Labor Finals Case Digests This Is It

13.
OTHER IMPORTANT LABOR PROVISIONS
A. CONTRACTING AGREEMENT
1. Philippine Bank of Communications vs. National Labor Relations Commission

GR No. L-66598 December 19, 1986
Facts:
Petitioner Philippine Bank of Communications and the Corporate Executive Search, Inc. (CESI) entered
into an agreement under which CESI would provide “Temporary Services” to petitioner consisting of
eleven (11) messengers, one of them was Orpiada. The contract period was described as “from
January 1976 – although it appeared that Orpiada had been assigned to the bank since June 1975.
He rendered messengerial services to the bank, within its promises, together with other the others
doing a similar job. In or about October 1976, the bank requested CESI to withdraw Orpiada’s
assignment because Orpiada’s services “were no longer needed.”
Orpiada filed a complaint against the bank for illegal dismissal and failure to pay the 13th- month pay.
The bank impleaded CESI as an additional respondent. The Labor Arbiter ruled in favor of Orpiada.
Hence, this petition for certiorari filed by the bank.
Issue: Whether or not an employer-employee relationship existed between the bank and private
respondent Orpiada.
Ruling:
Yes. There is an employer-employee relationship that existed between the bank and Orpiada. The fact
that Orpiada worked or rendered services to the bank for a period of about sixteen (16) months made
him an employee of the bank. Under the Labor Code, any employee who has rendered at least one (1)
year of service, whether such service is continuous or not, shall be considered a regular employee.
Thus, Orpiada’s services may not be terminated by the bank except for a just cause or when
authorized under the Labor Code. CESI was engaged in labor-only contracting. Therefore, the
petitioner bank is liable to Orpiada as if Orpiada had been directly employed, not only by CESI but also
by the bank.
2. VIRGINIA G. NERI and JOSE CABELIN, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION FAR EAST BANK & TRUST COMPANY (FEBTC) and BUILDING CARE
CORPORATION, respondents. G.R. Nos. 97008-09 July 23, 1993
Petitioners instituted complaints against FEBTC and BCC to compel the bank to accept them as regular
employees and for it to pay the differential between the wages being paid them by BCC and those
received by FEBTC employees with similar length of service. They contended that BCC in engaged in
labor-only contracting because it failed to adduce evidence purporting to show that it invested in the
form of tools, equipment, machineries, work premises and other materials which are necessary in the
conduct of its business. Moreover, petitioners argue that they perform duties which are directly related
to the principal business or operation of FEBTC.
It is well-settled that there is labor-only contracting where: (a) 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, (b) the workers recruited and placed by such person
are performing activities which are directly related to the principal business of the employer.
The Supreme Court ruled that respondent BCC need not prove that it made investments in the form of
tools, equipment, machineries, work premises, among others, because it has established that it has
sufficient capitalization. This fact was both determined by the Labor Arbiter and the NLRC as BCC had
a capital stock of P1 million fully subscribed and paid for. BCC is therefore a highly capitalized venture
and cannot be deemed engaged in labor-only contracting.
While there may be no evidence that it has investment in the form of tools, equipment, machineries,
work premises, among others, it is enough that it has substantial capital, as was established before
Rommel A. Tio Page 1 of 93 Labor Standards

the Labor Arbiter as well as the NLRC. The law does not require both substantial capital and
investment in the form of tools, equipment, machineries, etc. This is clear from the use of the
conjunction "or" instead of “and”. Having established that it has substantial capital, it was no longer
necessary for BCC to further adduce evidence to prove that it does not fall within the purview of
"labor-only" contracting. There is even no need for it to refute petitioners' contention that the
activities they perform are directly related to the principal business of respondent bank.
On the other hand, the Court has already taken judicial notice of the general practice adopted in
several government and private institutions and industries of hiring independent contractors to
perform special services. These services range from janitorial, security and even technical or other
specific services such as those performed by petitioners Neri and Cabelin. While these services may be
considered directly related to the principal business of the employer, nevertheless, they are not
necessary in the conduct of the principal business of the employer.
Petition dismissed.
3. FILIPINAS SYNTHETIC FIBER CORPORATION (FILSYN), petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION, LABOR ARBITER VOLTAIRE A. BALITAAN, FELIPE LOTERTE and
DE LIMA TRADING & GENERAL SERVICES, respondents. [G.R. No. 113347. June 14, 1996
De Lima Trading was found to be engaged in an independent job contracting since it is a highly
capitalized venture and the janitorial services performed by Loterte although may be considered
directly related to the business of FILSYN is nevertheless necessary in its operation, without which
production and company sales will not suffer.
However, with respect to liability, notwithstanding the lack of a direct employer-employee relationship
between FILSYN and Felipe Loterte, the FILSYN is still jointly and severally liable with respondent DE
LIMA for Loterte’s monetary claims under Art. 109 of the Labor Code without prejudice to the right of
FILSYN to seek reimbursement from DE LIMA for whatever amount it will have to pay Loterte.
4. ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (SECOND DIVISION) composed of Presiding Commissioner RAUL
T. AQUINO, Commissioner ROGELIO I. RAYALA and Commissioner VICTORIANO R.
CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA FILMS, respondents. [G.R. No. 120969.
January 22, 1998]
Petitioners are considered employers of Viva. They cannot be said to be employees of an independent
contractor “producer” since evidences show that the producers have no substantial capital or
investment in the form of tools, machines, etc and works directly related to the business of the
principal. Hence, with this regard, petitioners are employees of the private respondent. In addition,
petitioners have gained the status of a regular employee. Once a project or work pool employee has
been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the same
tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual
business or trade of the employer, then the employee must be deemed a regular employee, pursuant
to Article 280 of the Labor Code and jurisprudence. To rule otherwise would allow circumvention of
labor laws in industries not falling within the ambit of Policy Instruction No. 20/Department Order No.
19, hence allowing the prevention of acquisition of tenurial security by project or work pool employees
who have already gained the status of regular employees by the employer’s conduct.
5. SMC vs. MAERC INTEGRATED SERVICES; G.R. No. 144672. October 22, 2003
Maerc is a labor-only contractor. The whole arrangement of contracting the bottle washing and
segregation activities to MAERC was only devised apparently to avoid labor problems. SMC’s attempt
to distance itself from the workers after requiring MAERC to establish the conditions to satisfy the
requirements for a status of a legitimate job contractor cannot prosper inasmuch as there is enough
evidence to substantiate the existence of an employer-employee relationship between petitioner and
complainants. This Court has held that it will only recognize a company’s prerogatives so long as they

are exercised in good faith and for the advancement of the employer’s interest, and not for the
purpose of defeating or circumventing the rights of the employees.
6. MANILA WATER COMPANY, INC., petitioner, vs. HERMINIO D. PENA, et. al., respondents.
[G.R. No. 158255. July 8, 2004]
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. 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.
Before the end of the three-month contract, the 121 collectors incorporated the Association Collectors
Group, Inc. (ACGI), 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 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.
Private respondents filed a complaint for illegal dismissal and money claims against petitioner,
contending that they were petitioner’s employees as all the methods and procedures of their
collections were controlled by the latter.
ACGI 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. Since ACGI is only a labor-only contractor, the workers it
supplied should be considered as employees of the petitioner.
7. NATIONAL FOOD AUTHORITY (NFA), AND JUANITO M. DAVID, IN HIS CAPACITY AS

REGIONAL DIRECTOR, NFA REGIONAL OFFICE NO. 1, SAN JUAN, LA UNION, PETITIONERS,
VS. MASADA SECURITY AGENCY, INC., REPRESENTED BY ITS ACTING PRESIDENT &
GENERAL MANAGER, COL. EDWIN S. ESPEJO (RET.), RESPONDENTS. [G.R. No. 163448,
March 08, 2005]
NFA had a 1-year contract with the services of MASADA in providing security services in their various
offices in the region. Subsequently, the RTWPB issued several wage orders increasing the daily wage
rate. In accord with this, NFA made adjustments in the daily wage but denied the adjustments with
respect to other benefits and remunerations computed on the basis of the daily wage. This caused the
filing of the complaint. SC held the petition meritorious.
The term “wage” as used in Section 6 of RA 6727 pertains to no other than the “statutory minimum
wage” which is defined under the Rules Implementing RA 6727 as the lowest wage rate fixed by law
that an employer can pay his worker. The basis thereof under Section 7 of the same Rules is the
normal working hours, which shall not exceed eight hours a day. Hence, the prescribed increases or
the additional liability to be borne by the principal under Section 6 of RA 6727 is the increment or
amount added to the remuneration of an employee for an 8-hour work. Section 6 pertains to the
“statutory minimum wage” as defined herein, principals in service contracts cannot be made to pay
the corresponding wage increase in the overtime pay, night shift differential, holiday and rest day pay,
premium pay and other benefits granted to workers. While basis of said remuneration and benefits is
the statutory minimum wage, the law cannot be unduly expanded as to include those not stated in the
subject provision. If the lawmaker’s intention was to extend the obligation of principals in service
contracts to the payment of the increment in the other benefits and remuneration of workers, it would
have so expressly specified. In not so doing, the only logical conclusion is that the legislature

intended to limit the additional obligation imposed on principals in service contracts to the payment of
the increment in the statutory minimum wage.
At any rate, the interest of the employees will not be adversely affected if the obligation of principals
under the subject provision will be limited to the increase in the statutory minimum wage. This is so
because all remuneration and benefits other than the increased statutory minimum wage would be
shouldered and paid by the employer or service contractor to the workers concerned. Thus, in the
end, all allowances and benefits as computed under the increased rate mandated by RA 6727 and the
wage orders will be received by the workers.
Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into stipulations
increasing the liability of the principal. So long as the minimum obligation of the principal, i.e.,
payment of the increased statutory minimum wage is complied with, the Wage Rationalization Act is
not violated. The parties therefore acknowledged the application to their contract of the wage orders
issued by the RTWPB pursuant to RA 6727. There being no assumption by NFA of a greater liability
than that mandated by Section 6 of the Act, its obligation is limited to the payment of the increased
statutory minimum wage rates which, as admitted by respondent, had already been satisfied by NFA.
Under Article 1231 of the Civil Code, one of the modes of extinguishing an obligation is by payment.
Having discharged its obligation to respondent, NFA no longer have a duty that will give rise to a
correlative legal right of respondent. The latter’s complaint for collection of remuneration and benefits
other than the increased minimum wage rate, should therefore be dismissed for lack of cause of
action.
8. ZALDY G. ABELLA AND THE MEMBERS OF THE PLDT SECURITY PERSONNEL UNION LISTED
IN ANNEX “D” OF THIS PETITION, PETITIONERS, VS. PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY (PLDT CO.) AND PEOPLE’S SECURITY INC. (PSI), RESPONDENTS,
[G.R. No. 159469, June 08, 2005]
The Security Guards are employees of PSI and not of the PLDT. From the facts adduced in the trial
courts, sufficient evidences established that PLDT is not the employer of the petitioners. First, it was
the PSI, the security provider of the PLDT, which selected, engaged or hired and discharged the
security guards. The referral to PLDT is nothing but for possible assignment in a designated client
which has the inherent prerogative to accept and reject the assignee for justifiable grounds or even
arbitrarily. The employer-employee relationship is deemed perfected even before the posting of the
complainants with the PLDT, as assignment only comes after employment. Second, the security
guards which PSI had assigned to PLDT are already the former’s employees prior to assignment and if
the assigned guards to PLDT are rejected by PLDT for reasons germane to the security agreement,
then the rejected or terminated guard may still be assigned to other clients of PSI. Third, it is PSI that
determined and paid the petitioners’ wages, salaries, and compensation.
Moreover, as a case in point, manufacturing companies usually hold suppliers’ conferences to integrate
their suppliers’ corporate goals and visions with their own so that the manufacturing companies are
ensured of the quality and timing of their supplies of materials or services, as the case may be. It is
therefore not surprising that PLDT would demand that security guards assigned to its premises
undergo seminars and trainings on certain areas of concern which are unique to PLDT.
Further, it is in the ordinary course of things for big companies such as PLDT to assign their own
security personnel and supervisors to monitor the performance of the security guards as part of the
company’s internal check, monitoring and control system in order to rate whether the security agency
it hired is performing at par with PLDT’s set standards.
9. SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A. ABALLA, et. Al., and the COURT OF
APPEALS, respondents. [G.R. No. 149011. June 28, 2005]
Petitioner SMC entered into a one-year contract with the Sunflower Multi-Purpose Cooperative.
Sunflower engaged private respondents to render services at SMC’s Bacolod Shrimp Processing Plant
at Sta. Fe, Bacolod City. A complaint was filed by private respondents 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. SMC alleged
that Sunflower is engaged in a legitimate labor contracting and hence the private respondents cannot
be considered their employees.
Supreme Court ruled otherwise. Sunflower is a labor-only contractor for the following reasons: 1.
although Sunflower was issued a Certificate of Registration by the Cooperative Development Authority,
it merely shows it had P2,000 in paid-up share capital which amount cannot be considered substantial
capitalization; 2. its lot, building, machineries and all other working tools utilized by private
respondents in carrying out their tasks were owned and provided by SMC and the alleged office is
found within the confines of a small “carinderia” or “refreshment” (sic) owned by the mother of the
Cooperative Chairman Roy Asong and the only equipment used and owned by Sunflower was a
typewriter; 3. from the job description provided by SMC itself, the work- shrimp harvesting, receiving
and packing- assigned to private respondents, formed an integral part of the shrimp processing
operations of SMC; 4. it 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
SMC, as it is apparent that its role was merely to recruit persons to work for SMC- their daily time
records were signed by SMC supervisors, the control of the premises in which private respondents
worked was by SMC and 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; 5. Sunflower did not cater to clients other than SMC, and with the closure of
SMC’s Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist.
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 and as such are entitled to all the benefits and rights appurtenant to regular employment.
Absent any evidence showing that Sunflower has been dissolved in accordance with law, it is held
solidarily liable with SMC for all the rightful claims of private respondents.
10. MANILA ELECTRIC COMPANY, PETITIONER, VS. ROGELIO BENAMIRA, et. Al.; ARMED SECURITY &
DETECTIVE AGENCY, INC., (ASDAI) AND ADVANCE FORCES SECURITY & INVESTIGATION SERVICES,
INC., (AFSISI),
The individual respondents are licensed security guards formerly employed by People’s Security, Inc.
and deployed as such at MERALCO’s head office in Ortigas Avenue, Pasig, Metro Manila. On Nov. 30,
1990, the security service agreement between PSI and MERALCO was terminated.
Immediately thereafter, 56 of PSI’s security guards, including herein eight individual respondents,
filed a complaint for unpaid monetary benefits against PSI and MERALCO. Meanwhile, the security
service agreement between respondent Armed Security & Detective Agency, Inc., (ASDAI) and
MERALCO took effect on Dec. 1, 1990. Subsequently, the individual respondents were absorbed by
ASDAI and retained at MERALCO’s head office.
On June 29, 1992, the labor arbiter rendered a decision in favor of the former PSI security guards,
including the individual respondents. Less than a month later, the individual respondents filed another
complaint for unpaid monetary benefits, this time against ASDAI and MERALCO. On July 25, 1992, the
security service agreement between respondent Advance Forces Security & Investigation Services,
Inc. (AFSISI) and MERALCO took effect, terminating the previous security service agreement with
ASDAI. Except as to the number of security guards, the amount to be paid the agency, and the
effectivity of the agreement, the terms and conditions were substantially identical with the security
service agreement with ASDAI.
The individual respondents amended their complaint to implead AFSISI as party respondent. They
then again amended their complaint to allege that AFSISI terminated their services on August 6, 1992
without notice and just cause and therefore guilty of illegal dismissal.
The individual respondents alleged that MERALCO and ASDAI never paid their overtime pay, service
incentive leave pay, premium pay for Sundays and holidays, P50.00 monthly uniform allowance and
underpaid their 13th month pay; on July 24, 1992, when the security service agreement of ASDAI was
terminated and AFSISI took over the security functions of the former on July 25, 1992, respondent

security guard Benamira, was no longer given any work assignment when AFSISI learned that the
former has a pending case against PSI, in effect, dismissing him from the service without just cause;
and, the rest of the individual respondents were absorbed by AFSISI but were not given any
assignments, thereby dismissing them from the service without just cause.
ASDAI denied in general terms any liability for the claims of the individual respondents, claiming that
there is nothing due them in connection with their services.
On the other hand, MERALCO denied liability on the ground of lack of employer-employee relationship
with individual respondents. It averred that the individual respondents are the employees of the
security agencies it contracted for security services; and that it has no existing liability for the
individual respondents’ claims since said security agencies have been fully paid for their services per
their respective security service agreement.
For its part, AFSISI asserted that: it is not liable for illegal dismissal since it did not absorb or hire the
individual respondents, the latter were merely hold-over guards from ASDAI; it is not obliged to
employ or absorb the security guards of the agency it replaced since there is no provision in its
security service agreement with MERALCO or in law requiring it to absorb and hire the guards of
ASDAI as it has its own guards duly trained to service its various clients.
On January 3, 1994, after the submission of their respective evidence and position papers, the labor
arbiter rendered a Decision holding ASDAI and MERALCO jointly and solidarily liable to the monetary
claims of individual respondents and dismissing the complaint against AFSISI. All the parties, except
AFSISI, appealed to the NLRC. NLRC affirmed in toto the decision of the Labor Arbiter. The individual
respondents filed a motion for partial reconsideration but it was denied by the NLRC.
The individual respondents filed a petition for certiorari before the SC. They insisted that they were
absorbed by AFSISI and the latter effected their termination without notice and just cause. After the
submission of the responsive pleadings and memoranda, SC referred the petition to the CA which
modified the decision of the NLRC by declaring MERALCO as the direct employer of the individual
respondents.
The CA held that MERALCO changed the security agency manning its premises three times while
engaging the services of the same people, the individual respondents; MERALCO employed a scheme
of hiring guards through an agency and periodically entering into service contract with one agency
after another in order to evade the security of tenure of individual respondents; individual respondents
are regular employees of MERALCO since their services as security guards are usually necessary or
desirable in the usual business or trade of MERALCO and they have been in the service of MERALCO
for no less than six years; an employer-employee relationship exists between MERALCO and the
individual respondents because: (a) MERALCO had the final say in the selection and hiring of the
guards, as when its advice was proved to have carried weight in AFSISI’s decision not to absorb the
individual respondents into its workforce; (b) MERALCO paid the wages of individual respondents
through ASDAI and AFSISI; (c) MERALCO’s discretion on matters of dismissal of guards was given
great weight and even finality since the record shows that the individual respondents were replaced
upon the advice of MERALCO; and, (d) MERALCO has the right, at any time, to inspect the guards, to
require without explanation the replacement of any guard whose behavior, conduct or appearance is
not satisfactory and ASDAI and AFSISI cannot pull out any security guard from MERALCO without the
latter’s consent; and, a labor-only contract existed between ASDAI and AFSISI and MERALCO, such
that MERALCO is guilty of illegal dismissal without just cause and liable for reinstatement of individual
respondents to its workforce.
Issue:
Whether or not MERALCO is jointly and severally liable with AFSISI to the respondents.
Decision:
At the outset, it is noted that the individual respondents never alleged in their complaint in the Labor
Arbiter, in their appeal in the NLRC and even in their petition for certiorari in the CA that MERALCO
was their employer. They have always advanced the theory that AFSISI is their employer. The
individual respondents are bound by their submissions that AFSISI is their employer and they should

not be permitted to change their theory. Such a change of theory cannot be tolerated on appeal, not
due to the strict application of procedural rules but as a matter of fairness. A change of theory on
appeal is objectionable because it is contrary to the rules of fair play, justice and due process.
Thus, the CA should not have considered the new theory offered by the individual respondents in their
memorandum.
In this case, the terms and conditions embodied in the security service agreement between MERALCO
and ASDAI expressly recognized ASDAI as the employer of individual respondents.
Under the security service agreement, it was ASDAI which (a) selected, engaged or hired and
discharged the security guards; (b) assigned them to MERALCO according to the number agreed upon;
(c) provided the uniform, firearms and ammunition, nightsticks, flashlights, raincoats and other
paraphernalia of the security guards; (d) paid them salaries or wages; and, (e) disciplined and
supervised them or principally controlled their conduct. The agreement even explicitly provided that
“[n]othing herein contained shall be understood to make the security guards under this Agreement,
employees of the COMPANY, it being clearly understood that such security guards shall be considered
as they are, employees of the AGENCY alone.” Clearly, the individual respondents are the employees
of ASDAI.
As to the provision in the agreement that MERALCO reserved the right to seek replacement of any
guard whose behavior, conduct or appearance is not satisfactory, such merely confirms that the power
to discipline lies with the agency. It is a standard stipulation in security service agreements that the
client may request the replacement of the guards to it. Service-oriented enterprises, such as the
business of providing security services, generally adhere to the business adage that “the customer or
client is always right” and, thus, must satisfy the interests, conform to the needs, and cater to the
reasonable impositions of its clients.
Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without its
consent an indication of control. It is simply a security clause designed to prevent the agency from
unilaterally removing its security guards from their assigned posts at MERALCO’s premises to the
latter’s detriment.
The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its
premises is likewise not indicative of control as it is not a unilateral right. The agreement provides
that the agency is principally mandated to conduct inspections, without prejudice to MERALCO’s right
to conduct its own inspections.
Needless to stress, for the power of control to be present, the person for whom the services are
rendered must reserve the right to direct not only the end to be achieved but also the means for
reaching such end. 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.
Verily, the security service agreements in the present case provided that all specific instructions by
MERALCO relating to the discharge by the security guards of their duties shall be directed to the
agency and not directly to the individual respondents. The individual respondents failed to show that
the rules of MERALCO controlled their performance.
Moreover, ASDAI and AFSISI are not “labor-only” contractors. There is “labor only” contract when the
person acting as contractor is considered merely as an agent or intermediary of the principal who is
responsible to the workers in the same manner and to the same extent as if they had been directly
employed by him. On the other hand, “job (independent) contracting” is present if the following
conditions are met: (a) 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 to the result thereof; and (b) the contractor has substantial capital or
investments in the form of tools, equipment, machineries, work premises and other materials which
are necessary in the conduct of his business. Given the above distinction and the provisions of the

security service agreements entered into by petitioner with ASDAI and AFSISI, we are convinced that
ASDAI and AFSISI were engaged in job contracting.
The individual respondents can not be considered as regular employees of the MERALCO for, although
security services are necessary and desirable to the business of MERALCO, it is not directly related to
its principal business and may even be considered unnecessary in the conduct of MERALCO’s principal
business, which is the distribution of electricity.
Furthermore, the fact that the individual respondents filed their claim for unpaid monetary benefits
against ASDAI is a clear indication that the individual respondents acknowledge that ASDAI is their
employer.
We cannot give credence to individual respondents’ insistence that they were absorbed by AFSISI
when MERALCO’s security service agreement with ASDAI was terminated. The individual respondents
failed to present any evidence to confirm that AFSISI absorbed them into its workforce. Thus,
respondent Benamira was not retained in his post at MERALCO since July 25, 1992 due to the
termination of the security service agreement of MERALCO with ASDAI. As for the rest of the
individual respondents, they retained their post only as “hold-over” guards until the security guards of
AFSISI took over their post on August 6, 1992.
In the present case, respondent Benamira has been “off-detail” for seventeen days while the rest of
the individual respondents have only been ”off-detail” for five days when they amended their
complaint on August 11, 1992 to include the charge of illegal dismissal. The inclusion of the charge of
illegal dismissal then was premature. Nonetheless, bearing in mind that ASDAI simply stopped giving
the individual respondents any assignment and their inactivity clearly persisted beyond the six-month
period allowed by Article 286 of the Labor Code, the individual respondents were, in effect,
constructively dismissed by ASDAI from employment, hence, they should be reinstated.
The fact that there is no actual and direct employer-employee relationship between MERALCO and the
individual respondents does not exonerate MERALCO from liability as to the monetary claims of the
individual respondents. When MERALCO contracted for security services with ASDAI as the security
agency that hired individual respondents to work as guards for it, MERALCO became an indirect
employer of individual respondents pursuant to Article 107 of the Labor Code.
When ASDAI as contractor failed to pay the individual respondents, MERALCO as principal becomes
jointly and severally liable for the individual respondents’ wages, under Articles 106 and 109 of the
Labor Code.
ASDAI is held liable by virtue of its status as direct employer, while MERALCO is deemed the indirect
employer of the individual respondents for the purpose of paying their wages in the event of failure of
ASDAI to pay them. This statutory scheme gives the workers the ample protection consonant with
labor and social justice provisions of the 1987 Constitution.
However, as held in Mariveles Shipyard Corp. vs. Court of Appeals, the solidary liability of MERALCO
with that of ASDAI does not preclude the application of Article 1217 of the Civil Code on the right of
reimbursement from his co-debtor by the one who paid, which provides:
ART. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more
solidary debtors offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each,
with the interest for the payment already made. If the payment is made before the debt is due, no
interest for the intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor
paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of
each.
ASDAI may not seek exculpation by claiming that MERALCO’s payments to it were inadequate for the
individual respondent’ lawful compensation. As an employer, ASDAI is charged with knowledge of

labor laws and the adequacy of the compensation that it demands for contractual services is its
principal concern and not any other’s.
WHEREFORE, the present petition is GRANTED. The assailed Decision of the CA is REVERSED and SET
ASIDE. The Decision of the Labor Arbiter and the Resolution of the NLRC are AFFIRMED with the
MODIFICATION that the joint and solidary liability of ASDAI and MERALCO to pay individual
respondents’ monetary claims for underpayment of actual regular hours and overtime hours rendered,
and premium pay for holiday and rest day, as well as attorney”s fees, shall be without prejudice to
MERALCO’s right of reimbursement from ASDAI.
11. DOLE Phils. vs. Esteva, G.R. No. 161115, November 30, 2006
FACTS:
Petitioner is a corporation duly recognized and existing in accordance with Philippine laws, engaged
principally in the production and processing of pineapple for the export market. Its plantation is
located in Polomolok, South Cotabato .
Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO). CAMPCO was
organized in accordance with R.A. No. 6938, otherwise known as the Cooperative Code of the
Philippines , and duly –registered with the Cooperative Development Authority (CDA) on 6 January
1993. Members of CAMPCO live in communities surrounding petitioner’s plantation and are relatives of
petitioner’s employees.
On 17 August 1993, petitioner and CAMPCO entered into a Service Contract. The Service Contract
referred to petitioner as “the Company,” while CAMPCO was “the Contractor.” The said contract was
good for six months.
Pursuant to the contract, CAMPCO members rendered services to petitioner. The parties apparently
extended or renewed the same for the succeeding years without executing another written contract.
However, due to investigations and reliable information, the Regional Director of DOLE exercised his
visitorial and enforcement power and found out that CAMPCO is engaged in labor-only contracting
together with two other “cooperatives”.
The Law cited was Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code.
–(pertaining to Labor-only contracting… 1. no substantial capital; 2. work is directly related to the
principal business of the principal b. in such case, the one who alleges as contractor is deemed an
agent of the principal while the latter will latter is considered the indirect employer for purposes of
enforcement of the labor rights.)
Before the NLRC, respondents contended that they have been working more than one year too
petitioner. While some of the respondents were still working for petitioner, others were put on “stay
home status” on varying dates in the years 1994, 1995, and 1996 and were no longer furnished with
work thereafter. They, then, filed a case before the NLRC for illegal dismissal, regularization, wage
differentials, damages and attorney’s fees.
Respondents argued that they should be considered regular employees of petitioner given that: 1.
they were performing jobs that were usually necessary and desirable in the usual business of
petitioner; 2. petitioner exercised control over respondents, not only as to the results, but also as to
the manner by which they performed their assigned tasks; and 3. CAMPCO, a labor-only contractor,
was merely a conduit of petitioner. As regular employees of petitioner, respondents asserted that they
were entitled to security of tenure and those placed on “stay home status” for more than six months
had been constructively and illegally dismissed. Respondents further claimed entitlement to wage
differential, moral damages, and attorney’s fees.
NLRC affirmed the Labor Arbiter’s decision. CA also affirmed.

ISSUES: Whether the lower courts were correct in ruling that Petitioner is the employer of
respondents and that CAMPCO be considered merely as agent of the company
HELD:
In summary, this Court finds that CAMPCO was a labor-only contractor and, thus, petitioner is the real
employer of the respondents, with CAMPCO acting only as the agent or intermediary of petitioner. Due
to the nature of their work and length of their service, respondents should be considered as regular
employees of petitioner. Petitioner constructively dismissed a number of the respondents by placing
them on "stay home status" for over six months, and was therefore guilty of illegal dismissal.
Petitioner must accord respondents the status of regular employees, and reinstate the respondents
who it constructively and illegally dismissed, to their previous positions, without loss of seniority rights
and other benefits, and pay these respondents’ backwages from the date of filing of the Complaint
with the NLRC on 19 December 1996 up to actual reinstatement.
CRITERIA TO ESTABLISH THE EXISTENCE OF AN INDEPENDENT AND PERMISSIBLE CONTRACTOR

RELATIONSHIP
generally established by the following criteria: whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term and duration of
the relationship; the right to assign the performance of a specified piece of work; the control and
supervision of the work to another; the employer's power with respect to the hiring, firing and
payment of the contractor's workers; the control of the premises; the duty to supply the premises
tools, appliances, materials and labor; and the mode, manner and terms of payment
SEVERAL FACTORS ARE PRESENT IN THE CASE TO ESTABLISH A LABOR- ONLY CONTRACTING
ARRANGEMENT BY BETWEEN THE MANAGEMENT AND CAMPCO
While there is present in the relationship of petitioner and CAMPCO some factors suggestive of an
independent contractor relationship (i.e., CAMPCO chose who among its members should be sent to
work for petitioner; petitioner paid CAMPCO the wages of the members, plus a percentage thereof as
administrative charge; CAMPCO paid the wages of the members who rendered service to petitioner),
many other factors are present which would indicate a labor-only contracting arrangement between
petitioner and CAMPCO.
First, although petitioner touts the multi-million pesos assets of CAMPCO, it does well to remember
that such were amassed in the years following its establishment. In 1993, when CAMPCO was
established and the Service Contract between petitioner and CAMPCO was entered into, CAMPCO only
had P6,600.00 paid-up capital, which could hardly be considered substantial. It only managed to
increase its capitalization and assets in the succeeding years by continually and defiantly engaging in
what had been declared by authorized DOLE officials as labor-only contracting.
Second, CAMPCO did not carry out an independent business from petitioner. It was precisely
established to render services to petitioner to augment its workforce during peak seasons. Petitioner
was its only client. Even as CAMPCO had its own office and office equipment, these were mainly used
for administrative purposes; the tools, machineries, and equipment actually used by CAMPCO
members when rendering services to the petitioner belonged to the latter.
Third, petitioner exercised control over the CAMPCO members, including respondents. Petitioner
attempts to refute control by alleging the presence of a CAMPCO supervisor in the work premises. Yet,
the mere presence within the premises of a supervisor from the cooperative did not necessarily mean
that CAMPCO had control over its members. Section 8(1), Rule VIII, Book III of the implementing
rules of the Labor Code, as amended, required for permissible job contracting that the contractor
undertakes the contract work on his 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. As alleged by the
respondents, and unrebutted by petitioner, CAMPCO members, before working for the petitioner, had
to undergo instructions and pass the training provided by petitioner’s personnel. It was petitioner who
determined and prepared the work assignments of the CAMPCO members. CAMPCO members worked

within petitioner’s plantation and processing plants alongside regular employees performing identical
jobs, a circumstance recognized as an indicium of a labor-only contractorship.
Fourth, CAMPCO was not engaged to perform a specific and special job or service. In the Service
Contract of 1993, CAMPCO agreed to assist petitioner in its daily operations, and perform odd jobs as
may be assigned. CAMPCO complied with this venture by assigning members to petitioner. Apart from
that, no other particular job, work or service was required from CAMPCO, and it is apparent, with such
an arrangement, that CAMPCO merely acted as a recruitment agency for petitioner. Since the
undertaking of CAMPCO did not involve the performance of a specific job, but rather the supply of
manpower only, CAMPCO clearly conducted itself as a labor-only contractor.
Lastly, CAMPCO members, including respondents, performed activities directly related to the principal
business of petitioner. They worked as can processing attendant, feeder of canned pineapple and
pineapple processing, nata de coco processing attendant, fruit cocktail processing attendant, and etc.,
functions which were, not only directly related, but were very vital to petitioner’s business of
production and processing of pineapple products for export.
The findings enumerated in the preceding paragraphs only support what DOLE Regional Director Parel
and DOLE Undersecretary Trajano had long before conclusively established, that CAMPCO was a mere
labor-only contractor
EMPLOYER- EMPLOYEE RELATIONSHIP EXIST BETWEEN THE PETITIONER AND THE RESPONDENT
WITH THE DECLARATION THAT CAMPCO WAS ENGAGED IN THE PROHIBITED ACTS OF LABOR-ONLY
CONTRACTING
The declaration that CAMPCO is indeed engaged in the prohibited activities of labor-only contracting,
then consequently, an employer-employee relationship is deemed to exist between petitioner and
respondents, since CAMPCO shall be considered as a mere agent or intermediary of petitioner
RESPONDENTS ARE CONSIDERED REGULAR EMPLOYEES FOR THEY PERFORMED ACTIVITIES THAT
ARE NECESSARY OR DESIRABLE TO THE USUAL BUSINESS OF THE PETITIONER
Since respondents are now recognized as employees of petitioner, this Court is tasked to determine
the nature of their employment. In consideration of all the attendant circumstances in this case, this
Court concludes that respondents are regular employees of petitioner.
In the instant Petition, petitioner is engaged in the manufacture and production of pineapple products
for export. Respondents rendered services as processing attendant, feeder of canned pineapple and
pineapple processing, nata de coco processing attendant, fruit cocktail processing attendant, and etc.,
functions they performed alongside regular employees of the petitioner. There is no doubt that the
activities performed by respondents are necessary or desirable to the usual business of petitioner.
Petitioner likewise want this Court to believe that respondents’ employment was dependent on the
peaks in operation, work backlogs, absenteeism, and excessive leaves. However, bearing in mind that
respondents all claimed to have worked for petitioner for over a year, a claim which petitioner failed to
rebut, then respondent’s continued employment clearly demonstrates the continuing necessity and
indispensability of respondents’ employment to the business of petitioner.
THE COMPANY’S ACT OF PLACING SOME OF THE RESPONDENTS ON "STAY HOME STATUS" AND NOT
GIVING THEM WORK ASSIGNMENTS FOR MORE THAN SIX MONTHS WERE ALREADY TANTAMOUNT TO
CONSTRUCTIVE AND ILLEGAL DISMISSAL
Respondents, as regular employees of petitioner, are entitled to security of tenure. They could only be
removed based on just and authorized causes as provided for in the Labor Code, as amended, and
after they are accorded procedural due process. Therefore, petitioner’s acts of placing some of the
respondents on "stay home status" and not giving them work assignments for more than six months
were already tantamount to constructive and illegal dismissal

