court would sustain the expedient disposition of cases so long as the parties are not denied due
process.[15] The rule is that, due process is not violated where a person is given the opportunity to be heard, but
chooses not to give his or her side of the case.[16] Significantly, petitioner never claimed that it was denied due
process. Indeed, no such denial exists because it had all the opportunities to present evidence before the labor
tribunals below, the Court of Appeals, and even before this Court, but chose not to do so for reasons which will not
warrant the sacrifice of substantial justice over technicalities.
On the third issue, respondents employment with petitioner passed the four-fold test on employer-employee relations,
namely: (1) the selection and engagement of the employee, or the power to hire; (2) the payment of wages; (3) the
power to dismiss; and (4) the power to control the employee.
Petitioner failed to controvert with substantial evidence the allegation of respondents that they were hired by the
former on various dates from 1974 to 1997. If petitioner did not hire respondents and if it was the director alone who
chose the talents, petitioner could have easily shown, being in possession of the records, a contract to such
effect. However, petitioner merely relied on its contention that respondents were piece rate contractors who were paid
by results.[17] Note that under Policy Instruction No. 40, petitioner is obliged to execute the necessary contract
specifying the nature of the work to be performed, rates of pay, and the programs in which they will work. Moreover,
project or contractual employees are required to be apprised of the project they will undertake under a written
contract. This was not complied with by the petitioner, justifying the reasonable conclusion that no such contracts exist
and that respondents were in fact regular employees.
In ABS-CBN v. Marquez,[18] the Court held that the failure of the employer to produce the contract mandated by
Policy Instruction No. 40 is indicative that the so called talents or project workers are in reality, regular
employees. Thus
Policy Instruction No. 40 pertinently provides:
Program employees are those whose skills, talents or services are engaged by the
station for a particular or specific program or undertaking and who are not required to
observe normal working hours such that on some days they work for less than eight
(8) hours and on other days beyond the normal work hours observed by station
employees and are allowed to enter into employment contracts with other persons,
stations, advertising agencies or sponsoring companies. The engagement of
program employees, including those hired by advertising or sponsoring companies,
shall be under a written contract specifying, among other things, the nature of the
work to be performed, rates of pay, and the programs in which they will
work. The contract shall be duly registered by the station with the Broadcast
Media Council within three days from its consummation. (Emphasis supplied)

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Ironically, however, petitioner failed to adduce an iota proof that the requirements for program
employment were even complied with by it. It is basic that project or contractual employees are
appraised of the project they will work under a written contract, specifying, inter alia, the nature of
work to be performed and the rates of pay and the program in which they will work. Sadly, however,
no such written contract was ever presented by the petitioner. Petitioner is in the best of position to
present these documents. And because none was presented, we have every reason to surmise that
no such written contract was ever accomplished by the parties, thereby belying petitioners posture.
Worse, there was no showing of compliance with the requirement that after every engagement or
production of a particular television series, the required reports were filed with the proper government
agency, as provided no less under the very Policy Instruction invoked by the petitioner, nor under the
Omnibus Implementing Rules of the Labor Code for project employees. This alone bolsters
respondents contention that they were indeed petitioners regular employees since their employment
was not only for a particular program.
Moreover, the engagement of respondents for a period ranging from 2 to 25 years and the fact that their drama
programs were aired not only in Bacolod City but also in the sister stations of DYWB in the Visayas and Mindanao
areas, undoubtedly show that their work is necessary and indispensable to the usual business or trade of
petitioner. The test to determine whether employment is regular or not is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer. Also, if the
employee has been performing the job for at least one year, even if the performance is not continuous or merely
intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the
necessity, if not indispensability of that activity to the business. Thus, even assuming that respondents were initially
hired as project/contractual employees who were paid per drama or per project/contract, the engagement of their
services for 2 to 25 years justify their classification as regular employees, their services being deemed indispensable
to the business of petitioner.[19]
As to the payment of wages, it was petitioner who paid the same as shown by the payroll bearing the name of
petitioner company in the heading with the respective salaries of respondents opposite their names. Anent the power
of control, dismissal, and imposition of disciplinary measures, which are indicative of an employer-employee
relationship,[20] the same were duly proven by the following: (1) memorandum[21] duly noted by Wilfredo Alejaga,
petitioners station manager, calling the attention of the Drama Department to the late submission of scripts by writers
and the tardiness and absences of directors and talents, as well as the imposable fines of P100 to P200 for future
infractions; (2) the memorandum[22] of the station manager directing respondent Oberio to explain why no disciplinary
action should be taken against him for punching the time card of a certain Mrs. Fe Oberio who was not physically
present in their office; and (3) the station managers memorandum[23]suspending respondent Oberio for six days for
the said infraction which constituted violation of petitioners network policy. All these, taken together, unmistakably
show the existence of an employer-employee relationship. Not only did petitioner possess the power of control over
their work but also the power to discipline them through the imposition of fines and suspension for violation of
company rules and policies.
Finally, we find that respondents were illegally dismissed. In labor cases, the employer has the burden of proving that
the dismissal was for a just cause; failure to show this would necessarily mean that the dismissal was unjustified and,
therefore, illegal. To allow an employer to dismiss an employee based on mere allegations and generalities would
place the employee at the mercy of his employer; and the right to security of tenure, which this Court is bound to
protect, would be unduly emasculated.[24] In this case, petitioner merely contended that it was respondents who
ceased to report to work, and never presented any substantial evidence to support said allegation. Petitioner therefore
failed to discharge its burden, hence, respondents were correctly declared to have been illegally dismissed.
Furthermore, if doubts exist between the evidence presented by the employer and the employee, the scales of justice
must be tilted in favor of the latter the employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause. It is a time-honored rule that in controversies between a laborer and his master,
doubts reasonably arising from the evidence should be resolved in the formers favor.The policy is to extend the
doctrine to a greater number of employees who can avail of the benefits under the law, which is in consonance with
the avowed policy of the State to give maximum aid and protection of labor.[25]
When a person is illegally dismissed, he is entitled to reinstatement without loss of seniority rights and other privileges
and to his fullbackwages. In the event, however, that reinstatement is no longer feasible, or if the employee decides
not to be reinstated, the employer shall payhim separation pay in lieu of reinstatement. Such a rule is likewise
observed in the case of a strained employer-employee relationship or when the work or position formerly held by the
dismissed employee no longer exists. In sum, an illegally dismissed employee is entitled to: (1) eitherreinstatement if
viable or separation pay if reinstatement is no longer viable, and (2) backwages. In the instant controversy,
reinstatement is no longer viable considering the strained relations between petitioner and respondents. As admitted
by the latter, the complaint filed before the DOLE strained their relations with petitioner who eventually dismissed them
from service. Payment of separation pay instead of reinstatement would thus better promote the interest of both
parties.
Respondents separation pay should be computed based on their respective one (1) month pay, or one-half (1/2)
month pay for every year of service, whichever is higher, reckoned from their first day of employment up to finality of
this decision. Full backwages, on the other hand, should be computed from the date of their dismissal until the finality
of this decision.[26]
WHEREFORE, the petition is DENIED. The July 30, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 77098,
finding respondents to be regular employees of petitioner and holding them to be illegally dismissed and directing

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petitioner to pay full backwages, is AFFIRMED with the MODIFICATION that petitioner is ordered to pay respondents
their separation pay instead of effecting their reinstatement.
SO ORDERED.

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WILHELMINA
S.
OROZCO, petitioner,
vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY INQUIRER, and LETICIA
JIMENEZ MAGSANOC, respondents.
DECISION
NACHURA, J.:
The case before this Court raises a novel question never before decided in our jurisdiction whether a newspaper
columnist is an employee of the newspaper which publishes the column.
In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure, petitioner Wilhelmina S. Orozco
assails the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002 and its
Resolution2 dated September 11, 2002 denying her Motion for Reconsideration. The CA reversed and set aside the
Decision3 of the National Labor Relations Commission (NLRC), which in turn had affirmed the Decision 4 of the Labor
Arbiter finding that Orozco was an employee of private respondent Philippine Daily Inquirer (PDI) and was illegally
dismissed as columnist of said newspaper.
In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle section. She religiously
submitted her articles every week, except for a six-month stint in New York City when she, nonetheless, sent several
articles through mail. She received compensation of P250.00 later increased toP300.00 for every column
published.5
On November 7, 1992, petitioners column appeared in the PDI for the last time. Petitioner claims that her then editor,
Ms. Lita T. Logarta,6 told her that respondent Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop
publishing her column for no reason at all and advised petitioner to talk to Magsanoc herself. Petitioner narrates that
when she talked to Magsanoc, the latter informed her that it was PDI Chairperson Eugenia Apostol who had asked to
stop publication of her column, but that in a telephone conversation with Apostol, the latter said that Magsanoc
informed her (Apostol) that the Lifestyle section already had many columnists. 7
On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to discuss how to
improve said section. They agreed to cut down the number of columnists by keeping only those whose columns were
well-written, with regular feedback and following. In their judgment, petitioners column failed to improve, continued to
be superficially and poorly written, and failed to meet the high standards of the newspaper. Hence, they decided to
terminate petitioners column.8
Aggrieved by the newspapers action, petitioner filed a complaint for illegal dismissal, backwages, moral and
exemplary damages, and other money claims before the NLRC.
On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of petitioner, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of respondent company;
ordering respondent company to reinstate her to her former or equivalent position, with backwages.
Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.9
The Labor Arbiter found that:
[R]espondent company exercised full and complete control over the means and method by which
complainants work that of a regular columnist had to be accomplished. This control might not be found in
an instruction, verbal or oral, given to complainant defining the means and method she should write her
column. Rather, this control is manifested and certained (sic) in respondents admitted prerogative to reject
any article submitted by complainant for publication.
By virtue of this power, complainant was helplessly constrained to adopt her subjects and style of writing to
suit the editorial taste of her editor. Otherwise, off to the trash can went her articles.
Moreover, this control is already manifested in column title, "Feminist Reflection" allotted complainant. Under
this title, complainants writing was controlled and limited to a womans perspective on matters of feminine
interests. That respondent had no control over the subject matter written by complainant is strongly belied by
this observation. Even the length of complainants articles were set by respondents.
Inevitably, respondents would have no control over when or where complainant wrote her articles as she was
a columnist who could produce an article in thirty (3) (sic) months or three (3) days, depending on her mood or
the amount of research required for an article but her actions were controlled by her obligation to produce an
article a week. If complainant did not have to report for work eight (8) hours a day, six (6) days a week, it is
because her task was mainly mental. Lastly, the fact that her articles were (sic) published weekly for three (3)
years show that she was respondents regular employee, not a once-in-a-blue-moon contributor who was not
under any pressure or obligation to produce regular articles and who wrote at his own whim and leisure. 10
PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC Second Division dismissed
the appeal thereby affirming the Labor Arbiters Decision. The NLRC initially noted that PDI failed to perfect its appeal,
under Article 223 of the Labor Code, due to non-filing of a cash or surety bond. The NLRC said that the reason
proffered by PDI for not filing the bond that it was difficult or impossible to determine the amount of the bond since
the Labor Arbiter did not specify the amount of the judgment award was not persuasive. It said that all PDI had to do

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was compute based on the amount it was paying petitioner, counting the number of weeks from November 7, 1992 up
to promulgation of the Labor Arbiters decision.11
The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiters findings of fact and law. It
sustained the Labor Arbiters reasoning that respondent PDI exercised control over petitioners work.
PDI then filed a Petition for Review12 before this Court seeking the reversal of the NLRC Decision. However, in a
Resolution13 dated December 2, 1998, this Court referred the case to the Court of Appeals, pursuant to our ruling
in St. Martin Funeral Homes v. National Labor Relations Commission.14
The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision and dismissed petitioners
Complaint. It held that the NLRC misappreciated the facts and rendered a ruling wanting in substantial evidence. The
CA said:
The Court does not agree with public respondent NLRCs conclusion. First, private respondent admitted that
she was and [had] never been considered by petitioner PDI as its employee. Second, it is not disputed that
private respondent had no employment contract with petitioner PDI. In fact, her engagement to contribute
articles for publication was based on a verbal agreement between her and the petitioners Lifestyle Section
Editor. Moreover, it was evident that private respondent was not required to report to the office eight (8) hours
a day. Further, it is not disputed that she stayed in New York for six (6) months without petitioners permission
as to her leave of absence nor was she given any disciplinary action for the same. These undisputed facts
negate private respondents claim that she is an employee of petitioner.
Moreover, with regards (sic) to the control test, the public respondent NLRCs ruling that the guidelines given
by petitioner PDI for private respondent to follow, e.g. in terms of space allocation and length of article, is not
the form of control envisioned by the guidelines set by the Supreme Court. The length of the article is
obviously limited so that all the articles to be featured in the paper can be accommodated. As to the topic of
the article to be published, it is but logical that private respondent should not write morbid topics such as death
because she is contributing to the lifestyle section. Other than said given limitations, if the same could be
considered limitations, the topics of the articles submitted by private respondent were all her choices. Thus,
the petitioner PDI in deciding to publish private respondents articles only controls the result of the work and
not the means by which said articles were written.
As such, the above facts failed to measure up to the control test necessary for an employer-employee
relationship to exist.15
Petitioners Motion for Reconsideration was denied in a Resolution dated September 11, 2002. She then filed the
present Petition for Review.
In a Resolution dated April 29, 2005, the Court, without giving due course to the petition, ordered the Labor Arbiter to
clarify the amount of the award due petitioner and, thereafter, ordered PDI to post the requisite bond. Upon
compliance therewith, the petition would be given due course. Labor Arbiter Amansec clarified that the award under
the Decision amounted to P15,350.00. Thus, PDI posted the requisite bond on January 25, 2007. 16
We shall initially dispose of the procedural issue raised in the Petition.
Petitioner argues that the CA erred in not dismissing outright PDIs Petition forCertiorari for PDIs failure to post a cash
or surety bond in violation of Article 223 of the Labor Code.
This issue was settled by this Court in its Resolution dated April 29, 2005. 17There, the Court held:
But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to the perfection
of an appeal, there is a plethora of jurisprudence recognizing exceptional instances wherein the Court relaxed
the bond requirement as a condition for posting the appeal.
xxxx
In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed decision of the Labor
Arbiter concerned did not contain a computation of the monetary award due the employees, a circumstance
which is likewise present in this case. In said case, the Court stated,
As a rule, compliance with the requirements for the perfection of an appeal within the reglamentary
(sic) period is mandatory and jurisdictional. However, in National Federation of Labor Unions v.
Ladrido as well as in several other cases, this Court relaxed the requirement of the posting of an
appeal bond within the reglementary period as a condition for perfecting the appeal. This is in line with
the principle that substantial justice is better served by allowing the appeal to be resolved on the
merits rather than dismissing it based on a technicality.
The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to backwages,
13th month pay and service incentive leave pay without however including a computation of the alleged
amounts.
xxxx
In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be expected to post
such appeal bond equivalent to the amount of the monetary award when the amount thereof was not included
in the decision of the labor arbiter." The computation of the amount awarded to petitioner not having been
clearly stated in the decision of the labor arbiter, private respondents had no basis for determining the amount
of the bond to be posted.
Thus, while the requirements for perfecting an appeal must be strictly followed as they are considered
indispensable interdictions against needless delays and for orderly discharge of judicial business, the law
does admit of exceptions when warranted by the circumstances. Technicality should not be allowed to stand in

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the way of equitably and completely resolving the rights and obligations of the parties. But while this Court
may relax the observance of reglementary periods and technical rules to achieve substantial justice, it is not
prepared to give due course to this petition and make a pronouncement on the weighty issue obtaining in this
case until the law has been duly complied with and the requisite appeal bond duly paid by private
respondents.18
Records show that PDI has complied with the Courts directive for the posting of the bond; 19 thus, that issue has been
laid to rest.
We now proceed to rule on the merits of this case.
The main issue we must resolve is whether petitioner is an employee of PDI, and if the answer be in the affirmative,
whether she was illegally dismissed.
We rule for the respondents.
The existence of an employer-employee relationship is essentially a question of fact. 20 Factual findings of quasijudicial agencies like the NLRC are generally accorded respect and finality if supported by substantial evidence. 21
Considering, however, that the CAs findings are in direct conflict with those of the Labor Arbiter and NLRC, this Court
must now make its own examination and evaluation of the facts of this case.
It is true that petitioner herself admitted that she "was not, and [had] never been considered respondents employee
because the terms of works were arbitrarily decided upon by the respondent." 22 However, the employment status of a
person is defined and prescribed by law and not by what the parties say it should be. 23
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee
relationship between parties.24 The four elements of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employees conduct.25
Of these four elements, it is the power of control which is the most crucial 26 and most determinative factor,27 so
important, in fact, that the other elements may even be disregarded. 28 As this Court has previously held:
the significant factor in determining the relationship of the parties is the presence or absence of supervisory
authority to control the method and the details of performance of the service being rendered, and the degree
to which the principal may intervene to exercise such control. 29
In other words, the test is whether the employer controls or has reserved the right to control the employee, not only as
to the work done, but also as to the means and methods by which the same is accomplished. 30
Petitioner argues that several factors exist to prove that respondents exercised control over her and her work, namely:
a. As to the Contents of her Column The PETITIONER had to insure that the contents of her column hewed
closely to the objectives of its Lifestyle Section and the over-all principles that the newspaper projects itself to
stand for. As admitted, she wanted to write about death in relation to All Souls Day but was advised not to.
b. As to Time Control The PETITIONER, as a columnist, had to observe the deadlines of the newspaper for
her articles to be published. These deadlines were usually that time period when the Section Editor has to
"close the pages" of the Lifestyle Section where the column in located. "To close the pages" means to prepare
them for printing and publication.
As a columnist, the PETITIONERs writings had a definite day on which it was going to appear. So she
submitted her articles two days before the designated day on which the column would come out.
This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers obligations to the
readers with regard to timeliness and freshness of ideas.
c. As to Control of Space The PETITIONER was told to submit only two or three pages of article for the
column, (sic) "Feminist Reflections" per week. To go beyond that, the Lifestyle editor would already chop off
the article and publish the rest for the next week. This shows that PRIVATE RESPONDENTS had control over
the space that the PETITIONER was assigned to fill.
d. As to Discipline Over time, the newspaper readers eyes are trained or habituated to look for and read the
works of their favorite regular writers and columnists. They are conditioned, based on their daily purchase of
the newspaper, to look for specific spaces in the newspapers for their favorite write-ups/or opinions on matters
relevant and significant issues aside from not being late or amiss in the responsibility of timely submission of
their articles.
The PETITIONER was disciplined to submit her articles on highly relevant and significant issues on time by
the PRIVATE RESPONDENTS who have a say on whether the topics belong to those considered as highly
relevant and significant, through the Lifestyle Section Editor. The PETITIONER had to discuss the topics first
and submit the articles two days before publication date to keep her column in the newspaper space regularly
as expected or without miss by its readers.31
Given this discussion by petitioner, we then ask the question: Is this the form of control that our labor laws
contemplate such as to establish an employer-employee relationship between petitioner and respondent PDI?
It is not.
Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.
Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. Rules
which serve as general guidelines towards the achievement of the mutually desired result are not indicative of the
power of control.32 Thus, this Court has explained:

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It should, however, be obvious that not every form of control that the hiring party reserves to himself over the
conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an
employer-employee relationship between them in the legal or technical sense of the term. A line must be
drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to
vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the
party hired and eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. x x x. 33
The main determinant therefore is whether the rules set by the employer are meant to control not just the results of the
work but also the means and method to be used by the hired party in order to achieve such results. Thus, in this case,
we are to examine the factors enumerated by petitioner to see if these are merely guidelines or if they indeed fulfill the
requirements of the control test.
Petitioner believes that respondents acts are meant to control how she executes her work. We do not agree. A careful
examination reveals that the factors enumerated by the petitioner are inherent conditions in running a newspaper. In
other words, the so-called control as to time, space, and discipline are dictated by the very nature of the newspaper
business itself.
We agree with the observations of the Office of the Solicitor General that:
The Inquirer is the publisher of a newspaper of general circulation which is widely read throughout the country.
As such, public interest dictates that every article appearing in the newspaper should subscribe to the
standards set by the Inquirer, with its thousands of readers in mind. It is not, therefore, unusual for the Inquirer
to control what would be published in the newspaper. What is important is the fact that such control pertains
only to the end result, i.e., the submitted articles. The Inquirer has no control over [petitioner] as to the means
or method used by her in the preparation of her articles. The articles are done by [petitioner] herself without
any intervention from the Inquirer.34
Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or produce her articles
each week. Aside from the constraints presented by the space allocation of her column, there were no restraints on
her creativity; petitioner was free to write her column in the manner and style she was accustomed to and to use
whatever research method she deemed suitable for her purpose. The apparent limitation that she had to write only on
subjects that befitted the Lifestyle section did not translate to control, but was simply a logical consequence of the fact
that her column appeared in that section and therefore had to cater to the preference of the readers of that section.
The perceived constraint on petitioners column was dictated by her own choice of her columns perspective. The
column title "Feminist Reflections" was of her own choosing, as she herself admitted, since she had been known as a
feminist writer.35 Thus, respondent PDI, as well as her readers, could reasonably expect her columns to speak from
such perspective.
Contrary to petitioners protestations, it does not appear that there was any actual restraint or limitation on the subject
matter within the Lifestyle section that she could write about. Respondent PDI did not dictate how she wrote or
what she wrote in her column. Neither did PDIs guidelines dictate the kind of research, time, and effort she put into
each column. In fact, petitioner herself said that she received "no comments on her articlesexcept for her to shorten
them to fit into the box allotted to her column." Therefore, the control that PDI exercised over petitioner was only as to
the finished product of her efforts, i.e., the column itself, by way of either shortening or outright rejection of the column.
The newspapers power to approve or reject publication of any specific article she wrote for her column cannot be the
control contemplated in the "control test," as it is but logical that one who commissions another to do a piece of work
should have the right to accept or reject the product. The important factor to consider in the "control test" is still the
element of control over how the work itself is done, not just the end result thereof.
In contrast, a regular reporter is not as independent in doing his or her work for the newspaper. We note the common
practice in the newspaper business of assigning its regular reporters to cover specific subjects, geographical
locations, government agencies, or areas of concern, more commonly referred to as "beats." A reporter must produce
stories within his or her particular beat and cannot switch to another beat without permission from the editor. In most
newspapers also, a reporter must inform the editor about the story that he or she is working on for the day. The story
or article must also be submitted to the editor at a specified time. Moreover, the editor can easily pull out a reporter
from one beat and ask him or her to cover another beat, if the need arises.
This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was not precluded from
submitting her column ahead of time or from submitting columns to be published at a later time. More importantly,
respondents did not dictate upon petitioner the subject matter of her columns, but only imposed the general guideline
that the article should conform to the standards of the newspaper and the general tone of the particular section.
Where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit,
not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the
amount thereof, no employer-employee relationship exists. 36
Aside from the control test, this Court has also used the economic reality test. The economic realities prevailing within
the activity or between the parties are examined, taking into consideration the totality of circumstances surrounding
the true nature of the relationship between the parties. 37 This is especially appropriate when, as in this case, there is
no written agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of economic

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reality in analyzing possible employment relationships for purposes of applying the Labor Code ought to be the
economic dependence of the worker on his employer.38
Petitioners main occupation is not as a columnist for respondent but as a womens rights advocate working in various
womens organizations.39 Likewise, she herself admits that she also contributes articles to other publications. 40Thus,
it cannot be said that petitioner was dependent on respondent PDI for her continued employment in respondents line
of business.41
The inevitable conclusion is that petitioner was not respondent PDIs employee but an independent contractor,
engaged to do independent work.
There is no inflexible rule to determine if a person is an employee or an independent contractor; thus, the
characterization of the relationship must be made based on the particular circumstances of each case. 42 There are
several factors43 that may be considered by the courts, but as we already said, the right to control is the dominant
factor in determining whether one is an employee or an independent contractor.44
In our jurisdiction, the Court has held that an independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on ones own account and under ones own responsibility
according to ones 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. 45
On this point, Sonza v. ABS-CBN Broadcasting Corporation 46 is enlightening. In that case, the Court found, using the
four-fold test, that petitioner, Jose Y. Sonza, was not an employee of ABS-CBN, but an independent contractor. Sonza
was hired by ABS-CBN due to his "unique skills, talent and celebrity status not possessed by ordinary employees," a
circumstance that, the Court said, was indicative, though not conclusive, of an independent contractual relationship.
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them
from ordinary employees.47 The Court also found that, as to payment of wages, Sonzas talent fees were the result of
negotiations between him and ABS-CBN. 48 As to the power of dismissal, the Court found that the terms of Sonzas
engagement were dictated by the contract he entered into with ABS-CBN, and the same contract provided that either
party may terminate the contract in case of breach by the other of the terms thereof. 49 However, the Court held that
the foregoing are not determinative of an employer-employee relationship. Instead, it is still the power of control that is
most important.
On the power of control, the Court found that in performing his work, Sonza only needed his skills and talent how he
delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs control. 50 Thus:
We find that ABS-CBN was not involved in the actual performance that produced the finished product of
SONZAs work. ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right
to modify the program format and airtime schedule "for more effective programming." ABS-CBNs sole
concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means
and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast
SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees... Thus, even if ABS-CBN was
completely dissatisfied with the means and methods of SONZAs performance of his work, or even with the
quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could
do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full.
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue
paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance
of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of
performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the
expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that vaudeville performers
were independent contractors although the management reserved the right to delete objectionable features in
their shows. Since the management did not have control over the manner of performance of the skills of the
artists, it could only control the result of the work by deleting objectionable features.
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew.
No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs.
However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform
his job. What SONZA principally needed were his talent or skills and the costumes necessary for his
appearance. Even though ABS-CBN provided SONZA with the place of work and the necessary equipment,
SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABSCBNs sole concern was for SONZA to display his talent during the airing of the programs.
A radio broadcast specialist who works under minimal supervision is an independent contractor. SONZAs
work as television and radio program host required special skills and talent, which SONZA admittedly
possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA
utilized his skills and talent in his shows.51

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The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent, skill, experience,
and her unique viewpoint as a feminist advocate. How she utilized all these in writing her column was not subject to
dictation by respondent. As in Sonza, respondent PDI was not involved in the actual performance that produced the
finished product. It only reserved the right to shorten petitioners articles based on the newspapers capacity to
accommodate the same. This fact, we note, was not unique to petitioners column. It is a reality in the newspaper
business that space constraints often dictate the length of articles and columns, even those that regularly appear
therein.
Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she needed to perform her
work. Petitioner only needed her talent and skill to come up with a column every week. As such, she had all the tools
she needed to perform her work.
Considering that respondent PDI was not petitioners employer, it cannot be held guilty of illegal dismissal.
WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 50970 are hereby AFFIRMED.
SO ORDERED.
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audion electric v nlrc
GONZAGA_REYES, J.:
In this special civil action for certiorari, petitioner seeks the annulment of the resolution[1] dated March 24, 1992,
of the National Labor Relations Commission in NLRC NCR-CA No. 001034-90 and the Order[2] dated July 31, 1992,
denying petitioners motion for reconsideration dated April 22, 1992.
The facts of the case as summarized by Labor Arbiter Cresencio R. Iniego in his decision rendered on November
15, 1990 in NLRC-NCR Case No. -00-08-03906-89, and which are quoted in the questioned Resolution dated March
24, 1992 of the public respondent are as follows:
From the position paper and affidavit corroborated by oral testimony, it appears that complainant was employed by
respondent Audion Electric Company on June 30, 1976 as fabricator and continuously rendered service assigned in
different offices or projects as helper electrician, stockman and timekeeper. He has rendered thirteen (13) years of
continuous, loyal and dedicated service with a clean record. On August 3, complainant was surprised to receive a
letter informing him that he will be considered terminated after the turnover of materials, including respondents tools
and equipments not later than August 15, 1989.
Complainant claims that he was dismissed without justifiable cause and due process and that his dismissal was done
in bad faith which renders the dismissal illegal. For this reason, he claims that he is entitled to reinstatement with full
backwages. He also claims that he is entitled to moral and exemplary damages. He includes payment of his overtime
pay, project allowance, minimum wage increase adjustment, proportionate 13th month pay and attorneys fees.
On its part, respondent merely relied on its unverified letter-communication signed by its project manager, dated
September 25, 1989, the contents of which are as follows:
Your Honor:
Apropos to the complaints filed by NICOLAS MADOLID with your honorable office are as stated and corresponding
allegations as our defense to said complaints.
A. ILLEGAL DISMISSAL- There is no course (sic) to complain since employment contract signed by
complainant with respondent is co-terminus with the project. xxx
B. UNPAID WAGES- Admitting that salary payment was delayed due to late remittance of collection from
respondents Japanese prime contractor but nonetheless settled with complainant as evidenced by
signed Payroll Slips by complainant. xxx
C. NON-PAYMENT OF 13th MONTH PAY- As earlier admitted, there was a relative delay in the remittance of
collection payment from our Japanese prime contractor but respondent knowing the economic
predecament (sic) of complainant has seen to it that respondent be satisfied without awaiting for
remittance of 13th month from its Japanese contractor. attached is a xxx
In full satisfaction of the enumerated complaints made by complainant NICOLAS MADOLID against respondent THE
AUDION ELECTRIC CO., INC., we pray that charges against respondent be withdrawn and dropped.[3]
On November 15, 1990, Labor Arbiter Cresencio R. Iniego rendered a decision, the dispositive portion states:
WHEREFORE, judgment is hereby rendered ordering respondent Audion Electric Co., Inc. and/or Robert S. Coran,
Manager:
1. to reinstate complainant Nicolas Madolid to his former position with full backwages from the date of his
dismissal on August 15, 1989 up to the signing of this decision without loss of seniority rights in the
amount of P34,710.00;
2. to pay complainant his overtime pay for the period March 16 to April 3, 1989 in the amount of P 765.63;
3. to pay complainant his project allowances as follows:
April 16, 1989 to April 30, 1989 P30.00
May 1 to May 15, 1989 P45.00
May 16 to May 31, 1989 P30.00
June 1 to June 15, 1989 P45.00
June 16 to June 30, 1989 P30.00
July 1 to July 15, 1989 P30.00
July 16 to July 31, 1989 P45.00

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4. to pay complainant the minimum wage increase adjustment from August 1 to 14, 1989 in the amount of
P256.50;
5. to pay complainant his proportionate 13 th month pay from January to May 1988 in the amount
of P700.00;
6. to pay complainant moral and exemplary damages in the amount of P20,000.00; and
7. to pay attorneys fees equivalent to 10% of the total award of complainant.[4]
Petitioner appealed to the National Labor Relations Commission which rendered the questioned Resolution dated
March 24, 1992 dismissing the appeal.
The motion for reconsideration filed by petitioner was denied by the NLRC in its Order dated July 31, 1992.
Petitioner is now before us raising the following issues:
I
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN AFFIRMING THE DECISION
OF THE LABOR ARBITER DIRECTING THE REINSTATEMENT OF THE PRIVATE RESPONDENT TO HIS FORMER
POSITION WITHOUT LOSS OF SENIORITY RIGHTS AND WITH BACKWAGES AMOUNTING TO P34,710.00
NOTWITHSTANDING THE FACT THAT THE PRIVATE RESPONDENT WAS MERELY A PROJECT EMPLOYEE.
II
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT AWARDED THE
CLAIM FOR OVERTIME PAY TO PRIVATE RESPONDENT WHEN NO OVERTIME WORK WAS RENDERED.
III
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT AWARDED THE
CLAIMS OF PRIVATE RESPONDENT FOR PROJECT ALLOWANCES, MINIMUM WAGE INCREASE ADJUSTMENT
AND PROPORTIONATE 13TH MONTH PAY WITHOUT ANY EVIDENCE TO PROVE THE SAME.
IV
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT DENIED
PETITIONERS CLAIM THAT IT WAS DENIED DUE PROCESS.
V
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT DID NOT TOUCH
UPON MUCH LESS DISCUSS THE PETITIONERS ASSIGNMENTS OF ERRORS IN ITS APPEAL.
VI
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN AWARDING MORAL AND
EXEMPLARY DAMAGES IN THE AMOUNT OF P20,000 AS WELL AS ATTORNEYS FEES CONSIDERING THAT
THE SAME ARE WITHOUT FACTUAL AND LEGAL BASIS.[5]
The core issues presented before us are (a) whether the respondent NLRC committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it ruled that private respondent was a regular employee and not a
project employee, (b) whether petitioner was denied due process when all the money claims of private respondent, i.e.
overtime pay, project allowances, salary differential, proportionate 13th month pay, moral and exemplary damages as
well as attorneys fees, were granted.
Petitioner contends that as an electrical contractor, its business depends on contracts it may obtain from private
and government establishments, hence the duration of the employment of its work force is not permanent but coterminous with the project to which they are assigned; that the conclusion reached by the Labor Arbiter and affirmed
by the respondent court that private respondent was a regular employee of petitioner was merely based on mere
allegations of private respondent since the Labor Arbiter did not consider the letter-communication filed by petitioner
through its project manager for the reason that it was not under oath; that although private respondents employment
records showed that he was hired by petitioner as fabricator, helper/electrician, stockman and timekeeper in its
various projects from 1976 to August 14, 1989, the same employment record showed a gap in his employment service
by reason of completion of a particular project, hence, private respondent would be re-assigned to other on-going
projects of the petitioner or be laid off if there is no available project; that private respondent is a project worker whose
employment is co-terminous with the completion of project, regardless of the number of projects in which he had
worked as provided under Policy Instruction No. 20 of the Labor Department defining project employees as those
employed in connection with a particular construction project. Petitioner relies on the rulings laid down in Sandoval
Shipyard Inc. vs. NLRC[6]and Cartagenas vs. Romago Electric Co., Inc[7] where this court declared the employment
of project employees as co-terminous with the completion of the project for which they were hired.
Well-settled is the rule that the findings of the NLRC, except when there is grave abuse of discretion, are
practically conclusive on this Court. It is only when the NLRCs findings are bereft of any substantial support from the
records that the Court may step in and proceed to make its own independent evaluation of the facts.[8] We see no
reason to deviate from the rule.
In finding that private respondent was a regular employee of petitioner and not a mere project employee, the
respondent Commission held:
"Firstly, respondents assigning complainant to its various projects did not make complainant a project worker. As
found by the Labor Arbiter, it appears that complainant was employed by respondent xxx as fabricator and or projects
as helper electrician, stockman and timekeeper. Simply put, complainant was a regular non-project worker."[9]
Private respondents employment status was established by the Certification of Employment dated April 10, 1989
issued by petitioner which certified that private respondent is a bonafide employee of the petitioner from June 30,
1976 up to the time the certification was issued on April 10, 1989. The same certificate of employment showed that
private respondents exposure to their field of operation was as fabricator, helper/electrician,
stockman/timekeeper. This proves that private respondent was regularly and continuously employed by petitioner in

Page 143 of 191

various job assignments from 1976 to 1989, for a total of 13 years. The alleged gap in employment service cited by
petitioner does not defeat private respondents regular status as he was rehired for many more projects without
interruption and performed functions which are vital, necessary and indispensable to the usual business of petitioner.
We have held that where the employment of project employees is extended long after the supposed project has
been finished, the employees are removed from the scope of project employees and considered regular employees.
[10] Private respondent had presented substantial evidence to support his position, while petitioner merely presented
an unverified position paper merely stating therein that private respondent has no cause to complain since the
employment contract signed by private respondent with petitioner was co-terminous with the project. Notably,
petitioner failed to present such employment contract for a specific project signed by private respondent that would
show that his employment with the petitioner was for the duration of a particular project. Moreover, notwithstanding
petitioners claim in its reply that in taking interest in the welfare of its workers, petitioner would strive to provide them
with more continuous work by successively employing its workers, in this case, private respondent, petitioner failed to
present any report of termination. Petitioner should have submitted or filed as many reports of termination as there
were construction projects actually finished, considering that private respondent had been hired since 1976. The
failure of petitioner to submit reports of termination supports the claim ofprivate respondent that he was indeed a
regular employee.
Policy Instruction No. 20 of the Department of Labor is explicit that employers of project employees are exempted
from the clearance requirement but not from the submission of termination report. This court has consistently held that
failure of the employer to file termination reports after every project completion with the nearest public employment
office is an indication that private respondent was not and is not a project employee.[11] Department Order No. 19
superseding Policy Instruction No. 20 expressly provides that the report of termination is one of the indications of
project employment.[12]
As stated earlier, the rule in our jurisdiction is that findings of facts of the NLRC affirming those of the Labor
Arbiter are entitled to great weight and will not be disturbed if they are supported by substantial evidence.
[13] Substantial evidence is an amount of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion.[14] We find no grave abuse of discretion committed by NLRC in finding that private respondent
was not a project employee.
Our ruling in the case of Sandoval Shipyard vs. NLRC, supra, is not in point. In the said case, the hiring of
construction workers was not continuous for the reason that the shipyard merely accepts contracts for shipbuilding or
for repair of vessels from third parties and, it is only on occasions when it has work contracts of this nature that it hires
workers for the job which lasts only for less than a year or longer. With respect to Cartagenas vs. Romago Electric Co.
also relied upon by the petitioner, the complainants were considered project employees because they were issued
appointments from project to project, which were co-terminous with the phase or item of work assigned to them in said
project, a situation which is not obtaining in the instant case.
Petitioner further claims that respondent Commission erred in sustaining the awards for overtime pay, project
allowances, minimum wage increase adjustment and proportionate 13th month pay to private respondent in the
absence of any substantial evidence supporting the same; that private respondent failed to present any documentary
evidence other than his self-serving allegation that he actually rendered overtime work and that he failed to specify in
his position paper the actual number of overtime work alleged to have been rendered; that in petitioners lettercommunication filed with the labor arbiter, it showed that claims for allowances and salary differential and 13 th month
pay were already satisfied although petitioner admitted that there was a delay in the payment which was not rebutted
by private respondent.
We find no merit in petitioners contention.
Private respondent clearly specified in his affidavit the specific dates in which he was not paid overtime pay, that
is, from the period March 16, 1989 to April 3, 1989 amounting to P765.63, project allowance from April 16, 1989 to
July 31, 1989 in the total amount of P255.00, wage adjustment for the period from August 1, 1989 to August 14, 1989
in the amount of P256.50 and the proportionate 13th month pay for the period covering January to May 1988,
November-December 1988, and from January to August 1989. This same affidavit was confirmed by private
respondent in one of the scheduled hearings where he moved that he be allowed to present his evidence ex-parte for
failure of petitioner or any of his representative to appear thereat. On the other hand, petitioner submitted its unverified
Comment to private respondents complaint stating that he had already satisfied the unpaid wages and 13th month pay
claimed by private respondent, but this was not considered by the Labor Arbiter for being unverified. As a rule, one
who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment, the general rule
is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment.[15] The
debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.
[16] Petitioner failed to rebut the claims of private respondent. It failed to show proof by means of payroll or other
evidence to disprove the claim of private respondent. Petitioner was given the opportunity to cross-examine private
respondent yet petitioner forfeited such chance when it did not attend the hearing, and failed to rebut the claims of
private respondent.
Petitioners contention that it was denied due process when it was not given the chance to cross-examine the
adverse party and his witnesses, is devoid of merit. The essence of due process is simply an opportunity to be
heard[17] or as applied to administrative proceedings, an opportunity to explain ones side or an opportunity to seek a
reconsideration of the action or ruling complained of.[18] What the law prohibits is absolute absence of the opportunity
to be heard; hence, a party cannot feign denial of due process where he had been afforded the opportunity to present
his side.[19] Petitioner was not denied due process. As the respondent commission observed:

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The case was initially set for hearing on September 12, 1989 wherein complainant himself appeared. Respondents
representative appeared late. For this reason, the case was reset to September 26, 1989 at 9:30 a.m. wherein both
parties appeared. Complainant filed his position paper and respondents through its project manager filed a one-page
unverified communication stating therein its defense. The case was then reset to October 9 and 10, 1990 both at 3:00
p.m. warning the parties that no further postponement will be allowed. On October 9, 1989 complainant and his
counsel appeared but respondents and representative failed to appear despite due notice and warning. A reply to
respondents position paper was filed by complainant through counsel during the hearing. To give a chance to
respondents to appear, hearing was reset the next day, October 10, 1989. However, respondents or representative
again failed to appear which constrained counsel for complainant to move that he be allowed to present evidence exparte which motion was granted. Complainant was presented as witness, confirmed his affidavit, testified on additional
direct examination and identified the annexes attached to his position paper.
To allow the respondents to cross examine the complainant, hearing was again reset to October 31, 1989 at 9:30 a.m.
with the warning that if respondents again fail to appear, presentation of evidence will be deemed waived and the case
will be considered submitted for decision. On October 31, 1989, despite due notice and warning, counsel for
respondents failed to appear although a representative appeared requesting for a resetting alleging that counsel for
respondents is busy with the Office of the Commission of Immigration. Said motion was denied and the motion of
counsel for complainant to submit the case for decision was granted.[20]
Clearly, petitioner had ample opportunity to present its side of the controversy not only before the Labor Arbiter but
also with the NLRC on appeal, where petitioner submitted a memorandum as well as a motion for reconsideration,
which were all considered by the NLRC in the course of resolving the case.[21] It cannot thereafter interpose lack of
due process since it was given the chance to be heard and present his case.[22] Consequently, the alleged defect in
the proceedings before the Labor Arbiter, if there be any, should be deemed cured.
Petitioners contention that the respondent Commission did not touch upon each one of the errors enumerated in
petitioners appeal in its resolution of March 24, 1992 is untenable. In affirming the decision of the Labor Arbiter, the
respondent NLRC found the evidence supporting the labor arbiters factual findings to be substantial, and for this
reason found it unnecessary to make a separate discussion.
However, the award of moral and exemplary damages must be deleted for being devoid of legal basis. Moral and
exemplary damages are recoverable only where the dismissal of an employee was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy.
[23] The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence for
the law always presumes good faith.[24] It is not enough that one merely suffered sleepless nights, mental anguish,
serious anxiety as the result of the actuations of the other party. Invariably, such action must be shown to have been
willfully done in bad faith or with ill motive, and bad faith or ill motive under the law cannot be presumed but must be
established with clear and convincing evidence.[25] Private respondent predicated his claim for such damages on his
own allegations of sleepless nights and mental anguish, without establishing bad faith, fraud or ill motive as legal basis
therefor.
Private respondent not being entitled to award of moral damages, an award of exemplary damages is likewise
baseless.[26] Where the award of moral and exemplary damages is eliminated, so must the award for attorneys fees
be deleted.[27] Private respondent has not shown that he is entitled thereto pursuant to Art. 2208 of the Civil Code.
WHEREFORE, the challenged resolutions of the respondent NLRC are hereby AFFIRMED with the
MODIFICATION that the awards of moral and exemplary damages and attorneys fees are DELETED.
SO ORDERED.
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universal robina corp vs catapang
DECISION
CALLEJO, SR., J.:
Petitioner Universal Robina Corporation is a corporation duly organized and existing under the Philippine laws, while
petitioner Randy Gregorio is the manager of the petitioner companys duck farm in Calauan, Laguna.[1]
The individual respondents were hired by the petitioner company on various dates from 1991 to 1993 to work
at its duck farm in BarangaySto. Tomas, Calauan, Laguna. The respondents were hired under an employment contract
which provided for a five-month period. After the expiration of the said employment contracts, the petitioner company
would renew them and re-employ the respondents. This practice continued until sometime in 1996, when the
petitioners informed the respondents that they were no longer renewing their employment contracts.[2]
In October 1996, the respondents filed separate complaints for illegal dismissal, reinstatement, backwages, damages
and attorneys fees against the petitioners. The complaints were later consolidated.
On March 30, 1999, after due proceedings, the Labor Arbiter rendered a decision in favor of the respondents:
WHEREFORE, premises considered, judgment is hereby rendered declaring that
complainants have indeed been illegally dismissed from their employment.
Accordingly, respondents are hereby ordered to reinstate individual complainants to their
former positions without loss of seniority rights and to pay them their backwages as follows:

Page 145 of 191

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

Complainants Amount
Reynaldo Ararao P113,703.20
Carlos Ararao P100,372.48
Resty Alcoran P100,372.48
Richard Coronado P113,703.20
Quirino Platero P113,703.20
Benito Catapang P113,703.20
Jose Loria, Jr. P100,372.48
Elpidio Villanueva P113,703.20
Jonathan Villanueva P113,703.20
Baltazar Villanueva P113,703.20
Victoriano Loria P144,881.10
Roderick Pangao P100,372.48
Lito Cabrera P113,703.20
Elmer Hiling P113,703.20
Jaime Villegas P113,703.20
Angelito Conchada P119,192.20
Juan Aristado P113,703.20
Joel Villanueva P113,703.20
Ben Cervas P113,703.20
Ruel Marikit P113,703.20
Ireneo Comendador P113,703.20
Total ------------------------ P2,339,933.44

Respondents are likewise ordered to pay fifteen percent (15%) of the total amount due,
or P 350,990.01, as and by way of attorneys fees.
SO ORDERED.[3]
On May 17, 1999, the petitioners filed an Appeal Memorandum with the National Labor Relations Commission (NLRC)
on the ground that the Labor Arbiter erred in ruling that the respondents are the petitioner companys regular
employees.
Meanwhile, on May 18, 1999, the respondents filed a Motion for Enforcement of Reinstatement Order with the
Labor Arbiter. On June 3, 1999, the latter issued an Order, which reads in full:

Page 146 of 191

Finding the Motion for Enforcement of Reinstatement Order dated 18 May 1999, filed by the
complainants to be in order, respondents are hereby directed to immediately comply in good faith to
the reinstatement aspect of the Decision of this Office dated 30 March 1999.
Furthermore, it appearing from the records that several individuals in this case were inadvertently
omitted as party-complainants in the aforesaid Decision, clarification is hereby made that the
complainants hereinbelow set forth are to be deemed included in the coverage of the said decision
with the corresponding right(s) to their backwages, to wit:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Alvin Alcantara - P129,126.40

Onofre Casano - P106,917.20
Joseph Chuidian - P104,165.10
Ramon Joyosa - P128,029.20
Pablito Redondo - P105,409.20
Ramil Roxas - P109,330.00
Resty Salazar - P105,296.10
Noel Trinidad - P108,312.10
Felicisimo Varela - P119,358.20
TOTAL - P1,015,943.50

SO ORDERED.[4]
On June 21, 1999, the Labor Arbiter issued a Writ of Execution enforcing the immediate reinstatement of the
respondents as mandated in the March 30, 1999 Decision.
On July 13, 1999, the petitioners manifested to the Labor Arbiter that they can reinstate only 17 of the 30 employees in
view of the phase out of the petitioner companys Agricultural Section as early as 1996. They averred that there were
no other available positions substantially similar to the positions previously occupied by the other 13 respondents, but
that 10 of them could be accommodated at the farms Duck Dressing Section which operates at an average of three
days a week only.[5]

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On August 2, 1999, the Sheriff filed a Report stating that the petitioners had not yet reinstated the respondents.[6] The
respondents then urged the Labor Arbiter to order their physical or payroll reinstatement and to cite the petitioners in
contempt. On November 26, 1999, the Labor Arbiter issued an Order[7] directing the petitioners, under pain of
contempt, to comply with the March 30, 1999 Decision.
On December 16, 1999, 17 employees were reinstated to their former positions. Thereafter, the respondents moved
for the immediate reinstatement of the remaining 13 respondents. In the meantime, the petitioners manifested to the
Labor Arbiter about the closure of the duck farm effective March 15, 2000.[8]
On February 9, 2000, the Labor Arbiter issued an Order[9] directing the petitioners to immediately effect the actual or
payroll reinstatement of the remaining 13 respondents. In the said Order, the petitioners were likewise directed to
settle whatever financial accountabilities they may have with the said respondents due to the delay in complying with
the reinstatement aspect of the March 30, 1999 Decision.
On February 16, 2000, the respondents manifested that the petitioners still failed and refused to comply with the
February 9, 2000 Order. That same day, the Labor Arbiter issued an Alias Writ of Execution commanding the Sheriff to
cause the immediate reinstatement of the 13 respondents and to collect their withheld salaries.[10]
On February 21, 2000, the respondents moved for the issuance of a notice of garnishment to collect the accumulated
withheld wages of the 17 respondents who were reinstated on December 16, 1999 amounting to P649,400.00. The
Labor Arbiter granted the motion and issued a Second Alias Writ of Execution directing the Sheriff to proceed to collect
the said amount plus execution fees.[11]
Thereafter, the petitioners filed an urgent motion to reconsider the February 9, 2000 Order and to quash the Alias Writ
of Execution. They reiterated their previous contention that they are unable to comply with the order either because
the section to which the 13 respondents were previously assigned had been phased out or the positions previously
held by them have already been filled up.[12]
On March 1, 2000, the Labor Arbiter issued an Order[13] denying the petitioners motion to quash insofar as the
reinstatement aspect is concerned as well as the motion to reconsider and set aside the February 9, 2000 Order. In
case of failure to comply with the reinstatement of the 13 respondents, the Labor Arbiter directed the petitioner
company to pay them separation pay instead.[14]
On March 13, 2000, the petitioners filed a Memorandum and Notice of Appeal with Prayer for the Issuance of a
Temporary Restraining Order[15]with the NLRC, assailing the February 9, 2000 and March 1, 2000 Orders and the
two Alias Writs of Execution issued by the Labor Arbiter.
On November 22, 2000, the NLRC affirmed the decision of the Labor Arbiter with the modification that the award of
attorneys fees was reduced to 10% of the total monetary award.[16]
Aggrieved, the petitioners filed a petition for certiorari with the Court of Appeals (CA). On August 21, 2003, the CA
denied the petition for lack of merit.[17] The CA held that after rendering more than one year of continuous service, the
respondents became regular employees of the petitioners by operation of law. Moreover, the petitioners used the fivemonth contract of employment as a convenient subterfuge to prevent the respondents from becoming regular
employees and such contractual arrangement should be struck down or disregarded as contrary to public policy or
morals. The petitioners act of repeatedly and continuously hiring the respondents in a span of three to five years to do
the same kind of work negates their assertion that the respondents were hired for a specific project or undertaking
only. As to the issue of the failure to reinstate the 13 respondents pending appeal, the CA opined that the petitioners
should have at least reinstated them in the payroll if there were indeed no longer any available positions for which they
could be accommodated.[18] Finally, the CA did not believe that the petitioners counsel was not furnished with copies
of the assailed orders and the alias writs of execution considering that, after the issuance of the said orders, the
petitioners were able to file several pleadings questioning the same.[19]
On September 23, 2003, the petitioners filed a Manifestation and Motion for Additional Time to File a Motion for
Reconsideration of the CA Decision.[20] They alleged therein that they received a copy of the decision on September
8, 2003 and had until September 23, 2003 to file a motion for reconsideration. They then prayed for an extension of 10
days, or until October 3, 2003, to submit a motion for reconsideration.
Realizing their error, the petitioners filed their Motion for Reconsideration two days later. In a Resolution [21] dated
September 30, 2003, the CA denied the petitioners earlier motion for extension of time for being a prohibited pleading.
Subsequently, the petitioners filed their Urgent Motion to Admit Petitioners Motion for Reconsideration, but the CA
merely noted the petitioners motion for reconsideration in its April 15, 2004 Resolution. This prompted the petitioners
to file a Motion to Resolve Petitioners Motion for Reconsideration.[22] Finding no cogent reason to depart from its
previous resolution denying the motion for extension of time to file a motion for reconsideration, the CA denied the
said motion for lack of merit on July 19, 2004.[23]
Hence, this petition for review wherein the petitioners raise the following grounds:

Page 148 of 191

I.
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT RULED THAT THE RESPONDENTS
ATTAINED THE STATUS OF REGULAR EMPLOYMENT AFTER THE LAPSE OF ONE YEAR FROM
THE DATE OF THEIR EMPLOYMENT.
II.
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT RULED THAT DESPITE THE
UNAVAILABILITY OF POSITIONS WHERE THE THIRTEEN (13) RESPONDENTS ARE TO BE
REINSTATED THEY SHOULD STILL BE REINSTATED THROUGH PAYROLL.
III.
THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO RESOLVE THE ISSUE OF
WHETHER OR NOT THE PETITIONERS SHOULD BE HELD LIABLE FOR THE PAYMENT OF THE
ALLEGED WITHHELD SALARIES OF THE RESPONDENTS FROM THE DATE OF ISSUANCE OF
THE WRIT DESPITE THAT RESPONDENTS BELATED OR NON-REINSTATEMENT CANNOT BE
ATTRIBUTED TO THE PETITIONERS.
IV.
THE COURT OF APPEALS SHOULD HAVE RESOLVED PETITIONERS MOTION FOR
RECONSIDERATION CONSIDERING THAT THE DELAY WAS ONLY FOR TWO (2)
DAYS AND WAS THE RESULT OF AN HONEST MISTAKE.[24]
The petitioners submit that the respondents are not regular employees. They aver that it is of no moment that the
respondents have rendered service for more than a year since they were covered by the five-month individual
contracts to which they duly acquiesced. The petitioners contend that they were free to terminate the services of the
respondents at the expiration of
their individual contracts. The petitioners maintain that, in doing so, they merely implemented the terms of the
contracts.[25]
The petitioners assert that the respondents contracts of employment were not intended to circumvent security of
tenure. They point out that the respondents knowingly and voluntarily agreed to sign the contracts without the
petitioners having exercised any undue advantage over them. Moreover, there is no evidence showing that the
petitioners exerted moral dominance on the respondents.[26]
The petitioners further assert that they cannot be compelled to actually reinstate, or merely reinstate in the payroll the
13 respondents considering there are no longer any available positions in the company. They submit that
reinstatement presupposes that the previous positions from which the respondents had been removed still exist or that
there are unfilled positions, more or less, of similar nature as the ones previously occupied by the said employees.
Consequently, they cannot be made to pay the salaries of these employees from the time the writ of execution was
issued.[27]
Finally, the petitioners aver that their motion for reconsideration of the CA Decision should have been admitted by the
CA considering that the delay was only for two days and such delay was due to an honest mistake. They maintain that
the ends of substantial justice would have been better served if the motion for reconsideration was resolved since it
raised critical issues previously raised in the petition but not resolved by the CA.[28]
For their part, the respondents aver that the instant petition should be dismissed outright because the CA Decision has
already become final since the petitioners filed their motion for reconsideration beyond the reglementary 15-day
period. They also aver that the motion for extension of time to file a motion for reconsideration, a prohibited pleading,
did not suspend the running of the period to file a motion for reconsideration, which is also the period for filing an
appeal with this Court. Hence, at the time the present petition was filed with this Court, the period for filing the appeal
had already lapsed.[29] The respondents further aver that the petition should likewise be dismissed for lack of a
verified statement of material dates. They assert that the Rules of Court requires a separate verified statement of
material dates and its incorporation in the body of the petition is not substantial compliance of such requirement.[30]
The respondents aver that they acquired the status as regular employees after rendering one year of service to the
petitioner company. They contend that the contracts providing for a fixed period of employment should be struck down
as contrary to public policy, morals, good customs or public order as it was designed to preclude the acquisition of
tenurial security.[31]

Page 149 of 191

The respondents contend that the order directing their payroll reinstatement was proper considering that the
petitioners have failed to actually reinstate them.[32] They assert that the delay in the reinstatement of the 13
respondents could only be attributed to the petitioners; hence, they are liable for withheld salaries to these employees.
[33]
It appears that the present petition has, indeed, been filed beyond the reglementary period for filing a petition for
review under Rule 45 of the Rules of Court. This period is set forth in Section 2, Rule 45, which provides as follows:
SEC. 2. Time for filing; extension. The petition shall be filed within fifteen (15) days from notice of the
judgment or final order or resolution appealed from, or of the denial of the petitioners motion for new
trial or reconsideration filed in due time after notice of judgment. (Emphasis supplied.)
In conjunction with the said provision, Section 1, Rule 52 of the same Rules provides:
SEC. 1. Period for filing. A party may file a motion for reconsideration of a judgment or final resolution
within fifteen (15) days from notice threof, with proof of service on the adverse party.
Clearly, the period for filing a motion for reconsideration and a petition for review with this Court are the same, that is,
15 days from notice of the judgment. When an aggrieved party files a motion for reconsideration within the said period,
the period for filing an appeal is suspended. If the motion is denied, the aggrieved party is given another 15-day period
from notice of such denial within which to file a petition for review under Rule 45. It must be stressed that the
aggrieved party will be given a fresh 15-day period only when he has filed his motion for reconsideration in due time
on or before the expiration of the original 15-day period. Otherwise, if the motion for reconsideration is filed out of time
and no appeal has been filed, the subject decision becomes final and executory.[34] As such, it becomes immutable
and can no longer be attacked by any of the parties or be modified, directly or indirectly, even by the highest court of
the land.[35]
The petitioners received the CA Decision on September 8, 2003; hence, they had until September 23, 2003 within
which to file a motion for reconsideration, or an appeal, through a petition for review, with this Court. Instead, the
petitioners filed a motion for extension of time to file a motion for reconsideration on September 23, 2003, which is a
prohibited pleading.[36] Thus, it did not suspend the running of the period for filing an appeal. Consequently, the
period to file a petition for review with this Court also expired on September 23, 2003. Instead of going straight to this
Court to attempt to file a petition for review (which had already expired), the petitioners pursued recourse in the CA by
filing their motion for reconsideration two days later, or on September 25, 2003. The CA merely noted the same.
Dissatisfied, the petitioners subsequently filed a motion to resolve their motion for reconsideration. The CA acted on
this motion only on July 19, 2004 and denied the same for lack of merit.In filing their petition for review with this Court,
the petitioners counted the 15-day period from their receipt of the July 19, 2004 CA Resolution on August 4, 2004.
Hence, according to their Motion for Extension of Time to File Petition for Review which they filed on August 19, 2004,
they had until that day within which to file a petition for review. They then asked the Court that they be granted an
extension of 30 days, or until September 21, 2004 within which to file their petition. The Court granted the motion on
the belief that the petitioners motion for reconsideration before the CA was duly filed and that the assailed July 19,
2004 CA Resolution had denied the said motion. Thereafter, the petitioners filed their petition for review on September
20, 2004.
It is, therefore, evident from the foregoing that the present petition was filed way beyond the reglementary period.
Hence, its outright dismissal would be proper. The perfection of an appeal in the manner and within the period
prescribed by law is not only mandatory but jurisdictional, and failure to perfect an appeal has the effect of rendering
the judgment final and executory.[37] Just as a losing party has the privilege to file an appeal within the prescribed
period, so does the winner also have the correlative right to enjoy the finality of the decision.[38]
Anyone seeking exemption from the application of the reglementary period for filing an appeal has the burden of
proving the existence of exceptionally meritorious instances warranting such deviation.[39] In this case, the petitioners
failed to prove the existence of any fact which would warrant the relaxation of the rules. In fact, they have not even
acknowledged that their petition was filed beyond the reglementary period.
In any case, we find that the CA, the NLRC and the Labor Arbiter correctly categorized the respondents as regular
employees of the petitioner company. In Abasolo v. National Labor Relations Commission,[40] the Court reiterated the
test in determining whether one is a regular employee:
The primary standard, therefore, of determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual trade or business of
the employer. The test is whether the former is usually necessary or desirable in the usual business or
trade of the employer. The connection can be determined by considering the nature of work
performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the
employee has been performing the job for at least a year, even if the performance is not continuous
and merely intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the

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employment is considered regular, but only with respect to such activity and while such activity exists.
[41]
Thus, we quote with approval the following excerpt from the decision of the CA:
It is obvious that the said five-month contract of employment was used by petitioners as a convenient
subterfuge to prevent private respondents from becoming regular employees. Such contractual
arrangement should be struck down or disregarded as contrary to public policy or morals. To uphold
the same would, in effect, permit petitioners to avoid hiring permanent or regular employees by simply
hiring them on a temporary or casual basis, thereby violating the employees security of tenure in their
jobs.
Petitioners act of repeatedly and continuously hiring private respondents in a span of 3 to 5 years to
do the same kind of work negates their contention that private respondents were hired for a specific
project or undertaking only.[42]
Further, factual findings of labor officials who are deemed to have acquired expertise in matters within their respective
jurisdiction are generally accorded not only respect but even finality, and bind us when supported by substantial
evidence.[43]
WHEREFORE, premises considered, the petition is DENIED DUE COURSE. The Decision of the Court of Appeals
is AFFIRMED.
SO ORDERED.
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Abesco constructionand development corp. v Ramirez 487 scra
G.R. No. 174792

March 7, 2012

WILFREDO ARO, RONILO TIROL, JOSE PACALDO, PRIMITIVO CASQUEJO and MARCIAL ABGO,Petitioners,
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION,
Fourth
Division
and
Benthel
Development
Corporation,Respondents.
DECISION
PERALTA, J.:
For resolution of this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court, dated October
7, 2006, of petitioners Wilfredo Aro, Ronilo Tirol, Jose Pacaldo, Primitivo Casquejo and Marcial Abgo, seeking to
reverse and set aside the Decision 1 dated March 7, 2006, and Resolution 2 dated July 27, 2006, of the Court of
Appeals (CA) in CA-G.R. CEB-SP No. 01012 which reversed the Decision and Resolution dated June 25, 2004 and
June 30, 2005, respectively, of the National Labor Relations Commission (NLRC).
The facts, as culled from the records, are the following:
Several employees of private respondent Benthel Development Corporation, including the petitioners, filed a
Complaint for illegal dismissal with various money claims and prayer for damages against the latter, in the NLRC
Arbitration Branch No. VII in Cebu City and docketed as RAB Case No. 07-09-1222-97/12-1609-97. Thereafter, Labor
Arbiter Ernesto F. Carreon rendered a decision finding private respondent guilty of illegal dismissal and ordering it to
pay its thirty-six (36) employees P446,940.00 as separation pay.
The employees, including the petitioners herein, appealed from the said decision. The NLRC, in NLRC Case No. V000399-98, affirmed the decision of Labor Arbiter Carreon in its Decision dated January 12, 1999, with the
modification that private respondent pay backwages computed from the respective dates of dismissal until finality of
the decision.