12. SAN MIGUEL CORPORATION vs. NATIONAL LABOR RELATIONS COMMISSION and RAFAEL
MALIKSI, December 6, 2006, G.R. No. 147566
Maliksi filed a complaint against SMC to compel the latter to recognize him as a regular employee of
the company. He was first under the Lipercon, then the Skill power then the last in in PHILSSEC. SMC
denied allegation by stating that Maliksi is an employee of PHILSSEC, an independent contractor.
The Court takes judicial notice of the fact that Lipercon and Skillpower were declared to be labor-only
contractors, providing as they do manpower services to the public for a fee. The existence of an
employer-employee relationship is factual and giving 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 is valid. 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
SMC’s 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 SMC’s business on a daily basis.
With respect to PHILSSEC, SMC itself admits that Maliksi’s work under the computerization program
did “not require the operation of a computer system, such as the software program being developed
by PHILSSEC.” By this admission, not being a computer expert, Maliksi’s inclusion in the project was
uncalled for. Presumptuously, his placement in the project was for the purpose of circumventing 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. 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. 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 San Miguel Corporation v. MAERC Integrated
Services, Inc., SC 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.
Petition denied. SMC is liable for damages and payment of claimed wages and benefits.
13. EPARWA SECURITY AND JANITORIAL SERVICES, INC., vs. LICEO DE CAGAYAN UNIVERSITY, G.R.
No. 150402, November 28, 2006
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
LDCU’s 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.
LDCU’s 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 LDCU’s liability to
the security guards remains because of Articles 106, 107 and 109 of the Labor Code (solidary liable).
Eparwa is already precluded from asking LDCU for an adjustment in the contract price because of the
expiration of the contract, but Eparwa’s 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
(because the contract has expired).
14. ROLANDO E. ESCARIO, et. Al; petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
CALIFORNIA MANUFACTURING CO. INC. AND DONNA LOUISE ADVERTISING AND MARKETING
ASSOCIATES INCORPORATED, respondents. G.R. No. 124055. June 8, 2000

Private respondents California Marketing Co., Inc. is a domestic corporation principally engaged in the
manufacturing of food products and distribution of such products to wholesalers and retailers. Private
respondent Donna Louis Advertising and Marketing Associates, Inc. is a duly registered promotional
firm.
Petitioners alleged that they were employed by CMC as merchandisers. They alleged that the hiring,
control and supervision of workers and the payment of the salaries were all covered by CMC through
its agent D.L Admark in order CMC to avoid its liability under the law. Petitioners filed a case against
CMC before the labor arbiter for regularization of their employment status.
During the pendency of the case, D.L Admark terminated the services of the petitioners. The
complaint was amended to include alleged dismissal. CMC filed a motion to implead as party-
defendant D.L Admark, the latter filed a motion to intervene. Both motions were granted. CMC denied
being petitioners employer while D.L Admark asserted it is the employer of the petitioners.
The labor arbiter found petitioners as employees of CMC as they were engaged in activities that are
necessary and desirable in the usual business/trade of CMC. On appeal, the NLRC set aside the labor
arbiters decision. But ordered the reinstatement of the petitioners in D.L Admark petitioners filed a
motion for consideration before the NLRC which was denied for lack of merit. Hence the petition.
Issue:
Whether or not D.L Admark is a labor-only contractor or as independent contractor.
Decision:
The Supreme Court denied the petition.
There is labor-only contracting when the contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a principa. In labor only contracting, the following
elements are present:
The person supplying workers to an employer does not have substantial capital or investment in the
form of tools, equipments, machineries, wok premise, among other tools.
The workers recruited and placed by such person performing activities which are directly related to the
principal business of the employer.
In contract, there is permissible job contracting when a principal agrees to put out or farm out with a
contractor or a subcontractor the performance/completion of a specific job, work or services within a
definite or predetermined period, regardless of whether such job/services is to be performed or
completed within or outside the premises of the principal. In this arrangement, the following
conditions must concur.
The contractor carries on a distinct and independent business and undertakes the contract work on his
account under the responsibility according to his own manual and methods, free from the control and
direction of his employer or principal in all matters connected with the performance of his employer
work except as to the results thereof; and
The contractor has substantial capital / investment which are necessary in the conduct of his business.
The court reiterated that it is not enough to show substantial capitalization on investment. In addition
the following factors need be considered
whether the contractor is carrying on an independent business
the nature and extent of the work
the skill required
the term and duration of the relationship
the right to assign the performance of specified pieces of work
the control and supervision of the workers
the power of the employer with respect to the hiring, firing and payment of workers of the contractor
the control of the premises

the duty to supply premises, tools, appliances, materials and labor
mode, manner and terms of payment
Based on the foregoing criteria, the court found that D.L Admark is a legitimate independent
contractor. Applying the four-fold test, D.L Admark was found to be the employer of the petitioners.
The Supreme Court affirmed the NLRC’s ruling.
15. ABOITIZ HAULERS, INC., Petitioner v. MONAORAI DIMAPATOI, CECILIA AGAWIN, EMMANUEL
GUERRERO, RAUL MAMATE, and GEMENIANO BIGAW, Respondents, G. R. No. 148619; September
19, 2006
AHI is the employer of the respondents. Grigio is engaged in labor contracting and not job-
contracting. The elements of labor-contracting exist in this case: 1. The contractor or subcontractor
does not have substantial capital or investment which relates to the job, work or service to be
performed; it was not established or proven by substantial evidence that Grigio has substantial capital
or investment; 2. 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; considering the
fact that the respondents are mere employees of AHI on 1992, prior to the contract made with Grigio,
and continued/ renewed its services until 1996 proves that the respondents’ task as “checkers” is
clearly necessary for the petitioner’s business of forwarding and distributing of cargoes; or 3. the
contractor does not exercise the right to control over the performance of the work of the contractual
employee; on the contract, all duties and obligations of the respondents are stipulated in it. This
clearly indicates that these matters, which consist of the means and methods by which the work is to
be accomplished, were not within the absolute control of Grigio. By stipulating these matters in a
contract, Grigio is constrained to follow these provisions and would no longer be able to exercise the
freedom to alter these work shifts and schedules at its own convenience. Such being the case, Grigio
cannot be considered as an independent job contractor.
16. GSIS vs. NLRC
Facts:
Tomas Lanting, doing business under the name and style of Lanting Security and Watchman Agency
(LSWA) entered into a Security Service Contract to provide security guards to the properties of the
Government Service Insurance System (GSIS) at the contract rate of P3,000.00 per guard per month.
During the effectivity of the contract, LSWA requested the GSIS for an upward adjustment of the
contract rate in view of Section 7 of Wage Order No. 1 and Section 3 of Wage Order No. 2, which were
issued by the Regional Tripartite Wages and Productivity Board-NCR pursuant to Republic Act No.
6727, otherwise known as the Wage Rationalization Act.
Acting on the request of LSWA, the GSIS, through its Board of Trustees and under Board Resolution
No. 207, dated May 24, 1991, approved the upward adjustments of the contract price from P3,000.00
to P3,716.07 per guard, per month effective November 1, 1990 to January 7, 1991, and P4,200.00
effective January 8, 1991 to May 31, 1991.
On March 15, 1993, GSIS terminated the Security Service Contract with LSWA. All the complainants,
except Virgilio Soriano, were absorbed by the incoming security agency.
On March 7, 1994, complainants filed separate complaints against LSWA for underpayment of wages
and non-payment of labor standard benefits from March 1991 to March 15, 1993. Virgilio Soriano also
complained of illegal dismissal.
LSWA alleged that complainants were estopped from claiming that they were underpaid because they
were informed that the pay and benefits given to them were based on the contract rate of P103.00 per
eight hours of work or about P3,100.00 per month.
On August 9, 1994, LSWA filed a Third-Party Complaint against GSIS for underpayment of
complainants' wages.

GSIS alleged that the Third-Party Complaint states no cause of action against it; that LSWA obligated
itself in the Security Service Contract to be solely liable for the enforcement of and compliance with all
existing labor laws, rules and regulations; that the GSIS Board of Trustees approved the upward
adjustment on a month-to-month basis, at P4,200 per guard per month, effective January 8, 1991 to
May 31, 1991, under Board Resolution No. 207 dated May 24, 1991, which was incorporated in the
Security Service Contract; that GSIS fully paid the services of the security guards as agreed upon in
the Security Service Contract.
On August 27, 1996, Labor Arbiter Renato Bugarin rendered a Decision in favor of complainants.
The Labor Arbiter held LSWA and GSIS jointly and severally liable for the payment of complainants'
money claims, pursuant to Articles 106 and 107 of the Labor Code.
LSWA appealed to the NLRC. The NLRC held the GSIS solely liable for payment of complainants'
money claims.
On November 6, 2000, the GSIS filed a Petition for Certiorari with the CA arguing that the NLRC
gravely abused its discretion in holding GSIS solely liable for complainants' money claims.
While finding that the GSIS complied with its obligations under Wage Order Nos. 1 and 2 by
incorporating the mandated increase in the Security Service Contract, the CA held the GSIS jointly
and severally liable with LSWA for complainants' money claims pursuant to Articles 106 and 107 of the
Labor Code.
The GSIS avers that it cannot twice be held liable for complainants' salary differentials since it
fully paid complainants' salaries by incorporating in the Security Service Contract the salary rate
increases mandated by Wage Order Nos. 1 and 2; otherwise, it would be unjust enrichment on the
part of complainants and/or LSWA at its expense. It submits that Articles 106 and 107 of the Labor
Code were not contemplated by its framers to cover principals or clients of service contractors who
had already paid for the wages of the contractor or subcontractor.
In its Comment, LSWA maintains that the GSIS is jointly and severally liable with LSWA
because Articles 106 and 107 of the Labor Code provide so and these provisions were intended to
ensure that employees are paid the wages due them in case of violation of the Labor Code of either
the contractor or the principal; that the GSIS cannot claim that holding it jointly and severally liable
with LSWA would result in grave injustice since the law did not leave it without recourse as the GSIS
has the right of reimbursement from its co-debtor under Article 1217 of the Civil Code.
In their Comment, complainants argue that the GSIS is jointly and severally liable with LSWA
for complainants' money claims since LSWA actually paid only the sum of P3,100.00 a month, even
though the GSIS incorporated in the Security Service Contract the mandated wage increases in Wage
Order Nos. 1 and 2; that although the Security Service Contract provided that there shall be
employer-employer relationship between LSWA and/or its security guards and the GSIS, Article 106 of
the Labor Code establishes an employer-employee relationship between the employer and the job
contractor's employees for a limited purpose, that is, in order to ensure that the latter get paid the
wages due them.
Issue: Whether or not GSIS is jointly and severally liable with LSWA.
Held:
Articles 106 and 107 of the Labor Code provide:
ART. 106. Contractor or subcontractor.– Whenever an employer enters into 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 wage 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
ART. 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.
(Emphasis supplied.)
In this case, the GSIS cannot evade liability by claiming that it had fully paid complainants'
salaries by incorporating in the Security Service Contract the salary rate increases.
In Rosewood Processing, Inc. v. National Labor Relations Commission, the Court explained the
rationale for the joint and several liability of the employer, thus:
The joint and several liability of the employer or principal was enacted to ensure compliance with the
provisions of the Code, principally those on statutory minimum wage. The contractor or subcontractor
is made liable by virtue of his or her status as a direct employer, and the principal as the indirect
employer of the contractor’s employees. This liability facilitates, if not guarantees, payment of the
workers’ compensation, thus, giving the workers ample protection as mandated by the 1987
Constitution. This is not unduly burdensome to the employer. Should the indirect employer be
constrained to pay the workers, it can recover whatever amount it had paid in accordance with the
terms of the service contract between itself and the contractor.
Thus, the Court does not agree with the GSIS's claim that a double burden would be imposed
upon the latter because it would be paying twice for complainants' services. Such fears are unfounded.
Under Article 1217 of the Civil Code, if the GSIS should pay the money claims of complainants, it has
the right to recover from LSWA whatever amount it has paid in accordance with the terms of the
service contract between the LSWA and the GSIS.
Joint and solidary liability is simply meant to assure aggrieved workers of immediate and
sufficient payment of what is due them. This is in line with the policy of the State to protect and
alleviate the plight of the working class.
Petition is denied, CA’s decision are affirmed with modification that the joint and solidary liability of
LSWA and the GSIS to pay complainants' salary differentials shall be without prejudice to the GSIS's
right of reimbursement from LSWA.
17. Republic of the Philippines/SSc/SSS vs. Asiapro Cooperative
Facts:
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-

members are of two categories, to wit: (1) regular member, who is entitled to all the rights and
privileges of membership; and (2) associate member, who has no right to vote and be voted upon and
shall be entitled only to such rights and privileges provided in its by-laws. Its primary objectives are
to provide savings and credit facilities and to develop other livelihood services for its owners-
members. In the discharge of the aforesaid primary objectives, respondent cooperative entered into
several Service Contracts with Stanfilco - a division of DOLE Philippines, Inc. and a company based in
Bukidnon. The owners-members do not receive compensation or wages from the respondent
cooperative. Instead, they receive a share in the service surplus which the respondent cooperative
earns from different areas of trade it engages in, such as the income derived from the said Service
Contracts with Stanfilco. The owners-members get their income from the service surplus generated
by the quality and amount of services they rendered, which is determined by the Board of Directors of
the respondent cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the
respondent cooperative, who were assigned to Stanfilco requested the services of the latter to register
them with petitioner SSS as self-employed and to remit their contributions as such. Also, to comply
with Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS
contributions of the said owners-members were equal to the share of both the employer and the
employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division,
Atty. Eddie A. Jara, sent a letter to the respondent cooperative, addressed to its Chief Executive
Officer (CEO) and General Manager Leo G. Parma, informing the latter that based on the Service
Contracts it executed with Stanfilco, respondent cooperative is actually a manpower contractor
supplying employees to Stanfilco and for that reason, it is an employer of its owners-members
working with Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an
employer and make the corresponding report and remittance of premium contributions in accordance
with the Social Security Law of 1997. On 9 October 2002, respondent cooperative, through its
counsel, sent a reply to petitioner SSS’s letter asserting that it is not an employer because its owners-
members are the cooperative itself; hence, it cannot be its own employer. Again, on 21 October
2002, petitioner SSS sent a letter to respondent cooperative ordering the latter to register as an
employer and report its owners-members as employees for compulsory coverage with the petitioner
SSS. Respondent cooperative continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition before petitioner SSC against the
respondent cooperative and Stanfilco praying that the respondent cooperative or, in the alternative,
Stanfilco be directed to register as an employer and to report respondent cooperative’s owners-
members as covered employees under the compulsory coverage of SSS and to remit the necessary
contributions in accordance with the Social Security Law of 1997. The same was docketed as SSC
Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging that
no employer-employee relationship exists between it and its owners-members, thus, petitioner SSC
has no jurisdiction over the respondent cooperative. Stanfilco, on the other hand, filed an Answer
with Cross-claim against the respondent cooperative.
Issues:
Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner
SSS against the respondent cooperative.
There is an employer-employee relationship between [respondent cooperative] and its [owners-

members].
Held:
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section
1, Rule III of the 1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to coverage,
benefits, contributions and penalties thereon or any other matter related thereto, shall be cognizable
by the Commission, x x x.
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to
coverage, entitlement of benefits, collection and settlement of contributions and penalties thereon, or
any other matter related thereto, shall be cognizable by the Commission after the SSS through its
President, Manager or Officer-in-charge of the Department/Branch/Representative Office concerned
had first taken action thereon in writing.

It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the
SSS is well within the exclusive domain of the petitioner SSC. It is important to note, though, that the
mandatory coverage under the SSS Law is premised on the existence of an employer-employee
relationship except in cases of compulsory coverage of the self-employed.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the
respondent cooperative and Stanfilco alleges that the owners-members of the respondent cooperative
are subject to the compulsory coverage of the SSS because they are employees of the respondent
cooperative. Consequently, the respondent cooperative being the employer of its owners-members
must register as employer and report its owners-members as covered members of the SSS and remit
the necessary premium contributions in accordance with the Social Security Law of 1997. Accordingly,
based on the aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case
clearly falls within its jurisdiction. As previously pointed out by this Court, an employee-employer
relationship actually exists between the respondent cooperative and its owners-members. The four
elements in the four-fold test for the existence of an employment relationship have been complied
with. The respondent cooperative must not be allowed to deny its employment relationship with its
owners-members by invoking the questionable Service Contracts provision, when in actuality, it does
exist. The existence of an employer-employee relationship cannot be negated by expressly
repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The
employment status of a person is defined and prescribed by law and not by what the parties say it
should be.
The question involved here is whether an employer-employee relationship can exist between the
cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City,
Inc. will show that it actually recognized that an owner-member of a cooperative can be its own
employee.
It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions
as they want, and their agreement would have the force of law between them. However, the agreed
terms and conditions must not be contrary to law, morals, customs, public policy or public order. The
Service Contract provision in question must be struck down for being contrary to law and public policy
since it is apparently being used by the respondent cooperative merely to circumvent the compulsory
coverage of its employees, who are also its owners-members, by the Social Security Law.
It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the
Cooperative Development Authority. It has its Board of Directors, which directs and supervises its
business; meaning, its Board of Directors is the one in charge in the conduct and management of its
affairs. With that, a cooperative can be likened to a corporation with a personality separate and
distinct from its owners-members. Consequently, an owner-member of a cooperative can be an
employee of the latter and an employer-employee relationship can exist between them.
In the present case, it is not disputed that the respondent cooperative had registered itself with the
Cooperative Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460.
In its by-laws, its Board of Directors directs, controls, and supervises the business and manages the
property of the respondent cooperative. Clearly then, the management of the affairs of the
respondent cooperative is vested in its Board of Directors and not in its owners-members as a whole.
Therefore, it is completely logical that the respondent cooperative, as a juridical person represented
by its Board of Directors, can enter into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship between the respondent
cooperative and its owners-member, we conclude that the petitioner SSC has jurisdiction over the
petition-complaint filed before it by the petitioner SSS.
18. Jaguar Security and Investigation Agency vs. Sales
Facts:

Petitioner Jaguar Security and Investigation Agency ("Jaguar") is a private corporation engaged in the
business of providing security services to its clients, one of whom is Delta Milling Industries, Inc.
("Delta").
Private respondents Rodolfo Sales, Melvin Tamayo, Dionisio Caranyagan, Jesus Silva, Jr., Jaime Moron
and Daneth Fetalvero were hired as security guards by Jaguar. They were assigned at the premises of
Delta in Libis, Quezon City. Caranyagan and Tamayo were terminated by Jaguar on May 26, 1998 and
August 21, 1998, respectively. Allegedly their dismissals were arbitrary and illegal. Sales, Moron,
Fetalvero and Silva remained with Jaguar. All the guard-employees, claim for monetary benefits such
as underpayment, overtime pay, rest day and holiday premium pay, underpaid 13th month pay, night
shift differential, five days service and incentive leave pay. In addition to these money claims,
Caranyagan and Tamayo argue that they were entitled to separation pay and back wages, for the time
they were illegally dismissed until finality of the decision. Furthermore, all respondents claim for moral
and exemplary damages.
On September 18, 1998, respondent security guards instituted the instant labor case before the labor
arbiter.
On May 25, 1999, the labor arbiter rendered a decision in favor of private respondents Sales, et al.,
the dispositive portion of which provides:
"WHEREFORE, judgment is hereby rendered dismissing the charges of illegal dismissal on the part of
the complainants MELVIN R. TAMAYO and DIONISIO C. CARANYAGAN for lack of merit but ordering
respondents JAGUAR SECURITY AND INVESTIGATION AGENCY and DELTA MILLING INDUSTRIES,
INC., to jointly and severally pay all the six complainants, namely: RODOLFO A. SALES, MELVIN R.
TAMAYO, JAIME MORON and DANETH FETALVERO the following money claims for their services
rendered from April 24, 1995 to April 24, 1998:
a) wage differentials
b) overtime pay differentials (4 hours a day)
c) rest day pay
d) holiday pay
e) holiday premium pay
f) 13th month pay differentials
g) five days service incentive leave pay per year subject to the exception earlier cited.
The Research and Information Unit of this Commission is hereby directed to compute and quantify the
above awards and submit a report thereon within 15 days from receipt of this decision.
For purposes of any appeal, the appeal bond is tentatively set at P100,000.00.
All other claims are DISMISSED for lack of merit.
SO ORDERED."
On July 1, 1999, petitioner Jaguar filed a partial appeal questioning the failure of public respondent
NLRC to resolve its cross-claim against Delta as the party ultimately liable for payment of the
monetary award to the security guards.
In its Resolution dated September 19, 2000, the NLRC dismissed the appeal, holding that it was not
the proper forum to raise the issue. It went on to say that Jaguar, being the direct employer of the
security guards, is the one principally liable to the employees. Thus, it directed petitioner to file a
separate civil action for recovery of the amount before the regular court having jurisdiction over the
subject matter, for the purpose of proving the liability of Delta.
Jaguar sought reconsideration of the dismissal, but the Commission denied the same in its Resolution
dated November 9, 2001.
Petitioner filed a petition for certiorari with the CA, which, in the herein assailed Decision dated
October 21, 2002 and Resolution dated February 13, 2004, dismissed the petition for lack of merit.

Issue: Whether or not petitioner may claim reimbursement from Delta Milling through a cross-claim
filed with the labor court?
Held:
The Court ruled in the negative.
The jurisdiction of labor courts extends only to cases where an employer-employee relationship exists.
In the present case, there exists no employer-employee relationship between petitioner and Delta
Milling. In its cross-claim, petitioner is not seeking any relief under the Labor Code but merely
reimbursement of the monetary benefits claims awarded and to be paid to the guard employees.
There is no labor dispute involved in the cross-claim against Delta Milling. Rather, the cross-claim
involves a civil dispute between petitioner and Delta Milling. Petitioner's cross-claim is within the realm
of civil law, and jurisdiction over it belongs to the regular courts.
Moreover, the liability of Delta Milling to reimburse petitioner will only arise if and when petitioner
actually pays its employees the adjudged liabilities. Payment, which means not only the delivery of
money but also the performance, in any other manner, of the obligation, is the operative fact which
will entitle either of the solidary debtors to seek reimbursement for the share which corresponds to
each of the debtors. In this case, it appears that petitioner has yet to pay the guard employees.
The petition is DENIED.
19. Almeda vs. Asahi Glass
Facts:
The present Petition arose from a complaint for illegal dismissal with claims for moral and exemplary
damages and attorney's fees filed by petitioners against respondent and San Sebastian Allied
Services, Inc. (SSASI).
In their Complaint filed before the Labor Arbiter, petitioners alleged that respondent (a domestic
corporation engaged in the business of glass manufacturing) and SSASI (a labor-only contractor)
entered into a service contract on 5 March 2002 whereby the latter undertook to provide the former
with the necessary manpower for its operations. Pursuant to such a contract, SSASI employed
petitioners Randy Almeda, Edwin Audencial, Nolie Ramirez and Ernesto Calicagan as glass cutters, and
petitioner Reynaldo Calicagan as Quality Controller, all assigned to work for respondent. Petitioners
worked for respondent for periods ranging from three to 11 years. On 1 December 2002, respondent
terminated its service contract with SSASI, which in turn, terminated the employment of petitioners
on the same date. Believing that SSASI was a labor-only contractor, and having continuously worked
as glass cutters and quality controllers for the respondent — functions which are directly related to its
main line of business as glass manufacturer — for three to 11 years, petitioners asserted that they
should be considered regular employees of the respondent; and that their dismissal from employment
without the benefit of due process of law was unlawful. In support of their complaint, petitioners
submitted a copy of their work schedule to show that they were under the direct control of the
respondent which dictated the time and manner of performing their jobs.
Respondent, on the other hand, refuted petitioners' allegations that they were its regular employees.
Instead, respondent claimed that petitioners were employees of SSASI and were merely assigned by
SSASI to work for respondent to perform intermittent services pursuant to an Accreditation
Agreement, dated 5 March 2002, the validity of which was never assailed by the petitioners.
Respondent contested petitioners' contention that they were performing functions that were directly
related to respondent's main business since petitioners were simply tasked to do mirror cutting, an
activity occasionally performed upon a customer's order. Respondent likewise denied exercising
control over petitioners and asserted that such was wielded by SSASI. Finally, respondent maintained
that SSASI was engaged in legitimate job contracting and was licensed by the Department of Labor
and Employment (DOLE) to engage in such activity as shown in its Certificate of Registration. 6
Respondent presented before the Labor Arbiter copies of the Opinion dated 18 February 2003 of DOLE

Secretary Patricia Sto. Tomas authorizing respondent to contract out certain activities not necessary
or desirable to the business of the company; and the Opinion dated 10 July 2003 of DOLE Bureau of
Labor Relations (DOLE-BLR) Director Hans Leo Cacdac allowing respondent to contract out even
services that were not directly related to its main line of business.
SSASI, for its part, claimed that it was a duly registered independent contractor as evidenced by the
Certificate of Registration issued by the DOLE on 3 January 2003. SSASI averred that it was the one
who hired petitioners and assigned them to work for respondent on occasions that the latter's work
force could not meet the demands of its customers. Eventually, however, respondent ceased to give
job orders to SSASI, constraining the latter to terminate petitioners' employment.
On 18 February 2004, the Labor Arbiter promulgated his Decision finding that respondent submitted
overwhelming documentary evidence to refute the bare allegations of the petitioners and accordingly
dismissing the complaint for lack of merit. However, he also ordered the payment of separation
benefits to petitioners.
On appeal, the NLRC reversed the Decision of the Labor Arbiter, giving more evidentiary weight to
petitioners' testimonies. It appeared to the NLRC that SSASI was engaged in labor-only contracting
since it did not have substantial capital and investment in the form of tools, equipment and
machineries. The petitioners were recruited and assigned by SSASI to respondent as glass cutters,
positions which were directly related to respondent's principal business of glass manufacturing. In light
of the factual circumstances of the case, the NLRC declared that petitioners were employees of
respondent and not of SSASI. Hence, the NLRC ruled in its Decision dated 29 June 2005:
WHEREFORE, the decision appealed from is hereby VACATED and SET ASIDE. [Herein respondent] and
[SSASI] are hereby ordered to: (1) reinstate the [herein petitioners] to their former position as glass
cutters; and (2) pay [petitioners'] full backwages from December 2, 2002 up to the date of their
actual reinstatement. The liability of [respondent] and [SSASI] for [petitioners'] backwages is further
declared to be joint and several.
Only respondent moved for the reconsideration of the foregoing NLRC Decision. Respondent prayed
that the NLRC vacate its previous finding that SSASI was a labor-only contractor and that it was guilty
of the illegal dismissal of petitioners. In a Resolution dated 24 November 2005, the NLRC denied the
Motion for Reconsideration of respondent for lack of compelling justification to modify, alter or reverse
its earlier Decision.
This prompted respondent to elevate its case to the Court of Appeals by the filing of a Petition for
Certiorari with Application for the Issuance of Temporary Restraining Order (TRO), alleging that the
NLRC abused its discretion in ignoring the established facts and legal principles fully substantiated by
the documentary evidence on record and legal opinions of labor officials, and in giving more credence
to the empty allegations advanced by petitioners.
To prevent the execution of the Decision dated 25 June 2005 and Resolution dated 24 November 2005
of the NLRC, respondent included in its Petition a prayer for the issuance of a TRO, which it reiterated
in a motion filed on 29 August 2006. Acting on respondent's motion, the Court of Appeals issued a
TRO on 11 September 2006 enjoining the NLRC from enforcing its 25 June 2005 Decision and 24
November 2005 Resolution.
On 10 November 2006, the Court of Appeals rendered a Decision granting respondent's Petition for
Certiorari and reversing the NLRC Decision dated 25 June 2005.
The Court of Appeals denied petitioners' Motion for Reconsideration in a Resolution dated 27 April
2007.
Hence this petition.
Issues:
(1) Whether or not petitioners were employees of respondent?
(2) If they were, Whether or not they were illegally dismissed?

Held:
PETITIONERS WERE EMPLOYEES OF RESPONDENT
In the instant case, petitioners worked at the respondent's premises, and nowhere else. Petitioners
followed the work schedule prepared by respondent. They were required to observe all rules and
regulations of the respondent pertaining to, among other things, the quality of job performance,
regularity of job output, and the manner and method of accomplishing the jobs. Obscurity hounds
respondent's argument that even if petitioners were working under its roof, it was still SSASI which
exercised control over the manner in which they accomplished their work. There was no showing that
it was SSASI who established petitioners' working procedure and methods, or who supervised
petitioners in their work, or who evaluated the same. Other than being the one who hired petitioners,
there was absolute lack of evidence that SSASI exercised control over them or their work.
PETITIONERS ILLEGALLY DISMISSED
With regards to the second issue, the court ruled in affirmative.
Article 280 of the Labor Code, as amended, 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.
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 Court expounded on the afore-quoted provision, thus —
The primary standard, therefore, 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 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 considered regular, but only with respect to such activity and while such activity
exists.
In the instant Petition, the Court has already declared that petitioners' employment as quality
controllers and glass cutters are directly related to the usual business or trade of respondent as a
glass manufacturer. Respondent would have wanted this Court to believe that petitioners' employment
was dependent on the increased market demand. However, bearing in mind that petitioners have
worked for respondent for not less than three years and as much as 11 years, which respondent did
not refute, then petitioners' continued employment clearly demonstrates its continuing necessity and
indispensability to the business of respondent, raising their employment to regular status. Thus,
having gained regular status, petitioners were entitled to security of tenure and could only be
dismissed on just or authorized causes and after they had been accorded due process.
As petitioners' employer, respondent has the burden of proving that the dismissal was for a cause
allowed under the law, and that they were afforded procedural due process. However, respondent

failed to discharge this burden with substantial evidence as it noticeably narrowed its defense to the
denial of any employer-employee relationship between it and petitioners.
The sole reason given for the dismissal of petitioners by SSASI was the termination of its service
contract with respondent. But since SSASI was a labor-only contractor, and petitioners were to be
deemed the employees of respondent, then the said reason would not constitute a just or authorized
cause for petitioners' dismissal. It would then appear that petitioners were summarily dismissed based
on the afore-cited reason, without compliance with the procedural due process for notice and hearing.
Herein petitioners, having been unjustly dismissed from work, are entitled to reinstatement without
loss of seniority rights and other privileges and to full back wages, inclusive of allowances, and to
other benefits or their monetary equivalents computed from the time compensation was withheld up
to the time of actual reinstatement. Their earnings elsewhere during the periods of their illegal
dismissal shall not be deducted therefrom.
The petition is GRANTED.
20. Sasan, Sr. vs. NLRC and EPCIB
FACTS:
Respondent Equitable-PCI Bank (E-PCIBank), a banking entity duly organized and existing under and
by virtue of Philippine laws, entered into a Contract for Services with HI, a domestic corporation
primarily engaged in the business of providing janitorial and messengerial services. Pursuant to their
contract, HI shall hire and assign workers to E-PCIBank to perform janitorial/messengerial and
maintenance services. The contract was impliedly renewed year after year.
Petitioners Rolando Sasan, Sr., Leonilo Dayday, Modesto Aguirre, Alejandro Ardimer, Eleuterio Sacil,
Wilfredo Juegos, Petronilo Carcedo, and Cesar Peciencia were among those employed and assigned to
E-PCIBank at its branch along Gorordo Avenue, Lahug, Cebu City, as well as to its other branches in
the Visayas.
Petitioners filed with the Arbitration Branch of the NLRC in Cebu City separate complaints against E-
PCIBank and HI for illegal dismissal, with claims for separation pay, service incentive leave pay,
allowances, damages, attorney’s fees and costs.
Subsequently, petitioners amended their complaints to include a claim for 13th month-pay.
Several conciliation hearings were scheduled by Labor Arbiter Gutierrez but the parties still failed to
arrive at a mutually beneficial settlement; hence, Labor Arbiter Gutierrez ordered that they submit
their respective position papers.
Contention of the petitioner:
They had become regular employees of E-PCIBank with respect to the activities for which they were
employed, having continuously rendered janitorial and messengerial services to the bank for more
than one year; that E-PCIBank had direct control and supervision over the means and methods by
which they were to perform their jobs; and that their dismissal by HI was null and void because the
latter had no power to do so since they had become regular employees of E-PCIBank.
Contention of the respondent:
E-PCIBank averred that it entered into a Contract for Services with HI, an independent job contractor
which hired and assigned petitioners to the bank to perform janitorial and messengerial services
thereat.
It was HI that paid petitioners’ wages, monitored petitioners’ daily time records (DTR) and uniforms,
and exercised direct control and supervision over the petitioners and that therefore HI has every right
to terminate their services legally. E-PCIBank could not be held liable for whatever misdeed HI had
committed against its employees.