Page 151 of 191

Private respondent, unsatisfied with the modification made by the NLRC, filed a motion for reconsideration with the
contention that, since it has been found by the Labor Arbiter and affirmed in the assailed decision that the employees
were project employees, the computation of backwages should be limited to the date of the completion of the project
and not to the finality of the decision. The NLRC, however, denied the motion ruling that private respondent failed to
establish the date of the completion of the project.
Aggrieved, private respondent filed a Petition for Certiorari with the CA, docketed as CA-G.R. SP No. UDK 3092
assailing the January 12, 1999 decision of the NLRC and the denial of its motion for reconsideration which was
dismissed for non-payment of docket fees and insufficiency of form. It filed a motion for reconsideration, but the latter
was also denied.
Thus, private respondent filed with this Court, docketed as G.R. No. 144433 a Petition for Review on Certiorari. In a
Resolution dated September 20, 2000, this Court denied the petition for having been filed out of time and for nonpayment of docket and other lawful fees.
The employees, including the petitioners, upon the finality of this Court's resolution, filed a Motion for Execution before
the Labor Arbiter of the January 12, 1999 decision. Thereafter, the Labor Arbiter ordered for the issuance of a writ of
execution directing the computation of the awards.
Afterwards, private respondent filed an appeal from the said Order with an urgent prayer for the issuance of a
temporary restraining order and/or preliminary injunction with public respondent NLRC. The said appeal was denied.
The NLRC held that the appeal was premature, there having been no computation yet made by the Labor Arbiter as to
the exact amount to be paid to the employees. Public respondent remanded the case to the arbitration branch for
appropriate action.
Labor Arbiter Carreon inhibited himself from further proceedings in the case upon motion of private respondent. In the
meantime, fifteen (15) employees have executed Affidavits of Full Settlement after having settled amicably with the
private respondent. Labor Arbiter Violeta Ortiz-Bantug issued an Order dated July 31, 2003 for the issuance of a writ
of execution only for the payment of the claims of the twenty-one (21) remaining employees in the total amount
of P4,383,225.00, which included attorney's fees equivalent to ten (10%) percent of the sum received as settlement by
the fifteen (15) employees who had earlier settled with the private respondent.
Private respondent appealed to public respondent NLRC contending that the computation for backwages must be only
until the completion of the project and not until the finality of the decision. Public respondent, in its Decision dated
June 25, 2004, affirmed the Order of Labor Arbiter Bantug, but reduced the total amount to P4,073,858.00, inclusive of
attorney's fees. Thereafter, private respondent filed a motion for reconsideration of the June 25, 2004 decision which
was denied by the public respondent, but not before the admittance of the affidavits of withdrawal, release/waiver and
quitclaim executed by another group of fourteen (14) employees, leaving unresolved only the claims of the petitioners
herein. Thus, in the resolution of the private respondent's motion for reconsideration, the award was reduced to the
sum of P1,374,339.00, inclusive of attorney's fees.
As a recourse, private respondent filed a petition for certiorari with the CA, alleging that public respondent committed
grave abuse of discretion in promulgating its assailed decision and denying its motion for reconsideration. The CA
granted the petition, therefore, annulling and setting aside the decision and resolution of the NLRC as to the award for
backwages and remanded the case to the same public respondent for the proper computation of the backwages due
to each of the petitioners herein. The dispositive portion of the decision reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING the petition filed in
this case. The assailed Decision and Resolution dated June 04, 2004 (sic) and June 30, 2005, respectively, issued by
the public respondent in NLRC Case No. V-000586-2003 are hereby ANNULLED and SET ASIDE as to the award for
backwages granted to the seven private respondents named in the petition at bench.
The case is hereby remanded to the public respondent for the proper computation of the backwages due to each of
the said seven private respondents, computed until March 18, 1997.
SO ORDERED.3

Page 152 of 191

Hence, the present petition.

Petitioners assigned the following errors:
GROUND/ASSIGNMENT OF ERRORS
THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT OVERTURNED ITS
OWN DECISION AND THAT OF THE SUPREME COURT.
THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION IN DECLARING THAT
PETITIONERS ARE PROJECT EMPLOYEES, CONSIDERING THAT THE NLRC 4TH DIVISION HAD LONG
RULED THAT SAID EMPLOYEES ARE IN FACT REGULAR EMPLOYEES AND WHICH RULING WAS
LONG CONFIRMED AND AFFIRMED NOT ONLY BY THE COURT OF APPEALS BUT BY THE SUPREME
COURT ITSELF.
THE RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT REFUSED TO
RULE ON THE INVALIDITY OF THE RELEASE AND QUITCLAIMS EXECUTED BY SOME OF THE
EMPLOYEES WITHOUT THE ASSISTANCE OF COUNSEL.4
In its Comment5 dated January 24, 2007, private respondent stated the following counter-arguments:
1. The issues presented in CA-G.R. SP No. UDK 3092 and SC G.R. No. 144433 are not the same issues
recently raised in the Petition for Certiorari before the Court of Appeals.
2. There is no final and executory ruling that herein petitioners were regular employees and not just project
employees.6
First of all, this Court has to address the nature of the petition filed by petitioners. As pointed out by private
respondent, and not disputed by petitioners, the present petition was filed out of time. Petitioners received, on August
4, 2006, a copy of the CA Resolution dated July 27, 2006. The period within which to file a petition for review under
Rule 45 is within fifteen (15) days from notice of the judgment or final order or resolution appealed from, or from the
denial of the petitioners' motion for new trial or reconsideration filed in due time after notice of the judgment, or in this
case, not later than August 19, 2006. Under Rule 65, a petition for certiorari may be filed not later than sixty (60) days
from notice of the judgment, order or resolution, or in this case, not later than October 3, 2006. However, the present
petition is dated October 7, 2006 and as it appears on the records, this Court received the said petition on October 17,
2006. Thus, on its face and in reality, the present petition was filed out of time, whether it be under Rule 45 or Rule 65
of the Rules of Court. Nevertheless, this Court did not dismiss the present petition and required private respondent to
file its Comment. Consequently, a Reply from petitioners and eventually, both parties' respective memorandum were
filed. In view of that premise and in the interest of justice, this Court shall forego the technicalities and is constrained to
resolve the present petition as a petition forcertiorari under Rule 65, since the main issue raised by petitioners is
whether or not the CA committed grave abuse of discretion which amounted to lack or excess of its jurisdiction.
Petitioners argue that the CA should have dismissed private respondent's petition, since there was already a finality of
the judgment of the NLRC. It is not disputed that on January 31, 2000, the CA, through its 17th Division, issued a
Resolution dismissing private respondent's petition for certiorari (docketed as CA-G.R. SP No. UDK 3092.
Subsequently, the same private respondent filed a motion for reconsideration, which was denied by the CA in its
Resolution dated June 8, 2000. Not contented, private respondent filed a petition with this Court, which the latter
denied, through its Second Division (G.R. No. 144433), in its Resolution dated September 20, 2000. Still aggrieved,
private respondent filed a second motion for reconsideration, which was dismissed by this Court. Thus, according to
petitioners, there was already a finality of judgment.
On the other hand, private respondent insists that the inequitable, nay illegal, in a decision cannot lapse into finality,
referring to the computation of the backwages which is not commensurate to the factual findings of the Labor Arbiter
and the NLRC. Basically, according to private respondent, the CA merely sought to correct the NLRC's and the Labor
Arbiter's one-sided and blind adherence to and/or misguided application of strict technical rules, and their overzealous
partiality in favor of labor. Private respondent further claims that the issues presented in their earlier petitions with the
CA and this Court (CA-G.R. SP No. UDK 3092 and SC G.R. No. 144433, respectively) are not the same issues raised

Page 153 of 191

in the petition for certiorari later filed with the CA and the decision of which is now the subject of herein petition. Private
respondent clarifies that there is no final and executory ruling that petitioners were regular and not just project
employees, hence, there was a need to file a petition with the CA.
The issue as to whether petitioners were project employees or regular employees is factual in nature. It is well-settled
in jurisprudence that factual findings of administrative or quasi-judicial bodies, which are deemed to have acquired
expertise in matters within their respective jurisdictions, are generally accorded not only respect but even finality, and
bind the Court when supported by substantial evidence. 7 Section 5, Rule 133 of the Rules of Court, defines substantial
evidence as "that amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion." Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in
labor cases.8 We [this Court] may take cognizance of and resolve factual issues, only when the findings of fact and
conclusions of law of the Labor Arbiter or the NLRC are inconsistent with those of the CA. 9 In the present case, the
NLRC and the CA have opposing views.
According to the CA, petitioners are project employees as found by Labor Arbiter Ernesto Carreon in his Decision
dated May 28, 1998, because they were hired for the construction of the Cordova Reef Village Resort in Cordova,
Cebu, which was later on affirmed by the NLRC in its January 12, 1999 decision. The only discrepancy is the Order of
the NLRC that petitioners are entitled to backwages up to the finality of its decision, when as project employees,
private respondents are only entitled to payment of backwages until the date of the completion of the project. In a later
resolution on private respondent's motion for reconsideration of its January 12, 1999 decision, the NLRC changed its
findings by ruling that petitioners herein were regular employees and, therefore, entitled to full backwages, until finality
of the decision, citing that petitioners repeated rehiring over a long span of time made them regular employees.
Article 280 of the Labor Code distinguishes a "project employee" from a "regular employee," thus:
Article 280. Regular and Casual Employment The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year 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.
In Hanjin Heavy Industries and Construction Co. Ltd. v. Ibaez, 10 this Court extensively discussed the above
distinction, thus:
x x x [T]he principal test for determining whether particular employees are properly characterized as "project
employees" as distinguished from "regular employees" is whether or not the project employees were assigned to carry
out a "specific project or undertaking," the duration and scope of which were specified at the time the employees were
engaged for that project.11
In a number of cases,12 the Court has held that the length of service or the re-hiring of construction workers on a
project-to-project basis does not confer upon them regular employment status, since their re-hiring is only a natural
consequence of the fact that experienced construction workers are preferred. Employees who are hired for carrying
out a separate job, distinct from the other undertakings of the company, the scope and duration of which has been
determined and made known to the employees at the time of the employment , are properly treated as project
employees and their services may be lawfully terminated upon the completion of a project. 13Should the terms of their
employment fail to comply with this standard, they cannot be considered project employees.
In Abesco Construction and Development Corporation v. Ramirez,14 which also involved a construction company and
its workers, this Court considered it crucial that the employees were informed of their status as project employees:

Page 154 of 191

The principal test for determining whether employees are "project employees" or "regular employees" is whether they
are assigned to carry out a specific project or undertaking, the duration and scope of which are specified at the time
they are engaged for that project. Such duration, as well as the particular work/service to be performed, is defined in
an employment agreement and is made clear to the employees at the time of hiring.
In this case, petitioners did not have that kind of agreement with respondents. Neither did they inform respondents of
the nature of the latters work at the time of hiring. Hence, for failure of petitioners to substantiate their claim that
respondents were project employees, we are constrained to declare them as regular employees.
In Caramol v. National Labor Relations Commission,15 and later reiterated in Salinas, Jr. v. National Labor Relations
Commission,16 the Court markedly stressed the importance of the employees' knowing consent to being engaged as
project employees when it clarified that "there is no question that stipulation on employment contract providing for a
fixed period of employment such as "project-to-project" contract is valid provided the period was agreed upon
knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon
the employee and absent any other circumstances vitiating his consent x x x."
Applying the above disquisition, this Court agrees with the findings of the CA that petitioners were project employees.
It is not disputed that petitioners were hired for the construction of the Cordova Reef Village Resort in Cordova, Cebu.
By the nature of the contract alone, it is clear that petitioners' employment was to carry out a specific project. Hence,
the CA did not commit grave abuse of discretion when it affirmed the findings of the Labor Arbiter. The CA correctly
ruled:
A review of the facts and the evidence in this case readily shows that a finding had been made by Labor Arbiter
Ernesto Carreon, in his decision dated May 28, 1998, that complainants, including private respondents, are project
employees. They were hired for the construction of the Cordova Reef Village Resort in Cordova, Cebu. We note that
no appeal had been made by the complainants, including herein private respondents, from the said finding. Thus, that
private respondents are project employees has already been effectively established.
Likewise, a review of the public respondent's January 12, 1999 decision shows that it affirmed the labor arbiter's
finding of the private respondents' being project employees.
We therefore cannot fathom how the public respondent could have ordered backwages up to the finality of its decision
when, as project employees, private respondents are only entitled to payment of the same until the date of the
completion of the project. It is settled that, without a valid cause, the employment of project employees cannot be
terminated prior to expiration. Otherwise, they shall be entitled to reinstatement with full backwages. However, if the
project or work is completed during the pendency of the ensuing suit for illegal dismissal, the employees shall be
entitled only to full backwages from the date of the termination of their employment until the actual completion of the
work.
While it may be true that in the proceedings below the date of completion of the project for which the private
respondents were hired had not been clearly established, it constitutes grave abuse of discretion on the part of the
public respondent for not determining for itself the date of said completion instead of merely ordering payment of
backwages until finality of its decision.
xxxx
The decision of the labor arbiter, as affirmed by the public respondent in its January 12, 1999 decision, clearly
established that private respondents were project employees. Because there was no showing then that the project for
which their services were engaged had already been completed, the public respondent likewise found that private
respondents were illegally dismissed and thus entitled to backwages.
However, in utter disregard of the law and prevailing jurisprudence, the public respondents capriciously and arbitrarily
ordered that the said backwages be computed until the finality of its decision instead of only until the date of the
project completion. In grave abuse of its discretion, the public respondent refused to consider the evidence presented
before it as to the date of completion of the Cordova Reef Village Resort project. The records show that affidavits have
been executed by the petitioner's manager, corporate architect and project engineer as to the fact of the completion of

Page 155 of 191

the project in October 1996. As these evidences [sic] were already a matter of record, the public respondent should
not have closed its eyes and should have endeavored to render a correct and just judgment.
xxxx
Furthermore, as earlier noted, private respondents did not appeal from the Labor Arbiter's findings that they were
indubitably project employees. However, they were entitled to the payment of separation pay only for the reason that
the date of the completion of the project for which they were hired had not been clearly established. Thus, in affirming
the labor arbiter's decision, the public respondent in effect sustained the finding that private respondents are project
employees. The statement, therefore, contained in the resolution of the petitioner's motion for reconsideration of its
January 12, 1999 decision that repeated rehiring makes the worker a regular employee, is at best an obiter, especially
considering that such conclusion had not been shown to apply to the circumstances then obtaining with the private
respondents' employment with the petitioner.17
Therefore, being project employees, petitioners are only entitled to full backwages, computed from the date of the
termination of their employment until the actual completion of the work. Illegally dismissed workers are entitled to the
payment of their salaries corresponding to the unexpired portion of their employment where the employment is for a
definite period.18 In this case, as found by the CA, the Cordova Reef Village Resort project had been completed in
October 1996 and private respondent herein had signified its willingness, by way of concession to petitioners, to set
the date of completion of the project as March 18, 1997; hence, the latter date should be considered as the date of
completion of the project for purposes of computing the full backwages of petitioners.1wphi1
As to the issue that the CA committed grave abuse of discretion in refusing to rule on the invalidity of the release and
quitclaims executed by some of the employees other than the petitioners, such is inconsequential as those employees
are not parties in the present case.
WHEREFORE, the Petition for Review dated October 7, 2006, of petitioners Wilfredo Aro, Ronilo Tirol, Jose Pacaldo,
Primitivo Casquejo and Marcial Abgo is hereby DENIED. Consequently, the Decision dated March 7, 2006 and
Resolution dated July 27, 2006 of the Court of Appeals are hereby AFFIRMED in toto.
SO ORDERED.
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Philippine federation of credit coop inc v NLRC
PHIL.

FEDERATION
OF
CREDIT
COOPERATIVES,
INC.
(PECCI)
and
FR.
BENEDICTO
JAYOMA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (First Division) and VICTORIA
ABRIL, respondents.