HI, on the other hand, asserted that it was an independent job contractor engaged in the business of
providing janitorial and related services to business establishments, and E-PCIBank was one of its
clients. Petitioners were its employees, part of its pool of janitors/messengers assigned to E-PCIBank.
The Contract for Services between HI and E-PCIBank expired on 15 July 2000. E-PCIBank no longer
renewed said contract with HI and, instead, bidded out its janitorial requirements to two other job
contractors, Able Services and Puritan. HI designated petitioners to new work assignments, but the
latter refused to comply with the same. Petitioners were not dismissed by HI, whether actually or
constructively, thus, petitioners’ complaints before the NLRC were without basis.
Labor Arbiter Gutierrez rendered a Decision finding that HI was not a legitimate job contractor on the
ground that it did not possess the required substantial capital or investment to actually perform the
job, work, or service under its own account and responsibility as required under the Labor Code. HI is
therefore a labor-only contractor and the real employer of petitioners is E-PCIBank which is held liable
to petitioners.
Aggrieved by the decision of Labor Arbiter Gutierrez, respondents E-PCIBank and HI appealed the
same to the NLRC, it promulgated its Decision on modifying the ruling of Labor Arbiter Gutierrez.
The charge of illegal dismissal was prematurely filed. The record shows that barely eight (8) days
from 15 July 2001 The NLRC took into consideration the documentary evidence presented by HI for
the first time on appeal and, on the basis thereof, declared HI as a highly capitalized venture with
sufficient capitalization, which cannot be considered engaged in “labor-only contracting.”
The NLRC deleted Labor Arbiter Gutierrez’s award of backwages and separation pay, but affirmed his
award for 13th month pay and attorney’s fees equivalent to ten percent (10%) of the 13th month pay,
to the petitioners.
Petitioners’ Motion for Reconsideration was denied by the NLRC in its Resolution dated 1 July 2003.
The Court of Appeals affirmed the findings of the NLRC that HI was a legitimate job contractor and
that it did not illegally dismiss petitioners:
ISSUE: Whether HI is a labor-only contactor and E-PCIBank should be deemed petitioners’ principal
employer; and whether petitioners were illegally dismissed from their employment.
HELD:
Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to

put out or farm out to a contractor or subcontractor the performance or completion of a specific job,
work or service within a definite or predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the premises of the principal. A person is
considered engaged in legitimate job contracting or subcontracting if the following conditions concur:
(a) The 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;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the
contractual employees entitlement to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and social and welfare benefits.
In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or

subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal. In labor-only contracting, the following elements are present:

(a) The contractor or subcontractor does not have substantial capital or investment to actually
perform the job, work or service under its own account and responsibility; and
(b) 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.
In distinguishing between permissible job contracting and prohibited labor-only contracting, we

elucidated it is not enough to show substantial capitalization or investment in the form of tools,
equipment, etc. Other facts that may be considered include the following: whether or not the
contractor is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance of specified
pieces of work; the control and supervision of the work to another; the employer’s power with respect
to the hiring, firing and payment of the contractor’s workers; the control of the premises; the duty to
supply premises, tools, appliances, materials and labor; and the mode and manner or terms of
payment. Simply put, the totality of the facts and the surrounding circumstances of the case are to be
considered. Each case must be determined by its own facts and all the features of the relationship are
to be considered.
In the case at bar, we find substantial evidence to support the finding of the NLRC, affirmed by the
Court of Appeals, that HI is a legitimate job contractor.
We further rule that petitioners were not illegally dismissed by HI. Upon the termination of the
Contract of Service between HI and E-PCIBank, petitioners cannot insist to continue to work for the
latter.
21. Purefoods Corp. vs. NLRC
The antecedents follow:
Lolita Neri (Neri) originally filed a claim for nonpayment of additional wage increase, regularization,
nonpayment of service incentive leave, underpayment of 13th month pay, and nonpayment of
premium pay for holiday and holiday pay against Purefoods Corporation (Purefoods).
However, Neri was dismissed from her work as a Deli-Attendant. Subsequently, eleven (11) other
complainants joined forces with Neri and together they filed an amended complaint, with Neri charging
Purefoods with illegal dismissal. All the other complainants, save for Neri, were still working for
Purefoods at the time of the filing of the amended complaint.
Labor Arbiter Arthur L. Amansec declared Neri and the complainants as Purefoods' regular employees;
and Neri as having been illegally dismissed and entitled to reinstatement with payment of backwages.
Purefoods filed a partial appeal, praying that the claims of complainants be dismissed for lack of merit,
or in the alternative, the case be remanded for formal hearing on the merits and to implead D.L.
Admark as a party-respondent. The NLRC granted the appeal and remanded the case for further
hearings on the factual issues.
The case was remanded to Labor Arbiter Felipe P. Pati, who, after finding that Neri is not an employee
of petitioner, but rather of D.L. Admark, an independent labor contractor, dismissed the complaint. A
memorandum on appeal was nominally filed by all the complainants; however, it was only Neri who
verified the same.The NLRC ruled in complainants' favor and reversed and set aside the labor arbiter's
decision.
According to the NLRC, the pieces of evidence on record established the employer-employee
relationship between Purefoods and Neri and the other complainants. It thus ordered Neri's
reinstatement and the payment of backwages or of separation pay if reinstatement is not possible.
Purefoods moved for the reconsideration of the decision but its motion was denied for lack of merit.
The Court of Appeals, relying on the case of Escario v. NLRC, held that D.L. Admark is a legitimate
independent contractor. However, it ruled that complainants are regular employees of Purefoods.
Citing Art. 280 of the Labor Code, the appellate court found that complainants were engaged to
perform activities which are usually necessary or desirable in the usual business or trade of Purefoods,

and that they were under the control and supervision of Purefoods' supervisors, and not of D.L.
Admark's. It noted that in the Promotions Agreements between D.L. Admark and Purefoods, there was
no mention of the list of D.L. Admark employees who will handle particular promotions for petitioner,
and that complainants' periods of employment are not fully covered by the Promotions Agreements.
Purefoods sought reconsideration2 of the decision but its motion was denied.
Argument of petitioner:
Purefoods argues that the affidavits it attached to its motion for reconsideration before the Court of
Appeals are not evidence presented for the first time, but rather just corroboration, clarification,
and/or explanation of what it had advanced in the proceedings below. It likewise claims that the other
complainants in this case are not entitled to the avails of the suit because they failed to verify the
position paper and the memorandum on appeal.
Purefoods maintains that Neri and the complainants are not employees of Purefoods, but of D.L.
Admark, an independent job contractor. Thus, it cannot be held liable for illegal dismissal.
Finally, it claims that Article 280 of the Labor Code is not applicable in a trilateral relationship involving
a principal, an independent job contractor, and the latter's employees.
ISSUE: WHETHER OR NOT THERE EXIST AND EMPLOYEE-EMPLYER RELATIONSHIP.
HELD:
The Court agrees with Purefoods' argument that Art. 280 of the Labor Code finds no application in a
trilateral relationship involving a principal, an independent job contractor, and the latter's employees.
Indeed, the Court has ruled that said provision 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; it does not apply where the existence
of an employment relationship is in dispute.
It is therefore erroneous on the part of the Court of Appeals to rely on Art. 280 in determining
whether an employer-employee relationship exists between respondent Neri and Purefoods.
Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to

put out or farm out with the contractor or subcontractor the performance or completion of a specific
job, work or service within a definite or predetermined period regardless of whether such job, work or
service is to be performed or completed within or outside the premises of the principal. In this
arrangement, the following conditions must be met: (a) the contractor carries on a distinct and
independent business and undertakes the contract work on his 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 his work except as to the results thereof;
(b) the contractor has substantial capital or investment; and (c) the agreement between the principal
and contractor or subcontractor assures the contractual employees' entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-organization, security of
tenure, and social welfare benefits.
Moreover, applying the four-fold test used in determining employer-employee relationship, the Court
found that: the employees therein were selected and hired by D.L. Admark; D.L. Admark paid their
salaries, as evidenced by the payroll prepared by D.L. Admark and sample contribution forms; D.L.
Admark had the power of dismissal as it admitted that it was the one who terminated the employment
of the employees; and finally, it was D.L. Admark who exercised control and supervision over the
employees.
Furthermore, it is evident from the Promotions Agreements entered into by Purefoods that D.L.
Admark is a legitimate labor contractor.

The agreements confirm that D.L. Admark is an independent contractor which Purefoods had engaged
to supply general promotion services, and not mere manpower services, to it. The provisions expressly
permit D.L. Admark to handle and implement Purefoods' project, and categorically state that there
shall be no employer-employee relationship between D.L. Admark's employees and Purefoods. While it
may be true that complainants were required to submit regular reports and were introduced as
Purefoods merchandisers, these are not enough to establish Purefoods' control over them. Even if the
report requirements are somehow considered as control measures, they were imposed only to ensure
the effectiveness of the promotion services rendered by D.L. Admark. 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. Indeed, it would be foolhardy for any company to completely
give the reins and totally ignore the operations it has contracted out.
Significantly, the pieces of evidence submitted by Neri do not support her claim of having been a
regular employee of Purefoods. Even the identification cards presented by Neri are neither binding on
Purefoods nor even indicative of her claimed employee status of Purefoods, issued as they were by the
supermarkets concerned and not by Purefoods itself. Moreover, the check voucher issued by Purefoods
marked "IN PAYMENT OF DL ADMARK DELI ATTENDANTS 12.00 PESOS ADJUSTMENT JAN 30, 1991 TO
JUNE 22, 1992," signed and received by Neri, is proof that Purefoods never considered Neri as its own
employee, but rather as one of D.L. Admark's deli attendants.
We also note that Neri herself admitted in her Sinumpaang Salaysay and in the hearings that she
applied with D.L. Admark and that she worked for Purefoods through D.L. Admark. Neri was aware
from the start that D.L. Admark was her employer and not Purefoods. She had kept her contract with
D.L. Admark, and inquired about her employment status with D.L. Admark. It was D.L. Admark, as
her employer, which had the final say in, and which actually effected, her termination.
Neri is not an employee of Purefoods, but that of D.L. Admark. In the absence of employer-employee
relations between Neri and Purefoods, the complaint for illegal dismissal and other monetary claims
must fail.
22. Maranaw Hotels and Resort vs. Court of Appeals
Facts:
Private respondent Oabel was initially hired by petitioner as an extra beverage attendant on April 24,
1995. This lasted until February 7, 1997.1 Respondent worked in Century Park Hotel, an
establishment owned by the petitioner. On September 16, 1996,the petitioner contracted with Manila
Resource Development Corporation. Subsequently, private respondent Oabel was transferred to
MANRED, with the latter deporting itself as her employer. MANRED has intervened at all stages of
these proceedings and has consistently claimed to be the employer of private respondent Oabel.
After which private respondent Oabel was dismissed from employment and the same filed a case of
illegal dismissal against the petitioner. Labor Arbiter dismissed private respondent's complaint
considering that complainant job with the respondent hotel was on a per function basis or on a "need
basis", complainant could not even be considered as casual employee or provisional employee but
project employee which does not ripened into regular employee.
NLRC reversed the ruling of the Labor Arbiter and held that: (1) MANRED is a labor-only contractor,
and (2) private respondent was illegally dismissed. Ruling that MANRED had insufficient capitalization
and was not sufficiently equipped to provide specific jobs and operations of the former is directly
related to and usually necessary or desirable in the business of the petitioner.The CA affirmed lower
court's decision. Hence this petition.
Issue: Whether or Not MANRED was a labor-only contractor thereby making the petitioner liable in the
case herein for illegal dismissal
Ruling:

SC affirmed the decision of CA; on account of the failure of the petitioner to append the board
resolution authorizing the counsel for petitioner to file the petition before the Court of Appeals.
Furthermore, it was dismissed on the ground of non-compliance with the rule on certification against
forum shopping taking into account that the aforesaid certification was subscribed and verified by the
Personnel Director of petitioner corporation without attaching thereto his authority to do so for and in
behalf of petitioner corporation per board resolution or special power of attorney executed by the
latter.
As decided in the case of BPI Leasing Corp. v. Court of Appeals where this Court emphasized that the
lawyer acting for the corporation must be specifically authorized to sign pleadings for the corporation.
Specific authorization, the Court held, could only come in the form of a board resolution issued by the
Board of Directors that specifically authorizes the counsel to institute the petition and execute the
certification, to make his actions binding on his principal, i.e., the corporation.
However, even if this grave procedural infirmity is set aside, the petition must still fail. It appears
further that private respondent has already rendered more than one year of service to the petitioner,
for the period 1995-1998, for which she must already be considered a regular employee, pursuant to
Article 280 of the Labor Code:
Art. 280. Regular and casual employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed
to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

Provided, That any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists.
23. Coca-Cola Bottler’s Philippines vs. Agito
FACTS:
Petitioner (Coke) is a domestic corporation engaged in manufacturing, bottling and distributing soft
drink beverages and other allied products. Respondents were salesmen assigned at Coke Lagro Sales
Office for years but were not regularized. Coke averred that respondents were employees of
Interserve who were tasked to perform contracted services in accordance with the provisions of the
Contract of Services executed between Coke and Interserve on 23 March 2002. Said Contract
constituted legitimate job contracting, given that the latter was a bona fide independent contractor
with substantial capital or investment in the form of tools, equipment, and machinery necessary in the
conduct of its business.
To prove the status of Interserve as an independent contractor, petitioner presented the following
pieces of evidence: (1) the Articles of Incorporation of Interserve; (2) the Certificate of Registration of
Interserve with the Bureau of Internal Revenue; (3) the Income Tax Return, with Audited Financial
Statements, of Interserve for 2001; and (4) the Certificate of Registration of Interserve as an
independent job contractor, issued by the Department of Labor and Employment (DOLE).
As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter
which hired them, paid their wages, and supervised their work, as proven by: (1) respondents’
Personal Data Files in the records of Interserve; (2) respondents’ Contract of Temporary Employment
with Interserve; and (3) the payroll records of Interserve.
ISSUES:
1. Whether or not Inteserve is a labor-only contractor;

2. Whether or not an employer-employee relationship exists between petitioner Coca-Cola Bottlers
Phils. Inc. and respondents.
RULING:
At the outset, the Court clarifies that although Interserve has an authorized capital stock amounting to
P2,000,000.00, only P625,000.00 thereof was paid up as of 31 December 2001. The Court does not
set an absolute figure for what it considers substantial capital for an independent job contractor, but it
measures the same against the type of work which the contractor is obligated to perform for the
principal. However, this is rendered impossible in this case since the Contract between petitioner and
Interserve does not even specify the work or the project that needs to be performed or completed by
the latter’s employees, and uses the dubious phrase “tasks and activities that are considered
contractible under existing laws and regulations.” Even in its pleadings, petitioner carefully sidesteps
identifying or describing the exact nature of the services that Interserve was obligated to render to
petitioner. The importance of identifying with particularity the work or task which Interserve was
supposed to accomplish for petitioner becomes even more evident, considering that the Articles of
Incorporation of Interserve states that its primary purpose is to operate, conduct, and maintain the
business of janitorial and allied services. But respondents were hired as salesmen and leadman for
petitioner. The Court cannot, under such ambiguous circumstances, make a reasonable determination
if Interserve had substantial capital or investment to undertake the job it was contracting with
petitioner.
[In] Vinoya v. NLRC, we clarified that it was not enough to show substantial capitalization or
investment in the form of tools, equipment, machinery and work premises, etc., to be considered an
independent contractor. In fact, jurisprudential holdings were to the effect that in determining the
existence of an independent contractor relationship, several factors may be considered, such as, but
not necessarily confined to, whether the contractor was carrying on an independent business; the
nature and extent of the work; the skill required; the term and duration of the relationship; the right
to assign the performance of specified pieces of work; the control and supervision of the workers; the
power of the employer with respect to the hiring, firing and payment of the workers of the contractor;
the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and
the mode, manner and terms of payment.
In sum, Interserve did not have substantial capital or investment in the form of tools, equipment,
machineries, and work premises; and respondents, its supposed employees, performed work which
was directly related to the principal business of petitioner. It is, thus, evident that Interserve falls
under the definition of a “labor-only” contractor, under Article 106 of the Labor Code; as well as
Section 5(i) of the Rules Implementing Articles 106-109 of the Labor Code, as amended. It is also
apparent that Interserve is a labor-only contractor under Section 5(ii) of the Rules Implementing
Articles 106-109 of the Labor Code, as amended, since it did not exercise the right to control the
performance of the work of respondents.
The lack of control of Interserve over the respondents can be gleaned from the Contract of Services
between Interserve (as the CONTRACTOR) and petitioner (as the CLIENT). The Contract of Services
between Interserve and petitioner did not identify the work needed to be performed and the final
result required to be accomplished. Instead, the Contract specified the type of workers Interserve
must provide petitioner (“Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD”) and their
qualifications (technical/vocational course graduates, physically fit, of good moral character, and have
not been convicted of any crime). The Contract also states that, “to carry out the undertakings
specified in the immediately preceding paragraph, the CONTRACTOR shall employ the necessary
personnel,” thus, acknowledging that Interserve did not yet have in its employ the personnel needed
by petitioner and would still pick out such personnel based on the criteria provided by petitioner. In
other words, Interserve did not obligate itself to perform an identifiable job, work, or service for
petitioner, but merely bound itself to provide the latter with specific types of employees. These
contractual provisions strongly indicated that Interserve was merely a recruiting and manpower
agency providing petitioner with workers performing tasks directly related to the latter’s principal
business.

The certification issued by the DOLE stating that Interserve is an independent job contractor does not
sway this Court to take it at face value, since the primary purpose stated in the Articles of
Incorporation of Interserve is misleading. According to its Articles of Incorporation, the principal
business of Interserve is to provide janitorial and allied services. The delivery and distribution of Coca-
Cola products, the work for which respondents were employed and assigned to petitioner, were in no
way allied to janitorial services. While the DOLE may have found that the capital and/or investments in
tools and equipment of Interserve were sufficient for an independent contractor for janitorial services,
this does not mean that such capital and/or investments were likewise sufficient to maintain an
independent contracting business for the delivery and distribution of Coca-Cola products.
With the finding that Interserve was engaged in prohibited labor-only contracting, petitioner shall be
deemed the true employer of respondents. As regular employees of petitioner, respondents cannot be
dismissed except for just or authorized causes, none of which were alleged or proven to exist in this
case, the only defense of petitioner against the charge of illegal dismissal being that respondents were
not its employees. Records also failed to show that petitioner afforded respondents the twin
requirements of procedural due process, i.e., notice and hearing, prior to their dismissal. Respondents
were not served notices informing them of the particular acts for which their dismissal was sought.
Nor were they required to give their side regarding the charges made against them. Certainly, the
respondents’ dismissal was not carried out in accordance with law and, therefore, illegal.
24. South Davao Development Company vs. Gamo
Facts:
Petitioner South Davao Development Company, operator of a coconut and mango farm in San Isidro,
Davao Oriental and Inawayan/Baracatan, Davao del Sur, hired on August 1963 petitioner respondent
Sergio L. Gamo (Gamo) as a foreman. Sometime in 1987, petitioner appointed Gamo as a copra
maker contractor. All of the abovenamed respondents (copra workers - all employees in petitioner’s
coconut and mango farm) were later transferred (except Eleonor Cosep who has a different case) by
petitioner to Gamo as the latter’s copraceros. From 1987 to 1999, Gamo and petitioner entered into a
profit-sharing agreement wherein 70% of the net proceeds of the sale of copra went to petitioner and
30% to Gamo. The copra workers were paid by Gamo from his 30% share.
On 2 October 1999, petitioner proposed a new payment scheme to Gamo. Gamo and petitioner failed
to agree on a payment scheme, thus, petitioner did not renew the "contract" of Gamo.
Respondents filed a complaint for illegal dismissal against petitioner. They alleged that sometime in
December 1999, petitioner verbally terminated them en masse. The labor arbiter dismissed the
complaint.
Respondents filed a petition for certiorari under Rule 65 with the Court of Appeals. The Court of
Appeals ruled that there existed an employer-employee relationship.
Issue:
Whether or not Gamo is an independent contractor.
Ruling:
Gamo is not an independent contractor. Employer-employee relationship exists.
To establish the existence of an independent contractor, we apply the following conditions: first, 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
to the result thereof; and second, the contractor has substantial capital or investments in the form of
tools, equipment, machineries, work premises and other materials which are necessary in the conduct
of his business. The Implementing Rules and Regulation of the Labor Code defines investment—as
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 investment must be sufficient to carry out the job at hand.
In the case at bar, Gamo and the copra workers did not exercise independent judgment in the
performance of their tasks. The tools used by Gamo and his copra workers like the karit, bolo,
pangbunot, panglugit and pangtapok are not sufficient to enable them to complete the job. Reliance
on these primitive tools is not enough. In fact, the accomplishment of their task required more
expensive machineries and equipment, like the trucks to haul the harvests and the drying facility,
which petitioner corporation owns.
In order to determine the existence of an employer-employee relationship, the Court has frequently
applied the four-fold test.
From the time they were hired by petitioner corporation up to the time that they were reassigned to
work under Gamo’s supervision, their status as petitioner corporation’s employees did not cease.
Likewise, payment of their wages was merely coursed through Gamo. As to the most determinative
test―the power of control, it is sufficient that the power to control the manner of doing the work
exists, it does not require the actual exercise of such power. In this case, it was in the exercise of its
power of control when petitioner corporation transferred the copra workers from their previous
assignments to work as copraceros. It was also in the exercise of the same power that petitioner
corporation put Gamo in charge of the copra workers although under a different payment scheme.
Thus, it is clear that an employer-employee relationship has existed between petitioner corporation
and respondents since the beginning and such relationship did not cease despite their reassignments
and the change of payment scheme.
25. Jethro Intelligence and Security Group vs. Sec./DOLE
Facts:
Petitioner Jethro is a security service contractor with a security service contract agreement with co-
petitioner Yakult. On the basis of a complaint filed by respondent Garcia , one of the security guards
deployed by Jethro, for underpayment of wages, legal/special holiday pay, premium pay for rest day,
13th month pay, and night shift differential, the Department of Labor and Employment (DOLE)-
Regional Office No. IV conducted an inspection at Yakult's premises in Laguna in the course of which
several labor standards violations were noted, including keeping of payrolls and daily time records in
the main office, underpayment of wages, overtime pay and other benefits, and non-registration with
the DOLE as required under Department Order.
By order of the DOLE Regional Director, noting petitioners' failure to rectify the violations noted during
the above-stated inspection within the period given for the purpose, found them jointly and severally
liable to herein respondents for the aggregate amount of P809,210.16 representing their wage
differentials, regular holiday pay, special day premium pay, 13th month pay, overtime pay, service
incentive leave pay, night shift differential premium and rest day premium.
Jethro appealed to SOLE and having been denied by SOLE and CA, petitioner comes to SC under Rule
45.
Issue: Whether or not Jethro is liable.
Ruling:
In the case at bar, the Secretary of Labor correctly assumed jurisdiction over the case as it does not
come under the exception clause in Art. 128 (b) of the Labor Code. While petitioner Jethro appealed
the inspection results and there is a need to examine evidentiary matters to resolve the issues raised,
the payrolls presented by it were considered in the ordinary course of inspection. While the
employment records of the employees could not be expected to be found in Yakult's premises in
Calamba, as Jethro's offices are in Quezon City, the records show that Jethro was given ample
opportunity to present its payrolls and other pertinent documents during the hearings and to rectify
the violations noted during the ocular inspection. It, however, failed to do so, more particularly to

submit competent proof that it was giving its security guards the wages and benefits mandated by
law.
Jethro's failure to keep payrolls and daily time records in Yakult's premises was not the only labor
standard violation found to have been committed by it; it likewise failed to register as a service
contractor with the DOLE, pursuant to Department Order No. 18-02 and, as earlier stated, to pay the
wages and benefits in accordance with the rates prescribed by law.
WHEREFORE, the petition is DENIED.
26. Traveño vs. Bobongon Banana Growers Multi-purpose Cooperative
Facts:
By the account of petitioner Traveño and his 16 co-petitioners, in 1992, respondent Timog Agricultural
Corporation (TACOR) and respondent Diamond Farms, Inc. (DFI) hired them to work at a banana
plantation at Bobongon, Davao Del Norte which covered lands previously planted with rice and corn
but whose owners had agreed to convert into a banana plantation upon being convinced that TACOR
and DFI could provide the needed capital, expertise, and equipment. Petitioners helped prepare the
lands for the planting of banana suckers and eventually carried out the planting as well.
Petitioners asseverated that while they worked under the direct control of supervisors assigned by
TACOR and DFI, these companies used different schemes to make it appear that petitioners were
hired through independent contractors, including individuals, unregistered associations, and
cooperatives; that the successive changes in the names of their employers notwithstanding, they
continued to perform the same work under the direct control of TACOR and DFI supervisors; and that
under the last scheme adopted by these companies, the nominal individual contractors were required
to, as they did, join a cooperative and thus became members of respondent Bobongon Banana
Growers Multi-purpose Cooperative.(Cooperative)
Three separate complaints for illegal dismissal were filed by petitioners, individually and collectively,
with the NLRC against said respondents including respondent Dole Asia Philippines as it then
supposedly owned TACOR, 4 for unpaid salaries, overtime pay, 13th month pay, service incentive
leave pay, damages, and attorney's fees.
The Labor Arbiter, found respondent Cooperative guilty of illegal dismissal.
The NLRC sustained the Labor Arbiter's ruling that the employer of petitioners is the Cooperative. It
partially granted petitioners' appeal, however, by ordering the Cooperative to pay them their unpaid
wages, wage differentials, service incentive leave pay, and 13th month pay. It thus remanded the
case to the Labor Arbiter for computation of those awards.
By Resolution dated February 20, 2004, 12 the appellate court dismissed petitioners' petition for
certiorari on the ground that the accompanying verification and certification against forum shopping
was defective, it having been signed by only 19 of the 22 therein named petitioners. Petitioners posit
that the appellate court erred in dismissing their petition on a mere technicality.
Issue: Whether DFI (with which TACOR had been merged) and DPI should be held solidarily liable with
the Cooperative for petitioners' illegal dismissal and money claims.
Ruling:
The matter of whether the Cooperative is an independent contractor or a labor-only contractor may
not be used to predicate a ruling in this case. Job contracting or subcontracting refers to an
arrangement whereby a principal agrees to farm out with a contractor or subcontractor the
performance of a specific job, work or service within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or completed within or outside the premises of
the principal. The present case does not involve such an arrangement.

WHEREFORE, the petition is DISMISSED.
DFI did not farm out to the Cooperative the performance of a specific job, work, or service. Instead, it
entered into a Banana Production and Purchase Agreement 25 (Contract) with the Cooperative, under
which the Cooperative would handle and fund the production of bananas and operation of the
plantation covering lands owned by its members in consideration of DFI's commitment to provide
financial and technical assistance as needed, including the supply of information and equipment in
growing, packing, and shipping bananas. The Cooperative would hire its own workers and pay their
wages and benefits, and sell exclusively to DFI all export quality bananas produced that meet the
specifications agreed upon.
To the Court, the Contract between the Cooperative and DFI, far from being a job contracting
arrangement, is in essence a business partnership that partakes of the nature of a joint venture. The
rules on job contracting are, therefore, inapposite. The Court may not alter the intention of the
contracting parties as gleaned from their stipulations without violating the autonomy of contracts
principle under Article 1306 of the Civil Code which gives the contracting parties the utmost liberality
and freedom to establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good custom, public order or public policy.
Petitioners' claim of employment relationship with the Cooperative's herein co-respondents must be
assessed on the basis of four standards, viz.: (a) the manner of their selection and engagement; (b)
the mode of payment of their wages; (c) the presence or absence of the power of dismissal; and (d)
the presence or absence of control over their conduct. Most determinative among these factors is the
so-called "control test".
There is nothing in the records which indicates the presence of any of the foregoing elements of an
employer-employee relationship.
The absence of the first requisite, which refers to selection and engagement, is shown by DFI's total
lack of knowledge on who actually were engaged by the Cooperative to work in the banana plantation.
This is borne out by the Contract between the Cooperative and DFI, under which the Cooperative was
to hire its own workers. As TACOR had been merged with DFI, and DPI is merely alleged to have
previously owned TACOR, this applies to them as well. Petitioners failed to prove the contrary. No
employment contract whatsoever was submitted to substantiate how petitioners were hired and by
whom.
On the second requisite, which refers to the payment of wages, it was likewise the Cooperative that
paid the same. As reflected earlier, under the Contract, the Cooperative was to handle and fund the
production of bananas and operation of the plantation. The Cooperative was also to be responsible for
the proper conduct, safety, benefits, and general welfare of its members and workers in the
plantation.
As to the third requisite, which refers to the power of dismissal, and the fourth requisite, which refers
to the power of control, both were retained by the Cooperative. Again, the Contract stipulated that the
Cooperative was to be responsible for the proper conduct and general welfare of its members and
workers in the plantation.
The crucial element of control refers to the authority of the employer to control the employee not only
with regard to the result of the work to be done, but also to the means and methods by which the
work is to be accomplished. 30 While it suffices that the power of control exists, albeit not actually
exercised, there must be some evidence of such power. In the present case, petitioners did not
present any.
There being no employer-employee relationship between petitioners and the Cooperative's co-
respondents, the latter are not solidarily liable with the Cooperative for petitioners' illegal dismissal
and money claims.
27. Aliviado vs. Procter and Gamble Philippines

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, 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.
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as
habitual absenteeism, dishonesty or changing day-off without prior notice.
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. 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.
In December 1991, petitioners filed a complaint10 against P&G for regularization, service incentive
leave pay and other benefits with damages. The complaint was later amended to include the matter of
their subsequent dismissal.
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.
Petitioners filed an appeal to NLRC which affirmed the decision of the labor Arbiter and also denied
their motion for reconsideration.
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.
Issues:
(1) Whether P&G is the employer of petitioner
(2) Whether petitioners were illegally dismissed
(3) Whether petitioners are entitled for payment of actual, moral and exemplary damages as well as
litigation costs and attorney’s fees.
Arguments:
Petitioner
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:
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.

Ruling:
The petition has merit.
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. – 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
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. 18-02,24 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 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.
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.29 Promm-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 regular, not merely contractual or project employees.
Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor.

We find that it is a legitimate independent contractor 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.
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: 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 latter’s merchandising concerns only. Under the circumstances prevailing in the instant case, we
cannot consider SAPS as an independent contractor.
WHEREFORE, the petition is GRANTED.
WORKER’S PREFERENCE
DBP vs. NLRC, 242 SCRA 59 [1995]
A preference applies only to claims which do not attach to specific properties. A lien creates a charge
on a particular property. The right of first preference as regards unpaid wages recognized by Article
110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a
preference of credit in their favor, a preference in application. It is a method adopted to determine
and specify the order in which credits should be paid in the final distribution of the proceeds of the
insolvent’s assets. It is a right to a first preference in the discharge of the funds of the judgment
debtor.
Furthermore, workers’ claims for unpaid wages and monetary benefits cannot be paid outside of a
bankruptcy or judicial liquidation proceedings against the employer. It is settled that the application of
Article 110 of the Labor Code is contingent upon the institution of those proceedings, during which all
creditors are convened, their claims ascertained and inventoried, and their preferences determined.
Assured thereby is an orderly determination of the preference given to creditors’ claims; and
preserved in harmony is the legal scheme of classification, concurrence and preference of credits in
the Civil Code, the Insolvency Law, and the Labor Code.
BATONG BUHAY GOLD MINES, INC., petitioner, vs. HONORABLE DIONISIO DELA SERNA IN HIS
CAPACITY AS THE UNDERSECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, ELSIE
ROSALINDA TY, ANTONIO MENDELEBAR, MA. CONCEPCION Q. REYES, AND THE OTHER
COMPLAINANTS IN CASE NO. NCR-LSED-CI-2047-87; MFT CORPORATION AND SALTER HOLDINGS
PTY. LTD., respondents. [G.R. No. 86963. August 6, 1999]
Private respondents filed a complaint against petitioner for under payment of wages and non payment
of benefits. In pursuant to the exercise of the Regional Director’s visitorial and enforcement power, it
adopted the recommendation of the LSWOs and issued an order directing the respondent to pay the
complainants the sum of P4,818,746.40 representing their unpaid 13th month pay for 1985 and 1986,
wage and ECOLA differentials under wage order Nos. 2 and 5, unpaid salaries from 16 March 1986 to
present and vacation/sick leave benefits for 1984, 1985 and 1986. When the respondent failed to post
a cash/surety bond, and upon motion for the issuance of a writ of execution by the complainants, the
Regional Director, issued a writ of execution and ordered the sheriff to comply with the same. The
Special Sheriff proceeded to execute the appealed Order and seized three (3) units of Peterbuilt trucks

and then sold the same by public auction. Various materials and motor vehicles were also seized on
different dates and sold at public auction by said sheriff.
The Supreme Court ruled that the public auction held was null and void since on the properties of
petitioner involved was constituted a mortgage between petitioner and the Development Bank of the
Philippines. The aforementioned documents were executed between the petitioner and Development
Bank of the Philippines (DBP) even prior to the filing of the complaint of petitioner’s employees.
Private respondents contended that even if subject properties were mortgaged to DBP (now under
Asset Privatization Trust), Article 110 of the Labor Code, as amended by RA 6715, applies just the
same. According to them, the said provision of law grants preference to money claims of workers
over and above all credits of the petitioner. This contention is untenable.
In the case of DBP vs. NLRC, the Supreme Court held that the workers preference regarding wages
and other monetary claims under Article 110 of the Labor Code, as amended, contemplates
bankruptcy or liquidation proceedings of the employer’s business. What is more, it does not disregard
the preferential lien of mortgagees considered as preferred credits under the provisions of the New
Civil Code on the classification, concurrence and preference of credits.
Barayoga vs. Asset Privatization Trust, G.R. No. 160073, October 24, 2005
The Facts
Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar Development

Corporation (BISUDECO), a sugar plantation mill located in Himaao, Pili, Camarines Sur. On December
8, 1986, [Respondent] Asset Privatization Trust (APT), a public trust was created under Proclamation
No. 50, as amended, mandated to take title to and possession of, conserve, provisionally manage and
dispose of non-performing assets of the Philippine government identified for privatization or
disposition. Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino issued
Administrative Order No. 14 identifying certain assets of government institutions that were to be
transferred to the National Government. Among the assets transferred was the financial claim of the
Philippine National Bank against BISUDECO in the form of a secured loan.
Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine Sugar
Corporation (Philsucor) to take over the management of the sugar plantation and milling operations
until August 31, 1992. Meanwhile, because of the continued failure of BISUDECO to pay its
outstanding loan with PNB, its mortgaged properties were foreclosed and subsequently sold in a public
auction to APT, as the sole bidder. On April 2, 1991, APT was issued a Sheriff’s Certificate of Sale.
On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal, illegal
deduction and underpayment of wages and other labor standard benefits plus damages.
“In the meantime, on July 15, 1992, APT’s Board of Trustees issued a resolution accepting the offer of
Bicol-Agro-Industrial Cooperative (BAPCI) to buy the sugar plantation and mill. Again, on September
23, 1992, the board passed another resolution authorizing the payment of separation benefits to
BISUDECO’s employees in the event of the company’s privatization. Then, on October 30, 1992,
BAPCI purchased the foreclosed assets of BISUDECO from APT and took over its sugar milling
operations under the trade name Peñafrancia Sugar Mill (Pensumil).
In the Union’s Position Paper, they alleged that when Philsucor initially took over the operations of the
company, it retained BISUDECO’s existing personnel under the same terms and conditions of
employment. Nonetheless, at the start of the season sometime in May 1991, Philsucor started
recalling workers back to work, to the exception of the union members. Management told them that
they will be re-hired only if they resign from the union. Just the same, thereafter, the company
started to employ the services of outsiders under the ‘pakyaw’ system.
After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T. Aurellano disposed that
respondent APT pay complainants of the mandated employment benefits provided for under Section

27 of Proclamation No. 50 which benefits had been earlier extended to other employees similarly
situated. Both the union and APT elevated the labor arbiter’s decision before NLRC.
The NLRC affirmed APT’s liability for petitioners’ money claims. While no employer-employee
relationship existed between members of the petitioner union and APT, at the time of the employees’
illegal dismissal, the assets of BISUDECO had been transferred to the national government through
APT. Moreover, the NLRC held that APT should have treated petitioners’ claim as a lien on the assets
of BISUDECO.
Finding their computation to be in order, the NLRC awarded to petitioners their money claims for
underpayment, labor-standard benefits, and ECOLA. It also awarded them their back wages,
computed at the prevailing minimum wage, for the period May 1, 1991 (the date of their illegal
dismissal) until October 30, 1992 (the sale of BISUDECO assets to the BAPCI). On the other hand,
the NLRC ruled that petitioners were not entitled to separation pay because of the huge business
losses incurred by BISUDECO, which had resulted in its bankruptcy.
Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the Rules of Court.
The CA ruled that APT should not be held liable for petitioners’ claims for unfair labor practice, illegal
dismissal, illegal deduction and underpayment of wages, as well as other labor-standard benefits plus
damages. As found by the NLRC, APT was not the employer of petitioners, but was impleaded only for
possessing BISUDECO’s mortgaged properties as trustee and, later, as the highest bidder in the
foreclosure sale of those assets, the CA concluded that petitioners’ claims could not be enforced
against APT as mortgagee of the foreclosed properties of BISUDECO.
Issue: The main issue raised is whether Respondent APT is liable for petitioners’ monetary claims.
The Court’s Ruling
The Petition has no merit
In the present case, petitioner-union’s members who were not recalled to work by Philsucor in May
1991 seek to hold APT liable for their monetary claims and allegedly illegal dismissal. Significantly,
prior to the actual sale of BISUDECO assets to BAPCI on October 30, 1992, the APT board of trustees
had approved a Resolution on September 23, 1992. The Resolution authorized the payment of
separation benefits to the employees of the corporation in the event of its privatization. Not included
in the Resolution, though, were petitioner-union’s members who had not been recalled to work in May
1991.
The question now before the Court is whether APT is liable to pay petitioners’ monetary claims,
including back wages from May 1, 1991, to October 30, 1992 (the date of the sale of BISUDECO
assets to BAPCI).
We rule in the negative. The duties and liabilities of BISUDECO, including its monetary liabilities to its
employees, were not all automatically assumed by APT as purchaser of the foreclosed properties at
the auction sale. Any assumption of liability must be specifically and categorically agreed upon. In
Sundowner Development Corp. v. Drilon,[13] the Court ruled that, unless expressly assumed, labor
contracts like collective bargaining agreements are not enforceable against the transferee of an
enterprise. Labor contracts are in personam and thus binding only between the parties.
No succession of employment rights and obligations can be said to have taken place between the two.
Between the employees of BISUDECO and APT, there is no privity of contract that would make the
latter a substitute employer that should be burdened with the obligations of the corporation. To rule
otherwise would result in unduly imposing upon APT an unwarranted assumption of accounts not
contemplated in Proclamation No. 50 or in the Deed of Transfer between the national government and
PNB.
Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or
substantially all, the properties of the seller or transferor is not obliged to absorb the latter’s
employees.[14] The most that the purchasing company may do, for reasons of public policy and

social justice, is to give preference of reemployment to the selling company’s qualified separated
employees, who in its judgment are necessary to the continued operation of the business
establishment.
The liabilities of the previous owner to its employees are not enforceable against the buyer or
transferee, unless (1) the latter unequivocally assumes them; or (2) the sale or transfer was made in
bad faith. Thus, APT cannot be held responsible for the monetary claims of petitioners who had been
dismissed even before it actually took over BISUDECO’s assets.
Moreover, it should be remembered that APT merely became a transferee of BISUDECO’s assets for
purposes of conservation because of its lien on those assets -- a lien it assumed as assignee of the
loan secured by the corporation from PNB. Subsequently, APT, as the highest bidder in the auction
sale, acquired ownership of the foreclosed properties. Relevant to this transfer of assets is Article 110
of the Labor Code, as amended by Republic Act No. 6715, which reads:
“Article 110. Worker’s preference in case of bankruptcy. – In the event of bankruptcy or

liquidation of the employer’s business, his workers shall enjoy first preference as regards their unpaid
wages and other monetary claims shall be paid in full before the claims of the Government and other
creditors may be paid.”
Thus, the right of employees to be paid benefits due them from the properties of their employer
cannot have any preference over the latter’s mortgage credit. In other words, being a mortgage
credit, APT’s lien on BISUDECO’s mortgaged assets is a special preferred lien that must be satisfied
first before the claims of the workers.
Furthermore, workers’ claims for unpaid wages and monetary benefits cannot be paid outside of a
bankruptcy or judicial liquidation proceedings against the employer.[26] It is settled that the
application of Article 110 of the Labor Code is contingent upon the institution of those proceedings,
during which all creditors are convened, their claims ascertained and inventoried, and their
preferences determined.[27] Assured thereby is an orderly determination of the preference given to
creditors’ claims; and preserved in harmony is the legal scheme of classification, concurrence and
preference of credits in the Civil Code, the Insolvency Law, and the Labor Code. As a mere transferee
of the mortgage credit and later as the purchaser in a public auction of BISUDECO’s foreclosed
properties, APT cannot be held liable for petitioners’ claims against BISUDECO: illegal dismissal,
unpaid back wages and other monetary benefits.
WHEREFORE, the Petition is hereby DENIED,
PHILIPPINE AIRLINES, INCORPORATED, FRANCISCO X. YNGENTE IV, PAG-ASA C. RAMOS, JESUS

FEDERICO V. VIRAY, RICARDO D. ABUYUAN, PETITIONERS, VS. BERNARDIN J. ZAMORA,
RESPONDENT. [G. R. No. 166996, February 06, 2007]
Zamora filed a labor Complaint against PAL for illegal dismissal, unfair labor practice, non-payment of
wages, damages and attorney’s fees. During the pendency of the case, PAL, was undergoing
rehabilitation per SEC’s order appointing a permanent rehabilitation receiver for petitioner. CA, on
appeal, awarded the reinstatement of Zamora together with the payment of wages and other benefits.
Supreme Court however, reversed said decision. It ruled that the law is clear that, upon the creation
of a management committee or the appointment of a rehabilitation receiver, ALL claims for actions
“shall be suspended accordingly.” No exception in favor of labor claims is mentioned in the law. Since
the law makes no distinction or exemptions, neither should this Court. This is to enable the
management committee or rehabilitation receiver to effectively exercise its/his powers free from any
judicial or extra-judicial interference that might unduly hinder or prevent the “rescue” of the debtor
company. To allow such other action to continue would only add to the burden of the management
committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending
claims against the corporation instead of being directed toward its restructuring and rehabilitation.
The suspension of action for claims against a corporation under rehabilitation receiver or management
committee embraces all phases of the suit, be it before the trial court or any tribunal or before this
Court. Furthermore, the actions that are suspended cover ALL claims against a distressed corporation

whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any
other claims of a pecuniary nature.
As to the case at bar, allowing such actions to proceed would only increase the work-load of the
management committee or the rehabilitation receiver, whose precious time and effort would be
dissipated and wasted in defending suits against the corporation, instead of being channeled toward
restructuring and rehabilitation. Moreover, the appellate court’s amended directive that “the monetary
claims of petitioner Zamora must be presented to the PAL Rehabilitation Receiver, subject to the rules
on preference of credits,” the same is erroneous for there has been no declaration of bankruptcy or
judicial liquidation. Thus, the rules on preference of credits do not apply in the case of rehabilitation.
Phil. Airlines vs. Phil. Airlines Employees Association, 525 SCRA 29 [2007]
FACTS:
This case arose from a labor complaint filed against PAL by PALEA and Mary Anne el Rosario, Director
of Personnel of PAL for unfair labor practice for non-payment of 13th month pay of employees not
regularized as of 30th of April 1988 as allegedly stated in the CBA.
CBA was entered into between PAL and PALEA to cover the period of 1986-1989. The pertinent
provisions of which state:
Section 4 – 13th Month Pay (Mid-year Bonus)

A 13th month pay, equivalent to one month's current basic pay, consistent with the existing practice
shall be paid in advance in May.
Section 5 – Christmas Bonus

The equivalent of one month's basic pay as of November 30, shall be paid in December as a Christmas
bonus. Payment may be staggered in two (2) stages. It is distinctly understood that nothing herein
contained shall be construed to mean that the Company may not at its sole discretion give an
additional amount or increase the Christmas bonus.8
Prior to the payment of the 13th month pay, PAL released an implementing guideline on April 22,
1988. Which reads:
1) Eligibility
a) Ground employees in the general payroll who are regular as of April 30, 1988;
b) Other ground employees in the general payroll, not falling within category a) above shall receive
their 13th Month Pay on or before December 24, 1988;
2) Amount
a) For category a) above, one month basic salary as of April 30, 1988;
b) Employees covered under 1 b) above shall be paid not less than 1/12 of their basic salary for every
month of service within the calendar year.
3) Payment Date: May 9, 1988 for category 1 a) above.10
PALEA assailed the implementation of said guideline on the view that all employees of PAL, whether
regular or non-regular, should be paid their 13th month pay.
PAL countered by saying that rank and file employees who were regularized after April 30, 1988 were
not enlisted to the 13th month pay as they were already given the Christmas bonus in December 1988
per PD 851.
PALEA disagreed and filed the complaint arguing that the cut-off period for regularization should not
be used as the parameter for granting the 13th month pay considering that the law does not
distinguish the status of employment but the law covers all employees.
In its position paper PAL countered that those rank and file employees who were not regularized by
April 30 of a particular year are, in principle, not denied their 13th month pay, considering they
receive said mandatory bonus in the form of the Christmas bonus.

Labor Arbiter dismissed the complaint as the giving of the particular bonus was deemed only an
additional practice made in the past, such being the case, it violated no agreement or existing practice
or committee unfair labor practice.
On appeal, NLRC and the CA ruled in favor of PALEA.
ISSUE:
Whether or not a court or a quasi-judicial agency can amen or alter a CBA by expanding its coverage
to non-regular employees who are not covered by the bargaining unit.
HELD:
The court, instead of addressing the issue took cognizance of the fact that PAL, as of that time, was
still undergoing rehabilitation per the mandate of the SEC.
The pertinent law concerning the suspension for claims against corporations is PD 902-A, as amended.
Particularly, Section 5(d) and 6(c) which reads:
SECTION 5. In addition to the regulatory adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to
hear and decide cases involving:
xxxx
d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of
payments in cases where the corporation, partnership or association possesses property to cover all
its debts but foresees the impossibility of meeting them when they respectively fall due or in cases
where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is
under the [management of a rehabilitation receiver or] management committee created pursuant to
this Decree.
SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the
following:
xxxx
c) To appoint one or more receivers of the property, real or personal, which is the subject of the
action pending before the Commission in accordance with the pertinent provisions of the Rules of
Court in such other cases whenever necessary in order to preserve the rights of the parties-litigants
and/or protect the interest of the investing public and creditors: x x x Provided, finally, That upon
appointment of a management committee, the rehabilitation receiver, board or body, pursuant to this
Decree, all actions for claims against corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be suspended accordingly.
(Emphasis supplied.)
The term “claims” refers to debts or demands of a pecuniary nature. It means the assertion of a right
to have money paid.
In the instant case, if the Court does not find merit in the petition, PAL will be obliged to satisfy the
pecuniary claims of PALEA.
In a plethora of cases, the Court has upheld the suspension of proceedings involving claims against
PAL based on the SEC Order which appointed an Interim Rehabilitation Receiver for PAL.
In Rubberworld (Phils.), Inc. v NLRC, the Court posited that the rationale for the automatic suspension
therein set out would apply to the instant case where the employee’s claim was elevated on certiorari
before the Court. xxx the rendition of judgment while petitioner is under a state of receivership could
render a violence to the rationale for suspension of payments in Section 6(c) of P 902-A, if the
judgment would result in the granting of the private respondent’s claim to separation pay, thus
defeating the basic purpose behind Sec. 6 (c) which is to prevent dissipation of the distressed
company’s resources.

In PAL v Zamora, the court held that “Otherwise stated, no other action may be taken in, including the
rendition of judgment during the state of suspension – what are automatically stayed or suspended
are the proceedings of an action or suit and not just the payment of claims during the execution stage
after the case had become final and executor.
The suspension of action for claims against a corporation under rehabilitation receiver or management
committee embraces all phases of the suit, be it before the trial court or any tribunal or before this
Court. Furthermore, the actions that are suspended cover all claims against a distressed corporation
whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any
other claims of a pecuniary nature.
In actual fact, allowing such actions to proceed would only increase the work-load of the management
committee or the rehabilitation receiver, whose precious time and effort would be dissipated and
wasted in defending suits against the corporation, instead of being channeled toward restructuring and
rehabilitation.”
All told, this Court is constrained to suspend the progress, development and other proceedings in the
present petition.
Castillo vs. Uniwide Warehouse Club, G.R. No. 169725, April 30, 2010
FACTS:
This case stems from a complaint filed by Castillo against Uniwide and its President Jimmy Gow for
payment of Saturdays worked for the year 2001; holiday pay; separation pay; actual, moral and
exemplary damages; and attorney’s fees.
Two months after the filing of the complaint however, the respondents moved to dismiss said
complaint on the ground that it petitioned the SEC for suspension of payments and approval of its
rehabilitation plan. It appears that on June 29, 1999, the SEC had ruled favorably on the petition and
ordered that all claims, actions and proceedings against herein respondents pending before any court,
tribunal, board, office, body or commission be suspended, and that following the appointment of an
interim receiver, the suspension order had been extended to until February 7, 2000. On April 11,
2000, the SEC declared the Uniwide Group of Companies to be in a state of suspension of payments
and approved its rehabilitation plan.
Labor Arbiter and NLRC denied the motion of respondent. Respondent then filed a petition under Rule
65 with the Court of Appeals which found merit in the petition and reversed the resolutions of the
NLRC affirming the Labor Arbiter.
ISSUE: Whether or not the proceeding can be validly suspended.
HELD:
Petioner argues that suspension of the proceedings is not in order, because his claim against
respondent and the latter’s corresponding liability are yet to be determined.
Respondents countered by saying that the CA was correct since it was among those actions for claims
that are automatically suspended on the appointment of a management committee or receiver
according to Se. 6 of PD 902-A. Respondents advance the notion that while said Section 6 expressly
referred to suspension of pending claims, the clear and unmistakable intention of the law is to bar the
filing of any such claims in order to maintain parity of status among the different creditors of the
distressed corporation at least while the rehabilitation efforts are ongoing.
To begin with, corporate rehabilitation connotes the restoration of the debtor to a position of
successful operation and solvency, if it is shown that its continued operation is economically feasible
and its creditors can recover by way of the present value of payments projected in the rehabilitation
plan, more if the corporation continues as a going concern than if it is immediately liquidated. It

contemplates a continuance of corporate life and activities in an effort to restore and reinstate the
corporation to its former position of successful operation and solvency, the purpose being to enable
the company to gain a new lease on life and allow its creditors to be paid their claims out of its
earnings.
An essential function of corporate rehabilitation is the mechanism of suspension of all actions

and claims against the distressed corporation, which operates upon the due appointment of a
management committee or rehabilitation receiver. P.D. No. 902-A, as amended. Section 6(c) of the
law mandates that, upon appointment of a management committee, rehabilitation receiver, board, or
body, all actions for claims against corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board, or body shall be suspended.
In a plethora of cases, the Court has upheld the suspension of proceedings regaring claims
against distressed coprations pursuant to PD902-A. The actions that were suspended cover all claims
against a distressed corporation whether for damages founded on a breach of contract of carriage,
labor cases, collection suits or any other claims of a pecuniary nature. More importantly, the new rules
on corporate rehabilitation, as well as the interim rules, provide an all-encompassing definition of the
term and, thus, include all claims or demands of whatever nature or character against a debtor or its
property, whether for money or otherwise. There is no doubt that petitioner’s claim in this case,
arising as it does from his alleged illegal dismissal, is a claim covered by the suspension order issued
by the SEC, as it is one for pecuniary consideration.
Jurisprudence is settled that the suspension of proceedings referred to in the law uniformly
applies to “all actions for claims” filed against a corporation, partnership or association under
management or receivership, without distinction, except only those expenses incurred in the ordinary
course of business. In the oft-cited case of Rubberworld (Phils.) Inc. v. NLRC, the Court noted that
aside from the given exception, the law is clear and makes no distinction as to the claims that are
suspended once a management committee is created or a rehabilitation receiver is appointed. Since
the law makes no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos
distinguere debemos. Philippine Airlines, Inc. v. Zamora declares that the automatic suspension of an
action for claims against a corporation under a rehabilitation receiver or management committee
embraces all phases of the suit, that is, the entire proceedings of an action or suit and not just the
payment of claims.
It must be conceded that the date when the claim arose, or when the action was filed, has no
bearing at all in deciding whether the given action or claim is covered by the stay or suspension order.
What matters is that as long as the corporation is under a management committee or a rehabilitation
receiver, all actions for claims against it, whether for money or otherwise, must yield to the greater
imperative of corporate revival, excepting only, as already mentioned, claims for payment of
obligations incurred by the corporation in the ordinary course of business.
In the instant case, a Certification issued by the SEC and signed by its General Counsel states
that as of August 17, 2006, the petition of Uniwide Sales, Inc. for declaration of suspension of
payments and rehabilitations was still pending with it, and that the company was still under its
rehabilitation proceedings. Hence, since petitioner’s claim was one for wages accruing from the time
of dismissal, as well as for benefits and damages, the same should have been suspended pending the
rehabilitation proceedings. In other words, the Labor Arbiter should have abstained from resolving the
illegal dismissal case and, instead, directed petitioner to present his claim to the rehabilitation receiver
duly appointed by the SEC, inasmuch as the stay or suspension order was effective and it subsisted
from issuance until the dismissal of the petition for rehabilitation or the termination of the
rehabilitation proceedings. The Court of Appeals was thus correct in directing the suspension of the
proceedings.
ATTORNEY’S FEES AND APPEARANCE OF LAWYERS
BANK OF THE PHILIPPINE ISLANDS VS. NLRC, 171 SCRA 556
Facts:

Three cases here intertwined which were consolidated because they all involve the same employee-
employer relations of the Bank of the Philippine Islands and its personnel.
G.R. Nos. 69746-47
First Issue
In the course of their negotiations with the Bank of the Philippine Islands for a new collective
bargaining agreement to replace the one expiring on March 31, 1982, serious differences arose
between the Bank of the Philippine Islands Employees Union-Metro Manila and its mother federation,
the Associated Labor Unions. This prompted the former to manifest that it would henceforth negotiate
alone with BPI independently of ALU, which in turn, suspended all the elective officers of BPIEU-Metro
Manila led by its president, Carlito Reyes, who was replaced by Rolando Valdez as acting president. In
retaliation, Reyes and his followers, claiming to be the legal and sole representatives of BPIEU-Metro
Manila, formally disaffiliated from ALU on November 16, 1982.
As no agreement could be reached on a wide variety of economic issues, the dispute between BPI and
its employees was certified by the Minister of Labor for compulsory arbitration and docketed in the
National Labor Relations Commission as Certified Cases Nos. 0279 and 0281. These cases were later
consolidated with the Manifestation and Motion for Interpleader and to Consign Union Dues, which was
filed by BPI in view of the conflicting claims of the Reyes and Valdez groups for the said dues.
On March 22, 1983, the NLRC resolved the bargaining deadlock by fixing the wage increases and other
economic benefits and ordering them to be embodied in a new collective bargaining agreement to be
concluded by BPIEU-Metro Manila and ALU with BPI. It did not decide the intra-union dispute,
however, holding that this was under the original jurisdiction of the med-arbiter and the exclusive
appellate jurisdiction of the Bureau of Labor Relations.
Claiming to be the labor union referred to in the decision, the Reyes group filed a petition with the
Bureau of Labor Relations for direct certification on the ground of its disaffiliation from ALU. This
petition was denied in a decision dated June 13, 1983, where BLR Director Cresenciano Trajano held
that the disaffiliation was invalid because it was done beyond the freedom period.
Issue: The question precisely before the Court then was which as between the Reyes and Valdez
groups should be recognized as the legitimate representative of the employees in general to negotiate
with BPI NLRC had no jurisdiction to resolve that question.
More importantly, the issue has become moot and academic. In its decision dated June 13, 1985, the
Bureau of Labor Relations did hold that the disaffiliation of the Reyes group from ALU was invalid
because it was done beyond the freedom period that is within sixty days before the expiration of the
collective bargaining agreement on March 31, 1982. But that is all past and done now. That CBA was
replaced by another collective bargaining agreement concluded with BPI by the BPIEU-Metro Manila
after its disaffiliation valid this time because it was done within the freedom period. That agreement
expired on March 31, 1985. In fact, even the agreement concluded afterwards was itself to have
expired on March 31, 1988, or almost a year ago.
Second Issue
As a result of its merger with the Commercial Bank and Trust Company in 1981, the BPI found it
necessary to close the COMTRUST branch in Davao City and transfer it to General Santos City.
Pursuant to an earlier understanding, seven of the employees of the said branch who were absorbed
by BPI were transferred to the General Santos City branch. However, three of them, namely Glenna,
Ongkiko, Arturo Napales, and Gregorio Gito, refused to move. After efforts to persuade them failed,
BPI dismissed them. This triggered a strike by the Davao Chapter of the BPIEU-ALU which was
followed by sympathy strikes by other local chapters.
On October 19, 1983, the Minister of Labor sustained the transfer of the three employees by the BPI
and issued a return-to-work order. This was ignored by the striking workers, who continued to
question the transfer. Another return-to-work order was issued, this time by the NLRC, which was

obeyed by the strikers upon admission by the BPI of the three recalcitrant employees to their original
stations in Davao City. This was done pending the opening of the General Santos City branch.
Upon the inauguration of the said branch, BPI filed a motion to transfer the said employees thereto as
sanctioned earlier by the Minister of Labor. The situation was complicated when another employee,
Lennie Aninon who had earlier agreed to transfer, now insisted on remaining in the Davao City branch.
She too was included in the motion, which was granted by the NLRC in its decision dated December 5,
1984.
Napales and Gito agreed to move to General Santos City, but the two lady employees, to wit Ongkiko
and Aninon remained adamant.
Issue: Whether or not directing the transfer of the four employees is tainted with grave abuse of
discretion and should be set aside.
the right of the employer to transfer the employees in the interest of the efficient and economic
operation of its business cannot be seriously challenged. That is its prerogative. The only limitation on
the discretion of management in this regard is its mala fides. The only time the employer cannot
exercise this right is where it is vitiated by improper motive and is merely a disguised attempt to
remove or punish the employee sought to be transferred.
Such improper motive has not been shown in the case at bar. On the contrary, it has been established
that the transfer was necessitated by the fact that the COMBANK branch in Davao City had to be
closed because it was just across the street from the BPI branch. There was certainly no justification
to maintain the two branches as they both belonged now to the BPI. Moreover, it is not disputed that
the lateral transfer of the employees involved no demotion in their rank or salary or other benefits.
More to the point, it was expressly provided in the collective bargaining agreement then existing that:
Section 1. The UNION and all its members hereby recognize that the Management and operation of
the business of the BANK which include, among others, the hiring of employees, promotion, transfer
and dismissals for just cause as well as the maintenance of order, discipline and efficiency in its
operations, are the sole and exclusive right and prerogative of the BANK Management. . . .
Section 2. The BANK and the UNION agree that permanent transfer of a member of the UNION shall
be limited only to the offices of the BANK in the following areas, unless the transfer to an office of the
BANK in another area is requested or agreed to by the member, to wit:
Member of the UNION's Davao City Chapter, Tagum Chapter, Digos Chapter to any office of the BANK
within the Southern Mindanao area.
It is not disputed that General Santos City is in the Southern Mindanao area.
G.R. Nos. 76842-44
Following the dismissal of its petition against the BLR the Reyes group, on April 26, 1985, filed a
motion with the NLRC for the release to it of the union dues consigned by BPI. This motion was
opposed by the Valdez group, which subsequently filed its own petition for the payment to it of the
said dues, on the ground that it was the legitimate BPIEU recognized by the BLR. In its decision dated
September 26, 1986, the NLRC declared as follows:
The disaffiliation of Reyes' group having been disapproved, the local union referred to in Director
Trajano's decision is none other than BPIEU-ALU (Valdez). It is the union that is entitled to the
disputed union dues deposited with this Commission.
Issue: Who was entitled to have a share of the union dues.
As the disaffiliation of the Reyes group was disallowed by the BLR because it was done beyond the
freedom period, the Reyes group could not have claimed an Identity distinct from that of the original

BPIEU-Metro Manila. For the same reason, the Valdez group could not exclude the Reyes group from
the same BPIEU-Metro Manila because both of them were still part of that original local union. In other
words, BPIEU-Metro Manila then consisted of the members of the two contending groups whose
affiliation with ALU, as the mother federation, remained intact.
In any event, this issue of dues-sharing has also become moot and academic now because the Reyes
group has finally succeeded in disaffiliating from ALU and is now a separate and independent union. As
such, it does not have to share with ALU whatever union dues it may now collect from its members.
But at the time this petition was filed, the issue was very much alive and had to be resolved to
determine who were entitled to the union dues and in what proportion. The NLRC therefore did not
commit any grave abuse of discretion in rendering the challenged decision as we have here
interpreted it.
G.R. Nos. 76916-17
Following the promulgation by the NLRC of its decision of March 23, 1983, in Certified Cases Nos.
0279 and 0281, private respondent Ignacio Lacsina filed a motion for the entry of attorney's lien for
legal services to be rendered by him as counsel of BPIEU in the negotiation of the new collective
bargaining agreement with BPI.
The basis of this motion was a resolution dated August 26, 1982.
On April 7, 1983, the Labor Arbiter issued an order directing the respondent bank to check off the
amount of 5 % of the total economic benefits due its employees under the new collective bargaining
agreement between the bank and the union corresponding to the first year of effectivity thereof and to
deliver the amount collected to Atty. Lacsina or to his duly authorized representative.
Accordingly, BPI deducted the amount of P 200.00 from each of the employees who had signed the
authorization.
Upon learning about this, the petitioners challenged the said order, on the ground that it was not
authorized under the Labor Code. On April 15, 1983, the NLRC issued a resolution setting aside the
order and requiring BPI to safe keep the amounts sought to be deducted "until the rights thereto of
the interested parties shall have been determined in appropriate proceedings. Subsequently, the NLRC
issued an en banc resolution dated September 27, 1983, ordering the release to Lacsina of the
amounts deducted "except with respect to any portion thereof as to which no individual signed
authorization has been given by the members concerned or where such authorization has been
withdrawn.
Issue: Whether or not it was proper for NLRC to order the payment of attorney’s fees to be made
directly by the individual workers.
Ruling:
The court see no such imposition in the case at bar. A reading of the resolution will clearly show that
the signatories thereof have not been in any manner compelled to undertake the obligation they have,
they are assumed. On the contrary it is plain that they were voluntarily authorizing the check-off of
the attorney's fees from their payment of benefits and the turnover to Lacsina of the amounts
deducted, conformably to their agreement with him. There is no compulsion here. And significantly,
the authorized deductions affected only the workers who adopted and signed the resolution and who
were the only ones from whose benefits the deductions were made by BPI. No similar deductions were
taken from the other workers who did not sign the resolution and so were not bound by it.
That only those who signed the resolution could be subjected to the authorized deductions was
recognized and made clear by the order itself of the NLRC. It was there categorically declared that the
check-off could not be made where "no individual signed authorization has been given by the
members concerned or where such authorization has been withdrawn."

It is noteworthy, though, that the Court there impliedly recognized arrangements such as the one at
bar with the following significant observation:
Moreover, the case is covered squarely by the mandatory and explicit prescription of Art. 222 which is
another guarantee intended to protect the employee against unwarranted practices that would
diminish his compensation without his knowledge and consent. (Emphasis supplied.)
A similar recognition was made in Galvadores v. Trajano, where the payment of the attorney's fees
from the wages of the employees was not allowed because: "No check-offs from any amount due to
employees may be effected without individual written authorities duly signed by the employees
specifically stating the amount, purpose and beneficiary of the deduction. The required individual
authorizations in this case are wanting."
Finally, we hold that the agreement in question is in every respect a valid contract as it satisfies all the
elements thereof and does not contravene law, morals, good customs, public order, or public policy.
On the contrary, it enables the workers to avail themselves of the services of the lawyer of their
choice and confidence under terms mutually acceptable to the parties and, hopefully, also for their
mutual benefit.
TRADERS ROYAL BANK EMPLOYEES UNION-INDEPENDENT, petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION and EMMANUEL NOEL A. CRUZ, respondents. G.R. No. 120592 March 14,
1997
Petitioner Traders Royal Bank Employees Union and private respondent Atty. Emmanuel Noel A. Cruz,
head of the E.N.A. Cruz and Associates law firm, entered into a retainer agreement whereby the
former obligated itself to pay the latter a monthly retainer fee of P3,000.00 in consideration of the law
firm's undertaking to render the services enumerated in their contract.
During the existence of that agreement, petitioner union referred to private respondent the claims of
its members for holiday, mid-year and year-end bonuses against their employer, Traders Royal Bank
(TRB). After the appropriate complaint was filed by private respondent, a favored decision was
granted by the Court.
This action was filed by private respondent to collect his attorney’s fees due him. Petitioner contends
that the award for attorney's fees should have been incorporated in the main case and not after the
Supreme Court had already reviewed and passed upon the decision of the NLRC. Since the claim for
attorney's fees by private respondent was neither taken up nor approved by the Supreme Court, NLRC
cannot grant the same. Moreover, it insists that it is not guilty of unjust enrichment because all
attorney's fees due to private respondent were covered by the retainer fee of P3,000.00 which it has
been regularly paying to private respondent under their retainer agreement. To be entitled to the
additional attorney's fees as provided in their agreement it avers that there must be a separate
mutual agreement between the union and the law firm prior to the performance of the additional
services by the latter. Since there was none, the payment of the additional attorney's fees is
considered waived.
The Court ruled on the matter. On the issue of jurisdiction, private respondent's present claim for
attorney's fees may be filed before the NLRC even though or, better stated, especially after its earlier
decision had been reviewed and partially affirmed. It is well settled that a claim for attorney's fees
may be asserted either in the very action in which the services of a lawyer had been rendered or in a
separate action.
As to the attorney’s fees, there are two commonly accepted concepts of attorney's fees, the so-called
ordinary and extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation
paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this
compensation is the fact of his employment by AND his agreement with the client. In its extraordinary
concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the losing
party in a litigation. The basis of this is any of the cases provided by law where such award can be
made, such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the

client, unless they have agreed that the award shall pertain to the lawyer as additional compensation
or as part thereof.
With respect to the first situation, the remedy for recovering attorney's fees as an incident of the main
action may be availed of only when something is due to the client. Attorney's fees cannot be
determined until after the main litigation has been decided and the subject of the recovery is at the
disposition of the court. The issue over attorney's fees only arises when something has been
recovered from which the fee is to be paid.
While a claim for attorney's fees may be filed before the judgment is rendered, the determination as
to the propriety of the fees or as to the amount thereof will have to be held in abeyance until the main
case from which the lawyer's claim for attorney's fees may arise has become final. Otherwise, the
determination to be made by the courts will be premature. Of course, a petition for attorney's fees
may be filed before the judgment in favor of the client is satisfied or the proceeds thereof delivered to
the client.
It is apparent that a lawyer has two options as to when to file his claim for professional fees. Hence,
private respondent was well within his rights when he made his claim and waited for the finality of the
judgment for holiday pay differential, instead of filing it ahead of the award's complete resolution. To
declare that a lawyer may file a claim for fees in the same action only before the judgment is reviewed
by a higher tribunal would deprive him of his aforestated options and render ineffective the foregoing
pronouncements of this Court.
In addition, the difference between a compensation for a commitment to render legal services AND a
remuneration for legal services actually rendered can better be appreciated with a discussion of the
two kinds of retainer fees a client may pay his lawyer. These are a general retainer, or a retaining fee,
and a special retainer.
A general retainer, or retaining fee, is the fee paid to a lawyer to secure his future services as general
counsel for any ordinary legal problem that may arise in the routinary business of the client and
referred to him for legal action. The future services of the lawyer are secured and committed to the
retaining client. For this, the client pays the lawyer a fixed retainer fee which could be monthly or
otherwise, depending upon their arrangement. The fees are paid whether or not there are cases
referred to the lawyer. The reason for the remuneration is that the lawyer is deprived of the
opportunity of rendering services for a fee to the opposing party or other parties. In fine, it is a
compensation for lost opportunities.
A special retainer is a fee for a specific case handled or special service rendered by the lawyer for a
client. A client may have several cases demanding special or individual attention. If for every case
there is a separate and independent contract for attorney's fees, each fee is considered a special
retainer.
Evidently, the P3,000.00 monthly fee provided in the retainer agreement between the union and the
law firm refers to a general retainer, or a retaining fee, as said monthly fee covers only the law firm's
pledge, or as expressly stated therein, its "commitment to render the legal services enumerated." The
fee is NOT payment for private respondent's execution or performance of the services listed in the
contract, subject to some particular qualifications or permutations stated there.
In addition, a quasi-contract between the parties in the case at bar arose from private respondent's
lawful, voluntary and unilateral prosecution of petitioner's cause without awaiting the latter's consent
and approval. Petitioner cannot deny that it did benefit from private respondent's efforts as the law
firm was able to obtain an award of holiday pay differential in favor of the union. It cannot even hide
behind the cloak of the monthly retainer of P3,000.00 paid to private respondent because, as
demonstrated earlier, private respondent's actual rendition of legal services is not compensable
merely by said amount.
Private respondent is entitled to an additional remuneration for pursuing legal action in the interest of
petitioner before the labor arbiter and the NLRC, on top of the P3,000.00 retainer fee he received
monthly from petitioner. The law firm's services are decidedly worth more than such basic fee in the
retainer agreement.

A quasi-contract is based on the presumed will or intent of the obligor dictated by equity and by the
principles of absolute justice. Some of these principles are: (1) It is presumed that a person agrees to
that which will benefit him; (2) Nobody wants to enrich himself unjustly at the expense of another;
and (3) We must do unto others what we want them to do unto us under the same circumstances.
Viewed from another aspect, since it is claimed that petitioner obtained respondent's legal services
and assistance regarding its claims against the bank, only they did not enter into a special contract
regarding the compensation therefor, there is at least the innominate contract of facio ut des (I do
that you may give). This rule of law, likewise founded on the principle against unjust enrichment,
would also warrant payment for the services of private respondent which proved beneficial to
petitioner's members. In any case, whether there is an agreement or not, the courts can fix a
reasonable compensation which lawyers should receive for their professional services. However, the
value of private respondent's legal services should not be established on the basis of Article 111 of the
Labor Code alone.
In the first place, the fees mentioned here are the extraordinary attorney's fees recoverable as
indemnity for damages sustained by and payable to the prevailing part. In the second place, the ten
percent (10%) attorney's fees provided for in Article 111 of the Labor Code and Section 11, Rule VIII,
Book III of the Implementing Rules is the maximum of the award that may thus be granted. Article
111 thus fixes only the limit on the amount of attorney's fees the victorious party may recover in any
judicial or administrative proceedings and it does not even prevent the NLRC from fixing an amount
lower than the ten percent (10%) ceiling prescribed by the article when circumstances warrant it.
The measure of compensation for private respondent's services as against his client should properly be
addressed by the rule of quantum meruit long adopted in this jurisdiction. Quantum meruit, meaning
"as much as he deserves," is used as the basis for determining the lawyer's professional fees in the
absence of a contract, but recoverable by him from his client.
Where a lawyer is employed without a price for his services being agreed upon, the courts shall fix the
amount on quantum meruit basis. In such a case, he would be entitled to receive what he merits for
his services.
It is essential for the proper operation of the principle that there is an acceptance of the benefits by
one sought to be charged for the services rendered under circumstances as reasonably to notify him
that the lawyer performing the task was expecting to be paid compensation therefor. The doctrine of
quantum meruit is a device to prevent undue enrichment based on the equitable postulate that it is
unjust for a person to retain benefit without paying for it.
Article 111 of the Labor Code regulates the amount recoverable as attorney's fees in the nature of
damages sustained by and awarded to the prevailing party. It may not be used therefore, as the lone
standard in fixing the exact amount payable to the lawyer by his client for the legal services he
rendered. Also, while it limits the maximum allowable amount of attorney's fees, it does not direct the
instantaneous and automatic award of attorney's fees in such maximum limit.
It, therefore, behooves the adjudicator in questions and circumstances similar to those in the case at
bar, involving a conflict between lawyer and client, to observe the above guidelines in cases calling for
the operation of the principles of quasi-contract and quantum meruit, and to conduct a hearing for the
proper determination of attorney's fees. The criteria found in the Code of Professional Responsibility
are to be considered, and not disregarded, in assessing the proper amount.
Brahm Industries, Inc. vs. NLRC; G.R. No. 118853, October 16, 1997
Respondents filed a case for illegal suspension, illegal dismissal, illegal layoff, illegal deductions, non-
payment of service incentive leave, 13th month pay and actual, oral and exemplary damages against
petitioner before the Labor Arbiter. Petitioner alleged that respondents were never employed on a
regular basis as the latter had their own customers who required them to render home service. The
Labor Arbiter ruled in favor of respondents thus the order for reinstatement and payment of
backwages in their favor.