DECISION
ROMERO, J.:
It is an elementary rule in the law on labor relations that a probationary employee who is engaged to work beyond
the probationary period of six months, as provided under Art. 281 of the Labor Code, as amended, or for any length of
time set forth by the employer, shall be considered a regular employee.
Sometime in September 1982, private respondent Victoria Abril was employed by petitioner Philippine Federation
of Credit Cooperatives, Inc. (PFCCI), a corporation engaged in organizing services to credit and cooperative entities,
as Junior Auditor/Field Examiner and thereafter held positions in different capacities, to wit: as office secretary in 1985
and as cashier-designate for four (4) months ending in April 1988. Respondent, shortly after resuming her position as
office secretary, subsequently went on leave until she gave birth to a baby girl. Upon her return sometime in
November 1989, however, she discovered that a certain Vangie Santos had been permanently appointed to her former
position. She, nevertheless, accepted the position of Regional Field Officer as evidenced by a contract which
stipulated, among other things, that respondents employment status shall be probationary for a period of six (6)
months. Said period having elapsed, respondent was allowed to work until PFCCI presented to her another

Page 156 of 191

employment contract for a period of one year commencing on January 2, 1991 until December 31, 1991, after which
period, her employment was terminated.
In a complaint for illegal dismissal filed by respondent against PFCCI on April 1, 1992, Labor Arbiter Cornelio L.
Linsangan rendered a decision on March 10, 1993 dismissing the same for lack of merit but ordered PFCCI to
reimburse her the amount of P2,500.00 which had been deducted from her salary.
On appeal, however, the said decision was reversed by the National Labor Relations Commission (NLRC), the
dispositive portion of which reads:
WHEREFORE, the appealed decision is hereby set aside. The respondents are hereby directed to reinstate
complainant to her position last held, which is that of a Regional Field Officer, or to an equivalent position if such is no
longer feasible, with full backwages computed from January 1, 1992 until she is actually reinstated.
SO ORDERED.
We find no merit in the petition.
Article 281 of the Labor Code, as amended, allows the employer to secure the services of an employee on a
probationary basis which allows him to terminate the latter for just cause or upon failure to qualify in accordance with
reasonable standards set forth by the employer at the time of his engagement. As defined in the case of International
Catholic Migration v. NLRC,[1] a probationary employee is one who is on trial by an employer during which the
employer determines whether or not he is qualified for permanent employment. A probationary employment is made to
afford the employer an opportunity to observe the fitness of a probationer while at work, and to ascertain whether he
will become a proper and efficient employee.
Probationary employees, notwithstanding their limited tenure, are also entitled to security of tenure. Thus, except
for just cause as provided by law,[2] or under the employment contract, a probationary employee cannot be terminated.
[3]

In the instant case, petitioner refutes the findings of the NLRC arguing that, after respondent had allegedly
abandoned her secretarial position for eight (8) months, she applied for the position of Regional Field Officer for
Region IV, which appointment, as petitioner would aptly put it, had been fixed for a specific project or undertaking the
completion or termination of which had been determined at the time of the engagement of said private respondent and
therefore considered as a casual or contractual employment under Article 280 of the Labor Code. [4]
The contention that respondent could either be classified as a casual or contractual employee is utterly
misplaced; thus, it is imperative for the Court to elucidate on the kinds of employment recognized in this
jurisdiction. The pertinent provision of the Labor Code, as amended, states:
Art. 280. Regular and casual employment. - The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists.
This provision of law comprehends three kinds of employees: (a) regular employees or those whose work is
necessary or desirable to the usual business of the employer; (b) project employees or those whose employment has
been fixed for a specific project or undertaking the completion or termination of which has been determined at the time
of the engagement of the employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season; and (c) casual employees or those who are neither regular nor project

Page 157 of 191

employees. With regard to contractual employees, the Court in the leading case of Brent School, Inc. v. Zamora, [5] laid
down the guidelines before a contract of employment may be held as valid, to wit: stipulations in employment
contracts providing for term employment or fixed period employment are valid when the period were agreed upon
knowingly and voluntarily by the parties without force, duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the
employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter.
Having expounded on the various types of employees, the Court is constrained to review the contract of
employment entered into between the party-litigants. The said contract reads:
That the employer hires the employee on contractual basis to the position of Regional Field Officer of Region 4 under
PFCCI/WOCCU/Aid Project No. 8175 and to do the function as stipulated in the job description assigned to him (her):
on probationary status effective February 17/90 for a period not to exceed six (6) months from said effectivity, subject
to renewal of this contract should the employees performance be satisfactory.
While the initial statements of the contract show that respondents employment was for a fixed period, the
succeeding provisions thereof contradicted the same when it provided that respondent shall be under probationary
status commencing on February 17, 1990 and ending six (6) months thereafter. Petitioner manifested that
respondents employment for a period of one year, from January until December 1991, having been fixed for a
specified period, could not have converted her employment status to one of regular employment. Conversely, it
likewise insisted that respondent was employed to perform work related to a project funded by the World Council of
Credit Unions (WOCCU) and hence, her status is that of a project employee. The Court is, thus, confronted with a
situation under which the terms of the contract are so ambiguous as to preclude a precise application of the pertinent
labor laws.
Amidst the muddled assertions by petitioner, we adhere to the pronouncement stated in the recent case of
Villanueva v. NLRC,[6] where the Court ruled that where a contract of employment, being a contract of adhesion, is
ambiguous, any ambiguity therein should be construed strictly against the party who prepared it. Furthermore, Article
1702 of the Civil Code provides that, in case of doubt, all labor contracts shall be construed in favor of the laborer. It
added:
We cannot allow the respondent company to construe otherwise what appears to be clear from the wordings of the
contract. The interpretation which the respondent company seeks to wiggle out is wholly unacceptable, as it would
result in a violation of petitioners right to security of tenure guaranteed in Section 3 of Article XIII of the Constitution
and in Articles 279 and 281 of the Labor Code.
After a careful scrutiny of the subject contract, we arrive at the conclusion that there was no grave abuse of
discretion on the part of the NLRC and, thus, affirm the finding that respondent has become a regular employee
entitled to security of tenure guaranteed under the Constitution and labor laws.
Regardless of the designation petitioner may have conferred upon respondents employment status, it is,
however, uncontroverted that the latter, having completed the probationary period and allowed to work thereafter,
became a regular employee who may be dismissed only for just or authorized causes under Articles 282, 283 and 284
of the Labor Code, as amended. Therefore, the dismissal, premised on the alleged expiration of the contract, is illegal
and entitles respondent to the reliefs prayed for.
WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED and the decision of the National Labor
Relations Commission dated November 28, 1994 is AFFIRMED. No costs.
SO ORDERED.
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Computation of the 6th month probationary period
Cals poultry supply corp v roco
CALS

POULTRY SUPPLY CORPORATION and DANILO YAP, petitioners, vs. ALFREDO

CANDELARIA ROCO, respondents.

ROCO

and

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RESOLUTION
KAPUNAN, J.:
For our resolution is the motion for reconsideration of the Courts minute Resolution dated April 1, 2002, denying
the petition for review filed by CALS Poultry Supply Corporation (hereinafter referred to as CALS) of the Court of
Appeals decision in favor of herein private respondents Alfredo Roco and Candelaria Roco. The Court of Appeals
reversed the decision of the National Labor Relations Commission affirming the Labor Arbiters decision which
dismissed private respondents complaint for illegal dismissal against CALS. Private respondents filed a comment on
the motion for reconsideration as required by the Court.
CALS Poultry Supply Corporation is engaged in the business of selling dressed chicken and other related
products and managed by Danilo Yap.[1]
On March 15, 1984, CALS hired Alfredo Roco as its driver. On the same date, CALS hired Edna Roco, Alfredos
sister, as a helper in the dressing room of CALS. [2] On May 16, 1995, it hired Candelaria Roco, another sister, as
helper,[3] also at its chicken dressing plant on a probationary basis.
On March 5, 1996, Alfredo Roco and Candelaria Roco filed a complaint for illegal dismissal against CALS and
Danilo Yap alleging that Alfredo and Candelaria were illegally dismissed on January 20, 1996 and November 5, 1996,
respectively.[4] Both also claimed that they were underpaid of their wages. [5] Edna Roco, likewise, filed a complaint for
illegal dismissal, alleging that on June 26, 1996, she was reassigned to the task of washing dirty sacks and for this
reason, in addition to her being transferred from night shift to day time duties, which she considered as management
act of harassment, she did not report for work.[6]
According to Alfredo Roco, he was dismissed on January 20, 1996 when he refused to accept P30,000.00 being
offered to him by CALS lawyer, Atty. Myra Cristela A. Yngcong, in exchange for his executing a letter of voluntary
resignation. On the part of Candelaria Roco, she averred that she was terminated without cause from her job as
helper after serving more than six (6) months as probationary employee.
The Labor Arbiter on April 16, 1998, issued a decision dismissing the complaints for illegal dismissal for lack of
merit. The Labor Arbiter found that Alfredo Roco applied for and was granted a leave of absence for the period from
January 4 to 18, 1996. He did not report back for work after the expiration of his leave of absence, prompting CALS,
through its Chief Maintenance Officer to send him a letter on March 12, 1996 inquiring if he still had intentions of
resuming his work. Alfredo Roco did not respond to the letter despite receipt thereof, thus, Alfredo was not dismissed;
it was he who unilaterally severed his relation with his employer.[7]
In the case of Candelaria Roco, the Labor Arbiter upheld CALS decision not to continue with her probationary
employment having been found her unsuited for the work for which her services were engaged. She was hired on May
16, 1995 and her services were terminated on November 15, 1995.
Edna Roco, according to the Labor Arbiter, began absenting herself on June 25, 1996. She was sent a memo on
July 1, 1996 requiring her to report for work immediately, but she did not respond. [8]
In their position papers, the complainants claimed that they were not given their overtime pay, premium pay for
holidays, premium pay for rest days, 13 th month pay, allowances. They were also not given their separation pay after
their dismissal. The Labor Arbiter, however, denied their claims, stating that they had not substantiated the same; on
the other hand, CALS presented evidence showing that complainants received the correct salaries and related
benefits.
The National Labor Relations Commission (NLRC), in a decision promulgated on January 17, 2000, affirmed the
judgment of the Labor Arbiter.
On appeal by Alfredo, Candelaria and Edna Roco to the Court of Appeals, the appellate court set aside the
NLRCs decision and ordered reinstatement of Alfredo and Candelaria Roco to their former positions without loss of
seniority of rights and benefits, with full payment of backwages. However, in the case of Edna Roco, the Court of

Page 159 of 191

Appeals found that her appeal cannot be favorably considered as she actually abandoned her work without
justification.
In holding that Alfredo Roco did not abandon his employment, but was illegally dismissed, the Court of Appeals
ratiocinated:
xxx (P)etitioner Alfredo can not be said to have abandoned his employment. The failure of Alfredo to report for work
was justified under the circumstances. The positive assertion of petitioner that when he reported for work on January
20, 1996, he was told that his services were already terminated is more convincing than the mere denial of respondent
Danilo Yap. Petitioner Alfredos failure to inquire from private respondent as to the cause of his dismissal should not be
taken against him. It should be noted that when the secretary of respondent Danilo Yap conveyed the order of
dismissal, Alfredo took steps to verify the same from the companys Chief Maintenance Officer Rolando Sibugan who
confirmed said order. The filing of the illegal dismissal case against CALS by petitioner Alfredo negates the charge of
abandonment. Private respondent failed to show that Alfredo clearly and unequivocably performed overt acts to sever
the employer-employee relationship.
xxx
In termination cases, the burden of proving just and valid cause for dismissing an employee from his employment
rests upon the employer, and the latters failure to do so would result in a finding that the dismissal is
unjustified. Abandonment as a just and valid ground for termination means the deliberate, unjustified refusal of the
employee to resume his employment, and the burden of proof is on the employer to show a clear, deliberate and
unequivocal intent on the part of the employee to discontinue employment without any intention of returning. Other
than its self-serving claim that petitioner Alfredo did not report for work, private respondent failed to adduce other
evidence of any overt act of Alfredo showing an intent to abandon his work. In short, private respondent failed to
discharge the burden.
Moreover, not only was there a lack of a valid cause for the dismissal of petitioner Alfredo; the record of the case is
devoid of any evidence that Alfredo was afforded his right to due process. If Alfredo was dismissed because of his
abandonment of work, CALS should have given him a written notice of termination in accordance with Section 2, Rule
XVI, Book V of the Omnibus Rules Implementing the Labor Code which provides:
Section 2. Notice of Dismissal. Any employer who seeks to dismiss a worker shall furnish him a written notice stating
the particular acts or omission constituting the grounds for his dismissal. In cases of abandonment of work, the notice
shall be served at the workers last known address.
In the instant case, private respondent failed to present as evidence such notice despite every companys standard
policy to record and file every transaction including notices of termination.
CALS contention that the letter of Rolando Sibugan inquiring from Alfredo whether he still had intention of resuming
work is a manifestation of its willingness to reinstate the latter to his former position, thereby negating any intention on
its part to dismiss Alfredo, is not well-taken. The fact that the employer later made an offer to re-employ Alfredo did not
cure the vice of his earlier arbitrary dismissal. The wrong had been committed and the harm done. Notably, it was only
after the complaint had been filed that CALS, in a belated gesture of good will, sought to invite Alfredo back to
work. CALS sincerity is suspect. Its offer of reinstatement is doubtful since the same could not have been made if
Alfredo had not complained against it. Whether the offer was sincere or not, the same could not correct the earlier
illegal dismissal of Alfredo. It must be borne in mind that CALS offer to reinstate Alfredo was obviously an attempt to
escape liability from having illegally terminated the latters services. Hence, CALS incurred liability under the Labor
Code from the moment Alfredo was illegally dismissed, and the liability was not abated as a result of CALS offer to
reinstate.[9]
In ruling in favor of Candelaria Roco, the appellate court held that when her employment was terminated on
November 15, 1995 (she was hired on May 16, 1995), it was four (4) days after she ceased to be a probationary
employee and became a regular employee within the ambit of Article 281 of the Labor Code, which provides:
ART. 281. Probationary employment. - Probationary employment shall not exceed six months from the date the
employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The

Page 160 of 191

services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when
he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be
considered a regular employee.
Not satisfied with the decision of the Court of Appeals, CALS and Danilo Yap brought before us the petition for
review on certiorari claiming that said court erred in ruling that respondents Alfredo Roco and Candelaria Roco were
illegally dismissed and that they are entitled to any money claims.
In considering that Alfredo Roco was illegally dismissed, the Court of Appeals relied on his allegation that on
January 20, 1996 when he reported for work, following his leave of absence from January 10 to 18, 1996, he learned
from Elvie Acantelado, a secretary of Danilo Yap that he was already separated from his employment.
Yet, as observed in the decision of the NLRC, he did not even attempt to verify from Danilo Yap, the owner and
general manager of CALS, if his employment was being terminated and the cause of the termination. Elvie Acantelado
denied vehemently having told Alfredo that he was being dismissed.
Private respondents also stated in their position paper that Alfredo was told by CALS lawyer to sign a resignation
letter in consideration of P30,000.00. Strangely, apart from this bare allegation, which finds no corroboration, there is
no explanation when, where and how was the offer made. Alfredo did not advance any theory why CALS wanted him
to resign. Atty. Myra Cristela Yngcong, counsel for CALS categorically denied having offered Alfredo Roco P30,000.00
in exchange for his resignation. She explained that, in fact, she met Alfredo for the first time when he appeared before
the Labor Arbiter on April 23, 1996.
On Alfredos assertion that CALS letter dated March 12, 1996 asking him to report for duty was just an
afterthought because it was sent after Alfredo filed his complaint for illegal dismissal on March 5, 1996. CALS
maintains that it came to know of the complaint filed by the Rocos with the Labor Arbiter only on April 4, 1996 when it
received the Notification and Summons dated March 25, 1996 from the Labor Arbiter.
On the other hand, CALS imputed an ulterior motive for the complaint filed by the Rocos against it. It said it was
manipulated by their relatives Domingo Roco against whom CALS filed several criminal cases for violation of B.P. Blg.
22 on account of Domingo Rocos failure to fund the checks he issued as payment for CALS products he had
purchase.
From the facts established, we are of the view that Alfredo Roco has not established convincingly that he was
dismissed. No notice of termination was given to him by CALS. There is no proof at all, except his self-serving
assertion, that he was prevented from working after the end of his leave of absence on January 18, 1996. In fact,
CALS notified him in a letter dated March 12, 1996 to resume his work. Both the Labor Arbiter and the NLRC found
that Alfredo, as well as Candelaria Roco, was not dismissed. Their findings of fact are entitled to great weight.
In Chong Guan Trading v. NLRC, et al.,[10] we held:
After a careful examination of the events that gave rise to the present controversy as shown by the records, the Court
is convinced that private respondent was never dismissed by the petitioner. Even if it were true that Mariano Lim
ordered private respondent to go and that at that time he intended to dismiss private respondent, the record is bereft
of evidence to show that he carried out this intention. Private respondent was not even notified that he had been
dismissed. Nor was he prevented from returning to his work after the October 28 incident. The only thing that is
established from the record, and which is not disputed by the parties, is that private respondent Chua did not return to
his work after his heated argument with the Lim brothers.
xxx
In this case, private respondents failure to work was due to the misunderstanding between the petitioners
management and private respondent. As correctly observed by the Labor Arbiter, private respondent must have
construed the October 28 incident as his dismissal so that he opted not to work for many days thereafter and instead
filed a complaint for illegal dismissal. On the other hand, petitioner interpreted private respondents failure to report for
work as an intentional abandonment. However, there was no intent to dismiss private respondent since the petitioner

Page 161 of 191

is willing to reinstate him. Nor was there an intent to abandon on the part of private respondent since he immediately
filed a complaint for illegal dismissal soon after the October 28 incident. It would be illogical for private respondent to
abandon his work and then immediately file an action seeking his reinstatement xxx. Under these circumstances, it is
but fair that each party must bear his own loss, thus placing the parties on equal footing.
xxx.
With respect to Candelaria Roco, there is no dispute that she was employed on probationary basis. She was
hired on May 16, 1995 and her services were terminated on November 15, 1995 due to poor work performance. She
did not measure up to the work standards on the dressing of chicken. The Labor Arbiter sustained CALS in terminating
her employment. The NLRC affirmed the Labor Arbiters ruling.
The Court of Appeals did not disagree with the NLRCs finding that Candelaria was dismissed because she did
not qualify as a regular employee in accordance with the reasonable standards made known by the company to her at
the time of her employment.[11]
The standards required by the National Meat Inspection Commission for dressing plants with Double AA Rating to
which CALS employee were brief and with regard to which Candelaria failed to comply are stated in part in the
affidavit dated March 7, 1997 of Rolly Villaeba, Cold Storage Supervisor of CALS Dressing Plant:
xxx
2. As Cold Storage Supervisor of Cals; Dressing Plant, I am responsible among others, for briefing the new employee
on the workflow in the dressing plant, the nature of their respective jobs pursuant to the said workflow, and the work
standards required of them by Cals, as well as seeing to it that Cals work standards are complied with/followed by the
employees.
xxx
4. It is the NMIC standard that the dressing of chickens and its parts must stricly (sic) observe the chronological order
of the following workflow, to wit:
1. Depinning
2. Detoing
3. Removals of entrails/cecum/liver/
Gizzard/heart/ Bile
4. Removal of Lungs
5. First Wash
6. Second Wash
7. Third Wash
8. Carcass Quality Control
a. Selection of Carcass
b. Leg Bonding
c. Weighing
d. First Chilling

Page 162 of 191

e. Final Chilling
xxx
9. For the duration of Candelaria Rocos probationary employment, she failed to comply with Cals standards in the
work assigned to her. First, she frequently failed to observe the allowable inches to be cut, which must only be 1.5
inches, in performing the surgical incision of the chicken butt, either she cuts it too long, thereby distorting the
appearance of the chickens or she cuts it too short, thereby making it difficult to remove the chicken parts without
damaging these parts; Second, she frequently mishandles the pull-out of chicken parts, such that, she damaged said
parts; Third, she frequently completes her assigned tasks in twenty (20) to even twenty-five (25) seconds, over and
above the required time limit, which is only eight (8) to ten (10) seconds. Resultantly, the chickens/parts which passed
through her hands frequently suffer from premature decomposition/bacterial or salmonella contamination;
10. By reason of the foregoing, Cals management deemed it best to terminate her probationary employment.
xxx[12]
However, the Court of Appeals set aside the NLRC ruling on the ground that at the time Candelarias services
were terminated, she had attained the status of a regular employee as the termination on November 15, 1995 was
effected four (4) days after the 6-month probationary period had expired, hence, she is entitled to security of tenure in
accordance with Article 281 of the Labor Code.
CALS argues that the Court of Appeals computation of the 6-month probationary period is erroneous as the
termination of Candelarias services on November 15, 1995 was exactly on the last day of the 6-month period.
We agree with CALS contention as upheld by both the Labor Arbiter and the NLRC that Candelarias services was
terminated within and not beyond the 6-month probationary period. In Cebu Royal v. Deputy Minister of Labor,[13] our
computation of the 6-month probationary period is reckoned from the date of appointment up to the same calendar
date of the 6th month following. Thus, we held:
The original findings were contained in a one-page order reciting simply that complainant was employed on a
probationary period of employment for six (6) months. After said period, he underwent medical examination for
qualification as regular employee but the results showed that he is suffering from PTB minimal. Consequently, he was
informed of the termination of his employment by respondent. The order then concluded that the termination was
justified. That was all.
As there is no mention of the basis of the above order, we may assume it was the temporary payroll authority
submitted by the petitioner showing that the private respondent was employed on probation on February 16,
1978. Even supposing that it is not self-serving, we find nevertheless that it is self-defeating. The six-month period of
probation started from the said date of appointment and so ended on August 17, 1978, but it is not shown that the
private respondents employment also ended then; on the contrary, he continued working as usual. Under Article 282
of the Labor Code, an employee who is allowed to work after a probationary period shall be considered a regular
employee.' Hence, Pilones was already on permanent status when he was dismissed on August 21, 1978, or four
days after he ceased to be a probationer.
WHEREFORE, our Resolution of April 1, 2002 denying the petition is hereby SET ASIDE and another one
entered REVERSING the decision of the Court of Appeals insofar as it ruled in favor of herein respondents and the
decisions of the Labor Arbiter and the National Labor Relations Commission REINSTATED.
SO ORDERED.
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Mitsubishi motors phil corp v Chrysler phils labor union
This is a petition for review on certiorari of the Decision [1] of the Court of Appeals in CA-GR SP No. 46030 and the
Resolution denying the motion for reconsideration filed by petitioner Mitsubishi Motors Philippines Corporation.