Upon appeal by petitioner, the National Labor relations Commission (NLRC) affirmed the Labor
Arbiter’s decision but modified it with respect to attorney’s fees, hence its reduction to 5% of the total
monetary award (previously 10%). Hence, this petition.
Issue: Whether or not petitioners were entitled to attorney’s fees.
Held:
The Supreme Court held that despite the fact that the matter on attorney’s fees was touched only
once in the dispositive portion of the Labor Arbiter’s decision and that no discussion or reason was
stated thereof, petitioners should be awarded the same.
In the Labor arbiter’s decision, it invoked Art. 2208 of the Civil Code which allows attorney’s fees to be
awarded by a court where its claimant is compelled to litigate with third persons by reason of
unjustified act or omission of the party from whom it is sought.
The Supreme Court further ruled that nothing precludes the appellate courts from reducing the award
of attorney’s fees where it is found to be unconscionable or excessive under the circumstances. In this
case, the NLRC reduced to 5% the adjudged relief, it appearing that the substantial portion of the
award referred to respondents’ backwages and not to withheld salaries to which the Court affirmed.
Petition was dismissed.
Heirs of Aniban vs. NLRC, 282 SCRA 377 [1997]
Facts:
BRIGIDA P. ANIBAN representing the heirs of the late Reynaldo Aniban assails the decision of the
National Labor Relations Commission (NLRC), reversing that of the Philippine Overseas Employment
Administration (POEA) which ruled that myocardial infarction was an occupational decease in the case
of radio operator Reynaldo Aniban and awarded, aside from attorney's fees of US$6,700.00, a total of
US$67,000.00 in death benefits to his heirs: US$13,000.00 for death benefits under the POEA
Standard Employment Contract; US$30,000.00 for death benefits under the Collective Bargaining
Agreement; and, US$24,000.00 as additional compensation for his three (3) children under eighteen
(18) years of age at US$8,000.00 each, as well as denying the motion for its reconsideration.
Reynaldo Aniban was employed by the Philippine Transmarine Carriers, Inc. (TRANSMARINE) acting in
behalf of its foreign principal Norwegian Ship Management A/S (NORWEGIAN) as radio operator
(R/O) on board the vessel "Kassel” for a contract period of nine (9) to eleven (11) months. On 26
June 1992, or during the period of his employment, R/O Aniban died due to myocardial infarction. He
was survived by a pregnant wife and three (3) minor children who prayed for death benefits provided
under par. (1) Of the POEA Standard Employment Contract.
A claim was also made for additional death benefits under the Collective Bargaining Agreement
executed between Associated Marine Officers and Seamen's Union of the Philippines and NORWEGIAN
represented by TRANSMARINE.
The claim was granted only to the extent of US$13,000.00 provided under the POEA Standard
Employment Contract. The claim under the CBA was rejected on the ground that myocardial infarction
of which R/O Aniban died was not an occupational disease as to entitle his heirs to the additional
death benefits provided therein. Consequently, Brigida Aniban and her children filed a formal
complaint for non-payment of death compensation benefits under the CBA.
On 11 January 1994 the POEA ruled that myocardial infarction was an occupational disease in the case
of R/O Aniban and granted the prayer of his heirs for payment of death benefits under the POEA
Standard Employment Contract as well as under the Collective Bargaining Agreement plus attorney's
fees of US$6,700.00 equivalent to 10% of the total award.
On appeal, however, the NLRC reversed the POEA and denied the claim for additional death benefits
on the ground that it was the Employees Compensation Commission (ECC) which had original and
exclusive jurisdiction to hear and determine the claim for death benefits. A motion to

reconsider the decision of the NLRC was denied; hence, this petition by the heirs of R/O Reynaldo
Aniban.
Issues:
Whether the POEA has jurisdiction to determine the claim of petitioners for death benefits
Whether myocardial infarction is an occupational disease as to entitle petitioners to the death
benefits provided under the CBA.
Ruling:
1st issue
On the issue of jurisdiction, it is not disputed that R/O Reynaldo Aniban was a Filipino seaman and
that he died on board the vessel of his foreign employer during the existence of his employment
contract, hence, this claim for death benefits by his widow and children.
The law applicable at the time the complaint was filed on 13 November 1992 was Art. 20 of the Labor
Code as amended by E. O. Nos. 797 and 247 which clearly provided that "original and exclusive
jurisdiction over all matters or cases including money claims, involving employer-employee relations,
arising out of or by virtue of any law or contract involving Filipino seamen for overseas
employment is vested with the POEA.
On the other hand, the jurisdiction of the ECC comes into play only when the liability of the State
Insurance Fund is in issue, as correctly suggested by the Solicitor General. The ECC was created
under Title II, Bk. IV, of the Labor Code with the heading of Employees Compensation and State
Insurance Fund. In addition to its powers and duties enumerated in Art. 177, Art. 180 explicitly
provides that the Commission exercises appellate jurisdiction only over decisions rendered by either
the Government Service Insurance System (GSIS) or Social Security System (SSS) in the exercise
of their respective original and exclusive jurisdictions. Hence, the ECC may not be considered as
having jurisdiction over money claims, albeit death compensation benefits, of overseas contract
workers. Thus, in so ruling, the NLRC clearly committed grave abuse of discretion.
2nd issue
Reynaldo Aniban was healthy at the time he boarded the vessel of his foreign employer. His medical
records reveal that he had no health problem except for a "defective central vision secondary to
injury." Hence, he was certified “fit to work as radio operator" by the examining physician. However,
R/O Aniban died three (3) months after he boarded "Kassel" due to myocardial infarction. As
aforesaid, the POEA ruled that the cause of death could be considered occupational. Being a
factual finding by the administrative agency tasked with its determination, such conclusion deserves
respect and must be accorded finality. Besides we have already repeatedly ruled that death due to
myocardial infarction is compensable. In Eastern Shipping Lines, Inc. v. POEA, although
compensability was not the main issue, we upheld the decision of the POEA adjudging as compensable
the death of a seaman on board the vessel of his foreign employer due to myocardial infarction.
Although it may be conceded in the instant case that the physical exertion involved in carrying out the
functions of a radio operator may have been quite minimal, we cannot discount the pressure and
strain that went with the position of radio operator. As radio operator, Reynaldo Aniban had to place
his full attention in hearing the exact messages received by the vessel and to relay those that needed
to be transmitted to the mainland or to other vessels. We have already recognized that any kind of
work or labor produces stress and strain normally resulting in the wear and tear of the human
body. It is not required that the occupation be the only cause of the disease as it is enough that the
employment contributed even in a small degree to its development.
It must be stressed that the strict rules of evidence are not applicable in claims for compensation
considering that probability and not the ultimate degree of certainty is the test of proof in
compensation proceedings.

It is a matter of judicial notice that an overseas worker, having to ward off homesickness by reason of
being physically separated from his family for the entire duration of his contract, bears a great degree
of emotional strain while making an effort to perform his work well. The strain is even greater in the
case of a seaman who is constantly subjected to the perils of the sea while at work abroad and away
from his family. In this case, there is substantial proof that myocardial infarction is an occupational
disease for which Aniban's employer obligated itself to pay death benefits and additional
compensation under the CBA in the event of the demise of its employee by reason thereof.
On the award of attorney’s fees:
On the award of attorney's fees which NLRC deleted on the ground that there was no unlawful
withholding of wages, suffice it to say that Art. 111 of the Labor Code do not limit the award of
attorney’s fees to cases of unlawful withholding of wages only. What it explicitly prohibits is the
award of attorney's fees which exceed 10% of the amount of wages recovered. Thus, under the
circumstances, attorney's fees are recoverable for the services rendered by petitioner's counsel to
compel Aniban's employer to pay its monetary obligations under the CBA. However the amount of
P50,000.00 claimed as attorney's fees in this case is the reasonable compensation based on the
records and not the maximum 10% of the total award as granted by POEA. The reduction of
unreasonable attorney's fees is within our regulatory powers.
Sapio vs. Undaloc Construction et al., G.R. No. 155034, May 22, 2008
Facts:
Petitioner had been employed as watchman from 1 May 1995 to 30 May 1998 when he was
terminated on the ground that the project he was assigned to was already finished, he being allegedly
a project employee.
Petitioner filed a complaint against respondent for illegal dismissal, underpayment of wages and non-
payment of statutory benefits.
It should be useful to note that respondent is a single proprietorship engaged in road construction
business.
On July 12, 1999, the Labor Arbiter rendered a decision against petitioner, to which they appealed to
the NLRC. The NLRC sustained the Labor Arbiter’s decision. An appeal to the CA yielded no result.
Thus, the instant petition.
Issues:
• Whether or not the payrolls made in pencil were valid.
• Whether or not petitioner is entitled to the salary differential ordered by the Labor Arbiter.
Ruling:
I.
YES, THEY ARE.
The conclusion of the Labor Arbiter that entries in the December 1995 payroll sheet could have been
altered is utterly baseless. The claim that the December 1995 payroll sheet was written in pencil and
was thus rendered it prone to alterations or erasures is clearly non sequitur. The same is true with
respect to the typewritten payroll sheets. In fact, neither the Labor Arbiter nor the NLRC found any
alteration or erasure or traces thereat, whether on the pencil-written or typewritten payroll sheets.
Indeed, the most minute examination will not reveal any tampering. Furthermore, if there is any
adverse conclusion as regards the December 1995 payroll sheet, it must be confined only to it and
cannot be applied to the typewritten payroll sheets.
Moreover, absent any evidence to the contrary, good faith must be presumed in this case. Entries in
the payroll, being entries in the course of business, enjoy the presumption of regularity under Rule
130, Section 43 of the Rules of Court. Hence, while as a general rule, the burden of proving payment
of monetary claims rests on the employer, when fraud is alleged in the preparation of the payroll, the

burden of evidence shifts to the employee and it is incumbent upon him to adduce clear and
convincing evidence in support of his claim. Unfortunately, petitioner’s bare assertions of fraud do not
suffice to overcome the disputable presumption of regularity.
II.
NO, HE IS NOT.
The Labor Arbiter erred in his computation. He fixed the daily wage rate actually received by
petitioner at P105.00 without taking into consideration the P141.00 rate indicated in the typewritten
payroll sheets submitted by respondents. Moreover, the Labor Arbiter misapplied the wage orders
when he wrongly categorized respondent as falling within the first category. Based on the stipulated
number of employees and audited financial statements, respondents should have been covered by the
second category.
The total salary differential that petitioner is lawfully entitled to amounts to P6,578.00 However,
pursuant to Section 12 of Republic Act (R.A.) No. 6727, as amended by R.A. No. 8188. Respondents
are required to pay double the amount owed to petitioner, bringing their total liability to P13,156.00.
Section 12. Any person, corporation, trust, firm, partnership, association or entity which refuses or
fails to pay any of the prescribed increases or adjustments in the wage rates made in accordance with
this Act shall be punished by a fine not less than Twenty-five thousand pesos (P25,000.00) nor more
than One hundred thousand pesos (P100,000.00) or imprisonment of not less than two (2) years nor
more than four (4) years, or both such fine and imprisonment at the discretion of the court: Provided,
That any person convicted under this Act shall not be entitled to the benefits provided for under the
Probation Law.
The employer concerned shall be ordered to pay an amount equivalent to double the unpaid benefits
owing to the employees: Provided, That payment of indemnity shall not absolve the employer from
the criminal liability imposable under this Act.
If the violation is committed by a corporation, trust or firm, partnership, association or any other
entity, the penalty of imprisonment shall be imposed upon the entity’s responsible officers, including,
but not limited to, the president, vice president, chief executive officer, general manager, managing
director or partner.
The award of attorney’s fees is warranted under the circumstances of this case. Under Article 2208 of
the New Civil Code, attorney's fees can be recovered in actions for the recovery of wages of laborers
and actions for indemnity under employer's liability laws but shall not exceed 10% of the amount
awarded. The fees may be deducted from the total amount due the winning party.
Atty. Ortiz vs. San Miguel Corp., G.R. No. 151983-84, July 31, 2008
FACTS:
Petitioner is a member of the Philippine Bar who represented the complainants in NLRC Cases No. V-
0255-94 and No. V-0068-95 instituted against herein private respondent San Miguel Corporation
sometime in 1992 and 1993.
Private respondent, on the other hand, is a corporation duly organized and existing under and by
virtue of the laws of the Republic of the Philippines. It is primarily engaged in the manufacture and
sale of food and beverage particularly beer products. In line with its business, it operates breweries
and sales offices throughout the Philippines. The complainants in NLRC Cases No. V-0255-94 and No.
V-0068-95 was employees at private respondents Sales Offices in the provinces.
NLRC Case No. V-0255-94 (Aguirre Cases)
In 1992, several employees from the Bacolod, Cadiz, and Himamaylan Beer Sales Offices filed with the
Labor Arbiter separate complaints against private respondent for illegal dismissal with prayer for
reinstatement with backwages; elevation of employment status from casual-temporary to regular-

permanent reckoned after six months from the start of complainants employment; underpayment of
salaries; non-payment of holiday pay, service incentive leave pay, allowances and sick leaves; non-
payment of benefits under the existing Collective Bargaining Agreements (CBA); attorneys fees;
moral, exemplary and other damages; and interest. The foregoing complaints were consolidated and
initially docketed as RAB Cases No. 06-01-10031-92; 06-01-10048-92; 06-01-10049-92; 06-02-
10210-92; 06-02-10211-92; and 06-03-10255-92 (hereinafter collectively referred to as theAguirre
Cases). After conducting a full-blown trial, the parties were given the opportunity to submit their
respective memoranda. Subsequently, the cases were submitted for resolution.
On 30 June 1994, Labor Arbiter Reynaldo J. Gulmatico (Labor Arbiter Gulmatico) rendered a Decision
in the Aguirre Cases finding all the complainants to have been illegally dismissed. He ordered
complainants reinstatement to their previous or equivalent positions without loss of seniority rights.
He also ordered private respondent to pay the complainants (1) full backwages and other CBA benefits
in the total amount of P6,197,952.88; (2) rice subsidy or its monetary equivalent; and (3) attorneys
fees equivalent to 10% of the monetary award or in the amount of P619,795.28. Labor Arbiter
Gulmatico, however, dismissed complainants claim for overtime pay, holiday pay, 13th month pay
differential, service incentive leave pay, moral damages and all other claims for lack of merit.
Unsatisfied with Labor Arbiter Gulmaticos monetary and economic awards, complainants appealed to
the NLRC, where the Aguirre Cases were collectively docketed as NLRC Case No. V-0255-94. The
NLRC would later render a Decision dated 21 July 1995 in the Aguirre Cases affirming the Decision of
Labor Arbiter Gulmatico, with the following modifications: (1) granting sales commission to the
complainants and adopting their computation thereof in their Appeal Memorandum[8] filed before the
NLRC; (2) adjusting and/or reducing the amounts awarded to complainants Alfredo Gadian, Jr.,
Renato Junsay, Agustines Llacuna, and Florencio de la Piedra depending on the dates they were
employed; (3) determining that Modesto Jabaybay, who died on 28 December 1993, was to receive
only the amount of P356,128.02; (4) declaring that all the complainants except Romeo Magbanua,
who withdrew his complaint, were entitled to whatever benefits were given under the CBA; and (5)
that complainants Romeo Magbanua and Modesto Jabaybay shall no longer be reinstated.
Private respondent moved for the reconsideration of the aforesaid 21 July 1995 NLRC Decision, but its
motion was denied by the NLRC in its Resolution dated 27 February 1996.
NLRC Case No. V-0068-95 (Toquero Case)
While the Aguirre Cases were still pending resolution by Labor Arbiter Gulmatico, three other
employees at the San Carlos Sales Office filed with the Labor Arbiter a similar complaint for illegal
dismissal against private respondent in 1993. Their complaint was docketed as RAB Case No. 06-07-
10404-93 (hereinafter referred to as the Toquero Case).
On 26 December 1994, Labor Arbiter Ray Allan T. Drilon (Labor Arbiter Drilon) rendered his Decision
in the Toquero Case also ruling that the three complainants were illegally dismissed. Thus, he ordered
the complainants immediate reinstatement to their former positions without loss of seniority rights. He
ordered private respondent to pay complainants (1) backwages and other benefits in the amount of
P572,542.50; (2) all benefits, privileges and rights enjoyed by the private respondents regular
employees in the total amount of P339,055.00; (3) a total of 159 sacks of rice ration; (4) sales
commissions based on the monthly sales of beer sold by their office for the last three years; and (5)
attorneys fees in the amount of P91,159.75.
Again, the complainants were not contented with Labor Arbiter Drilons Decision, and they appealed
their case to the NLRC which was then docketed as NLRC Case No. V-0068-95. On 25 July 1995, the
NLRC rendered a Decision modifying the 26 December 1994 Decision of Labor Arbiter Drilon by
ordering the private respondent to pay the complainants the following: (1) additional awards of sales
commission; (2) tailoring allowance; (3) monetary equivalent of their uniform for two years consisting
of 24 sets of t-shirts and 6 pairs of pants; and (4) attorneys fees of 10% of the total monetary award
or P198,296.95.

In its Resolution dated 9 October 1995, the NLRC partially granted private respondents motion for
reconsideration by allowing the deduction from the award of backwages any earnings of complainants
elsewhere during the pendency of their case.
CA-G.R. SP No. 54576-77
Failing to get a favorable ruling from the NLRC in both the Aguirre and Toquero Cases, private
respondent elevated the NLRC Decisions to this Court via a Petition for Certiorari, where they were
docketed as G.R. No. 124426 and G.R. No. 122975, respectively. On 15 July 1996, this Court issued a
Resolution consolidating the two cases.In another Resolution dated 30 June 1999; this Court referred
the said cases to the Court of Appeals conforming to its ruling in St. Martin Funeral Home v. NLRC and
Bienvenido Aricayos. The Court of Appeals accepted the consolidated cases in its Resolution dated 7
September 1999, and docketed the same as CA-G.R. SP No. 54576-77.
While the private respondents Petitions for Certiorari were pending before the Court of Appeals, all but
one of the remaining complainants in the Aguirre and Toquero Cases appeared on various dates before
Labor Arbiters Gulmatico and Drilon, and in the presence of two witnesses, signed separate Deeds of
Release, Waiver and Quitclaim[22] in favor of private respondent. Based on the Deeds they executed,
the complainants agreed to settle their claims against private respondent for amounts less than what
the NLRC actually awarded. Private respondent withheld 10% of the total amount agreed upon by the
parties in the said Deeds as attorneys fees and handed it over to petitioner.
Private respondent then attached the Deeds of Release, Waiver and Quitclaim to its Manifestation and
Motion filed before the appellate court. On 22 August 2001, the Court of Appeals rendered a Decision
in CA-G.R. SP No. 54576-77 affirming the NLRC Decision dated 21 July 1995 and Resolution dated 27
February 1996 in the Aguirre Cases, only insofar as it concerned complainant Alfredo Gadian, Jr.
(complainant Gadian), the only complainant who did not execute a Deed of Release, Waiver and
Quitclaim. With respect to the other complainants in the Aguirre and Toquero Cases, their complaints
were dismissed on account of their duly executed Deeds of Release, Waiver and Quitclaim.
Private respondent moved for the partial reconsideration of the 22 August 2001 Decision of the Court
of Appeals, seeking the reversal and setting aside of the 22 August 2001 Decision of the Court of
Appeals in CA-G.R. SP. No. 54576-77, which affirmed the 21 July 1995 Decision and 27 February 1996
Resolution of the NLRC in the Aguirre Cases, insofar as complainant Gadian was concerned; and the
dismissal of complainant Gadians complaint against private respondent for lack of merit. Complainant
Gadian and his counsel, herein petitioner, for their part, likewise moved for the partial reconsideration
of the same Decision of the appellate court praying that the award of attorneys fees of 10% should be
based on the monetary awards adjudged by the NLRC. In a Resolution[28] dated9 January 2002, the
appellate court denied both motions.
G.R. No. 151421 and No. 151427
Private respondent appealed before this Court by filing a Petition for Review, docketed as G.R. No.
151421 and No. 151427. However, private respondents Petition was denied due course by this Court
in a Resolution dated 18 March 2002 for failure of the private respondent to show that a reversible
error had been committed by the appellate court. The Court also denied private respondents motion
for reconsideration. The denial of the private respondents Petition in G.R. No. 151421 and No. 151427
became final and executory on 24 July 2002.
ISSUES: Whether petitioner is entitled to additional attorneys fees on top of what was already
received.
RULING:
While this Court concedes that the instant Petition for Review raises a question of law, it denies the
Petition for lack of merit and lack of petitioners standing to file the same.
This Court has consistently ruled that a question of law exists when there is a doubt or controversy as
to what the law is on a certain state of facts. On the other hand, there is a question of fact when the

doubt or difference arises as to the alleged truth or falsehood of the alleged facts. For a question to be
one of law, it must involve no examination of the probative value of the evidence presented by the
litigants or any of them.[35] The test of whether a question is one of law or of fact is not the
appellation given to such question by the party raising the same; rather, it is whether the appellate
court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is
a question of law; otherwise, it is a question of fact.
In the case at bar, the core issue presented by the petitioner is with respect to the amount of
attorneys fees to which he should be entitled: whether he is entitled to the amount of attorneys fees
as adjudged by the NLRC in its Decisions in the Aguirre and Toquero Cases or only to the 10% of the
amounts actually paid to his clients, the complainants who signed the Deeds of Release, Waiver and
Quitclaim.
The aforesaid issue evidently involves a question of law. In determining whether the petitioner should
be entitled to the attorneys fees stated in the NLRC Decisions, this Court does not need to go over the
pieces of evidence submitted by the parties in the proceedings below to determine their probative
value. What it needs to do is ascertain and apply the relevant law and jurisprudence on the award of
attorneys fees to the prevailing parties in labor cases.
Article 111 of the Labor Code, as amended, specifically provides:
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. (Emphasis supplied.)
In PCL Shipping Philippines, Inc. v. National Labor Relations Commission citing Dr. Reyes v. Court of
Appeals, this Court enunciated that there are two commonly accepted concepts of attorneys fees, the
so-called ordinary and extraordinary. In its ordinary concept, an attorneys fee is the reasonable
compensation paid to a lawyer by his client for the legal services the former has rendered to the
latter. The basis of this compensation is the fact of the attorney’s employment by and his agreement
with the client. In its extraordinary concept, attorneys fees are deemed indemnity for damages
ordered by the court to be paid by the losing party in a litigation. The instances in which these may be
awarded are those enumerated in Article 2208 of the Civil Code, specifically paragraph 7 thereof,
which pertains to actions for recovery of wages, and is payable not to the lawyer but to the client,
unless they have agreed that the award shall pertain to the lawyer as additional compensation or as
part thereof. Article 111 of the Labor Code, as amended, contemplates the extraordinary concept of
attorneys fees.
Still according to PCL Shipping, Article 111 is an exception to the declared policy of strict construction
in the awarding of attorneys fees. Although express findings of fact and law are 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. In carrying out and interpreting the Labor Codes provisions and
implementing regulations, the employees welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided in Article 4 of the Labor Code, which states that all doubts
in the implementation and interpretation of the provisions of the Labor Code including its
implementing rules and regulations, shall be resolved in favor of labor; and Article 1702 of the Civil
Code, which provides that in case of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the laborer.
Based on the foregoing, the attorney’s fees awarded by the NLRC in its Decisions in the Aguirre and
Toquero Cases pertain to the complainants, petitioners clients, as indemnity for damages; and not to
petitioner as compensation for his legal services. Records show that the petitioner neither alleged nor
proved that his clients, the complainants, willingly agreed that the award of attorney’s fees would
accrue to him as an additional compensation or part thereof.

What the complainants explicitly agreed to in their individual Deeds of Release, Waiver, and Quitclaim
was that the 10% attorney’s fees of the petitioner shall be deducted from the amount of the gross
settlement. Provision 8 of the Deeds of Release, Waiver and Quitclaim reads:
8. As a client, I have the right to decide on the matter of whether to settle my case and the amount of
the settlement, which right I am now exercising without prejudice to my counsels claim to the legally
mandated 10% attorneys fees. As a matter of fact, I had requested and [herein private respondent]
has complied with it, that [private respondent] deduct from the gross settlement 10% representing
attorneys fees of [herein petitioner] and make a check payable to the latter in such amount.
The foregoing provision cannot be taken to mean that the complainants concerned agreed that the
attorneys fees awarded by the NLRC pertained to petitioner as additional compensation or part thereof
since (1) the Deeds were executed between complainants and private respondent, the petitioner was
not even a party to the said documents; and (2) private complainants request that private respondent
withhold 10% attorneys fees to be payable to petitioner was in relation to the amount of gross
settlement under the Deeds and not to the amounts awarded by the NLRC. In fact, petitioner
challenges the due execution of the Deeds, and may not now take an inconsistent position by using
the provisions of the very same Deeds as proof that complainants impliedly or expressly agreed that
the attorney’s fees awarded by the NLRC pertained to him under the ordinary concept of attorney’s
fees.
Thus, this Court has no recourse but to interpret the award of attorney’s fees by the NLRC in its
extraordinary concept. And since the attorney’s fees pertained to the complainants as indemnity for
damages, it was totally within the complainant’s right to waive the amount of said attorney’s fees and
settle for a lesser amount thereof in exchange for the immediate end to litigation. Petitioner cannot
prevent complainants from compromising and/or withdrawing their complaints at any stage of the
proceedings just to protect his anticipated attorney’s fees.
Even assuming arguendo that the complainants in the Aguirre and Toquero Cases did indeed agree
that the attorneys fees awarded by the NLRC should be considered in their ordinary concept, i.e., as
compensation for petitioners services, we refer back to Article 111 of the Labor Code, as amended,
which provides that the attorneys fees should be equivalent to 10% of the amount of wages
recovered. Since the complainants decided to settle their complaints against the private respondent,
the amounts actually received by them pursuant to the Deeds of Release, Waiver and Quitclaim are
the amounts recovered and the proper basis for determining the 10% attorney’s fees.
In addition, as found by the Court of Appeals, when the complainants executed their respective Deeds
of Release, Waiver and Quitclaim, petitioner already received attorneys fees equivalent to 10% of the
amounts paid to the complainants in accordance with the Deeds, as evidenced by several cash
vouchers and checks payable to petitioner and signed by his representative. Even petitioner himself
admitted this fact.
This would show that petitioner has been compensated for the services he rendered the complainants.
It may do well for petitioner to remember that as a lawyer, he is a member of an honorable
profession, the primary vision of which is justice. The practice of law is a decent profession and not a
money-making trade. Compensation should be but a mere incident.
If petitioner earnestly believes that the amounts he already received are grossly deficient, considering
the substantial time and efforts he and his assistant lawyers invested, as well as the personal money
he expended for the prosecution of complainants cases for more than seven or eight years, then
petitioners remedy is not against the private respondent, but against his own clients, the
complainants. He should file a separate action for collection of sum of money against complainants to
recover just compensation for his legal services, and not the present Petition for Review to claim from
private respondent the attorney’s fees which were adjudged by the NLRC in favor of complainants as
the prevailing parties in the Aguirre and Toquero Cases.
Masmud vs. NLRC
FACTS:

On July 9, 2003, Evangelina Masmud’s (Evangelina) husband, the late Alexander J. Masmud
(Alexander), filed a complaint3 against First Victory Shipping Services and Angelakos (Hellas) S.A. for
non-payment of permanent disability benefits, medical expenses, sickness allowance, moral and
exemplary damages, and attorney’s fees. Alexander engaged the services of Atty. Rolando B. Go, Jr.
(Atty. Go) as his counsel.
In consideration of Atty. Go’s legal services, Alexander agreed to pay attorney’s fees on a contingent
basis, as follows: twenty percent (20%) of total monetary claims as settled or paid and an additional
ten percent (10%) in case of appeal. It was likewise agreed that any award of attorney’s fees shall
pertain to respondent’s law firm as compensation.
On November 21, 2003, the Labor Arbiter (LA) rendered a Decision granting the monetary claims of
Alexander. The dispositive portion of the decision, as quoted in the CA Decision, reads:
WHEREFORE, foregoing considered, judgment is rendered finding the [First Victory Shipping Services
and Angelakos (Hellas) S.A.] jointly and severally liable to pay [Alexander’s] total permanent disability
benefits in the amount of US$60,000.00 and his sickness allowance of US$2,348.00, both in Philippine
currency at the prevailing rate of exchange at the time of payment; and to pay further the amount of
P200,000.00 as moral damages,P100,000.00 as exemplary damages and attorney’s fees equivalent to
ten percent (10%) of the total monetary award.
[Alexander’s] claim for payment of medical expenses is dismissed for lack of basis. SO ORDERED.
Alexander’s employer filed an appeal before the National Labor Relations Commission (NLRC). During
the pendency of the proceedings before the NLRC, Alexander died. After explaining the terms of the
lawyer’s fees to Evangelina, Atty. Go caused her substitution as complainant. On April 30, 2004, the
NLRC rendered a Decision dismissing the appeal of Alexander’s employer. The employer subsequently
filed a motion for reconsideration. The NLRC denied the same in an Order dated October 26, 2004.
On appeal before the CA, the decision of the LA was affirmed with modification. The award of moral
and exemplary damages was deleted.5 Alexander’s employers filed a petition for certiorari6 before
this Court. On February 6, 2006, the Court issued a Resolution dismissing the case for lack of merit.
Eventually, the decision of the NLRC became final and executory. Atty. Go moved for the execution of
the NLRC decision, which was later granted by the LA. The surety bond of the employer was
garnished. Upon motion of Atty. Go, the surety company delivered to the NLRC Cashier, through the
NLRC Sheriff, the check amounting toP3,454,079.20. Thereafter, Atty. Go moved for the release of the
said amount to Evangelina.
On January 10, 2005, the LA directed the NLRC Cashier to release the amount of P3,454,079.20 to
Evangelina. Out of the said amount, Evangelina paid Atty. Go the sum of P680,000.00.
Dissatisfied, Atty. Go filed a motion to record and enforce the attorney’s lien alleging that Evangelina
reneged on their contingent fee agreement. Evangelina paid only the amount of P680,000.00,
equivalent to 20% of the award as attorney’s fees, thus, leaving a balance of 10%, plus the award
pertaining to the counsel as attorney’s fees.
In response to the motion filed by Atty. Go, Evangelina filed a comment with motion to release the
amount deposited with the NLRC Cashier. In her comment, Evangelina manifested that Atty. Go’s
claim for attorney’s fees of 40% of the total monetary award was null and void based on Article 111 of
the Labor Code.
In effect, petitioner seeks affirmance of her conviction that the legal compensation of a lawyer in a
labor proceeding should be based on Article 111 of the Labor Code.
There are two concepts of attorney's fees. In the ordinary sense, attorney's fees represent the
reasonable compensation paid to a lawyer by his client for the legal services rendered to the latter. On
the other hand, in its extraordinary concept, attorney's fees may be awarded by the court as
indemnity for damages to be paid by the losing party to the prevailing party, such that, in any of the

cases provided by law where such award can be made, e.g., those authorized in Article 2208 of the
Civil Code, the amount is payable not to the lawyer but to the client, unless they have agreed that the
award shall pertain to the lawyer as additional compensation or as part thereof.
Here, we apply the ordinary concept of attorney’s fees, or the compensation that Atty. Go is entitled
to receive for representing Evangelina, in substitution of her husband, before the labor tribunals and
before the court.
Evangelina maintains that Article 111 of the Labor Code is the law that should govern Atty. Go’s
compensation as her counsel and assiduously opposes their agreed retainer contract.
Article 111 of the said Code provides:
ART. 111. Attorney's fees. — (a) In cases of unlawful withholding of wages the culpable party may be
assessed attorney's fees equivalent to ten percent of the amount of the wages recovered.
DECISION:
Contrary to Evangelina’s proposition, Article 111 of the Labor Code deals with the extraordinary
concept of attorney’s fees. It regulates the amount recoverable as attorney's fees in the nature of
damages sustained by and awarded to the prevailing party. It may not be used as the standard in
fixing the amount payable to the lawyer by his client for the legal services he rendered.
In this regard, Section 24, Rule 138 of the Rules of Court should be observed in determining Atty. Go’s
compensation.
Considering that Atty. Go successfully represented his client, it is only proper that he should receive
adequate compensation for his efforts. Even as we agree with the reduction of the award of attorney's
fees by the CA, the fact that a lawyer plays a vital role in the administration of justice emphasizes the
need to secure to him his honorarium lawfully earned as a means to preserve the decorum and
respectability of the legal profession. A lawyer is as much entitled to judicial protection against
injustice or imposition of fraud on the part of his client as the client is against abuse on the part of his
counsel. The duty of the court is not alone to ensure that a lawyer acts in a proper and lawful manner,
but also to see that a lawyer is paid his just fees. With his capital consisting of his brains and with his
skill acquired at tremendous cost not only in money but in expenditure of time and energy, he is
entitled to the protection of any judicial tribunal against any attempt on the part of his client to escape
payment of his just compensation. It would be ironic if after putting forth the best in him to secure
justice for his client; he himself would not get his due.
WHEREFORE, in view of the foregoing, the Decision dated October 31, 2007 and the Resolution dated
June 6, 2008 of the Court of Appeals in CA-G.R. SP No. 96279 are hereby AFFIRMED.
SPECIAL TYPES OF WORKERS
Bernardo vs. NLRC, G.R. No. 122917. July 12, 1999
Complainants are deaf-mutes who were hired on various periods by respondent Far East Bank and
Trust Co. as Money Sorters and Counters through a uniformly worded agreement called ‘Employment
Contract for Handicapped Workers’. Private respondent alleged that it hired temporarily the petitioners
under special employment arrangement which was a result of overtures made by some civic and
political personalities to the respondent Bank. In addition, it claimed that from the beginning there
have been no separate items in the respondent Bank plantilla for sorters or counters; that the tellers
themselves already did the sorting and counting chore as a regular feature and integral part of their
duties. Petitioners maintain that they should be considered regular employees, because their task as
money sorters and counters was necessary and desirable to the business of respondent bank. Private
respondent responded that it hired petitioners as “special workers” according to Art. 80 of the Labor
Code and not regular employees.
The Labor Arbiter and NLRC ruled against the petitioners. However, the Court reversed such findings
and held that (only) the employees, who worked for more than six months and whose contracts were