Page 163 of 191

The Antecedents
Mitsubishi Motors Philippines Corporation (MMPC) is a domestic corporation engaged in the assembly and distribution
of Mitsubishi motor vehicles. Chrysler Philippines Labor Union (CPLU) is a legitimate labor organization and the duly
certified bargaining agent of the hourly-paid regular rank and file employees of MMPC. Nelson Paras was a member
of CPLU. His wife, Cecille Paras, was the President of the Chrysler Philippines Salaried Employees Union (CPSU).
Nelson Paras was first employed by MMPC as a shuttle bus driver on March 19, 1976. He resigned on June
16, 1982. He applied for and was hired as a diesel mechanic and heavy equipment operator in Saudi Arabia from
1982 to 1993. When he returned to the Philippines, he was re-hired as a welder-fabricator at the MMPC tooling shop
from October 3, 1994 to October 31, 1994. [2] On October 29, 1994, his contract was renewed from November 1, 1994
up to March 3, 1995.[3]
Sometime in May of 1996, Paras was re-hired on a probationary basis as a manufacturing trainee at the Plant
Engineering Maintenance Department. He and the new and re-hired employees were given an orientation on May 15,
1996[4] by Emma P. Aninipot, respecting the companys history, corporate philosophy, organizational structure, and
company rules and regulations, including the company standards for regularization, code of conduct and companyprovided benefits.[5]
Paras started reporting for work on May 27, 1996. He was assigned at the paint ovens, air make-up and
conveyors. As part of the MMPCs policy, Paras was evaluated by his immediate supervisors Lito R. Lacambacal [6] and
Wilfredo J. Lopez[7] after six (6) months, and received an average rating. Later, Lacambacal informed Paras that based
on his performance rating, he would be regularized. [8]
However, the Department and Division Managers, A.C. Velando and H.T. Victoria, [9] including Mr. Dante Ong,
reviewed the performance evaluation made on Paras. They unanimously agreed, along with Paras immediate
supervisors, that the performance of Paras was unsatisfactory.[11] As a consequence, Paras was not considered for
regularization. On November 26, 1996, he received a Notice of Termination dated November 25, 1996, informing him
that his services were terminated effective the said date since he failed to meet the required company standards for
regularization.[12]
[10]

Utilizing the grievance machinery in the collective bargaining agreement, the CPLU demanded the settlement
of the dispute which arose from Paras termination. [13] The dispute was thereafter submitted for voluntary arbitration, as
the parties were unable to agree on a mutually acceptable solution. CPLU posited that Paras was dismissed on his
one hundred eighty third (183rd) day of employment, or three (3) days after the expiration of the probationary period of
six (6) months.It was contended that Paras was already a regular employee on the date of the termination of his
probationary employment.
According to CPLU and Paras, the latters dismissal was an offshoot of the heated argument during the CBA
negotiations between MMPC Labor Relations Manager, Atty. Carlos S. Cao, on the one hand, and Cecille Paras, the
President of the Chrysler Philippines Salaried Employees Union (CPSU) and Paras wife, on the other.
On November 3, 1997, the Voluntary Arbitrator (VA) rendered a decision finding the dismissal of Paras valid
for his failure to pass the probationary standards of MMPC. The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered finding the
termination of Mr. Paras was valid for cause his failure to pass the probationary period. [14]

The VA declared that hiring an employee on a probationary basis to determine his or her fitness for regular
employment was in accord with the MMPCs exercise of its management prerogative. The VA pointed out that MMPC
had complied with the requirement of apprising Paras of the standards of performance evaluation and regularization at
the inception of his probationary employment. The VA agreed with the MMPC that the termination of Paras
employment was effected prior to the expiration of the six-month probationary period. As to Paras contention that he
was already a regular employee before he was dismissed in 1994 considering that he had an accumulated service of
eleven (11) months, the VA ruled that Paras delay in filing a complaint for regularization only in 1996, for services
rendered in October 1994 to March 1995, militated against him. The VA stated that Paras dismissal was based on the
unsatisfactory performance rating given to him by his direct supervisors Lito Lacambacal and Wilfredo Lopez. The VA
also found that the alleged heated argument between Atty. Carlos S. Cao, the Labor Relations Manager of MMPC,
and Cecille Paras, the President of CPSU, was irrelevant in the termination of Paras services. [15]

Page 164 of 191

The Case Before the Court of Appeals

Aggrieved, Paras and CPLU filed a petition for review under Rule 43 of the Rules of Court before the Court of
Appeals, docketed as C.A.-G.R. SP No. 46030.They assigned the following errors:

I
THE VOLUNTARY ARBITRATOR COMMITTED A SERIOUS ERROR OF LAW IN FAILING TO HOLD
THAT THE NOTICE OF TERMINATION WAS SERVED UPON PETITIONER NELSON PARAS
AFTER HE HAS ALREADY BECOME A REGULAR EMPLOYEE, HIS PERIOD FOR PROBATION
HAVING EXPIRED.

II
THE VOLUNTARY ARBITRATOR SERIOUSLY ERRED AND GRAVELY ABUSED HIS DISCRETION
IN HOLDING THAT PETITIONER NELSON PARAS SUPPOSED DELAY IN FILING THE ILLEGAL
DISMISSAL CASE WORKED AGAINST HIM.

III
THE VOLUNTARY ARBITRATOR ACTED WITH GRAVE ABUSE OF DISCRETION AND
COMMITTED SERIOUS ERRORS OF FACT AND LAW IN NOT HOLDING THAT THE
PERFORMANCE OF NELSON PARAS WAS SATISFACTORY AND THAT HIS DISMISSAL WAS
POLITICALLY MOTIVATED.[16]

Therein, Paras and CPLU asserted that pursuant to Article 13 of the New Civil Code, the period of May 27, 1996 to
November 26, 1996 consisted of one hundred eighty-three (183) days. They asserted that the maximum of the
probationary period is six (6) months, which is equivalent to 180 days; as such, Paras, who continued to be employed
even after the 180th day, had become a regular employee as provided for in Article 282 of the Labor Code. They
averred that as a regular employee, Paras employment could be terminated only for just or authorized causes as
provided for under the Labor Code, and after due notice. They posited that in the Letter of Termination dated
November 25, 1996, the ground for Paras termination was not among those sanctioned by the Labor Code; hence, his
dismissal was illegal.

Paras and CPLU also stressed that he had already been in the employ of MMPC from October 3, 1994 to March 3,
1995 as a welder-fabricator in the production of jigs and fixtures, a function necessary and desirable to the usual
business of MMPC. Such period, in addition to the six-month probationary period, amounted to eleven (11) months of
service, which is sufficient for him to be considered as a regular employee.

Page 165 of 191

Paras and CPLU averred that the filing of an illegal dismissal complaint only after his termination in 1996 did not make
Paras claim for regularization specious, since an illegally dismissed employee, like him, has four (4) years within
which to file a complaint.[17]

They emphasized that Paras performance evaluation was changed to unsatisfactory as an off-shoot of the arguments
between the latters wife, the President of the CPSU, and Atty. Carlos S. Cao, one of MMPCs negotiators, over the
provisions in the CBA.[18]

The MMPC, for its part, averred that under Article 13 of the New Civil Code, Paras probationary employment which
commenced on May 27, 1996 would expire on November 27, 1996. Since he received the notice of termination of his
employment on November 25, 1996, the same should be considered to have been served within the six-month
probationary period.
The MMPC asserted that the VA acted correctly in not considering the five-month period of Paras contractual
employment as a welder-fabricator to qualify him for regularization. It argued that his rating showed that his immediate
supervisors, in tandem with his department head, found his performance unsatisfactory. Thus, his failure to meet a
satisfactory performance rating justified the termination of his probationary employment.

Page 166 of 191

For its part, the Office of the Solicitor General (OSG), in representation of Voluntary Arbitrator Danilo Lorredo,
agreed that Parasand CPLUs allegation, that the notice of termination was served on Paras 183 rd day, was
erroneous. The OSG opined that the six-month probationary period was to expire on November 27, 1996 and since
Paras was served such notice on November 25, 1996, his employment was deemed terminated within the six-month
probationary period. It posited that the failure of Paras to get a satisfactory performance rating justified the termination
of his probationary employment, and that the inclusion of his five-month contractual employment as welder-fabricator
did not qualify him for regular employment.

Finally, the OSG contended that the appointment of a probationary employee to a regular status is voluntary
and discretionary on the part of the employer.

In a Decision promulgated on September 13, 2000, the CA reversed the ruling of the Voluntary Arbitrator, the
dispositive portion of which is herein quoted:
WHEREFORE, the petition is GRANTED. The Decision of public respondent, dated
November 3, 1997, is REVERSED and SET ASIDE. In lieu thereof, judgment is hereby entered
declaring Mitsubishi Motors Phils. Corporations dismissal of Nelson Paras as ILLEGAL and
ORDERING the former to reinstate Paras to his former position without loss of seniority rights and
other privileges. Conformably with the latest pronouncement of the Supreme Court on
backwages, supra, Mitsubishi Motors Phils. Corporation is further ORDERED to pay Paras full
backwages (without qualifications or deductions), inclusive of allowances, and his other benefits or
their monetary equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement. Petitioners claims for attorneys fees, moral and exemplary damages
are, nevertheless, DENIED for lack of sufficient basis. No costs.[19]

The CA agreed with Paras and CPLUs interpretation that six (6) months is equivalent to one hundred eighty
(180 days) and that computed from May 27, 1996, such period expired on November 23, 1996. Thus,
when Paras received the letter of termination on November 26, 1996, the same was served on the 183 rd day or after
the expiration of the six-month probationary period. The CA stated that since he was allowed to work beyond the
probationary period, Paras became a regular employee. Hence, his dismissal must be based on the just and
authorized causes under the Labor Code, and in accordance with the two-notice requirement provided for in the
implementing rules. The appellate court concluded that for MMPCs failure to show that Paras was duly notified of the
cause of his dismissal, the latter was illegally dismissed; hence, his actual reinstatement without loss of seniority rights
and the payment of backwages up to the time of his reinstatement were in order.

Dissatisfied, the MMPC filed a motion for reconsideration of the decision, alleging that the CA erred in holding
that the six-month probationary period which commenced on May 27, 1996, expired on November 23, 1996.

The MMPC contended that the reinstatement of Paras to his former position had become moot and academic
because it had retrenched approximately seven hundred (700) employees as a result of its financial losses in 1997. It
posited that the payment of full backwages should only be computed up to February 1998, the date when MMPC
effected the first phase of its retrenchment program.

The CA denied the motion in a Resolution dated June 18, 2001.[20]

Page 167 of 191

The Present Petition

Undaunted, the MMPC, now the petitioner, filed this instant petition, alleging as follows:
A.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE 3 NOVEMBER
1997 DECISION OF THE HONORABLE VA DANILO LORREDO, AND IN FINDING THAT
RESPONDENT PARAS (WAS) ILLEGALLY DISMISSED AND ORDERING HIS REINSTATEMENT.
B.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ORDERING THE
REINSTATEMENT OF PARAS WITH FULL BACKWAGES DESPITE THE CHANGE IN THE
FINANCIAL CIRCUMSTANCES OF THE COMPANY.
C.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE SIX-MONTH
PROBATIONARY PERIOD OF PARAS WHICH STARTED ON 27 MAY 1996 HAD EXPIRED 23
NOVEMBER 1996.[21]

The petitioner asserts that the CA erred in ruling that respondent Paras was already a regular employee when
he was served the notice of termination. Citing Article 13 of the New Civil Code, the petitioner argued that the sixmonth probationary period should be computed as follows:

May 27-31 = 4 days

Jun(e) 1-30 = 1 month (30 days)
July 1-31 = 1 month (30 days)
Aug(.) 1-31 = 1 month (30 days)
Sept(.) 1-30 = 1 month (30 days)
Oct(.) 1-31 = 1 month (30 days)
Nov(.) 1-26 = 26 days[22]

Hence, according to the petitioner, when the termination letter was served on November 26, 1996, Paras was
still
a
probationary
employee.
Considering that he did not qualify for regularization, his services were legally terminated. As such, the CA erred in
ordering his reinstatement and the payment of his backwages.

Page 168 of 191

According to the petitioner, even assuming that respondent Paras was a regular employee when he was
dismissed, his reinstatement had already become moot and academic because of the retrenchment program effected
as a result of the business losses it had suffered in the year 1997. Respondent Paras, who was employed only in May
27, 1996, would have been included in the first batch of employees retrenched in February of 1998, in accordance
with the last in first out policy embedded in the CBA. The petitioner further contends that Paras backwages should be
computed only up to February of 1998.

In their comment on the petition, the respondents argue that the CA was correct in concluding that the
termination letter was served on respondent Paras one hundred eighty third (183 rd) day of employment with the
petitioner, asserting that six (6) months is equivalent to one hundred eighty (180) days. Since respondent Paras was
employed on May 27, 1996, the 180th day fell on November 23, 1996. Thus, respondent Paras was already a regular
employee when the termination letter was served on him. Consequently, his dismissal should be based on the just or
authorized causes provided for by the Labor Code, and after proper notice.

The respondents, likewise, contend that the petitioner cannot raise new and unsubstantiated allegations in its
petition at bar.

The Issues

The issues for resolution are the following: (a) whether or not respondent Paras was already a regular
employee on November 26, 1996; (b) whether or not he was legally dismissed; (c) if so, whether or not his
reinstatement had been rendered moot and academic; and, (d) whether or not his backwages should be computed
only up to February of 1998.

The Courts Ruling

The petition is partially granted.

Page 169 of 191

At the outset, we must stress that only errors of law are generally reviewed by this Court in petitions for review
on certiorari of CA decisions.[23] Questions of fact are not entertained. [24] This Court is not a trier of facts and, in labor
cases, this doctrine applies with greater force. Factual questions are for labor tribunals to resolve. [25] The findings of
fact of quasi-judicial bodies like the National Labor Relations Commission (NLRC), are accorded with respect, even
finality, if supported by substantial evidence.Particularly when passed upon and upheld by the Court of Appeals, such
findings are binding and conclusive upon the Supreme Court and will not normally be disturbed. [26]
However, when the findings of the NLRC and the Court of Appeals are inconsistent with each other, there is a
need to review the records to determine which of them should be preferred as more conformable to the evidentiary
facts.[27] Considering that the CAs findings of fact clash with those of the Voluntary Arbitrator, this Court is compelled to
go over the records of the case, as well as the submissions of the parties. [28]

Regularization of
Employment

Indeed, an employer, in the exercise of its management prerogative, may hire an employee on a probationary
basis in order to determine his fitness to perform work. [29] Under Article 281 of the Labor Code, the employer must
inform the employee of the standards for which his employment may be considered for regularization. Such
probationary period, unless covered by an apprenticeship agreement, shall not exceed six (6) months from the date
the employee started working. The employees services may be terminated for just cause or for his failure to qualify as
a regular employee based on reasonable standards made known to him. [30]

Page 170 of 191

Respondent Paras was employed as a management trainee on a probationary basis. During the orientation conducted
on May 15, 1996, he was apprised of the standards upon which his regularization would be based. He reported for
work
on
May
27,
1996. As
per
the
companys
policy,
the
probationary period was from three (3) months to a maximum of six (6) months.

Applying Article 13 of the Civil Code, [31] the probationary period of six (6) months consists of one hundred
eighty (180) days.[32] This is in conformity with paragraph one, Article 13 of the Civil Code, which provides that the
months which are not designated by their names shall be understood as consisting of thirty (30) days each. The
number of months in the probationary period, six (6), should then be multiplied by the number of days within a month,
thirty (30); hence, the period of one hundred eighty (180) days.

As clearly provided for in the last paragraph of Article 13, in computing a period, the first day shall be excluded
and the last day included. Thus, the one hundred eighty (180) days commenced on May 27, 1996, and ended on
November 23, 1996. The termination letter dated November 25, 1996 was served on respondent Paras only at 3:00
a.m. of

Page 171 of 191

November 26, 1996. He was, by then, already a regular employee of the petitioner under Article 281 of the Labor
Code.

The Legality of
The Dismissal

An employee cannot be dismissed except for just or authorized cause as found in the Labor Code and after due
process.[33] The following grounds would justify the dismissal of an employee:

(a)

(b)

Serious misconduct or willful disobedience by the employee of the lawful orders of the
employer or representative in connection with his work;

Gross and habitual neglect by the employee of his duties;

(c)

Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

(d)

Commission of a crime or offense by the employee against the person of his employer or of
any immediate member of his family or his duly authorized representative; and

(e)

Other causes analogous to the foregoing.[34]

The basis for which respondent Paras services were terminated was his alleged unsatisfactory rating arising
from poor performance. It is a settled doctrine that the employer has the burden of proving the lawfulness of his
employees dismissal. The validity of the charge must be clearly established in a manner consistent with due process.
[35]

Under Article 282 of the Labor Code, an unsatisfactory rating can be a just cause for dismissal only if it
amounts to gross and habitual neglect of duties. Gross negligence has been defined to be the want or absence of
even slight care or diligence as to amount to a reckless disregard of the safety of person or property. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid them. [36] A careful perusal of the records of
this case does not show that respondent Paras was grossly negligent in the performance of his duties.

The company policy provides the following rule in performance evaluation:

Page 172 of 191

The performance rating sheet must be accomplished by the immediate supervisor, then reviewed by
the Department Head, and concurred by the Division Head. The Personnel Manager likewise must
note all submitted performance sheets.

Once the rating sheet has gone through this standard procedure, the immediate supervisor shall
discuss the results of the performance rating with the employee. The discussion/conference may be
done in the presence of the Department Head. This is to emphasize the point that the employee is
given due importance especially in matters pertaining to his development as a person and employee.
[37]

Page 173 of 191

In the present case, the immediate supervisor of respondent Paras gave him an average performance rating and
found him fit for regularization.[38] Thereafter, his immediate supervisor and the department head reviewed the said
rating, which was duly noted by the personnel manager. However, in a complete turn around, the petitioner made it
appear that after the performance evaluation of respondent Paras was reviewed by the department and division
heads, it was unanimously agreed that therespondents performance rating was unsatisfactory, making him unfit for
regularization.

There is no showing that respondent Paras was informed of the basis for the volte face of the management group
tasked
to
review
his
performance rating. His immediate supervisor even told him that he had garnered a satisfactory rating and was
qualified for regularization, only to later receive a letter notifying him that his employment was being terminated.

Considering that respondent Paras was not dismissed for a just or authorized cause, his dismissal from
employment was illegal. Furthermore, the petitioners failure to inform him of any charges against him deprived him of
due process. Clearly, the termination of his employment based on his alleged unsatisfactory performance rating was
effected merely to cover up and deodorize the illegality of his dismissal.

Reinstatement and
Backwages

Page 174 of 191

The normal consequences of illegal dismissal are reinstatement without loss of seniority rights and the
payment of backwages computed from the time the employees compensation was withheld from him. [39] Since
respondent Paras dismissal from employment is illegal, he is entitled toreinstatement and to be paid backwages from
the time of his dismissal up to the time of his actual reinstatement.

The petitioner asserts that assuming respondent Paras was illegally dismissed, his reinstatement had become
moot and academic because of its retrenchment program which was effected beginning February 1998. The petitioner
posits that even if respondent Paras had become a regular employee by November 26, 1996, he would have been
included in the first phase of its retrenchment program, pursuant to the last in first out policy embedded in the
CBA. Hence, the petitioner concludes, the payment of backwages should be computed up to February of 1998.

The respondents, for their part, aver that the petitioner is proscribed from alleging new circumstances and
allegations of fact, particularly on financial reverses, before the Court of Appeals and the Voluntary Arbitrator.

We do not agree with the respondents.

A cursory examination of the records shows that the petitioner could not raise its retrenchment program as an
issue before the VA, because it was implemented only in February 1998, when the case was already in the
CA. However, we note that the petitioner did not raise the same in its comment to the petition. The petitioner asserted
the matter only in its October 20, 2000 motion for reconsideration of the decision of the CA, where it alleged that the
retrenchment program was effected to arrest the continuing business losses resulting from the financial reverses it
experienced in 1997.

Nevertheless, it is not denied that because of the petitioners losses, it retrenched seven hundred (700)
employees. Business reverses or losses are recognized by law as an authorized cause for termination of employment.
Still, it is an essential requirement that alleged losses in business operations must be proven convincingly.Otherwise,
such ground for termination would be susceptible to abuse by scheming employers, who might be merely feigning
business losses or reverses in their business ventures to ease out employees. [40] Retrenchment is an authorized
cause for termination of employment which the law accords an employer who is not making good in its operations in
order to cut back on expenses for salaries and wages by laying off some employees. The purpose of retrenchment is
to save a financially ailing business establishment from eventually collapsing. [41]

In this case, the petitioner submitted in the CA its financial statements for 1996, 1997 and 1998 [42] as well as
its application for retrenchment. In its Statements of Income and Unappropriated Retained Earning, it was shown that
in 1996, the parent company of the petitioner had a net income of P467,744,285. In 1997, it had a net loss
of P29,253,511.[43] In 1998, its net loss, after effecting retrenchment and closing several plants, was arrested and
dropped to P8,156,585.[44] This shows that even after the retrenchment, the petitioner MMPC still suffered net losses.

In 1996, the petitioners current assets amounted to P5,381,743,576; it increased to P8,033,932,745[45] in

1997, while in 1998, it was reduced toP5,053,874,359.[46] This shows that the petitioners assets acquired in 1997
diminished in 1998. The figures for Current Liabilities are consistent with the movement of current assets for 1997 and
1998.

Page 175 of 191

In 1996, the petitioner incurred current liabilities of P1,966,445,401 which increased to P5,088,990,117[47] in
1997 and decreased to P2,880,259,811[48] in 1998. To reduce its losses, the petitioner had to dispose of some of its
current assets to cover the increased liability incurred in 1997, and had to resort to borrowings in 1998. The continuity
of losses which started in 1997 is further illustrated in the figures on retained earnings for 1996, 1997 and 1998. In
1996, retained earnings stood at P1,838,098,175,[49] which decreased to P994,942,628[50] in 1997 and further
decreased to P592,614,548[51] in 1998.

The petitioners losses in 1997 and 1998 are not insignificant. It is beyond cavil then, that the serious and
actual business reverses suffered by the petitioner justified its resort to retrenchment of seven hundred (700) of its
employees.

The records show that the petitioner informed the Department of Labor and Employment of its plight and
intention to retrench employees as a result of the shutdown of its plants. [52] The termination of the five hundred thirtyone (531) affected employees were made effective a month from receipt of the termination letter mailed on February
25, 1998.[53]

In accordance with the CBA between MMPC and CPLU, employees who were recently hired were the ones
retrenched. Considering that respondent Paras had just been regularized on November 24, 1996, he would have been
included among those who had been retrenched had he not been dismissed.

The unfavorable financial conditions of the petitioner may not justify reinstatement. However, it is not a
sufficient ground to deny backwages to respondent Paras who was illegally dismissed. [54] Considering that notices of
retrenchment were mailed on February 25, 1998 and made effective one month therefrom, respondent Paras should
be paid full backwages from the date of his illegal dismissal up to March 25, 1998. Pursuant to Article 283 of the Labor
Code, he should be paid separation pay equivalent to one (1) month salary, or to at least one-half month pay for every
year of service, whichever is higher, a fraction of at least six months to be considered as one (1) year. [55]
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The September 13, 2000
Decision of the Court of Appeals in CAGR SP No. 46030 is hereby AFFIRMED WITH MODIFICATIONS. The
petitioner is ORDERED to pay respondent Nelson Paras separation pay equivalent to one (1) month, or to at least
one-half (1/2) month pay for every year of service, whichever is higher, a fraction of at least six (6) months to be
considered as one year; and to pay full backwages, computed from the time of his dismissal up to March 25,
1998. That portion of the decision of the Court of Appeals directing the reinstatement of the respondent Paras
is DELETED.

No costs.

SO ORDERED.
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Extension of probationary priod relaxed by SC
Mariwasa manufacturing v leogardo

Page 176 of 191

G.R. No. 74246 January 26, 1989

MARIWASA
MANUFACTURING,
INC.,
and
ANGEL
T.
DAZO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of Ministry of Labor and Employment
judgment, and JOAQUIN A. DEQUILA, respondents.
Cruz, Agabin, Atienza & Alday for petitioners.
The Solicitor General of public respondent.
Norberto M. Alensuela, Sr. for private respondent.

NARVASA, J.:
There is no dispute about the facts in this case, and the only question for the Court is whether or not, Article 282 of the
Labor Code notwithstanding, probationary employment may validly be extended beyond the prescribed six-month
period by agreement of the employer and the employee.
Private respondent Joaquin A. Dequila (or Dequilla) was hired on probation by petitioner Mariwasa Manufacturing, Inc.
(hereafter, Mariwasa only) as a general utility worker on January 10, 1979. Upon the expiration of the probationary
period of six months, Dequila was informed by his employer that his work had proved unsatisfactory and had failed to
meet the required standards. To give him a chance to improve his performance and qualify for regular employment,
instead of dispensing with his service then and there, with his written consent Mariwasa extended his probation period
for another three months from July 10 to October 9, 1979. His performance, however, did not improve and on that
account Mariwasa terminated his employment at the end of the extended period. 1
Dequila thereupon filed with the Ministry of Labor against Mariwasa and its Vice-President for Administration, Angel T.
Dazo, a complaint for illegal dismissal and violation of Presidential Decrees Nos. 928 and 1389. 2 His complaint was
dismissed after hearing by Director Francisco L. Estrella, Director of the Ministry's National Capital Region, who ruled
that the termination of Dequila's employment was in the circumstances justified and rejected his money claims for
insufficiency of evidence. 3 On appeal to the Office of the Minister, however, said disposition was reversed.
Respondent Deputy Minister Vicente Leogardo, Jr. held that Dequila was already a regular employee at the time of his
dismissal, therefore, could not have been lawfully dismissed for failure to meet company standards as a probationary
worker. He was ordered reinstated to his former position without loss of seniority and with full back wages from the
date of his dismissal until actually reinstated. 4 This last order appears later to have been amended so as to direct
payment of Dequila's back wages from the date of his dismissal to December 20, 1982 only. 5
Mariwasa and Dazo, now petitioners, thereafter be sought this Court to review Hon. Leogardo's decision
oncertiorari and prohibition, urging its reversal for having been rendered with grave abuse of discretion and/or without
or in excess of jurisdiction. 6
The petition, as well as the parties' comments subsequently submitted all underscore the fact that the threshold issue
here is, as first above stated, the legal one of whether employer and employee may by agreement extend the
probationary period of employment beyond the six months prescribed in Art. 282 of the Labor Code, which provides
that:
Art. 282. Probationary Employment. Probationary employment shall not exceed six (6) months from
the date the employee started working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been engaged on a probationary
basis may be terminated for a just cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the employee at the time of
his engagement. An employee who is allowed to work after probationary period shall be considered a
regular employee.'

Page 177 of 191

The Court agrees with the Solicitor General, who takes the same position as the petitioners, that such an extension
may lawfully be covenanted, notwithstanding the seemingly restrictive language of the cited provision.Buiser vs.
Leogardo, Jr . 7 recognized agreements stipulating longer probationary periods as constituting lawful exceptions to the
statutory prescription limiting such periods to six months, when it upheld as valid an employment contract between an
employer and two of its employees that provided for an eigthteen-month probation period. This Court there held:
'It is petitioners' submission that probationary employment cannot exceed six (6) months, the only
exception being apprenticeship and learnership agreements as provided in the Labor Code; that the
Policy Instruction of the Minister of Labor and Employment nor any agreement of the parties could
prevail over this mandatory requirement of the law; that this six months prescription of the Labor Code
was mandated to give further efficacy to the constitutionally-guaranteed security of tenure of workers;
and that the law does not allow any discretion on the part of the Minister of Labor and Employment to
extend the probationary period for a longer period except in the aforecited instances. Finally,
petitioners maintain that since they are regular employees, they can only be removed or dismissed for
any of the just and valid causes enumerated under Article 283. of the Labor Code.
We reject petitioners' contentions. They have no basis in law.
Generally, the probationary period of employment is limited to six (6) months. The exception to this
general rule is when the parties to an employment contract may agree otherwise, such as when the
same is established by company policy or when the same is required by the nature of work to be
performed by the employee. In the latter case, there is recognition of the exercise of managerial
prerogatives in requiring a longer period of probationary employment, such as in the present case
where the probationary period was set for eighteen (18) months, i.e. from May, 1980 to October, 1981
inclusive, especially where the employee must learn a particular kind of work such as selling, or when
the job requires certain qualifications, skills experience or training.
xxx
We therefore, hold and rule that the probationary employment of petitioners set to eighteen (18)
months is legal and valid and that the Regional Director and the Deputy Minister of Labor and
Employment committed no abuse of discretion in ruling accordingly.
The single difference between Buiser and the present case: that in the former involved an eighteen-month
probationary period stipulated in the original contract of employment, whereas the latter refers to an extension agreed
upon at or prior to the expiration of the statutory six-month period, is hardly such as to warrant or even suggest a
different ruling here. In both cases the parties' agreements in fact resulted in extensions of the period prescribed by
law. That in this case the inability of the probationer to make the grade became apparent only at or about the end of
the six-month period, hence an extension could not have been pre-arranged as was done in Buiser assumes no
adverse significance, given the lack, as pointed out by the Solicitor General, of any indication that the extension to
which Dequila gave his agreement was a mere stratagem of petitioners to avoid the legal consequences of a
probationary period satisfactorily completed.
For aught that appears of record, the extension of Dequila's probation was ex gratia, an act of liberality on the part of
his employer affording him a second chance to make good after having initially failed to prove his worth as an
employee. Such an act cannot now unjustly be turned against said employer's account to compel it to keep on its
payroll one who could not perform according to its work standards. The law, surely, was never meant to produce such
an inequitable result.
By voluntarily agreeing to an extension of the probationary period, Dequila in effect waived any benefit attaching to the
completion of said period if he still failed to make the grade during the period of extension. The Court finds nothing in
the law which by any fair interpretation prohibits such a waiver. And no public policy protecting the employee and the
security of his tenure is served by prescribing voluntary agreements which, by reasonably extending the period of
probation, actually improve and further a probationary employee's prospects of demonstrating his fitness for regular
employment.

Page 178 of 191

Having reached the foregoing conclusions, the Court finds it unnecessary to consider and pass upon the additional
issue raised in the Supplemental Petition 8 that the back wages adjudged in favor of private respondent Dequila were
erroneously computed.
WHEREFORE, the petition is granted. The orders of the public respondent complained of are reversed and set aside.
Private respondent's complaint against petitioners for illegal dismissal and violation of Presidential Decrees 928 and
1389 is dismissed for lack of merit, without pronouncement as to costs.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

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Repetitive proby priod
Villanueva vs nlrc
DAVIDE, JR., J.:
In this special civil action for certiorari, petitioner Juanito Villanueva seeks to annul the decision [1] of the National
Labor Relations Commission (NLRC) in NLRC Case No. 00-09-06202-95 and its resolution [2] denying petitioners
motion for reconsideration. The former reversed the decision [3] of the Labor Arbiter of 21 May 1996 finding that the
petitioner was illegally dismissed from his employment.
The factual and procedural antecedents of this case are as follows:
Petitioner Juanito M. Villanueva started working with respondent Innodata Philippines, Inc.,/Innodata Processing
Corporation as an "abstractor" with a daily salary of P180.
The contract of employment[4] provided for a period of effectivity of "one year commencing on Feb. 21, 1994, until Aug.
21, 1995." It was also stipulated that from 21 February 1994 to 21 August 1994, or for a period of six months,
petitioner's employment would be "contractual" and could be terminated at whatever date within this period by mere
service of notice to that effect.However, should his employment be continued beyond 21 August 1994, he would
become a regular employee upon demonstration of sufficient skill to meet the standards set by the respondent
company. Should he fail to demonstrate the ability to master his task during the first six months, he could be placed on
probation for another six months; after which, he could be evaluated for promotion as a regular employee.
On 21 February 1995, petitioner's services were terminated by reason of "end of contract." [5]
Three weeks thereafter, the petitioner was rehired by the respondent corporation, this time, as a data encoder
effective 13 March 1995 to 15 August 1995, with a lesser pay of P164.10 per day.[6]
On 13 August 1995, the petitioner was again separated from the respondent company also on account of "end of
contract."[7] This prompted the petitioner to file a complaint against the respondent company and its president, Todd
Solomon, for illegal dismissal with prayer for moral and exemplary damages and attorney's fees.
In his 21 May 1996 Decision, Labor Arbiter Manuel R. Caday held that as an abstractor engaged in processing,
encoding of data, precoding, editing, proofreading and scoring -- activities which were necessary and desirable in the
usual business of the respondent corporation -- the petitioner was a regular employee pursuant to Article 280 of the
Labor Code, who enjoyed security of tenure. Moreover, when he was allowed to work after 21 August 1994, when his
probationary employment of six months expired, he acquired a vested right to a permanent employment and could
only be dismissed for a valid cause.
Accordingly, after finding petitioner's dismissal to be illegal, the Labor Arbiter ordered the respondent company to
immediately reinstate the petitioner to his former position without loss of seniority rights, with full back wages and

Page 179 of 191

benefits computed from the date of his dismissal until his actual reinstatement, less the salaries he received under his
second employment contract.
On appeal, respondent NLRC reversed the Labor Arbiter's decision and upheld the validity of petitioner's
separation from the respondent company on the ground that his employment contract was for a fixed period of one
year and six months, certain to end on 21 August 1994.
His motion for reconsideration having been denied, the petitioner filed this special civil action
for certiorari contending that respondent NLRC palpably erred and committed grave abuse of discretion in reversing
the decision of the Labor Arbiter. Section 2 of the contract of employment itself recognized the status of the petitioner
as a probationary employee. Having worked beyond 21 August 1994 and for six months thereafter until his dismissal
on 21 February 1995, he had become a regular employee "not only by operation of law (Articles 280 and 281) but also
by virtue of the contract."
In its Comment, the respondent company supports the assailed decision and maintains that the petitioner was
hired on a fixed-term basis and was never placed on probation. The termination of his services was not due to his
dismissal but the expiration of his term of employment; thus, he is not entitled to reinstatement, back wages, and
damages.
On the other hand, in its Manifestation in Lieu of Comment, the Office of the Solicitor General (OSG) agrees with
the petitioner. Hence, we required the NLRC to file its own comment. As expected, the NLRC urged affirmance of the
challenged decision.
The only question before us is whether the NLRC committed grave abuse of discretion in reversing the decision
of the Labor Arbiter, which ordered the reinstatement of the petitioner with full back wages.
We resolve the issue in the affirmative. The NLRC committed grave abuse of discretion when it reversed the
findings of fact of the Labor Arbiter by giving undue, if not unwarranted, emphasis on the dates fixed in the contract
and failing to consider the rest of the terms of the contract, as well as the attendant circumstances surrounding
petitioners employment. Section 2 of the Contract of Employment in question provided:
Section 2. This contract shall be effective for a period of one year commencing on Feb. 21, 1994 until Aug. 21, 1995,
unless sooner terminated pursuant to the provision hereof.
From Feb. 21, 1994 to August 21, 1994, or for a period of six (6) months, the EMPLOYEE shall be contractual during
which the EMPLOYER can terminate the EMPLOYEE's services by serving written notice to that effect. Such
termination shall be immediate, or at whatever date within this six-month period, as the EMPLOYER may
determine. Should the EMPLOYEE continue his employment beyond Aug. 21, 1994, he shall become a regular
employee upon demonstration of sufficient skill in terms of his ability to meet the standards set by the EMPLOYER. If
the EMPLOYEE fails to demonstrate the ability to master his task during the first six months he can be placed on
probation for another six (6) months after which he will be evaluated for promotion as regular employee.
We agree with the OSG that the contract cannot be strictly construed as one for a fixed term. For one, while the
first paragraph of Section 2 spoke of the contract's duration to be "one" year, it was in fact, for one year and six
months because it was to commence on 21 February 1994 and terminate on 21 August 1995. For another, while the
second paragraph specified the first six-month period of employment, 21 February to 21 August 1994, as contractual,
the third sentence of that paragraph granted the petitioner regular employment status should he "continue his
employment beyond August 21, 1994, upon demonstration of sufficient skill in terms of his ability to meet the
standards" set by the respondent company. It is clear that the first six months was in reality the "probation period"
under Article 281 of the Labor Code,[8] since petitioner would become a regular employee if the employment would
continue beyond that period upon demonstration of sufficient skill in accord with the standards set by the respondent
corporation.
Significantly, the respondent company alleges that it has never placed the petitioner on probation. [9] This could
only mean that petitioner's continuance in employment beyond 21 August 1994 was not for probation purposes under
the fourth sentence of the second paragraph of Section 2 reading as follows: "If the employee fails to demonstrate the
ability to master his task during the first six months he can be placed on probation for another six (6) months after

Page 180 of 191

which he will be evaluated for promotion as a regular employee." If the petitioner was thus allowed to remain in
employment beyond 21 August 1994, it could be for no other reason than that he demonstrated "sufficient skill in
terms of his ability to meet the standards set" by the respondent company. He, therefore, became a regular employee
by virtue of the third sentence of the second paragraph of Section 2 of the contract.
Besides, the Labor Arbiter found that as an abstractor, the petitioner was engaged in "processing, encoding of
data, precoding, editing, proofreading and scoring, all of which activities are deemed necessary and desirable in the
usual business[10] of respondent company." The employment then was "regular" under the first paragraph of Article 280
of the Labor Code, which reads:
ART. 280. Regular and casual employment. -- The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.
The termination of petitioner's employment contract on 21 February 1995, as well as the subsequent issuance on
13 March 1995 of a "new" contract for five months as "data encoder," was a devious, but crude, attempt to circumvent
petitioner's right to security of tenure as a regular employee guaranteed by Article 279 of the Labor Code. [11] Hence,
the so-called "end of contract" on 21 February 1995 amounted to a dismissal without any valid cause.
Notably, the respondent company prepared the contract of employment. It was a contract of adhesion, and
petitioner had only to adhere to it by signing it. Its terms should be construed strictly against the party who prepared it.
[12]
Any ambiguity therein must be resolved against the respondent company, [13] especially because under Article 1702
of the Civil Code, in case of doubt, all labor contracts shall be construed in favor of the laborer. We cannot allow the
respondent company to construe otherwise what appears to be clear from the wordings of the contract.The
interpretation which the respondent company seeks to wiggle out is wholly unacceptable, as it would result in a
violation of petitioner's right to security of tenure guaranteed in Section 3 of Article XIII of the Constitution and in
Articles 279 and 281 of the Labor Code.
WHEREFORE, the challenged decision of 11 October 1996 and resolution of 29 November 1996 of the National
Labor Relations Commission are SET ASIDE, and the decision of the Labor Arbiter of 21 May 1996 in NLRC-NCR-0009-06202-95 is REINSTATED.
Costs against private respondent Innodata Philippines, Inc.
SO ORDERED.
Wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww
Stipulation in employment contract fixing the period of proby period
Innodata phils inc. v. quejada lopez

A contract that misuses a purported fixed-term employment to block the acquisition of tenure by the
employees deserves to be struck down for being contrary to law, morals, good customs, public order and public policy.