renewed are deemed regular. Hence, their dismissal from employment was illegal. Succeeding events
and the enactment of RA No. 7277 (the Magna Carta for Disabled Persons), however, justify the
application of Article 280 of the Labor Code and not Art. 80 as alleged by the private respondent.
The renewal of the contracts of the handicapped workers and the hiring of others (56) lead to the
conclusion that their tasks were beneficial and necessary to the bank. More important, these facts
show that they were qualified to perform the responsibilities of their positions. In other words, their
disability did not render them unqualified or unfit for the tasks assigned to them.
The fact that the employees were qualified disabled persons necessarily removes the employment
contracts from the ambit of Article 80. Since the Magna Carta mandates that qualified disabled
persons be granted the same terms and conditions of employment as qualified able-bodied employees,
herein petitioners are thus covered by Article 280 of the Labor Code.
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. An employee is regular because of the nature of work and the length of service, not
because of the mode or even the reason for hiring them.
The noble objectives of Magna Carta for Disabled Persons are not based merely on charity or
accommodation, but on justice and the equal treatment of qualified persons, disabled or not. In the
present case, the handicap of petitioners (deaf-mutes) is not a hindrance to their work. The eloquent
proof of this statement is the repeated renewal of their employment contracts. Why then should they
be dismissed, simply because they are physically impaired? The Court believes, that, after showing
their fitness for the work assigned to them, they should be treated and granted the same rights like
any other regular employees.
EMPLOYMENT OF WOMEN
Philippine Telegraph and Telephone Company vs. National Labor Relations Commission, G.R. No.
118978, May 23, 1997
Facts:
Grace de Guzman was initially hired by petitioner as a reliever, for a fixed period to substitute one C.F.
Tenorio who went on maternity leave. Her services as reliever were again engaged by petitioner, this
time in replacement of another person. After August 8, 1991, and pursuant to their Reliever
Agreement, her services were terminated.
She was once more asked to join the company as a probationary employee, the probationary period to
cover 150 days. In the job application form that was furnished her to be filled up for the purpose, she
indicated in the portion for civil status therein that she was single although she had contracted
marriage a few months earlier.
When petitioner supposedly learned about the same later, its branch supervisor in Baguio City, Delia
M. Official, sent to private respondent a memorandum dated January 15, 1992 requiring her to explain
the discrepancy. In that memorandum, she was reminded about the company's policy of not accepting
married women for employment. She stated that she was not aware of PT&T's policy regarding
married women at the time, and that all along she had not deliberately hidden her true civil status.
Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed
from the company. She filed a complaint for illegal dismissal, coupled with a claim for non-payment of
cost of living allowances.
Issue: Whether or not the company policy tantamount to unjust and unlawful discrimination against
married women.
Decision:
Petitioner's policy of not accepting or considering as disqualified from work any woman worker who
contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all women

workers by our labor laws and by no less than the Constitution. Contrary to petitioner's assertion that
it dismissed private respondent from employment on account of her dishonesty, the record discloses
clearly that her ties with the company were dissolved principally because of the company's policy that
married women are not qualified for employment in the said company, and not merely because of her
supposed acts of dishonesty.
Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on the
right of a woman to be free from any kind of stipulation against marriage in connection with her
employment, but it likewise assaults good morals and public policy, tending as it does to deprive a
woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual
as an intangible and inalienable right.
Hence, while it is true that the parties to a contract may establish any agreements, terms, and
conditions that they may deem convenient, the same should not be contrary to law, morals, good
customs, public order, or public policy. Carried to its logical consequences, it may even be said that
petitioner's policy against legitimate marital bonds would encourage illicit or common-law relations
and subvert the sacrament of marriage.
DEL MONTE PHILIPPINES, INC., PETITIONER, VS. LOLITA VELASCO, RESPONDENT.
Lolita M. Velasco started working with Del Monte Philippines on October 21, 1976 as a seasonal
employee and was regularized on May 1, 1977. Her latest assignment was as Field Laborer.
On June 16, 1987, respondent was warned in writing due to her absences. On May 4, 1991,
respondent, thru a letter, was again warned in writing by petitioner about her absences without
permission and a forfeiture of her vacation leave entitlement for the year 1990-1991 was imposed
against her. On September 14, 1992, another warning letter was sent to respondent regarding her
absences without permission during the year 1991-1992. Her vacation entitlement for the said
employment year affected was consequently forfeited.
In view of the said alleged absences without permission, on September 17, 1994, a notice of hearing
was sent to respondent notifying her of the charges filed against her for violating the Absence Without
Official Leave rule: that is for excessive absence without permission on August 15-18, 29-31 and
September 1-10, 1994. The hearing was set on September 23, 1994. Respondent having failed to
appear on September 23, 1994 hearing, another notice of hearing was sent to her resetting the
investigation on September 30, 1994. It was again reset to October 5, 1994. On January 10, 1995,
after hearing, the petitioner terminated the services of respondent effective January 16, 1994 due to
excessive absences without permission.
Feeling aggrieved, respondent filed a case for illegal dismissal against petitioner asserting that her
dismissal was illegal because she was on the family way suffering from urinary tract infection, a
pregnancy-borne, at the time she committed the alleged absences. She explained that for her
absence from work on August 15, 16, 17 & 18, 1994 she had sent an application for leave to her
supervisor, Prima Ybañez. Thereafter, she went to the company hospital for check-up and was
advised accordingly to rest in quarters for four (4) days or on August 27 to 30, 1994. Still not feeling
well, she failed to work on September 1, 1994 and was again advised two days of rest in quarters on
September 2-3, 1994. Unable to recover, she went to see an outside doctor, Dr. Marilyn Casino, and
the latter ordered her to rest for another five (5) consecutive days, or from September 5 to 9, 1994.
She declared she did not file the adequate leave of absence because a medical certificate was already
sufficient per company policy. On September 10, 1994 she failed to report to work but sent an
application for leave of absence to her supervisor, Prima Ybañez, which was not anymore accepted.
Issues:
1. Whether the employment of respondent had been validly terminated on the ground of excessive
absences without permission.
2. Whether the petitioner discharged the respondent on account of pregnancy, a prohibited act.
Ruling:

In the first issue, the employment of respondent has not been validly terminated. In this jurisdiction
tardiness and absenteeism, like abandonment, are recognized forms of neglect of duties, the existence
of which justify the dismissal of the erring employee. Respondent’s rule penalizing with discharge any
employee who has incurred six (6) or more absences without permission or subsequent justification is
admittedly within the purview of the foregoing standard.
However, while it is not disputed that complainant incurred absences exceeding six (6) days as she
actually failed to report for work from August 15-18, 23-26, 29-31, September 1-3, 5-10, 12-17, 21-
24, 26-30, and October 1-3, 1994, her being pregnant at the time these absences were incurred is not
questioned and is even admitted by respondent.
The Court agrees with the CA in concluding that respondent’s sickness was pregnancy-related and,
therefore, the petitioner cannot terminate respondent’s services because in doing so, petitioner will, in
effect, be violating the Labor Code which prohibits an employer to discharge an employee on account
of the latter’s pregnancy. “Art. 137. Prohibited acts. – It shall be unlawful for any employer: (2)To
discharge such woman on account of her pregnancy, while on leave or in confinement due to her
pregnancy.”
The Court finds no cogent reason to disturb the findings of the NLRC and the CA that the respondent
was able to subsequently justify her absences in accordance with company rules and policy; that the
respondent was pregnant at the time she incurred the absences; that this fact of pregnancy and its
related illnesses had been duly proven through substantial evidence; that the respondent attempted to
file leaves of absence but the petitioner’s supervisor refused to receive them; that she could not have
filed prior leaves due to her continuing condition; and that the petitioner, in the last analysis,
dismissed the respondent on account of her pregnancy, a prohibited act.
The Court is convinced that the petitioner terminated the services of respondent on account of her
pregnancy which justified her absences and, thus, committed a prohibited act rendering the dismissal
illegal.
EMPLOYMENT OF HOUSEHELPER
ULTRA VILLA FOOD HAUS vs. GENISTON; Gr. No. 120473, June 23, 1999
Facts:
Renato Geniston,private respondent herein filed a complaint for illegal dismissal against the Ultra Vires
Food Haus restaurant and/or its alleged owner Rosie Tio. Private respondent alleged that he was
employed as a "do it all guy," acting as waiter, driver, and maintenance man, in said restaurant. His
employment therein spanned from March 1, 1989 until he was dismissed on May 13, 1992. For his
services, private respondent was paid P60.00 in 1989, P70.00 in 1990, P80.00 in 1991 and P90.00
when he was dismissed in 1992.
Petitioner Rosie Tio, on the other hand, maintained that private respondent was her personal driver,
not an employee of the Ultra Villa Food Haus. As petitioner's personal driver, private respondent was
required to report for work at 7:00 a.m. to drive petitioner to Mandaue City where petitioner worked
as the Manager of the CFC Corporation. Private respondent was likewise given free meals as well as
13th month pay at the end of the year. Petitioner denied dismissing private respondent whom she
claimed abandoned his job.
During the elections of May 11, 1992, private respondent acted as a Poll Watcher for the National
Union of Christian Democrats. Though well aware that May 12, 1992 was a holiday, petitioner called
up private respondent that day to ask him to report for work as she had some important matters to
attend to. Private respondent's wife, however, coldly told petitioner that private respondent was
helping in the counting of ballots. Petitioner was thus forced to hire another driver to replace private
respondent. Private respondent came back a week after but only to collect his salary.
The Labor Arbiter concluded that private respondent, being a personal driver, was not entitled to
overtime pay, premium pay, service incentive leave pay and 13th month pay. The Labor Arbiter noted
private respondent's admission that he was petitioner's personal driver contained in the mandatory
conference order issued by the Labor Arbiter on January 10, 1994.

The NLRC ruled that private respondent was an employee of the Ultra Villa Food Haus.
Issues:
(1) Whether private respondent was an employee of the Ultra Villa Food Haus or the personal driver of
petitioner; and
(2) Whether private respondent was illegally dismissed from employment.
Decision:
The Supreme Court finds that private respondent was indeed the personal driver of petitioner, and not
an employee of the Ultra Villa Food Haus. There is substantial evidence to support such conclusion,
such as: private respondent's admission during the mandatory conference that he was petitioner's
personal driver, copies of the Ultra Villa Food Haus payroll which do not contain private respondent's
name and other pertinent documents.
Thus, Article 141 of the Labor Code applies, which provides:
Art. 141. Coverage. - This Chapter shall apply to all persons rendering services in households for
compensation.
"Domestic or household service" shall mean services in the employers home which is usually
necessary or desirable for the maintenance and enjoyment thereof and includes ministering to the
personal comfort and convenience of the members of the employers household, including services of
family drivers.
The Labor Code is silent on the grant of overtime pay, holiday pay, premium pay and service incentive
leave to those engaged in the domestic or household service.
Moreover, the specific provision of LC and Article 82, which defines the scope of the application of
these provisions, expressly excludes domestic helpers from its coverage:
Art. 82. Coverage. - The provision of this title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid by results as
determined by Secretary of Labor in appropriate regulations.
Clearly then, petitioner is not obliged by law to grant private respondent any of these benefits.
Employing the same line of analysis, it would seem that private respondent is not entitled to 13th
month pay. Nevertheless, we deem it just to award private respondent 13th month pay in view of
petitioner's practice of according private respondent such benefit. Indeed, petitioner admitted that she
gave private respondent 13th month pay every December.
No. The Supreme Court disagrees with petitioner which submits that private respondent abandoned
his job, preferring to work as an election watcher instead. To constitute abandonment, two requisites
must concur: (1) the failure to report to work or absence without valid or justifiable reason, and (2) a
clear intention to sever the employer-employee relationship as manifested by some overt acts, with
the second requisite as the more determinative factor. The burden of proving abandonment as a just
cause for dismissal is on the employer. Petitioner failed to discharge this burden. It is quite
unbelievable that private respondent would leave a stable and relatively well paying job as petitioner's
family driver to work as an election watcher.
Consequently, we do not find private respondent to have abandoned his job. His dismissal from
petitioner's employ being unjust, petitioner is entitled to an indemnity under Article 149 of the Labor
Code:
Art. 149. Indemnity for unjust termination of services. – If the period of household service is fixed,
neither the employer nor the househelper may terminate the contract before the expiration of the
term, except for a just cause. If the househelper is unjustly dismissed, he or she shall be paid the

compensation already earned plus that for fifteen (15) days by way of indemnity. If the househelper
leaves without justifiable reason he or she shall forfeit any unpaid salary due him or her not exceeding
fifteen (15) days.
REMINGTON INDUSTRIAL SALES CORPORATION vs. ERLINDA CASTANEDA; G.R. Nos. 169295-96,
November 20, 2006
Facts:
Erlinda alleged that she started working in August 1983 as company cook with a salary of Php
4,000.00 for Remington, a corporation engaged in the trading business; that she worked for six (6)
days a week, starting as early as 6:00 a.m. because she had to do the marketing and would end at
around 5:30 p.m., or even later, after most of the employees, if not all, had left the company
premises; that she continuously worked with Remington until she was unceremoniously prevented
from reporting for work when Remington transferred to a new site in Edsa, Caloocan City. She
averred that she reported for work at the new site in Caloocan City on January 15, 1998, only to be
informed that Remington no longer needed her services. Erlinda believed that her dismissal was illegal
because she was not given the notices required by law; hence, she filed her complaint for
reinstatement without loss of seniority rights, salary differentials, service incentive leave pay, 13th
month pay and 10% attorney’s fees.
Issue:
1. Whether or not Erlinda Casteneda is a regular employee of petitioner or mere domestic worker of
the family of Mr. Tan.
2. Whether or not she was illegally dismissed.
Decision:
The Court affirmed the decision of the NLRC and CA holding Erlinda a regular employee of petitioner.
Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended, the terms “househelper” or
“domestic servant” are defined as follows:
“The term ‘househelper’ as used herein is synonymous to the term ‘domestic servant’ and shall refer
to any person, whether male or female, who renders services in and about the employer’s home and
which services are usually necessary or desirable for the maintenance and enjoyment thereof, and
ministers exclusively to the personal comfort and enjoyment of the employer’s family.”
The foregoing definition clearly contemplates such househelper or domestic servant who is employed
in the employer’s home to minister exclusively to the personal comfort and enjoyment of the
employer’s family. Such definition covers family drivers, domestic servants, laundry women, yayas,
gardeners, houseboys and similar househelps.
The criteria are the personal comfort and enjoyment of the family of the employer in the home of said
employer. While it may be true that the nature of the work of a househelper, domestic servant or
laundrywoman in a home or in a company staff house may be similar in nature, the difference in their
circumstances is that in the former instance they are actually serving the family while in the latter
case, the mere fact that the househelper or domestic servant is working within the premises of the
business of the employer and in relation to or in connection with its business, as in its staffhouses for
its guest or even for its officers and employees, warrants the conclusion that such househelper or
domestic servant is and should be considered as a regular employee of the employer and not as a
mere family househelper or domestic servant as contemplated in Rule XIII, Section 1(b), Book 3 of
the Labor Code, as amended.
Clearly, the situs, as well as the nature of respondent’s work as a cook, who caters not only to the
needs of Mr. Tan and his family but also to that of the petitioner’s employees, makes her fall squarely
within the definition of a regular employee under the doctrine enunciated in the Apex Mining case.
That she works within company premises, and that she does not cater exclusively to the personal
comfort of Mr. Tan and his family, is reflective of the existence of the petitioner’s right of control over
her functions, which is the primary indicator of the existence of an employer-employee relationship.
Moreover, it is wrong to say that if the work is not directly related to the employer's business, then
the person performing such work could not be considered an employee of the latter. The

determination of the existence of an employer-employee relationship is defined by law according to
the facts of each case, regardless of the nature of the activities involved.
In addition, no less than the company’s corporate secretary has certified that respondent is a bonafide
company employee; she had a fixed schedule and routine of work and was paid a monthly salary of
P4,000.00; she served with the company for 15 years starting in 1983, buying and cooking food
served to company employees at lunch and merienda, and that this service was a regular feature of
employment with the company.
In the second issue, abandonment is the deliberate and unjustified refusal of an employee to resume
his employment. It is a form of neglect of duty; hence, a just cause for termination of employment by
the employer under Article 282 of the Labor Code, which enumerates the just causes for termination
by the employer. For a valid finding of abandonment, these two factors should be present: (1) the
failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to
sever employer-employee relationship, with the second as the more determinative factor which is
manifested by overt acts from which it may be deduced that the employee has no more intention to
work. The intent to discontinue the employment must be shown by clear proof that it was deliberate
and unjustified.
In the instant case, Erlinda’s immediate filing of her complaint with the NLRC negates abandonment.
Indeed, an employee who loses no time in protesting her layoff cannot by any reasoning be said to
have abandoned her work, for it is well-settled that the filing of an employee of a complaint for illegal
dismissal with a prayer for reinstatement is proof enough of her desire to return to work, thus,
negating the employer’s charge of abandonment.
In termination cases, the burden of proof rests upon the employer to show that the dismissal is for a
just and valid cause; failure to do so would necessarily mean that the dismissal was illegal. The
employer’s case succeeds or fails on the strength of its evidence and not on the weakness of the
employee’s defense. If doubt exists between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter.
14. MEDICAL, DENTAL AND OCCUPATIONAL SAFETY
EVELYN TOLOSA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, QWANA KAIUN (through
its resident-agent, FUMIO NAKAGAWA), ASIA BULK TRANSPORT PHILS. INC., PEDRO GARATE and
MARIO ASIS, respondents. [G.R. No. 149578. April 10, 2003]
Petitioner is the wife of late Capt. Tolosa praying to hold respondents solidarily liable for negligence
which resulted to the death of her husband. The labor arbiter ruled in her favor however on appeal,
respondents contended that her complaint is based on torts (due to negligence) and it is the regular
courts of law which have jurisdiction over the action. She argues that her cause of action is not
predicated on a quasi delict or tort, but on the failure of private respondents -- as employers of her
husband (Captain Tolosa) -- to provide him with timely, adequate and competent medical services
under Article 161 of the Labor Code:
“ART 161. Assistance of employer. -- It shall be the duty of any employer to provide all the necessary
assistance to ensure the adequate and immediate medical and dental attendance and treatment to an
injured or sick employee in case of emergency.”
Likewise, she contends that Article 217 (a) (4) of the Labor Code vests labor arbiters and the NLRC
with jurisdiction to award all kinds of damages in cases arising from employer-employee relations. She
also alleges that the “reasonable causal connection” rule should be applied in her favor.
The Supreme Court however affirmed the findings of the CA which ruled that the labor commission
had no jurisdiction over the subject matter of the action filed by petitioner. Her cause did not arise
from an employer-employee relation, but from a quasi-delict or tort. Further, there is no reasonable
causal connection between her suit for damages and her claim under Article 217 (a)(4) of the Labor
Code, which allows an award of damages incident to an employer-employee relation.
From her paper, it is evident that the primary reliefs she seeks are: (a) loss of earning capacity
denominated therein as “actual damages” or “lost income” and (b) blacklisting. The loss she claims

does not refer to the actual earnings of the deceased, but to his earning capacity based on a life
expectancy of 65 years. This amount is recoverable if the action is based on a quasi delict as provided
for in Article 2206 of the Civil Code, but not in the Labor Code.
While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs provided by
labor laws, but also damages governed by the Civil Code, these reliefs must still be based on an action
that has a reasonable causal connection with the Labor Code, other labor statutes, or collective
bargaining agreements.
“It is the character of the principal relief sought that appears essential in this connection.”
The labor arbiter found private respondents to be grossly negligent. He ruled that Captain Tolosa,
who died at age 58, could expect to live up to 65 years and to have an earning capacity of
US$176,400.
It must be noted that a worker’s loss of earning capacity and blacklisting are not to be equated with
wages, overtime compensation or separation pay, and other labor benefits that are generally cognized
in labor disputes. The loss of earning capacity is a relief or claim resulting from a quasi delict or a
similar cause within the realm of civil law.
On the other hand, petitioner’s claim for damages is not related to any other claim under Article 217,
other labor statutes, or collective bargaining agreements. In addition, she cannot anchor her claim for
damages to Article 161 of the Labor Code, which does not grant or specify a claim or relief. This
provision is only a safety and health standard under Book IV of the same Code. The enforcement of
this labor standard rests with the labor secretary. Thus, claims for an employer’s violation thereof are
beyond the jurisdiction of the labor arbiter. In other words, petitioner cannot enforce the labor
standard provided for in Article 161 by suing for damages before the labor arbiter.
It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in which the
employer-employee relation is merely incidental, and in which the cause of action proceeds from a
different source of obligation such as a tort. Since petitioner’s claim for damages is predicated on a
quasi delict or tort that has no reasonable causal connection with any of the claims provided for in
Article 217, other labor statutes, or collective bargaining agreements, jurisdiction over the action lies
with the regular courts-- not with the NLRC or the labor arbiters.
Phil. Global Communication vs. De Vera, 459 SCRA 260 [2005]
FACTS:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the business
of communication services and allied activities, while respondent Ricardo De Vera is a physician by
profession whom petitioner enlisted to attend to the medical needs of its employees.
On 15 May 1981, De Vera, via a letter dated 15 May 1981, offered his services to the petitioner,
therein proposing his plan of works required of a practitioner in industrial medicine, to include the
following:
1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for
consultation services to employees;
3. Management and treatment of employees that may necessitate hospitalization including emergency
cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees with no additional medical
fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as accomplishing medical forms, evaluating
conditions of employees applying for sick leave of absence and subsequently issuing proper
certification, and all matters referred which are medical in nature.

The parties agreed and formalized respondent’s proposal in a document denominated as
RETAINERSHIP CONTRACT which will be for a period of one year subject to renewal, it being made
clear therein that respondent will cover "the retainership the Company previously had with Dr. K.
Eulau" and that respondent’s "retainer fee" will be at P4,000.00 a month. Said contract was renewed
yearly. The retainership arrangement went on from 1981 to 1994 with changes in the retainer’s fee.
However, for the years 1995 and 1996, renewal of the contract was only made verbally.
In December 1996 when Philcom, thru a letter bearing on the subject boldly written as "TERMINATION
– RETAINERSHIP CONTRACT", informed De Vera of its decision to discontinue the latter’s "retainer’s
contract with the Company effective at the close of business hours of December 31, 1996" because
management has decided that it would be more practical to provide medical services to its employees
through accredited hospitals near the company premises.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a decision dismissing De
Vera’s complaint for lack of merit, on the rationale that as a "retained physician" under a valid
contract mutually agreed upon by the parties, De Vera was an "independent contractor" and that he
"was not dismissed but rather his contract with [PHILCOM] ended when said contract was not renewed
after December 31, 1996".
On De Vera’s appeal to the NLRC, the latter, in a decision dated 23 October 2000, reversed (the word
used is "modified") that of the Labor Arbiter, on a finding that De Vera is Philcom’s "regular employee"
and accordingly directed the company to reinstate him to his former position without loss of seniority
rights and privileges and with full backwages from the date of his dismissal until actual reinstatement.
De Vera filed a complaint for illegal dismissal.
The Court of Appeals rendered a decision, modifying that of the NLRC by deleting the award of
traveling allowance, and ordering payment of separation pay to De Vera in lieu of reinstatement.
Hence, the present petition.
ISSUES: Whether or not an employer-employee relationship exists between petitioner and

respondent
RULING:
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in decisions
rendered by the Court of Appeals. There are instances, however, where the Court departs from this
rule and reviews findings of fact so that substantial justice may be served. The exceptional instances
are where:
"xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture;
(2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court
of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both
appellant and appellees; (7) the findings of fact of the Court of Appeals are contrary to those of the
trial court; (8) said findings of facts are conclusions without citation of specific evidence on which they
are based; (9) the facts set forth in the petition as well as in the petitioner’s main and reply briefs are
not disputed by the respondents; and (10) the findings of fact of the Court of Appeals are premised on
the supposed absence of evidence and contradicted by the evidence on record.”
As we see it, the parties’ respective submissions revolve on the primordial issue of whether an
employer-employee relationship exists between petitioner and respondent, the existence of which is,
in itself, a question of fact well within the province of the NLRC. Nonetheless, given the reality that the
NLRC’s findings are at odds with those of the labor arbiter, the Court, consistent with its ruling in
Jimenez vs. National Labor Relations Commission, is constrained to look deeper into the attendant
circumstances obtaining in this case, as appearing on record.

The Court, in determining the existence of an employer-employee relationship, has invariably adhered
to the four-fold test, to wit: [1] the selection and engagement of the employee; [2] the payment of
wages; [3] the power of dismissal; and [4] the power to control the employee’s conduct, or the so-
called "control test", considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was respondent himself who sets the
parameters of what his duties would be in offering his services to petitioner.
The labor arbiter added the indicia, not disputed by respondent, that from the time he started to work
with petitioner, he never was included in its payroll; was never deducted any contribution for
remittance to the Social Security System (SSS); and was in fact subjected by petitioner to the ten
(10%) percent withholding tax for his professional fee, in accordance with the National Internal
Revenue Code, matters which are simply inconsistent with an employer-employee relationship.
Clearly, the elements of an employer-employee relationship are wanting in this case. We may add that
the records are replete with evidence showing that respondent had to bill petitioner for his monthly
professional fees. It simply runs against the grain of common experience to imagine that an ordinary
employee has yet to bill his employer to receive his salary.
We note, too, that the power to terminate the parties’ relationship was mutually vested on both.
Either may terminate the arrangement at will, with or without cause.
Finally, remarkably absent from the parties’ arrangement is the element of control, whereby the
employer has reserved the right to control the employee not only as to the result of the work done but
also as to the means and methods by which the same is to be accomplished.
Here, petitioner had no control over the means and methods by which respondent went about
performing his work at the company premises. He could even embark in the private practice of his
profession, not to mention the fact that respondent’s work hours and the additional compensation
therefor were negotiated upon by the parties. In fine, the parties themselves practically agreed on
every terms and conditions of respondent’s engagement, which thereby negates the element of
control in their relationship. For sure, respondent has never cited even a single instance when
petitioner interfered with his work.
Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157
of the Labor Code, and argues that he satisfies all the requirements thereunder. The provision relied
upon reads:
ART. 157. Emergency medical and dental services. – It shall be the duty of every employer to furnish
his employees in any locality with free medical and dental attendance and facilities consisting of:
The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not
more than two hundred (200) except when the employer does not maintain hazardous workplaces, in
which case the services of a graduate first-aider shall be provided for the protection of the workers,
where no registered nurse is available. The Secretary of Labor shall provide by appropriate regulations
the services that shall be required where the number of employees does not exceed fifty (50) and
shall determine by appropriate order hazardous workplaces for purposes of this Article;
The services of a full-time registered nurse, a part-time physician and dentist, and an emergency
clinic, when the number of employees exceeds two hundred (200) but not more than three hundred
(300); and
The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic,
and an infirmary or emergency hospital with one bed capacity for every one hundred (100) employees
when the number of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who
cannot stay in the premises of the establishment for at least two (2) hours, in the case of those
engaged on part-time basis, and not less than eight (8) hours in the case of those employed on full-
time basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be

engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe to
insure immediate availability of medical and dental treatment and attendance in case of emergency.
Had only respondent read carefully the very statutory provision invoked by him, he would have
noticed that in non-hazardous workplaces, the employer may engage the services of a physician "on
retained basis." As correctly observed by the petitioner, while it is true that the provision requires
employers to engage the services of medical practitioners in certain establishments depending on the
number of their employees, nothing is there in the law which says that medical practitioners so
engaged be actually hired as employees, adding that the law, as written, only requires the employer
"to retain", not employ, a part-time physician who needed to stay in the premises of the non-
hazardous workplace for two (2) hours.
Respondent takes no issue on the fact that petitioner’s business of telecommunications is not
hazardous in nature. As such, what applies here is the last paragraph of Article 157 which, to stress,
provides that the employer may engage the services of a physician and dentist "on retained basis",
subject to such regulations as the Secretary of Labor may prescribe. The successive "retainership"
agreements of the parties definitely hue to the very statutory provision relied upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is free
from doubt. Where the law is clear and unambiguous, it must be taken to mean exactly what it says,
and courts have no choice but to see to it that the mandate is obeyed. As it is, Article 157 of the
Labor Code clearly and unequivocally allows employers in non-hazardous establishments to engage
"on retained basis" the service of a dentist or physician. Nowhere does the law provide that the
physician or dentist so engaged thereby becomes a regular employee. The very phrase that they may
be engaged "on retained basis", revolts against the idea that this engagement gives rise to an
employer-employee relationship.
We note, however, that even as the contracts entered into by the parties invariably provide for a 60-
day notice requirement prior to termination, the same was not complied with by petitioner when it
terminated on 17 December 1996 the verbally-renewed retainership agreement, effective at the close
of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both parties, that execution of the NLRC
decision had already been made at the NLRC despite the pendency of the present recourse. For sure,
accounts of petitioner had already been garnished and released to respondent despite the previous
Status Quo Order issued by this Court. To all intents and purposes, therefore, the 60-day notice
requirement has become moot and academic if not waived by the respondent himself.
The Supreme Court granted the petition. The Court of Appeals decision was reversed and set aside.
The Labor Arbiter’s December 21, 1998 decision was reinstated.
U-Bix Corp., vs. Bandiola, 525 SCRA 566 [2007]
Facts:
Sometime in April 1995, Bandiola was employed by U-BIX to install furniture for its customers. On 13
April 1997, Bandiola and two other U-BIX employees were involved in a vehicular accident on their
way to Baguio, where they were assigned by U-BIX to install furniture for an exhibit. As a result of the
accident, Bandiola sustained a fracture on his left leg.
Bandiola and his co-employees were initially brought to the Rosario District Hospital. The next day, 14
April 1997, they were transferred to the Philippine Orthopedic Hospital (Orthopedic). After his broken
leg was cemented, Bandiola was advised to go back for further medical treatment. U-BIX paid for the
medical expenses incurred in both mentioned hospitals.
When Bandiola asked for additional financial assistance for further expenses in the treatment of his leg
which even needed to be casted in fiberglass, U-BIX allegedly refused.
On September 1998, Bandiola filed a Complaint before the Labor Arbiter, where he alleged
underpayment of salary; non-payment of overtime pay; premium pay for work performed on holidays

and rest days; separation pay; service incentive leave pay; 13th month pay; and the payment of
actual, moral and exemplary damages.
In its Decision, dated 16 September 1998, Labor Arbiter allowed Bandiola's claim for salary
differential, service incentive leave pay and 13th month pay due to U-BIX's failure to present payrolls
or similar documents. Incidentally, the award of these claims is no longer questioned in the present
petition. The other claims, particularly those for medical expenses that Bandiola allegedly incurred and
for moral and exemplary damages, were dismissed.
Bandiola asserts that U-BIX failed to extend to him any financial assistance after he was injured in the
performance of his duties, and that as a result, he suffered physical pain, mental torture, fright,
sleepless nights, and serious anxiety. He claims that this entitles him to moral and exemplary
damages.
Bandiola filed an appeal before the NLRC. NLRC amended the Decision rendered by the Labor Arbiter
ruling that U-BIX should reimburse Bandiola the amount for the medical expenses he incurred in
connection with his fractured leg; and further ruled that U-BIX is liable to pay Bandiola P25,000.00 in
moral damages and P25,000.00 in exemplary damages for refusing to reimburse Bandiola for the
medical expenses he incurred after it failed to report to the Social Security System (SSS) the injuries
sustained by Bandiola
It affirmed Bandiola's entitlement to reimbursement of his medical expenses, but reduced the amount
to P7,742.50, the amount of actual damages he was able to prove. It also affirmed without
modification the award of moral and exemplary damages, and the monetary award granted by the
Labor Arbiter
Issue: Whether or not petitioner U-BIX should reimburse respondent Bandiola for alleged medical
expenses of P7,742.50 and pay for moral damages of P25,000.00 and exemplary damages of
P25,000.00 to said respondent Bandiola.
Ruling:
Yes.
Contrary to the arguments put forward by U-BIX, it is liable to reimburse Bandiola the amount of
P7,742.50 for medical expenses because its failure to comply with its duty to record and report
Bandiola's injury to the SSS precluded Bandiola from making any claims. Moreover, U-BIX, by its own
admission, reimbursed its other employees who were involved in the same accident for their medical
expenses. Clearly, the reimbursement of medical expenses for injuries incurred in the course of
employment is part of the benefits enjoyed by U-BIX's employees. The only justification for its refusal
to reimburse Bandiola was that he intended to defraud the company by presenting spurious receipts
amounting to P7,742.50 that were allegedly issued four months before their presentation.
EMPLOYEES COMPENSATION FOR WORK-RELATED INJURIES, DISABILITIES AND DEATHS - Articles

205 and 206 of the Labor Code set the reportorial requirements in cases when an employee falls sick
or suffers an injury arising in the course of employment. An injury is said to arise "in the course of
employment" when it takes place within the period of employment, at a place where the employee
may reasonably be, and while he is fulfilling his duties or is engaged in doing something incidental
thereto. The aforecited provisions of the Labor Code provide that:
ART 205. RECORD OF DEATH OR DISABILITY
All employers shall keep a logbook to record chronologically the sickness, injury or death of their
employees, setting forth therein their names, dates and places of the contingency, nature of the
contingency and absences. Entries in the logbook shall be made within five days from notice or
knowledge of the occurrence of contingency. Within five days after entry in the logbook, the employer
shall report to the System only those contingencies he deems to be work-connected.