Page 181 of 191

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to reverse the September 18, 2003
Decision[2] of the Court of Appeals (CA) in CA-GR SP No. 73416, as well as its March 15, 2004 Resolution [3] denying
petitioners Motion for Reconsideration. Thedecretal portion of the Decision states:

WHEREFORE, the challenged decision of November 27, 2001 and resolution of July 22,
2002 of the National Labor Relations Commission areSET ASIDE, and the decision of the Labor
Arbiter
of December
29,
1999 in
NLRC
NCR
CASE
NO.
00-03-02732-98
is REINSTATED andAFFIRMED in all respect.[4]

The Facts

The factual antecedents are narrated by the CA as follows:

Innodata Philippines, Inc., is engaged in the encoding/data conversion business. It employs encoders,
indexers, formatters, programmers, quality/quantity staff, and others, to maintain its business and do
the job orders of its clients.
Estrella G. Natividad and Jocelyn L. Quejada were employed as formatters by Innodata Philippines,
Inc. They [worked] from March 4, 1997, until their separation on March 3, 1998.

Claiming that their job was necessary and desirable to the usual business of the company which is
data processing/conversion and that their employment is regular pursuant to Article 280 of the Labor
Code, [respondents] filed a complaint for illegal dismissal and for damages as well as for attorneys
fees
against Innodata Phils.,
Incorporated, Innodata Processing
Corporation
and
Todd
Solomon. [Respondents] further invoke the stare decicis doctrine in the case of Juanito Villanueva vs.
National Labor Relations Commission, et al., G.R. No. 127448 dated September 17, 1998 and the
case of Joaquin Servidadvs. National Labor Relations Commission, et al., G.R. No. 128682
dated March 18, 1999, arguing that the Highest Court has already ruled with finality that the nature of
employment at [petitioner] corporation is regular and not on a fixed term basis, as the job in the
company is necessary and desirable to the usual business of the corporation.

On the other hand, [petitioner] contends that [respondents] employment contracts expired, for [these
were] only for a fixed period of one (1) year.[Petitioner] company further invoked
the Brent School case by saying that since the period expired, [respondents] employment was
likewise terminated.

Page 182 of 191

After examination of the pleadings filed, Labor Arbiter Donato G. Quinto rendered a judgment in favor
of complainants, the dispositive portion of which reads:

WHEREFORE, foregoing premises considered, judgment is hereby rendered:

(1)

Holding
complainants
Estella
G. Natividad and
Jocelyn Quejada to have been illegally dismissed by
[Petitioners] Innodata Philippines
Incorporated
and Innodata Processing Corporation and ordering said
[petitioners] to reinstate them to their former position
without los[s] of seniority rights, or to a substantially
equivalent position, and to pay them jointly and
severally, backwages computed from the time they were
illegally dismissed on March 3, 1998 up to the date of this
decision in the amount of P112,535.28 EACH, or in the total
amount ofP225,070.56 for the two of them;

(2)

Further, [petitioners] are ordered to pay, jointly and

severally, [respondents] attorneys fees in the amount
equivalent to 10% of their respective awards; and

(3)

All other claims are hereby dismissed for lack of merit.

SO ORDERED.

Not satisfied, [petitioner] corporation interposed an appeal in the National Labor Relations
Commission, which reversed and set aside the Labor Arbiters decision and dismissed [respondents]
complaint for lack of merit. It declared that the contract between [respondents] and [petitioner]
company was for a fixed term and therefore, the dismissal of [respondents], at the end of their one
year term agreed upon, was valid.

A motion for reconsideration was filed but was denied in an order dated July 22, 2002.[5]

Ruling of the Court of Appeals

Page 183 of 191

The CA ruled that respondents were regular employees in accordance with Section 280 of the Labor Code. It said that
the fixed-term contract prepared by petitioner was a crude attempt to circumvent respondents right to security of
tenure.

Hence, this Petition.[6]

Issues

Petitioner raises the followings issues for the Courts consideration:

Whether or not the Court of Appeals committed serious reversible error when it did not take into
consideration that fixed-term employment contracts are valid under the law and prevailing
jurisprudence.

II

Whether or not the Court of Appeals committed serious reversible error when it failed to take into
consideration the nature of the business of petitioner vis--vis its resort to fixed-term employment
contracts.

III

Whether or not the Court of Appeals seriously erred when it failed to consider the fixed-term
employment contracts between petitioner and respondents as valid.

IV

Whether or not the Court of Appeals seriously erred when it held that regularity of employment is
always premised on the fact that it is directly related to the business of the employer.

Page 184 of 191

Whether or not the Court of Appeals committed serious reversible error in setting aside the Decision
of the National Labor Relations Commission, dated 27 November 2001 and Resolution of 22 July
2002, respectively[,] and reinstated the decision of the Labor Arbiter dated 29 December 1999. [7]

The foregoing issues may be reduced into one question: whether the alleged fixed-term employment contracts
entered into by petitioner and respondents are valid.

The Courts Ruling

The Petition has no merit.

Sole Issue:
Validity of the Fixed-Term Contract

Petitioner contends that the regularity of the employment of respondents does not depend on whether their task may
be necessary or desirable in the usual business of the employer. It argues that the use of fixed-term employment
contracts has long been recognized by this Court.

Petitioner adds that Villanueva v. NLRC[8] and Servidad v. NLRC[9] do not apply to the present factual
circumstances. These earlier cases struck down the employment contracts prepared by herein Petitioner Innodata for
being devious, but crude, attempts to circumvent [the employees] right to security of tenure x x x. Petitioner avers that
the present employment contracts it entered into with respondents no longer contain the so-called double-bladed
provisions previously found objectionable by the Court.

Petitioners contentions have no merit.

While this Court has recognized the validity of fixed-term employment contracts in a number of cases, [10] it has
consistently emphasized that when the circumstances of a case show that the periods were imposed to block the
acquisition of security of tenure, they should be struck down for being contrary to law, morals, good customs, public
order or public policy.[11]

Page 185 of 191

In a feeble attempt to conform to the earlier rulings of this Court in Villanueva[12] and Servidad,[13] petitioner has
reworded its present employment contracts. A close scrutiny of the provisions, however, show that the double-bladed
scheme to block the acquisition of tenurialsecurity still exists.

To stress, Servidad struck down the following objectionable contract provisions:

Section 2. This Contract shall be effective for a period of 1 [year] commencing on May 10, 1994,
until May 10, 1995 unless sooner terminated pursuant to the provisions hereof.

From May 10, 1994 to November 10, 1994, or for a period of six (6) months, the EMPLOYEE shall be
contractual during which the EMPLOYER can terminate the EMPLOYEES services by serving written
notice to that effect. Such termination shall be immediate, or at whatever date within the six-month
period, as the EMPLOYER may determine. Should the EMPLOYEE continue his employment
beyond November 10, 1994, he shall become a regular employee upon demonstration of sufficient
skill in the terms of his ability to meet the standards set by the EMPLOYER. If the EMPLOYEE fails to
demonstrate the ability to master his task during the first six months he can be placed on probation for
another six (6) months after which he will be evaluated for promotion as a regular employee. [14]

In comparison, the pertinent portions of the present employment contracts in dispute read as follows:

TERM/DURATION

1.

The EMPLOYER hereby employs, engages and hires the EMPLOYEE, and the
EMPLOYEE hereby accepts such appointment as FORMATTEReffective March 04,
1997 to March 03, 1998, a period of one (1) year.

xxxxxxxxx

TERMINATION

7.1 This Contract shall automatically terminate on March 03, 1998 without need of notice or demand.

xxxxxxxxx

Page 186 of 191

7.4 The EMPLOYEE acknowledges that the EMPLOYER entered into this Contract upon his express
representation that he/she is qualified and possesses the skills necessary and desirable for
the position indicated herein. Thus, the EMPLOYER is hereby granted the right to preterminate this Contract within the first three (3) months of its duration upon failure of
the EMPLOYEE to meet and pass the qualifications and standards set by the
EMPLOYER and made known to the EMPLOYEE prior to execution hereof. Failure of the
EMPLOYER to exercise its right hereunder shall be without prejudice to the automatic
termination of the EMPLOYEEs employment upon the expiration of this Contract or
cancellation thereof for other causes provided herein and by law.[15] (Emphasis supplied)

Like those in Villanueva and Servidad, the present contracts also provide for two periods. Aside from the fixed oneyear term set in paragraph 1, paragraph 7.4 provides for a three-month period during which petitioner has the right to
pre-terminate the employment for the failure of the employees to meet and pass the qualifications and standards set
by the employer and made known to the employee prior to their employment.Thus, although couched in ambiguous
language, paragraph 7.4 refers in reality to a probationary period.

Clearly, to avoid regularization, petitioner has again sought to resort alternatively to probationary employment and
employment for a fixed term.Noteworthy is the following pronouncement of this Court in Servidad:

If the contract was really for a fixed term, the [employer] should not have been given the discretion to
dismiss the [employee] during the one year period of employment for reasons other than the just and
authorized causes under the Labor Code. Settled is the rule that an employer can terminate the
services of an employee only for valid and just causes which must be shown by clear and convincing
evidence.

xxxxxxxxx

The language of the contract in dispute is truly a double-bladed scheme to block the acquisition of the
employee of tenurial security. Thereunder, [the employer] has two options. It can terminate the
employee by reason of expiration of contract, or it may use failure to meet work standards as the
ground for the employees dismissal. In either case, the tenor of the contract jeopardizes the right of
the worker to security of tenure guaranteed by the Constitution. [16]

In the interpretation of contracts, obscure words and provisions shall not favor the party that caused the
obscurity.[17] Consequently, the terms of the present contract should be construed strictly against petitioner, which
prepared it.[18]

Page 187 of 191

Article 1700 of the Civil Code declares:

Art. 1700. The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore, such
contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.

Indeed, a contract of employment is impressed with public interest. For this reason, provisions of applicable statutes
are deemed written into the contract. Hence, the parties are not at liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by simply contracting with each other. [19] Moreover, in case of doubt, the
terms of a contract should be construed in favor of labor.[20]

Lastly, petitioner claims that it was constrained by the nature of its business to enter into fixed-term employment
contracts with employees assigned to job orders. It argues that inasmuch as its business is that of a mere service
contractor, it relies on the availability of job orders or undertakings from its clients. Hence, the continuity of work
cannot be ascertained.

Petitioners contentions deserve little consideration.

By their very nature, businesses exist and thrive depending on the continued patronage of their clients. Thus, to some
degree, they are subject to the whims of clients who may decide to discontinue patronizing their products or services
for a variety of reasons. Being inherent in any enterprise, this entrepreneurial risk may not be used as an excuse to
circumvent labor laws; otherwise, no worker could ever attain regular employment status.

Finally, it is worth noting that after its past employment contracts had been declared void by this Court, petitioner was
expected to ensure that the subsequent contracts would already comply with the standards set by law and by this
Court. Regrettably, petitioner failed to do so.

WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution are AFFIRMED. Costs
against petitioner.
SO ORDERED.

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson, First Division

Page 188 of 191

Wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww
Buiser v hon leogardo
This is a petition for certiorari seeking to set aside the Order of the Deputy Minister of Labor and Employment,
affirming the Order of the Regional Director, National Capital Region, in Case No. NCR-STF-5-2851-81, which
dismissed the petitioners' complainant for alleged illegal dismissal and unpaid commission.
Petitioners were employed by the private respondent GENERAL TELEPHONE DIRECTORY COMPANY as sales
representatives and charged with the duty of soliciting advertisements for inclusion in a telephone directory.
The records show that petitioners Iluminada Ver Buiser and Ma. Mercedes P. Intengan entered into an "Employment
Contract (on Probationary Status)" on May 26, 1980 with private respondent, a corporation engaged in the business of
publication and circulation of the directory of the Philippine Long Distance Telephone Company. Petitioner Ma. Cecilia
Rillo-Acuna entered into the same employment contract on June 11, 1980 with the private respondent.
Among others, the "Employment Contract (On Probationary Status)" included the following common provisions:
l. The company hereby employs the employee as telephone representative on a probationary status
for a period of eighteen (18) months, i.e. from May 1980 to October 1981, inclusive. It is understood
that darung the probationary period of employment, the Employee may be terminated at the pleasure
of the company without the necessity of giving notice of termination or the payment of termination pay.
The Employee recognizes the fact that the nature of the telephone sales representative's job is such
that the company would be able to determine his true character, conduct and selling capabilities only
after the publication of the directory, and that it takes about eighteen (18) months before his worth as
a telephone saw representative can be fully evaluated inasmuch as the advertisement solicited by him
for a particular year are published in the directory only the following year.
Corollary to this, the private respondent prescribed sales quotas to be accomplished or met by the petitioners. Failing
to meet their respective sales quotas, the petitioners were dismissed from the service by the private respondent. The
records show that the private respondent terminated the services of petitioners Iluminada Ver Buiser and Cecilia RilloAcuna on May 14, 1981 and petitioner Ma. Mercedes P. Intengan on May 18, 1981 for their failure to meet their sales
quotas.
Thus, on May 27, 1981, petitioners filed with the National Capital Region, Ministry of Labor and Employment, a
complaint for illegal dismissal with claims for backwages, earned commissions and other benefits, docketed as Case
No. NCR-STF-5-2851-81.
The Regional Director of said ministry, in an Order dated September 21, 1982, dismissed the complaints of the
petitioners, except the claim for allowances which private respondent was ordered to pay. A reconsideration of the
Order was sought by the petitioners in a motion filed on September 30, 1982. This motion, however, was treated as an
appeal to the Minister of Labor.
On appeal, Deputy Minister Vicente Leogardo, Jr. of the Ministry of Labor issued an Order dated January 7, 1983,
affirming the Regional Director's Order dated September 21, 1982, wherein it ruled that the petitioners have not
attained permanent status since private respondent was justified in requiring a longer period of probation, and that the
termination of petitioners' services was valid since the latter failed to meet their sales quotas.Hence, this petition for
certiorari on the alleged ground that public respondent committed grave abuse of discretion amounting to lack of
jurisdiction. Specifically, petitioners submit that:1. The Hon. Regional Director and the Hon. Deputy Minister committed
grave abuse of discretion amounting to lack of jurisdiction in ruling that the probationary employment of petitioners
herein is eighteen (18) months instead of the mandated six (6) months under the Labor Code, and in consequently
further ruling that petitioners are not entitled to security of tenure while under said probation for 18 months.2. The Hon.
Regional Director and the Hon. Deputy Minister committed grave abuse of discretion amounting to lack of jurisdiction
in ruling that petitioners were dismissed for a just and valid cause.

Page 189 of 191

3. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of discretion amounting to lack of
jurisdiction in ruling that petitioners are not entitled to the commissions they have earned and accrued during their
period of employment.
Petitioners contend that under Articles 281-282 of the Labor Code, having served the respondent company
continuously for over six (6) months, they have become automatically regular employees notwithstanding an
agreement to the contrary. Articles 281-282 read thus:
Art. 282. Probationary Employment. Probationary employment shall not exceed six (6) months from
the date the employee started working, unless it iscCovered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been engaged on a probationary
basis may be terminated for a just cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to themployee at the time of his
engagement. An employee who is allowed to work after a probationary period shall be considered a
regular employee. (As amended by PD 850).
Art. 281. Regular and Casual Employment. 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 activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment
has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceeding paragraph.
Provided, That, any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such actually exists. (As amended by PD 850).
It is petitioners' submission that probationary employment cannot exceed six (6) months, the only exception being
apprenticeship and learnership agreements as provided in the Labor Code; that the Policy Instruction of the Minister of
Labor and Employment nor any agreement of the parties could prevail over this mandatory requirement of the law;
that this six months prescription of the Labor Code was mandated to give further efficacy to the constitutionallyguaranteed security of tenure of workers; and that the law does not allow any discretion on the part of the Minister of
Labor and Employment to extend the probationary period for a longer period except in the aforecited instances.
Finally, petitioners maintain that since they are regular employees, they can only be removed or dismissed for any of
the just and valid causes enumerated under Article 283 of the Labor Code.We reject petitioners' contentions. They
have no basis in law.Generally, the probationary period of employment is limited to six (6) months. The exception to
this general rule is When the parties to an employment contract may agree otherwise, such as when the same is
established by company policy or when the same is required by the nature of work to be performed by the employee.
In the latter case, there is recognition of the exercise of managerial prerogatives in requiring a longer period of
probationary employment, such as in the present case where the probationary period was set for eighteen (18)
months, i.e. from May, 1980 to October, 1981 inclusive, especially where the employee must learn a particular kind of
work such as selling, or when the job requires certain qualifications, skills, experience or training.
Policy Instruction No. 11 of the Minister of Labor and Employment has clarified any and all doubts on the period of
probationary employment. It states as follows:
Probationary Employment has been the subject of misunderstanding in some quarter. Some people believe six (6)
months is the probationary period in all cases. On the other hand employs who have already served the probationary
period are sometimes required to serve again on probation.
Under the Labor Code, six (6) months is the general probationary period ' but the probationary period is actually the
period needed to determine fitness for the job. This period, for lack of a better measurement is deemed to be the
period needed to learn the job.

Page 190 of 191

The purpose of this policy is to protect the worker at the same time enable the employer to make a meaningful
employee selection. This purpose should be kept in mind in enforcing this provision of the Code. This issuance shall
take effect immediately.
In the case at bar, it is shown that private respondent Company needs at least eighteen (18) months to determine the
character and selling capabilities of the petitioners as sales representatives. The Company is engaged in
advertisement and publication in the Yellow Pages of the PLDT Telephone Directories. Publication of solicited ads are
only made a year after the sale has been made and only then win the company be able to evaluate the efficiency,
conduct, and selling ability of its sales representatives, the evaluation being based on the published ads. Moreover, an
eighteen month probationary period is recognized by the Labor Union in the private respondent company, which is
Article V of the Collective Bargaining Agreement, ... thus:
Probationary Period New employees hired for regular or permanent shall undergo a probationary or trial period of
six (6) months, except in the cases of telephone or sales representatives where the probationary period shall be
eighteen (I 8) months.And as indicated earlier, the very contracts of employment signed and acquiesced to by the
petitioners specifically indicate that "the company hereby employs the employee as telephone sales representative on
a probationary status for a period of eighteen (18) months, i.e. from May 1980 to October 1981, inclusive. This
stipulation is not contrary to law, morals and public policy.We, therefore, hold and rule that the probationary
employment of petitioners set to eighteen (18) months is legal and valid and that the Regional Director and the Deputy
Minister of Labor and Employment committed no abuse of discretion in ruling accordingly.On the second assignment
of error that public respondent committed grave abuse of discretion in ruling that petitioners were dismissed for a just
and valid cause, this is not the first time that this issue has been raised before this Court. Earlier, in the case of "Arthur
Golez vs. The National Labor Relations Commission and General Telephone Directory Co. "G.R. No. L-64459, July
25, 1983, the petition for certiorari which raised the same issue against the herein private respondent was dismissed
by this Court for lack of merit.
The practice of a company in laying off workers because they failed to make the work quota has been recognized in
this jurisdiction. (Philippine American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634, 639). In the
case at bar, the petitioners' failure to meet the sales quota assigned to each of them constitute a just cause of their
dismissal, regardless of the permanent or probationary status of their employment. Failure to observe prescribed
standards of work, or to fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal.
Such inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to complete the
same within the alloted reasonable period, or by producing unsatisfactory results. This management prerogative of
requiring standards availed of so long as they are exercised in good faith for the advancement of the employer's
interest.
Petitioners anchor their claim for commission pay on the Collective Bargaining Agreement (CBA) of September 1981,
in support of their third assignment of error. Petitioners cannot avail of this agreement since their services had been
terminated in May, 1981, at a time when the CBA of September, 1981 was not yet in existence.
In fine, there is nothing in the records to show any abuse or misuse of power properly vested in the respondent
Deputy Minister of Labor and Employment. For certiorari to lie, "there must be capricious, arbitrary and whimsical
exercise of power, the very antithesis of the judicial prerogative inaccordance with centuries of both civil and common
law traditions." (Panaligan vs. Adolfo, 67 SCRA 176, 180). The "abuse of discretion must be grave and patent, and it
must be shown that the discretion was exercised arbitrarily or despotically." (Palma and Ignacio vs. Q. & S., Inc., et al.,
17 SCRA 97, 100; Philippine Virginia Tobacco Administration vs. Lucero, 125 SCRA 337, 343).
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.

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