All entries in the employers logbook shall be made by the employer or any of his authorized official
after verification of the contingencies or the employees absences for a period of a day or more. Upon
request by the System, the employer shall furnish the necessary certificate regarding information
about any contingency appearing in the logbook, citing the entry number, page number and date.
Such logbook shall be made available for inspection to the duly authorized representatives of the
System.
ART 206. NOTICE OF SICKNESS, INJURY OR DEATH

Notice of sickness, injury or death shall be given to the employer by the employee or by his
dependents or anybody on his behalf within five days from the occurrence of the contingency. No
notice to the employer shall be required if the contingency is known to the employer or his agents or
representatives.
GENERAL RULE AND EXCEPTION ON NOTIFICATION - As a general rule, the injured employee must
notify his employer, who is obligated to enter the notice in a logbook within five days after notification.
Within five days after making the entry, the employer of a private company reports the work-related
sickness or injury to the SSS. The claim is forwarded to the SSS, which decides on the validity of the
claim. When the SSS denies the claim, the denial may be appealed to the Employees' Compensation
Commission (ECC) within 30 days.
However, the law provides an exception to the rule requiring an employee to notify his or her
employer of his injuries. Under Section B of ECC Board Resolution No. 2127, issued on 5 August 1982,
notice of injury, sickness or death of the employee need not be given to the employer in any of the
following situations:
(1) When the employee suffers the contingency within the employer's premises;
(2) When the employee officially files an application for leave of absence by reason of the
contingency from which he suffers;
(3) When the employer provides medical services and/or medical supplies to the employee who
suffers from the contingency; and
(4) When the employer can be reasonably presumed to have had knowledge of the employee's
contingency, in view of the following circumstances:
4.1) The employee was performing an official function for the employer when the contingency
occurred;
(4.2) The employee's contingency has been publicized through mass media outlets; or
(4.3) The specific circumstances of the occurrence of the contingency have been such that the
employer can be presumed to have readily known it soon thereafter; or
(4.4) Any other circumstances that may give rise to a reasonable presumption that the employer
has been aware the contingency.
In the present case, there is no dispute that Bandiola's leg injury was sustained in the course of his
employment with U-BIX. At the time of the accident, Bandiola was on the way to Baguio, where he
was ordered by U-BIX to install furniture for an exhibit. Moreover, U-BIX was aware that Bandiola, as
well as his other co-employees, were injured during the accident. U-BIX admitted to providing
Bandiola and his co-employees with medical assistance and it even sent its representative, Rey
Reynes, to Rosario District Hospital, where they were confined, and had them transferred to the
Orthopedic. U-BIX was also aware that the Orthopedic instructed Bandiola to return for further medical
treatment. It is implicit that Bandiola needed further treatment for his broken leg and was, thus,
incapacitated to work.
Given the foregoing circumstances, U-BIX had the legal obligation to record pertinent information in
connection with the injuries sustained by Bandiola in its logbook within five days after it had known
about the injuries; and to report the same to the SSS within five days after it was recorded in the
logbook, in accordance with Articles 205 and 206 of the Labor Code. Had U-BIX performed its lawful
duties, the SSS, or the ECC on appeal, could have properly considered whether or not Bandiola was
entitled to reimbursement for his medical expenses, as well as disability benefits while he was unable
to work. However, U-BIX did not present any evidence showing that it had complied with these legal

requirements. It had not even replied to Bandiola's allegations in his Position Paper, dated 13 April
1998, that its employees were not even members of the SSS.
HISTORY AND IMPORTANCE OF “EMPLOYEES COMPENSATION” - As early as 1938, this Court

emphasized, in the case of Murillo v. Mendoza, that labor laws have demonstrated an impetus towards
ensuring that employees are compensated for work-related injuries. The law has since treated such
compensation as a right, which the employees can claim, instead of an act of charity to be given at
the employer's discretion.
The intention of the Legislature in enacting the Workmen's Compensation Act was to secure workmen
and their dependents against becoming objects of charity, by making a reasonable compensation for
such accidental calamities as are incidental to the employment. Under such act injuries to workmen
and employees are to be considered no longer as results of fault or negligence, but as the products of
the industry in which the employee is concerned. Compensation for such injuries is, under the theory
of such statute, like any other item in the cost of production or transportation, and ultimately charged
to the consumer. The law substitutes for liability for negligence an entirely new conception; that is,
that if the injury arises out of and in the course of the employment, under the doctrine of man's
humanity to man, the cost of compensation must be one of the elements to be liquidated and
balanced in the course of consumption. In other words, the theory of law is that, if the industry
produces an injury, the cost of that injury shall be included in the cost of the product of the industry.
In De Jesus v. Employee's Compensation Commission, this Court further noted that while the present
law protects employers from spurious and long overdue claims, it stresses at the same time that the
claims for compensation are to be promptly and properly addressed. More importantly, employers no
longer need to determine the validity of a claim or to defend themselves from spurious claims. Their
duties are thus limited to paying the monthly premiums and reporting the sickness, injury or death for
which compensation is due.
The new law establishes a state insurance fund built up by the contributions of employers based on
the salaries of their employees. The injured worker does not have to litigate his right to compensation.
No employer opposes his claim. There is neither notice of injury nor requirement of controversion. The
sick worker simply files a claim with a new neutral Employees' Compensation Commission which then
determines on the basis of the employee's supporting papers and medical evidence whether or not
compensation may be paid. The payment of benefits is more prompt. The cost of administration is
low. The amount of death benefits has also been doubled.
On the other hand, the employer's duty is only to pay the regular monthly premiums to the scheme. It
does not look for insurance companies to meet sudden demands for compensation payments or set up
its own funds to meet these contingencies. It does not have to defend itself from spuriously
documented or long past claims.
The new law applies the social security principle in the handling of workmen's compensation. The
Commission administers and settles claims from a fund under its exclusive control. The employer does
not intervene in the compensation process and it has no control, as in the past, over payment of
benefits. . . . .
Since there is no employer opposing or fighting a claim for compensation, the rules on presumption of
compensability and controversion cease to have importance. The lopsided situation of an employer
versus one employee, which called for equalization through the various rules and concepts favoring
the claimant, is now absent.
By failing to report Bandiola's injury to the SSS, U-BIX disregarded the law and its purpose; that is, to
provide a proper and prompt settlement of his claims. Instead, U-BIX arrogated upon itself the duty of
determining which medical expenses are proper for reimbursement. In doing so, it could unnecessarily
delay and unjustifiably refuse to reimburse Bandiola for medical expenses even if they were
adequately supported by receipts, as was done in this instance. The expense and delay undergone by
Bandiola since 1997 in obtaining reimbursement for his medical expenses of P7,742.50 very clearly
defeat the purpose of the law.

BURDEN OF PROOF ON THE DEFENDANT OF A CLAIM - U-BIX does not question its liability to pay for
medical expenses incurred in connection with the 13 April 1997 accident; it admits that it paid for all
the medical expenses of its other employees, who were involved in the accident. It refused, however,
to reimburse Bandiola for further medical expenses on the ground that the receipts were counterfeit
and belatedly presented to U-BIX.
Bandiola presented eight receipts with a total amount of P7,742.50 issued by MCP and his attending
physician, Dr. Celestino Musngi. The amounts indicated therein range from P200.00 to P2,936.00. The
receipts were issued on 24 April 1997 and 6 May 1997, or around the time the accident occurred on
13 April 1997. From the face of the receipts, there is no showing that these documents are false or
falsified. U-BIX could have easily confirmed with MCP or Dr. Celestino Musngi, who issued said
receipts, the authenticity of the documents. However, it failed to allege that it took any steps to check
the authenticity of the receipts. It also failed to present any evidence that these receipts are fake.
Absent any proof, no weight can be attached to the allegation that the receipts are spurious.
The party who alleges the fact has the burden of proving it. The burden of proof is assigned to the
defendant of a claim when he or she alleges an affirmative defense, which is not a denial of an
essential ingredient in the complainant's cause of action — the existence of the receipts, in the present
case — but is one which, if established, will be a good defense, i.e., an avoidance of the claim. One
who alleges an affirmative defense that is denied by the complainant — the falsity of the receipts, in
this case — has the burden of proving it. Unless the party asserting the affirmative of an issue
sustains the burden of proof, his or her cause will not succeed. If he or she fails to establish the facts
of which the matter asserted is predicated, the complainant is entitled to a verdict or decision in his or
her favor. In this case, U-BIX's affirmative defense that the receipts are spurious is rejected due to
utter lack of proof.
U-BIX asserts that no demand was made by the petitioner and that it only came to know of Bandiola's
medical expenses when it received the Summons to attend a preliminary conference before the Labor
Arbiter. For his part, Bandiola insists that before filing the case with the NLRC, he approached U-BIX
three times for financial assistance in connection with his medical expenses, but he was refused.
Bandiola identified the persons he spoke to as Rey Reynes and a certain Ms. Clarisse. U-BIX alleges
that it sent Rey Reynes to look for Bandiola in the address recorded in their office files, but that he no
longer resided therein. Bandiola contested this allegation by stating that he had not changed his
residence. As of 20 September 2006, Bandiola still resided at the same address, Sampaloc Site II-B,
Barangay B.F. Homes, Parañaque City, as evidenced by the Certificate of Indigency issued by
Barangay BF Homes Chairperson Florencia N. Amurao.
U-BIX maintains that Bandiola kept the company in the dark regarding his medical expenses because
he intended to file a baseless suit aimed at extorting money from the company. This Court finds it
implausible that a worker who received less than minimum wage would choose to initiate legal
proceedings before even seeking to collect from his employer. To automatically presume that Bandiola
intended to defraud the company despite the absence of supporting evidence would constitute a hasty
and unsubstantiated generalization, which displays a prejudice against ordinary workers, such as
Bandiola.
U-BIX's continued and stubborn refusal to reimburse Bandiola's medical expenses was made evident
during the mandatory conference before the Labor Arbiter when it refused to recognize the receipts
shown to it. If U-BIX had refused to take cognizance of the receipts presented during a quasi-judicial
proceeding before a public officer, then it would have been more likely that it ignored, if not flat-out
refused, to consider the said receipts when the same were presented by a lowly employee.
Under the facts of the case, Bandiola is entitled to moral and exemplary damages. There is no
question that moral damages may be awarded in cases when a wrongful act or omission has caused
the complainant mental anguish, fright and serious anxiety.
Articles 2217 and 2219, in connection with Article 21 of the Civil Code, read:
Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. Though

incapable of pecuniary computation, moral damages may be recovered if they are the proximate result
of the defendant's wrongful act for omission.
Art. 2219. Moral damages may be recovered in the following and analogous cases:
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage.
U-BIX failed to perform its legal obligation to report to the SSS the injuries suffered by Bandiola, and,
thereafter, failed to extend the same "financial aid" it extended to other employees who were involved
in the same accident. After it was shown the receipts for the medical expenses Bandiola paid for in
connection with the injuries, U-BIX unreasonably refused to reimburse him for the expenses. It is not
difficult to accept Bandiola's claim that he suffered mental anguish, serious anxiety and fright when U-
BIX left him without any options for financial support while he was suffering from and rendered
incapacitated by work-related injuries. He was severely distressed by his plight that he felt that he
could no longer continue to work for U-BIX. U-BIX's unjustified and continued refusal to reimburse
Bandiola after it failed to report his injury to the SSS, despite the receipts he presented, demonstrates
bad faith. By singling out Bandiola from its other employees, who were reimbursed for their medical
expenses, and forcing him to litigate for ten years in order to claim the unsubstantial amount of
P7,742.50, U-BIX was clearly indulging in malicious conduct.
AWARD ON MORAL DAMAGES - As regards the award of moral damages, this Court has ruled that
there is no hard and fast rule in determining the fair amount for moral damages, since each case must
be governed by its own peculiar circumstances. It should enable the injured parties to obtain means,
diversions or amusements that will serve to alleviate the moral sufferings the injured party has
undergone by reason of defendant's culpable action. In other words, the award of moral damages is
aimed at a restoration within the limits of the possible, of the spiritual and/or psychological status quo
ante; and therefore it must be proportionate to the suffering inflicted. Therefore, in light of the
sufferings sustained by Bandiola, this Court sustains the award of P25,000.00 as moral damages.
Article 2229 of the Civil Code provides that exemplary damages may be imposed by way of example
or correction for public good. It reads:
Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages.
Exemplary damages are designed to permit the courts to mould behavior that has socially deleterious
consequences, and their imposition is required by public policy to suppress the wanton acts of the
offender.
The Labor Code provides for the medical expenses, as well as disability benefits of workers suffering
from work-related injuries and recognizes such compensation as their right. Indeed, a system has
been put in place for the prompt collection of the benefits, which are given by law to injured
employees. All that U-BIX was required to do was to report the injury; it need not have defended itself
from what it perceived to be spurious claims. Instead, it took upon itself the duty of determining the
validity of Bandiola's claims and unjustifiably refused to reimburse his properly receipted medical
expenses. The prolonged litigation of his valid claims is not the only miserable situation which the
present labor laws sought to prevent, but the pathetic situation wherein a laborer is placed at the
mercy of his or her employer for recompense that is his or hers by right. Exemplary damages are,
thus, rightfully imposed against U-BIX.
Escasinas et al., vs. Shangri-la’s Mactan Island Resort et al., G.R. No. 178827, March 4, 2009
FACTS:
Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in
1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic

at respondent Shangri-la’s Mactan Island Resort (Shangri-la) in Cebu of which she was a retained
physician.
In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) a
complaint for regularization, underpayment of wages, non-payment of holiday pay, night shift
differential and 13th month pay differential against respondents, claiming that they are regular
employees of Shangri-la. Shangri-la claimed, however, that petitioners were not its employees but of
respondent doctor, that Article 157 of the Labor Code, as amended, does not make it mandatory for a
covered establishment to employ health personnel, that the services of nurses is not germane nor
indispensable to its operations, and that respondent doctor is a legitimate individual contractor who
has the power to hire, fire and supervise the work of nurses under her.
The Labor Arbiter (LA) declared petitioners to be regular employees of Shangri-la, noting that the
petitioners usually perform work which is necessary and desirable to Shangri-la’s business, and thus
ordered Shangri-la to grant them the wages and benefits due them as regular employees from the
time their services were engaged.
Upon appeal, the NLRC declared that no employer-employee relationship existed between
Shangri-la and petitioners. It ruled that contrary to the finding of the LA, even if Art. 280 of the Labor
Code states that if a worker performs work usually necessary or desirable in the business of an
employer, he cannot be automatically deemed a regular employee, and that the Memorandum of
Agreement between the respondent and the respondent doctor amply shows that respondent doctor
was in fact engaged by Shangri-la on retainer basis, under which she could hire her own nurses and
other clinic personnel.
The Court of Appeals (CA) affirmed the NLRC decision, concluding that all aspects of
employment of petitioners being under the supervision and control of respondent doctor and since
Shangri-la is not principally engaged in the business of providing medical or healthcare services,
petitioners could not be regarded as regular employees of Shangri-la.
ISSUES:
1. Whether or not Article 157 of the Labor Code make it mandatory for covered establishment to
employ health personnel;
2. Whether or not there exists an employer-employee relationship between Shangri-la and petitioners.
HELD:
The Court holds that, contrary to petitioners’ postulation, Art. 157 does not require the engagement of
full-time nurses as regular employees of a company employing not less than 50 workers. Thus, the
Article provides:
ART. 157. Emergency medical and dental services. – It shall be the duty of every employer to
furnish his employees in any locality with free medical and dental attendance and facilities consisting
of:
(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but
not more than two hundred (200) except when the employer does not maintain hazardous
workplaces, in which case the services of a graduate first-aider shall be provided for the protection of
the workers, where no registered nurse is available. The Secretary of Labor shall provide by
appropriate regulations the services that shall be required where the number of employees does not
exceed fifty (50) and shall determine by appropriate order hazardous workplaces for purposes of this
Article;(b) The services of a full-time registered nurse, a part-time physician and dentist, and an
emergency clinic, when the number of employees exceeds two hundred (200) but not more than three
hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental
clinic, and an infirmary or emergency hospital with one bed capacity for every one hundred (100)
employees when the number of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who
cannot stay in the premises of the establishment for at least two (2) hours, in the case of those
engaged on part-time basis, and not less than eight ( hours in the case of those employed on full-
time basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be
engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe to
insure immediate availability of medical and dental treatment and attendance in case of emergency.
Under the foregoing provision, Shangri-la, which employs more than 200 workers, is
mandated to “furnish” its employees with the services of a full-time registered nurse, a part-time
physician and dentist, and an emergency clinic which means that it should provide or make available
such medical and allied services to its employees, not necessarily to hire or employ a service provider.
As held in Philippine Global Communications vs. De Vera:
x x x while it is true that the provision requires employers to engage the services of medical
practitioners in certain establishments depending on the number of their employees, nothing is there
in the law which says that medical practitioners so engaged be actually hired as employees, adding
that the law, as written, only requires the employer “to retain”, not employ, a part-time physician who
needed to stay in the premises of the non-hazardous workplace for two (2) hours.The term “full-time”
in Art. 157 cannot be construed as referring to the type of employment of the person engaged to
provide the services, for Article 157 must not be read alongside Art. 280 in order to vest employer-
employee relationship on the employer and the person so engaged. So De Vera teaches:
x x For, we take it that any agreement may provide that one party shall render services for and in
behalf of another, no matter how necessary for the latter’s business, even without being hired as an
employee. This set-up is precisely true in the case of an independent contractorship as well as in an
agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the
yardstick for determining the existence of an employment relationship. As it is, the provision merely
distinguishes between two (2) kinds of employees, i.e., regular and casual. x x x
The phrase “services of a full-time registered nurse” should thus be taken to refer to the kind
of services that the nurse will render in the company’s premises and to its employees, not the manner
of his engagement.
The existence of an independent and permissible contractor relationship is generally

established by considering the following determinants: whether the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term and duration of
the relationship; the right to assign the performance of a specified piece of work; the control and
supervision of the work to another; the employer’s power with respect to the hiring, firing and
payment of the contractor’s workers; the control of the premises; the duty to supply the premises,
tools, appliances, materials and labor; and the mode, manner and terms of payment.
On the other hand, existence of an employer- employee relationship is established by the

presence of the following determinants: (1) the selection and engagement of the workers; (2) power
of dismissal; (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.
Against the above-listed determinants, the Court holds that respondent doctor is a legitimate
independent contractor. That Shangri-la provides the clinic premises and medical supplies for use of
its employees and guests does not necessarily prove that respondent doctor lacks substantial capital
and investment. Besides, the maintenance of a clinic and provision of medical services to its
employees is required under Art. 157, which are not directly related to Shangri-la’s principal business
– operation of hotels and restaurants.
As to payment of wages, respondent doctor is the one who underwrites the following: salaries,
SSS contributions and other benefits of the staff; group life, group personal accident insurance and
life/death insurance for the staff with minimum benefit payable at 12 times the employee’s last drawn

salary, as well as value added taxes and withholding taxes, sourced from her P60,000.00 monthly
retainer fee and 70% share of the service charges from Shangri-la’s guests who avail of the clinic
services. It is unlikely that respondent doctor would report petitioners as workers, pay their SSS
premium as well as their wages if they were not indeed her employees.
With respect to the supervision and control of the nurses and clinic staff, it is not disputed that
a document, “Clinic Policies and Employee Manual” claimed to have been prepared by respondent
doctor exists, to which petitioners gave their conformity and in which they acknowledged their co-
terminus employment status. It is thus presumed that said document, and not the employee manual
being followed by Shangri-la’s regular workers, governs how they perform their respective tasks and
responsibilities.
In fine, as Shangri-la does not control how the work should be performed by petitioners, it is
not petitioners’ employer.
15. MIGRANT WORKER’S ACT AND OVERSEAS FILIPINO ACT OF 1995 AND RECRUITMENT AND
PLACEMENT
JSS INDOCHINA CORPORATION, PETITIONER, VS. GERARDO R. FERRER, MELITON A. ASOR, HILARIO
Z. DAYRIT, AMADO E. VILLENA, JOEL C. CALDAIRA, HENRY G. DELA ROCA, MARIANO C. TIBUYIN,
EDGARDO B. VIAJE, EMMANUEL M. NOCON, LAUDENCIO O. MENDOZA AND GERONIMO O. SALAZAR,
RESPONDENTS. [G.R. No. 156381, October 14, 2005]
Respondents, in their complaint, alleged that petitioner hired them as construction workers for its
Taiwan-based principal/employer Formosa Plastics Corporation. Pursuant to the parties’ contracts of
employment, each respondent would receive a monthly salary of NT$15,360.00. Their employment
covered a period of one (1) year or from May 1, 1997 to May 1, 1998.
But upon their arrival, only 20 workers, excluding respondents, were employed as construction
workers at Formosa Plastics Corporation. Aggrieved, they sought assistance from Manila Economic
and Cultural Office (MECO) officials who directed them to sign separate affidavits alleging that they
were assigned, not as construction workers for Formosa Plastics Corporation, but as cable tray/pipe
tract workers at Shin Kwan Enterprise Co., Ltd. On May 17, 1997, they were repatriated to the
Philippines.
Petitioner denied the allegations in the complaint, claiming that, assisted by MECO officials,
respondents pre-terminated their respective contracts of employment as they refused to work after
being assigned as cable tray/pipe tract workers by Formosa Plastics Corporation to 33 KV Worksite
being administered by Shin Kwan Construction Company Limited.
Issue: Whether respondents were illegally dismissed from employment by petitioner.
There is no question that petitioner violated its contract with respondents. As found by the Labor
Arbiter, the NLRC and the Appellate Court, petitioner did not assign them as construction workers for
Formosa Plastics Corporation. Instead, they were directed to work as cable tray/pipe tract workers at
Shin Kwan Enterprise Co., Ltd.
The Labor Arbiter found that respondents’ “decision to resign from their employment were made by
force of circumstances not attributable to their own fault,” and “it was not their fault that they were
left out from among those workers who were considered for employment by the foreign employer.”
Likewise, the NLRC held that respondents’ “decision to go home to the Philippines was justified in view
of the evident breach of contract” by petitioner, as “it clearly appeared that upon their arrival at the
jobsite, there was no employer on hand.” Clearly, both labor tribunals correctly concluded, as affirmed
by the Court of Appeals, that they were forced to resign and to pre-terminate their employment
contracts in view of petitioner’s breach of their provisions. Undoubtedly, the termination of
respondents’ services is without just or valid cause.
Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act, provides:

“SECTION 10. Money Claims. — In case of termination of overseas employment without just, valid
or authorized cause as defined by law or contract, the worker shall be entitled to the full
reimbursement of his placement fee with interest at twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3) months for every year of
the unexpired term, whichever is less.
Verily, as correctly held by the Court of Appeals, respondents who were unjustly dismissed from work
are actually entitled to an amount representing their three (3) months salary considering that their
employment contract has a term of exactly one (1) year; plus a full refund of their placement fee, with
no ceiling, with interest at 12% per annum. Petition denied.
PEOPLE OF THE PHILIPPINES vs. CAPT. FLORENCIO O. GASACAO, G.R. No. 168445, November 11,
2005
Respondent’s guilt which has been proven beyond reasonable doubt appealed that he was not
engaged in illegal recruitment. The Court sustained the findings of the trial court. RA No. 8042 defines
illegal recruitment which shall mean any act of canvassing, enlisting, contracting, transporting,
utilizing, hiring, procuring workers and includes referring, contract services, promising or advertising
for employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder of
authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise
known as the Labor Code of the Philippines: Provided, that such non-licensee or non-holder who, in
any manner, offers or promises for a fee employment abroad to two or more persons shall be deemed
so engaged. It shall likewise include the following acts, whether committed by any persons, whether a
non-licensee, non-holder, licensee or holder of authority.
To charge or accept directly or indirectly any amount greater than the specified in the schedule of
allowable fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any
amount greater than that actually received by him as a loan or advance;
(l) Failure to actually deploy without valid reason as determined by the Department of Labor and
Employment; and
(m) Failure to reimburse expenses incurred by the workers in connection with his documentation and
processing for purposes of deployment, in cases where the deployment does not actually take place
without the worker's fault. Illegal recruitment when committed by a syndicate or in large scale shall be
considered as offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate carried out by a group of three (3) or more
persons conspiring or confederating with one another. It is deemed committed in large scale if
committed against three (3) or more persons individually or as a group.
A license is a document issued by the Department of Labor and Employment (DOLE) authorizing a
person or entity to operate a private employment agency, while an authority is a document issued by
the DOLE authorizing a person or association to engage in recruitment and placement activities as a
private recruitment entity. However, it appears that even licensees or holders of authority can be held
liable for illegal recruitment should they commit any of the above-enumerated acts.
Thus, it is inconsequential (insignificant) that appellant committed large scale illegal recruitment while
Great Eastern Shipping Agency, Inc. was holding a valid authority. The Court thus finds that the trial
court committed no reversible error in not appreciating that the manning agency was a holder of a
valid authority when appellant recruited the private complainants.
From the testimonies of the private complainants, it was clearly established that appellant is not a
mere employee of Great Eastern Shipping Agency Inc. As the crewing manager, it was appellant who
made representations with the private complainants that he can secure overseas employment for
them upon payment of the cash bond.
It is well settled that to prove illegal recruitment, it must be shown that appellant gave complainants
the distinct impression that he had the power or ability to send complainants abroad for work such
that the latter were convinced to part with their money in order to be employed. Appellant’s act of

promising the private complainants that they will be deployed abroad within three months after they
have paid the cash bond clearly shows that he is engaged in illegal recruitment.
Although he informed them that it is optional, he collected cash bonds and promised their deployment
notwithstanding the proscription against its collection under Section 60 of the Omnibus Rules and
Regulations Implementing R.A. No. 8042 which state that:
SEC. 60. Prohibition on Bonds and Deposits. – In no case shall an employment agency require any
bond or cash deposit from the worker to guarantee performance under the contract or his/her
repatriation.
Gasacao’s assertion that he was unaware of the prohibition against the collection of bonds or cash
deposits from applicants is unavailing. It is an established dictum that ignorance of the law excuses no
one from compliance therewith. The defense of good faith is neither available. Such failure to deploy
constitutes a violation of Section 6 (l) of RA No. 8042. Worse, when it became clear that appellant
cannot deploy the private complainants without their fault, he failed to return the amount of the cash
bond paid by them.
Illegal recruitment is deemed committed in large scale if committed against three or more persons
individually or as a group. In this case, five complainants testified against appellant’s acts of illegal
recruitment, thereby rendering his acts tantamount to economic sabotage.
MERCEDITA ACUÑA, MYRNA RAMONES, and JULIET MENDEZ, vs. HON. COURT OF APPEALS and JOIN
INTERNATIONAL CORPORATION and/or ELIZABETH ALAÑON, G.R. No. 159832, May 5, 2006
Petitioners are Filipino overseas workers deployed by private respondent Join International
Corporation (JIC), a licensed recruitment agency, to its principal, 3D Pre-Color Plastic, Inc., (3D) in
Taiwan, Republic of China, under a uniformly-worded employment contract for a period of two years.
Herein private respondent Elizabeth Alañon is the president of Join International Corporation.
On December 9, 1999, with 18 other contract workers they left for Taiwan. Upon arriving at the job
site, a factory owned by 3D, they were made to sign another contract which stated that their salary
was only NT$11,840.00. They were likewise informed that the dormitory which would serve as their
living quarters was still under construction. They were requested to temporarily bear with the
inconvenience but were assured that their dormitory would be completed in a short time.
Petitioners alleged that they were brought to a “small room with a cement floor so dirty and smelling
with foul odor (sic)”. Forty women were jam-packed in the room and each person was given a pillow.
Since the ladies’ comfort room was out of order, they had to ask permission to use the men’s comfort
room. Petitioners claim they were made to work twelve hours a day, from 8:00 p.m. to 8:00 a.m.
The petitioners averred that on December 16, 1999, due to unbearable working conditions, they were
constrained to inform management that they were leaving. They booked a flight home, at their own
expense. Before they left, they were made to sign a written waiver. In addition, petitioners were not
paid any salary for work rendered on December 11-15, 1999.
Issue: Whether petitioners were illegally dismissed under Rep. Act No. 8042, thus entitling them to
benefits plus damages.
The Labor Arbiter and the NLRC found that petitioners admitted they resigned from their jobs without
force, coercion, intimidation and pressure from private respondents’ principal abroad.
According to the Labor Arbiter, while it may be true that petitioners were not coerced into giving up
their jobs, the deplorable, oppressive and sub-human working conditions drove petitioners to resign.
In effect, according to the Labor Arbiter, the petitioners did not voluntarily resign.
The NLRC also ruled that there was constructive dismissal since working under said conditions was
unbearable.
As the Court has held previously, constructive dismissal covers the involuntary resignation resorted to
when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion

in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to an employee.
The Court rule for the petitioners. The claim for overtime pay should not have been disallowed
because of the failure of the petitioners to substantiate them. The claim of overseas workers against
foreign employers could not be subjected to same rules of evidence and procedure easily obtained by
complainants whose employers are locally based. While normally we would require the presentation of
payrolls, daily time records and similar documents before allowing claims for overtime pay, in this
case, that would be requiring the near-impossible.
It is therefore the private respondents who could have obtained the records of their principal to refute
petitioners’ claim for overtime pay. By their failure to do so, private respondents waived their defense
and in effect admitted the allegations of the petitioners.
However, although quitclaims are frowned at under the law, a perusal of the records reveals that
petitioners were not in any way deceived, coerced or intimidated into signing a quitclaim waiver in the
amounts of P13,640, P15,080 and P16,200 respectively. Nor was there a disparity between the
amount of the quitclaim and the amount actually due the petitioners.
Petition denied.
ASIAN INTERNATIONAL MANPOWER SERVICES, INC. (AIMS), VS. COURT OF APPEALS and ANICETA
LACERNA, G.R. No. 169652, October 9, 2006
The facts as alleged by Lacerna show that Proxy Maid Services Centre (Proxy), a Hong Kong based
recruitment agency hired her through AIMS, a recruitment entity in the Philippines.
Issue: Was Lacerna illegally dismissed? If yes, may AIMS be held liable for the monetary claims of
Lacerna.
The Court answered in the affirmative. There is no dispute that the last employer of Lacerna was
Donna and not Daisy Lee because the Hong Kong government directed her repatriation before she
could sign her contract with the latter. In dismissing her, Donna gave no reason for her termination.
Neither did Proxy explain the ground for her dismissal. And where there is no showing of a clear,
valid, and legal cause for the termination, the law considers the matter, a case of illegal dismissal.
In termination cases involving Filipino workers recruited for overseas employment, the burden of
proving just or authorized cause for termination rests with the foreign based employer/principal and
the local based entity which recruited the worker both being solidarily liable for liabilities arising from
the illegal dismissal of the worker.
In this case, the Court of Appeals correctly declared Lacerna’s termination illegal since no reason was
given to justify her termination.
AIMS argument that it cannot be held liable for the monetary claims of Lacerna because its contract
was limited only to Lacerna’s employment with Low See Ting and when she resigned as domestic
helper of the latter, the contract was allegedly extinguished making AIMS no longer privy to the
subsequent employment contract entered into by Proxy and Lacerna was untenable. The records of
the Immigration Department of Hong Kong belie the contention of AIMS that Lacerna was employed
by Low See Ting. Hence, between the alleged Lacerna’s resignation letter to Low See Ting and the
letters of the Hong Kong Immigration Department showing that Lacerna could not have been
employed by her, credence must be given to the said official records, especially so that AIMS never
assailed their authenticity.
Moreover, even granting that Lacerna truly resigned as domestic helper of Low See Ting, the liability
of AIMS was not extinguished. The contract of Lacerna as approved by the Philippine Overseas
Employment Administration (POEA) reveals that Proxy was her designated principal employer; the
agreed salary was HK$3,670.00 a month; and the contract duration was for two years. Since AIMS
was the local agency which recruited Lacerna for Proxy, it is solidarily liable with the latter for

liabilities arising from her illegal dismissal. To detach itself from the liability of Proxy, AIMS must show
by clear and convincing evidence that its contract is limited to Lacerna’s employment by Low See Ting.
However, aside from its bare allegation, AIMS presented no proof to corroborate its claim.
On the contrary, in transferring Lacerna from one employer to another, Proxy did not demand a new
placement fee from Lacerna. This only shows that Proxy’s conduct was in accordance with the original
contract executed with AIMS and not on an entirely new and separate agreement entered into in Hong
Kong.
This interpretation is in accord with the rule that all doubts in the construction of labor contracts
should be resolved in favor of the working class. The Constitution mandates the protection of labor
and the sympathetic concern of the State for the workers conformably to the social justice policy.
Verily, to absolve AIMS from liability based on its unsubstantiated claim that it is not privy to the
subsequent employment provided by Proxy for Lacerna would be to undermine the avowed policy of
the State. The joint and solidary liability imposed by law against recruitment agencies and foreign
employers is meant to assure the aggrieved worker of immediate and sufficient payment of what is
due him. Thus, Section 10 of R.A. No. 8042, provides:
SEC. 10. Money Claims. – The liability of the principal/employer and the recruitment/placement
agency for any and all claims under this section shall be joint and several. This provision shall be
incorporated in the contract for overseas employment and shall be a condition precedent for its
approval. The performance bond to be filed by the recruitment/placement agency, as provided by law,
shall be answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and partners as
the case may be, shall themselves be jointly and solidarily liable with the corporation or partnership
for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract and shall
not be affected by any substitution, amendment or modification made locally or in a foreign country of
the said contract.
In case of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, the worker shall be entitled to the full reimbursement of his placement fee with
interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of the
employment contract or for three (3) months for every year of the unexpired term, whichever is less.
The illegal dismissal of Lacerna entitles her to the full reimbursement of placement fee with interest at
twelve percent (12%) per annum, plus salaries for the unexpired portion of her employment contract
or for three months for every year of the unexpired term, whichever is less. Thus, the Court of
Appeals was correct in ordering AIMS to pay HK$11,010.00 corresponding to three months of her
salary or its equivalent in the Philippine Peso at the time of payment, plus placement fee of
P18,0000.00.
Sim vs. NLRC et al., G.R. No. 157376, October 2, 2007
FACTS:
Corazon Sim (petitioner) filed a case for illegal dismissal with the Labor Arbiter, alleging that she was
initially employed by Equitable PCI-Bank (respondent) in 1990 as Italian Remittance Marketing
Consultant to the Frankfurt Representative Office. Eventually, she was promoted to Manager position,
until September 1999, when she received a letter from Remegio David -- the Senior Officer, European
Head of PCIBank, and Managing Director of PCIB- Europe -- informing her that she was being
dismissed due to loss of trust and confidence based on alleged mismanagement and misappropriation
of funds.
Respondent denied any employer-employee relationship between them, and sought the dismissal of
the complaint.

On September 3, 2001, the Labor Arbiter rendered its Decision dismissing the case for want of
jurisdiction and/or lack of merit. The Labor Arbiter stressed that labor relations system in the
Philippines had no extra-territorial jurisdiction. And assuming that the Labor Arbiter had jurisdiction
over the case, the case must still be dismissed. Complainant as General Manager is an employee
whom the respondent company reposed its trust and confidence. In other words, she held a position
of trust. It is well-settled doctrine that the basic premise for dismissal on the ground of loss of
confidence is that the employee concerned holds a position of trust and confidence.
On appeal, the National Labor Relations Commission (NLRC) affirmed the Labor Arbiter's Decision and
dismissed petitioner's appeal for lack of merit. Without filing a motion for reconsideration with the
NLRC, petitioner went to the Court of Appeals (CA) via a petition for certiorari under Rule 65 of the
Rules of Court. In a Resolution dated October 29, 2002, the CA dismissed the petition due to
petitioner's non-filing of a motion for reconsideration with the NLRC. Petitioner filed a motion for
reconsideration but it was nonetheless denied by the CA per Resolution dated February 26, 2003.
Hence, the present recourse under Rule 45 of the Rules of Court.
ISSUE:
Whether or not a prior motion for reconsideration is indispensable for the filing of a petition for
certiorari under Rule 65 of the Rules of Court with the CA.
HELD:
Under Rule 65, the remedy of filing a special civil action for certiorari is available only when there is no
appeal; or any plain, speedy, and adequate remedy in the ordinary course of law. A "plain" and
"adequate remedy" is a motion for reconsideration of the assailed order or resolution, the filing of
which is an indispensable condition to the filing of a special civil action for certiorari. This is to give the
lower court the opportunity to correct itself.
There are of course, exceptions. However, petitioner failed to qualify her case as among the few
exceptions. In fact, the Court notes that the petition filed before the CA failed to allege any reason
why a motion for reconsideration was dispensed with by petitioner. It was only in her motion for
reconsideration of the CA's resolution of dismissal and in the petition filed in this case that petitioner
justified her non-filing of a motion for reconsideration.
Petitioner argues that filing a motion for reconsideration with the NLRC would be merely an exercise in
futility and useless. But it is not for petitioner to determine whether it is so.
Petitioner also contends that the issue at bench is purely a question of law, hence, an exception to the
rule. However, a careful reading would reveal that the issues raised in this case are mixed questions
of fact and law. The legality of petitioner's dismissal hinges on the question of whether there was an
employer-employee relationship, which was denied by respondent; and, if in the affirmative, whether
petitioner, indeed, committed a breach of trust and confidence justifying her dismissal. These are
mixed questions of fact and law and, as such, do not fall within the exception from the filing of a
motion for reconsideration.
Consequently, the CA was not in error when it dismissed the petition. More so since petitioner failed to
show any error on the part of the Labor Arbiter and the NLRC in ruling that she was dismissed for
cause.
The Court notes, however, a palpable error in the Labor Arbiter's disposition of the case, which was
affirmed by the NLRC, with regard to the issue on jurisdiction. It was wrong for the Labor Arbiter to
rule that "labor relations system in the Philippines has no extra-territorial jurisdiction."
Article 217 of the Labor Code provides for the jurisdiction of the Labor Arbiter and the National Labor
Relations Commission.

Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas Filipinos
Act of 1995, provides:
SECTION 10. Money Claims. — Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the
claims arising out of an employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral, exemplary and other
forms of damages.
Also, Section 62 of the Omnibus Rules and Regulations Implementing R.A. No. 8042 provides that the
Labor Arbiters of the NLRC shall have the original and exclusive jurisdiction to hear and decide all
claims arising out of employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral, exemplary and other
forms of damages, subject to the rules and procedures of the NLRC.
Under these provisions, it is clear that labor arbiters have original and exclusive jurisdiction over
claims arising from employer-employee relations, including termination disputes involving all workers,
among whom are overseas Filipino workers.
In any event, since the CA did not commit any error in dismissing the petition before it for failure to
file a prior motion for reconsideration with the NLRC, and considering that the Labor Arbiter and the
NLRC's factual findings as regards the validity of petitioner's dismissal are accorded great weight and
respect and even finality when the same are supported by substantial evidence, the Court finds no
compelling reason to relax the rule on the filing of a motion for reconsideration prior to the filing of a
petition for certiorari.
WHEREFORE, the petition is DENIED.
Bahia Shipping Services vs. Chua, G.R. No. 162195, April 8, 2008
FACTS:
Private respondent Reynaldo Chua was hired by the petitioner shipping company, Bahia Shipping
Services, Inc., as a restaurant waiter on board a luxury cruise ship liner M/S Black Watch pursuant to
a Philippine Overseas Employment Administration (POEA) approved employment contract dated
October 9, 1996 for a period of nine (9) months from October 18, 1996 to July 17, 1997.
On February 15, 1997, the private respondent reported for his working station one and one-half (1½)
hours late. On February 17, 1997, the master of the vessel served to the private respondent an official
warning-termination form pertaining to the said incident. On March 8, 1997, the vessel's master, ship
captain Thor Fleten conducted an inquisitorial hearing to investigate the said incident. Thereafter, on
March 9, 1997, private respondent was dismissed from the service on the strength of an unsigned and
undated notice of dismissal. An alleged record or minutes of the said investigation was attached to the
said dismissal notice.
On March 24, 1997, the private respondent filed a complaint to the Labor Arbiter for illegal dismissal
and other monetary claims.
The private respondent claimed that he was underpaid in the amount of US$110.00 per month for that
same period of five (5) months. He further asserted that his salaries were also deducted US$20.00 per
month by the petitioner for alleged union dues. Private respondent argued that it was his first offense
committed on board the vessel.
The petitioner justified its monthly deduction made for union dues against the private respondent's
salary in view of an alleged existing CBA between the Norwegian Seaman's Union (NSU, for brevity)
and the petitioner's principal, Blackfriars Shipping Co., Ltd. The petitioner further asseverated that the
private respondent has violated the terms and conditions of his contract as manifested in the said
official warning-termination form by always coming late when reporting for duty even prior to the
February 15, 1997 incident.

The Labor Arbiter rendered a Decision dated March 5, 1998, holding petitioner liable to respondent for
illegal dismissal and unauthorized deductions. Petitioner appealed to the NLRC which affirmed the
Labor Arbiter's decision but modified the monetary award therein. Upon a petition for certiorari filed
by petitioner, the CA rendered the August 28, 2003 Decision assailed herein, modifying the NLRC
decision as to the monetary award. The CA denied petitioner's Motion for Reconsideration.
ISSUES:
i) Whether or not the Court of Appeals could grant additional affirmative relief by increasing the award
despite the fact that respondent did not appeal the decision of both the Labor Arbiter and the NLRC.
ii) Whether or not reporting for work one and one-half (1½) hours late and abandoning his work are
valid grounds for dismissal.
iii) Whether or not respondent is entitled to overtime pay which was incorporated in his award for the
unexpired portion of the contract.
HELD:
The LA declared the dismissal of respondent illegal for the reason that the infraction he committed of
being tardy by 1½ hour should not have been penalized by petitioner with the ultimate punishment of
termination; rather, the commensurate penalty for such single tardiness would have been suspension
for one or two weeks.
Petitioner assails the ruling of the CA for being based on the faulty premise that respondent incurred
tardiness only once when in fact he had done so habitually. Whether respondent had been habitually
tardy prior to February 15, 1997 when he reported for work 1½ hours late is purely factual in nature.
As such, the Court defers to the concurrent assessments of the LA and NLRC, as affirmed by the CA,
for the evaluation of evidence and the appreciation of the credibility of witnesses fall within their
expertise.
It being settled that the dismissal of respondent was illegal, it follows that the latter is entitled to
payment of his salary for the unexpired portion of his contract, as provided under Republic Act (R.A.)
No. 8042, considering that his employment was pre-terminated on March 9, 1997 or four months prior
to the expiration of his employment contract on July 17, 1997.
Section 10 of R.A. No. 8042, entitles an overseas worker who has been illegally dismissed to "his
salaries for the unexpired portion of the employment contract or for three (3) months for every year
of the unexpired term, whichever is less."
The CA correctly applied the interpretation of the Court in Marsaman Manning Agency, Inc. v. National
Labor Relations Commission, that the second option which imposes a three months – salary cap
applies only when the term of the overseas contract is fixed at one year or longer; otherwise, the first
option applies in that the overseas worker shall be entitled payment of all his salaries for the entire
unexpired period of his contract.
In Skippers Pacific, Inc. v. Mira, wherein the overseas contract involved was only for six months, the
Court held that it is the first option provided under Section 10 of R.A. No. 8042 which is applicable in
that the overseas worker who was illegally dismissed is entitled to payment of all his salaries covering
the entire unexpired period of his contract.
Finally, the Court comes to the issue on whether in the computation of the foregoing award,
respondent's "guaranteed overtime" pay amounting to US$197.00 per month should be included as
part of his salary. Petitioner contends that there is no factual or legal basis for the inclusion of said
amount because, after respondent's repatriation, he could not have rendered any overtime work.
This time, petitioner's contention is well-taken.
It being improbable that respondent rendered overtime work during the unexpired term of his
contract, the inclusion of his "guaranteed overtime" pay into his monthly salary as basis in the

computation of his salaries for the entire unexpired period of his contract has no factual or legal basis
and the same should have been disallowed.
WHEREFORE, the petition is PARTLY GRANTED.
Masangkay vs. Trans-Global Maritime Agency Inc., et al., G.R. No. 172800, October 17, 2008
FACTS:
Ventnor is a foreign company based in Liberia and engaged in maritime commerce. It is represented in
the Philippines by its manning agent, and co-respondent herein, Trans-Global, a corporation organized
and existing under Philippine laws.
Petitioner Marciano Masangcay was hired by Ventnor, through its manning agent, Trans-Global, as an
oiler on M/T Eastern Jewel, an oil tanker. While on board M/T Eastern Jewel, Masangcay noticed a
“reddish discoloration of his urine upon urination. This happened several times and later became
associated with bouts of left lower abdominal pain radiating to the loin area.
Masangcay was brought to the Fujairah Hospital, United Arab Emirates, because of lower abdominal
pain and left loin pain with difficulty in urinating. Better removal of the right pelvi-ureteric calculus
was the recommended treatment but Masangcay refused surgical intervention and insisted on being
repatriated back to the Philippines instead.
Upon his arrival in Manila, Masangcay was immediately referred to Trans-Global’s designated
physician. Masangcay was hospitalized at the Makati Medical Center for treatment. The removal of the
non-functioning right kidney was advised but Masangcay refused. Masangcay was then referred to Dr.
Reynaldo C. de la Cruz of the National Kidney and Transplant Institute (NKTI) for a second opinion. An
operation was made and proved successful. Dr. dela Cruz pronounced that Masangcay was fit to
resume work as all his laboratory examinations showed normal results. Accordingly, Trans-Global’s
designated physician, declared Masangcay fit to go back to work after a regular medical examination.
Trans-Global, in behalf of Ventnor, paid Masangcay his full 120 days Sick Leave Pay as well as all his
medical and hospital expenses and professional fees of his attending physicians.
Masangcay was asked to report back to the office of Trans-Global for deployment line-up. When
Masangcay reported to the premises of Trans-Global, however, he was informed by the Port Captain
that he can no longer be deployed due to negative reports about him coming from its principal,
Ventnor.
Masangcay instituted a complaint against Trans-Global and Ventnor, including Trans-Global’s

President, Michael Estaniel, before the National Labor Relations Commission (NLRC) for the payment
of disability benefit, damages and attorney’s fees. Masangcay alleged that his illness was contracted
during the term of his Contract of Employment.
Labor Arbiter found Masangcay’s complaint meritorious and ordered Trans-Global, Ventnor,
and Estaniel to pay Masangcay for disability benefit. On appeal to the NLRC, the Commission affirmed
the decision of the labor arbiter. The Court of Appeals granted the petition for certiorari of Trans-
Global and Ventnor. It nullified and set aside the challenged Resolutions of the NLRC for having been
issued in grave abuse of discretion amounting to lack or excess of jurisdiction.
Hence, this petition for review on certiorari under Rule 45 of the Revised Rules of Court.
ISSUE: Whether or not Masangcay is entitled to disability benefits on account of his present condition.
RULING:
We rule in the negative.

Under Sec. 20(b), paragraph 6, of the 2000 POEA Amended Standard Terms and Conditions Governing
the Employment of Filipino Seafarers on Board Ocean-Going Vessels: permanent total or partial
disability suffered by a seafarer during the term of his contract must be caused by work-related illness
or injury. To be entitled to compensation and benefits under said provision, it is not sufficient to
establish that the seafarer’s illness or injury has rendered him permanently or partially disabled, but it
must also be shown that there is a causal connection between the seafarer’s illness or injury and the
work for which he had been contracted for.
Accordingly, in order to hold Trans-Global and Ventnor liable for payment of his claims, Masangcay
must prove that he is suffering from permanent total or partial disability due to a work-related illness
occurring during the term of his contract. Proof that he not only acquired or contracted his illness
during the term of his employment contract is clearly not enough; Masangcay must also present
evidence that such infirmity was work-related, or at the very least aggravated by the conditions of the
work for which he was contracted for.
The burden is clearly upon Masangcay to present substantial evidence, or such relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion, showing a reasonable
connection that the nature of his employment or working conditions between the conditions of his
work and his illness; or that the risk of contracting the same was increased by his working conditions.
This, he did not do. Masangcay does not even assert that his illness is work-related and/or was, at the
minimum, aggravated by his working conditions at the M/T Eastern Jewel.
There is no substantiation that the progression of his ailment was brought about largely by the
conditions of his job as an oiler. His medical history and/or records prior to his deployment as an oiler
in M/T Eastern Jewel were neither presented nor alluded to in order to demonstrate that the working
conditions on board said vessel increased the risk of contracting renal failure, chronic or otherwise.
But even assuming that Masangcay is suffering from chronic renal failure, it still does not entitle him
to compensation and benefits for a permanent disability. Chronic renal failure, is neither listed as a
disability under Sec. 32 of the 2000 POEA Amended Standard Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean-Going Vessels; nor an occupational disease under
Sec. 32-A thereof. But other than Masangcay’s bare avowal of entitlement just because an illness
became manifest during his contract of employment, there is nothing on record to substantiate the
same and would have justified an award of compensation on top of the aid or assistance already
extended to him by Trans-Global and Ventnor.
The dispute could have easily been resolved had the parties stayed true to the provisions of Sec.
20(b), paragraph 3 of the 2000 POEA Amended Standard Terms and Conditions: If a doctor appointed
by the seafarer disagrees with the assessment, a third doctor may be agreed jointly between the
Employer and the seafarer. The third doctor’s decision shall be final and binding on both parties.
Without the opinion of a third doctor, we are constrained to make a ruling based on the evidences
submitted by the parties and made part of the records of this case, which included the medical
certifications of their respective physicians.
Masangcay makes no allegation, much less presents no proof, that the illness was caused or
aggravated by his employment. The evidence on record is totally bare of essential facts on how he
contracted or developed such disease and on how and why his working conditions increased the risk of
contracting the same.
Magsaysay Maritime Corp., et al., vs. Velasquez, et al., G.R. No. 179802, November 14, 2008
FACTS:
Respondent Jaime M. Velasquez was hired by petitioner Magsaysay Maritime Corporation as second
cook for its foreign principal, co-petitioner ODF Jell ASA. While on duty as second cook on board the
vessel M/T Bow Favour, respondent suffered high fever and was unable to work. He took fever
relieving medicine but his condition worsened. By the fourth day, his body temperature reached

40.9°C. Respondent was brought to a hospital in Singapore where he was confined. Thereafter, he
was repatriated to the Philippines.
Respondent alleged that upon his repatriation, he was not confined to St. Luke’s Medical Center as he
expected. He claimed that he was compelled to seek medical treatment from an independent doctor.
He consulted a certain Dr. Efren Vicaldo who diagnosed him to be suffering from staphylococcal
bacteremia, multiple metastatic abcesses, pleural effusion and hypertension and declared his disability
as Impediment Grade 1 (120%). Dr. Vicaldo further concluded that respondent was “unfit to resume
work as seaman in any capacity.” Hence, respondent filed a claim for disability benefits, illness
allowance/ reimbursement of medical expenses, damages and attorney’s fees but petitioners refused
to pay.
The Labor Arbiter rendered a decision in favor of respondent. The NLRC rendered a decision reversing
that of the Labor Arbiter and dismissed respondent’s complaint for lack of merit. CA set aside the
decision of the NLRC and reinstated that of the Labor Arbiter.
ISSUE:
Whether or not the CA committed reversible error when it upheld the findings of respondent’s private
physician rather than the findings of the company-designated physician.
RULING:
CA committed reversible error in ignoring the medical assessment of the company-designated

physician.
The POEA Contract is clear in its provisions when it provided who should determine the disability
grading or fitness to work of seafarers. The POEA contract recognizes only the disability grading
provided by the company-designated physicians. Section 20 B.3 of the POEA clearly illustrate that
respondent’s disability can only be assessed by the company-designated physician. If the company-
designated physician declares him fit to work, then the seaman is bound by such declaration. The
parties are both bound by the provisions of the POEA Contract which declares that the degree of
disability or fitness to work of a seafarer should be assessed by the company-designated physician.
Jurisprudence is replete with pronouncements that it is the company-designated physician’s findings

which should form the basis of any disability claim of the seafarer. In this particular case, respondent
refused to accept the assessment made by the company-designated physician that he is fit to work.
It is beyond cavil that it is the company-designated physician who is entrusted with the task of
assessing the seaman’s disability. However, when the seaman’s private physician disagrees with the
assessment of the company-designated physician, as here, a third doctor’s opinion may be availed of
in determining his disability. This however was not resorted to by the parties. As such, the credibility
of the findings of company-designated doctors was properly evaluated by the NLRC.
The company-designated physician cleared respondent for work resumption upon finding that
his infection has subsided after successful medication. We agree with the NLRC that the doctor more
qualified to assess the disability grade of the respondent seaman is the doctor who regularly
monitored and treated him. The company-designated physician possessed personal knowledge of the
actual condition of respondent. Since the company-designated physician in this case deemed the
respondent as fit to work, then such declaration should be given credence, considering the amount of
time and effort the company doctor gave to monitoring and treating respondent’s condition. It is
undisputed that the recommendation of Dr. Vicaldo was based on a single medical report which
outlined the alleged findings and medical history of respondent despite the fact that Dr. Vicaldo
treated or examined respondent only once. As between the findings of the company-designated
physician (Dr. Alegre) and the physician appointed by respondent (Dr. Vicaldo), the former deserves
to be given greater evidentiary weight.
Serrano vs. Gallant Maritime Services et al., G.R. No. 167614, March 24, 2009 – En Banc

Facts:
Antonio M. Serrano was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd.
under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment
with the following terms and conditions:
Duration of contract 12 months

Position Chief Officer
Basic monthly salary US$1,400.00
Hours of work 48.0 hours per week
Overtime US$700.00 per month
Vacation leave with pay 7.00 days per month
On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded
employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon
the assurance and representation of MSI that he would be made Chief Officer by the end of April
1998.
MSI did not deliver on their promise to make petitioner Chief Officer. Hence, Soriano refused to stay
on as Second Officer and was repatriated to the Philippines on May 26, 1998.
Soriano’s employment contract was for a period of 12 months or from March 19, 1998 up to March 19,
1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and
seven (7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23)
days.
He filed with the Labor Arbiter (LA) a Complaint against respondents for constructive dismissal and for
payment of his money claims in the total amount of US$26,442.73 as well moral and exemplary
damages and attorney’s fees.
He got a favourable decision with the Labor Arbiter in the amount of US$ 8,770.00. In awarding
Soriano a lump-sum salary of US$8,770.00, the LA based his computation on the salary period of
three months only -- rather than the entire unexpired portion of nine months and 23 days of
petitioner's employment contract - applying the subject clause. However, the LA applied the salary
rate of US$2,590.00, consisting of petitioner's “[b]asic salary, US$1,400.00/month +
US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay =
US$2,590.00/compensation per month.”
MSI appealed to the National Labor Relations Commission (NLRC) to question the finding of the LA
that petitioner was illegally dismissed.
Soriano also appealed to the NLRC on the sole issue that the LA erred in not applying the ruling of the
Court in Triple Integrated Services, Inc. v. National Labor Relations Commission that in case of illegal
dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts.
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, ordering MSI to pay Soriano,
jointly and severally, in Philippine currency, at the prevailing rate of exchange at the time of payment
the following:
1. Three (3) months salary $1,400 x 3 US$4,200.00

2. Salary differential 45.00 US$4,245.00
3. 10% Attorney’s fees424.50 TOTAL US$4,669.50
The NLRC corrected the LA's computation of the lump-sum salary awarded to Soriano by reducing the
applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 “does not provide for
the award of overtime pay, which should be proven to have been actually performed, and for vacation
leave pay.”

Soriano filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of
the subject clause. The NLRC denied the motion.
Issue:
Whether or not Soriano is entitled to his salaries for the entire unexpired portion of his
employment contract consisting of nine months and 23 days?
Held:
Yes, Soriano is entitled to his salaries for the entire unexpired portion of his employment
contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per month.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who
were illegally discharged were treated alike in terms of the computation of their money claims: they
were uniformly entitled to their salaries for the entire unexpired portions of their contracts. But with
the enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed
OFWs with an unexpired portion of one year or more in their employment contract have since been
differently treated in that their money claims are subject to a 3-month cap, whereas no such limitation
is imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes
a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts,
but none on the claims of other OFWs or local workers with fixed-term employment. The subject
clause singles out one classification of OFWs and burdens it with a peculiar disadvantage.
People vs. Domingo, G.R. No. 181475, April 7, 2009
Facts:
In or about the month of November 1999 to January 20, 2000, in the Municipality of Malolos, province
of Bulacan, Philippines, Domingo, being a non-licensee or non-holder of authority from the
Department of Labor and Employment to recruit and/or place workers under local or overseas
employment, did then and there willfully and feloniously, with false pretenses, undertake illegal
recruitment, placement or deployment of Wilson A. Manzo, and 22 other individuals. This offense
involved economic sabotage, as it was committed in large scale.
The Informations for 23 counts of Estafa, all of which were similarly worded but varying with respect
to the name of each complainant and the amount which each purportedly gave to Domingo.
That in or about the month of November, 1999 to January, 2000, in the municipality of Malolos,
province of Bulacan, Philippines, and within the jurisdiction of this Honorable Court, the above-named
accused, by means of deceit, false pretenses and fraudulent manifestations, and with intent of gain,
did then and there willfully, unlawfully and feloniously defraud one [Wilson A. Manzo] by then and
there falsely representing that he has the power and capacity to recruit and employ persons in Saipan
and could facilitate the necessary papers in connection therewith if given the necessary amount, and
by means of deceit of similar import, when in truth and in fact, as the accused knew fully well his
representation was false and fraudulent and designed to inveigle [Wilson A. Manzo] to give, as in fact
the latter gave and delivered the amount of [P14,000.00] to him, which the accused misappropriated
to himself, to the damage and prejudice of Wilson A. Manzo in the said amount of [P14,000.00].
Rogelio Cambay: Domingo recruited him for a painting job in Marianas Island for which he paid him
the amount of P15,000 in two installments – P2,500 during his medical examination at Newton Clinic
in Makati City, and the balance of P12,500 before the scheduled departure on January 25, 2000.
On his scheduled departure, appellant did not show up at their meeting place in Malolos, Bulacan,
hence, the around one hundred people who waited for him organized a search party to look for him in
Zambales. Appellant was arrested on February 25, 2000 at the Balintawak tollgate.

Verification with the Department of Labor and Employment showed that appellant was not a licensed
recruiter.
Florentino Ondra: He was recruited by Domingo for employment as laborer in Saipan, for which he
gave P14,700 representing expenses for passporting, NBI clearance, and medical examination.
Dionisio Aguilar: In September, 1999, he met Domingo thru a friend whereupon he was interviewed,
tested for a hotel job, and scheduled for medical examination. He gave P30,000 to Domingo inside the
latter’s car on November, 1999 after his medical examination. While he was twice scheduled for
departure, it did not materialize.
Ma. Leah Vivas: After meeting Domingo thru Eddie Simbayan on October 19, 1999, she applied for a
job as a domestic helper in Saipan, for which she paid appellant P10,000, but like the other
complainants, she was never deployed.
Simeon Cabigao: He was recruited by Domingo in September, 1999 for employment as carpenter in
Saipan with a guaranteed salary of $375 per month. For the promised employment, he paid Domingo
P3,000 for medical fee, and an additional P9,000, supposedly to bribe the examining physician
because, per information of Domingo, he (Cabigao) was found to have an ailment. He was scheduled
for departure on February 23, 2000, but the same never took place.
He was among those who looked for appellant in Zambales.
Cabigao later recanted this testimony, per his affidavit dated March 3, 2003. Testifying anew, this
time for the defense, he averred that the one who actually recruited him and his co-complainants and
received their money was Danilo Gimeno (Gimeno), and that they only agreed among themselves to
file a case against appellant because Gimeno was nowhere to be found.
Domingo’s Argument:
Domingo, denying all the accusations against him, claimed as follows: He was a driver hired by the
real recruiter, Gimeno, whom he met inside the Victory Liner Bus bound for Manila in September,
2000. It was Gimeno who undertakes recruitment activities in Dakila, Malolos, Bulacan at the
residence of Eddie Simbayan, and that the other cases for illegal recruitment filed against him before
other courts have all been dismissed.
Domingo likewise presented as witnesses Enrico Espiritu and Roberto Castillo who corroborated his
claim that it was Gimeno who actually recruited them, and that the filing of the complaint against
appellant was a desperate attempt on their part to get even because Gimeno could not be located.
Issue:
Whether or not Domingo is guilty of Illegal Recruitment despite that there is no evidence showing that
he actually received money from complainants?
Held:
Yes, Domingo is guilty of Illegal Recruitment.
The term “recruitment and placement” is defined under Article 13(b) of the Labor Code of the
Philippines as follows:
(b) “Recruitment and placement” refers to any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring, or procuring workers, and includes referrals, contract services,
promising or advertising for employment, locally or abroad, whether for profit or not. Provided, That
any person or entity which, in any manner, offers or promises for a fee employment to two or more
persons shall be deemed engaged in recruitment and placement.

On the other hand, Article 38, paragraph (a) of the Labor Code, as amended, under which the accused
stands charged, provides:
Art. 38. Illegal Recruitment. - (a) Any recruitment activities, including the prohibited practices
enumerated under Article 34 of this Code, to be undertaken by non-licensees or non-holders of
authority shall be deemed illegal and punishable under Article 39 of this Code. The Ministry of Labor
and Employment or any law enforcement officer may initiate complaints under this Article.
(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense
involving economic sabotage and shall be penalized in accordance with Article 39 hereof.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more
persons conspiring and/or confederating with one another in carrying out any unlawful or illegal
transaction, enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is
deemed committed in large scale if committed against three (3) or more persons individually or as a
group.
From the foregoing provisions, it is clear that any recruitment activities to be undertaken by non-
licensee or non-holder of authority shall be deemed illegal and punishable under Article 39 of the
Labor Code of the Philippines. Illegal recruitment is deemed committed in large scale if committed
against three (3) or more persons individually or as a group.
To prove illegal recruitment in large scale, the prosecution must prove three essential elements, to
wit: (1) the person charged undertook a recruitment activity under Article 13(b) or any prohibited
practice under Article 34 of the Labor Code; (2) he/she did not have the license or the authority to
lawfully engage in the recruitment and placement of workers; and (3) he/she committed the
prohibited practice against three or more persons individually or as a group.
No receipt or document in which appellant acknowledged receipt of money for the promised jobs was
adduced in evidence does not free him of liability. For even if at the time appellant was promising
employment no cash was given to him, he is still considered as having been engaged in recruitment
activities, since Article 13(b) of the Labor Code states that the act of recruitment may be for profit or
not. It suffices that appellant promised or offered employment for a fee to the complaining witnesses
to warrant his conviction for illegal recruitment.
Great Southern Maritime Services Corp. vs. Surigao, G.R. No. 183646, September 18, 2009
FACTS:
These consolidated petitions assail the Amended Decision[1] of the Court of Appeals dated May 14,
2008 in CA-G.R. SP No. 80619 and CA-G.R. SP No. 81030 finding White Falcon Services, Inc. and
Becmen Service Exporter and Promotion, Inc. solidarily liable to indemnify spouses Simplicio and Mila
Cuaresma the amount of US$4,686.73 in actual damages with interest.
On January 6, 1997, Jasmin Cuaresma (Jasmin) was deployed by Becmen Service Exporter and
Promotion, Inc.[2] (Becmen) to serve as assistant nurse in Al-Birk Hospital in the Kingdom of Saudi
Arabia (KSA), for a contract duration of three years, with a corresponding salary of US$247.00 per
month.
Over a year later, she died allegedly of poisoning.
Jasmin’s body was repatriated to Manila on September 3, 1998. The following day, the City Health
Officer of Cabanatuan City conducted an autopsy and the resulting medical report indicated that
Jasmin died under violent circumstances, and not poisoning as originally found by the KSA examining
physician.
On March 11, 1999, Jasmin’s remains were exhumed and examined by the National Bureau of
Investigation (NBI). The toxicology report of the NBI, however, tested negative for non-volatile,
metallic poison and insecticides

On November 22, 1999, the Cuaresmas filed a complaint against Becmen and its principal in the KSA,
Rajab & Silsilah Company (Rajab), claiming death and insurance benefits, as well as moral and
exemplary damages for Jasmin’s death.[8] In their complaint, the Cuaresmas claim that Jasmin’s
death was work-related, having occurred at the employer’s premises that under Jasmin’s contract with
Becmen, she is entitled to “iqama insurance” coverage; that Jasmin is entitled to compensatory
damages in the amount of US$103,740.00, which is the sum total of her monthly salary of US$247.00
per month under her employment contract, multiplied by 35 years (or the remaining years of her
productive life had death not supervened at age 25, assuming that she lived and would have retired at
age 60).
In their position paper, Becmen and Rajab insist that Jasmin committed suicide, citing a prior
unsuccessful suicide attempt sometime in March or April 1998 and relying on the medical report of the
examining physician of the Al-Birk Hospital. They likewise deny liability because the Cuaresmas
already recovered death and other benefits totaling P130,000.00 from the OWWA. They insist that
the Cuaresmas are not entitled to “iqama insurance” because this refers to the “issuance” – not
insurance – of iqama, or residency/work permit required in the KSA.
On February 28, 2001, the Labor Arbiter rendered a Decision dismissing the complaint for lack of
merit.
On appeal, the National Labor Relations Commission (Commission) reversed the decision of the Labor
Arbiter. Relying on the findings of the City Health Officer of Cabanatuan City and the NBI as contained
in their autopsy and toxicology report, respectively, the Commission, via its November 22, 2002
Resolution declared that, based on substantial evidence adduced, Jasmin was the victim of
compensable work-connected criminal aggression.
The appellate court affirmed the NLRC’s findings that Jasmin’s death was compensable, the same
having occurred at the dormitory, which was contractually provided by the employer. Thus her death
should be considered to have occurred within the employer’s premises, arising out of and in the course
of her employment.
ISSUE:
The issue for resolution is whether the Cuaresmas are entitled to monetary claims, by way of benefits
and damages, for the death of their daughter Jasmin.
HELD:
Yes, they are. Rajab & Silsilah Company, White Falcon Services, Inc., Becmen Service Exporter and
Promotion, Inc., and their corporate directors and officers are found jointly and solidarily liable
The Court cannot subscribe to the idea that Jasmin committed suicide while halfway into her
employment contract. It is beyond human comprehension that a 25-year old Filipina, in the prime of
her life and working abroad with a chance at making a decent living with a high-paying job which she
could not find in her own country, would simply commit suicide for no compelling reason.
Rajab & Silsilah Company, White Falcon Services, Inc., Becmen Service Exporter and Promotion, Inc
They have placed their own financial and corporate interests above their moral and social obligations,
and chose to secure and insulate themselves from the perceived responsibility of having to answer for
and indemnify Jasmin’s heirs for her death.
Under Republic Act No. 8042 (R.A. 8042), or the Migrant Workers and Overseas Filipinos Act of 1995,
[22] the State shall, at all times, uphold the dignity of its citizens whether in country or overseas, in
general, and Filipino migrant workers, in particular.[23] The State shall provide adequate and timely
social, economic and legal services to Filipino migrant workers.[24] The rights and interest of
distressed[25] overseas Filipinos, in general, and Filipino migrant workers, in particular, documented
or undocumented, are adequately protected and safeguarded.[26]

Becmen and White Falcon, as licensed local recruitment agencies, miserably failed to abide by the
provisions of R.A. 8042. Recruitment agencies are expected to extend assistance to their deployed
OFWs, especially those in distress. Instead, they abandoned Jasmin’s case and allowed it to remain
unsolved to further their interests and avoid anticipated liability which parents or relatives of Jasmin
would certainly exact from them. They willfully refused to protect and tend to the welfare of the
deceased Jasmin, treating her case as just one of those unsolved crimes that is not worth wasting
their time and resources on. The evidence does not even show that Becmen and Rajab lifted a finger
to provide legal representation and seek an investigation of Jasmin’s case. Worst of all, they
unnecessarily trampled upon the person and dignity of Jasmin by standing pat on the argument that
Jasmin committed suicide, which is a grave accusation given its un-Christian nature.
Clearly, Rajab, Becmen and White Falcon’s acts and omissions are against public policy because they
undermine and subvert the interest and general welfare of our OFWs abroad, who are entitled to full
protection under the law. They set an awful example of how foreign employers and recruitment
agencies should treat and act with respect to their distressed employees and workers abroad. Their
shabby and callous treatment of Jasmin’s case; their uncaring attitude; their unjustified failure and
refusal to assist in the determination of the true circumstances surrounding her mysterious death, and
instead finding satisfaction in the unreasonable insistence that she committed suicide just so they can
conveniently avoid pecuniary liability; placing their own corporate interests above of the welfare of
their employee’s – all these are contrary to morals, good customs and public policy, and constitute
taking advantage of the poor employee and her family’s ignorance, helplessness, indigence and lack of
power and resources to seek the truth and obtain justice for the death of a loved one.
Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine
labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement
is in keeping with the basic public policy of the State to afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the
relations between workers and employers.

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13.

OTHER IMPORTANT LABOR PROVISIONS

1. Philippine Bank of Communications vs. National Labor Relations Commission

Rommel A. Tio Page 1 of 93 Labor Standards

3. FILIPINAS SYNTHETIC FIBER CORPORATION (FILSYN), petitioner, vs. NATIONAL LABOR

Rommel A. Tio Page 2 of 93 Labor Standards

7. NATIONAL FOOD AUTHORITY (NFA), AND JUANITO M. DAVID, IN HIS CAPACITY AS

Rommel A. Tio Page 3 of 93 Labor Standards

Rommel A. Tio Page 4 of 93 Labor Standards

Rommel A. Tio Page 5 of 93 Labor Standards

Rommel A. Tio Page 6 of 93 Labor Standards

Rommel A. Tio Page 7 of 93 Labor Standards

Rommel A. Tio Page 8 of 93 Labor Standards

NLRC affirmed the Labor Arbiter’s decision. CA also affirmed.

Rommel A. Tio Page 9 of 93 Labor Standards

CRITERIA TO ESTABLISH THE EXISTENCE OF AN INDEPENDENT AND PERMISSIBLE CONTRACTOR

Rommel A. Tio Page 10 of 93 Labor Standards

Rommel A. Tio Page 11 of 93 Labor Standards

Rommel A. Tio Page 12 of 93 Labor Standards

Rommel A. Tio Page 13 of 93 Labor Standards

16. GSIS vs. NLRC

Rommel A. Tio Page 14 of 93 Labor Standards

Articles 106 and 107 of the Labor Code provide:

Rommel A. Tio Page 15 of 93 Labor Standards

17. Republic of the Philippines/SSc/SSS vs. Asiapro Cooperative

Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-

Rommel A. Tio Page 16 of 93 Labor Standards

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

Section 5 of Republic Act No. 8282 provides:

Rommel A. Tio Page 17 of 93 Labor Standards

18. Jaguar Security and Investigation Agency vs. Sales

Rommel A. Tio Page 18 of 93 Labor Standards

Rommel A. Tio Page 19 of 93 Labor Standards

The Court ruled in the negative.

The petition is DENIED.

19. Almeda vs. Asahi Glass

Rommel A. Tio Page 20 of 93 Labor Standards

Hence this petition.

Rommel A. Tio Page 21 of 93 Labor Standards

PETITIONERS WERE EMPLOYEES OF RESPONDENT

PETITIONERS ILLEGALLY DISMISSED

With regards to the second issue, the court ruled in affirmative.

Article 280 of the Labor Code, as amended, reads —

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

This Court expounded on the afore-quoted provision, thus —

Rommel A. Tio Page 22 of 93 Labor Standards

The petition is GRANTED.

20. Sasan, Sr. vs. NLRC and EPCIB

Contention of the petitioner:

Rommel A. Tio Page 23 of 93 Labor Standards

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to

(b) The contractor or subcontractor has substantial capital or investment; and

In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or

Rommel A. Tio Page 24 of 93 Labor Standards

In distinguishing between permissible job contracting and prohibited labor-only contracting, we

21. Purefoods Corp. vs. NLRC

The antecedents follow:

Rommel A. Tio Page 25 of 93 Labor Standards

ISSUE: WHETHER OR NOT THERE EXIST AND EMPLOYEE-EMPLYER RELATIONSHIP.