3.

5 Reasonable Causal Connection

Smart Communications vs Astorga, 542 SCRA 434, Jan. 27, 2008
Regina was employed by Smart Communications, Inc. (SMART) as District Sales
Manager of the Corporate Sales Marketing Group/ Fixed Services Division
(CSMG/FSD) on May 8, 1997.
SMART launched an organizational realignment to achieve more efficient operations.
Part of the reorganization was the outsourcing of the marketing and sales force.
Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed
SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales
and marketing work, SMART abolished the CSMG/FSD, Reginas division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel
who garnered the highest ratings and who were favorably recommended to SNMI.
Regina landed last in the performance evaluation, thus, she was not recommended
by SMART. SMART, nonetheless, offered her a supervisory position in the Customer
Care Department, but she refused the offer because the position carried lower
salary rank and rate. Despite the abolition of her division, she continued reporting
for work until SMART issued a memorandum March 3, 1998 advising Regina of the
termination of her employment on ground of redundancy.
Regina filed a complaint for illegal dismissal contending that SMART cannot lawfully
contract out services which will displace the employees, especially if the contractor
is an in-house agency. She claimed that abolishing CSMG, thereby terminating her
employment, was illegal because it violated her right to security of tenure. SMART
responded that Regina was validly dismissed by reason of redundancy, an
authorized cause for termination of employment under Article 283 of the Labor
Code. The redundancy of Reginas position was the result of the abolition of CSMG
and the creation of a specialized and more technically equipped SNMI, which is a
valid and legitimate exercise of management prerogative.
LABOR ARBITERS DECISION:
The Labor Arbiter (LA) declared Reginas dismissal illegal. While recognizing
SMARTs right to abolish any of its departments, the Labor Arbiter held that such
right should be exercised in good faith and for causes beyond its control. The Arbiter
found the abolition of CSMG done neither in good faith nor for causes beyond the
control of SMART, but a ploy to terminate Reginas employment. The Arbiter also
ruled that contracting out the functions performed by Regina to an in-house agency
like SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the
Labor Code. Accordingly, the Labor Arbiter ordered Reginas reinstatement to her
former position, without loss of seniority rights and other privileges, with full
backwages, inclusive of all allowances and other benefits from the time of her
dismissal to the date of reinstatement.

NLRC DECISION:
SMART appealed the unfavorable ruling of the LA in the illegal dismissal case to the
National Labor Relations Commission (NLRC). The NLRC reversed the LA decision
and sustained Reginas dismissal. The NLRC declared the abolition of CSMG and the
creation of SNMI to do the sales and marketing services for SMART a valid
organizational action, i.e. a management prerogative. It also declared that
contracting, subcontracting and streamlining of operations for the purpose of
increasing efficiency are allowed under the law. The NLRC further found erroneous
the Labor Arbiters disquisition that redundancy to be valid must be impelled by
economic reasons, and upheld the redundancy measures undertaken by SMART.
Regina appealed but her action was denied by the NLRC on December 21, 1999.
COURT OF APPEALS DECISION:
Regina then appealed the NLRC decision to the Court of Appeals via certiorari. The
CA affirmed the NLRC resolutions that SMARTs reorganization resulting in the
abolition of CSMG was a legitimate exercise of management prerogative. It
rejected Reginas posturing that her non-absorption into SNMI was tainted with bad
faith. However, the CA found that SMART failed to comply with the mandatory onemonth notice prior to the intended termination and is thus obliged to pay the
petitioner an equivalent of her one-month salary.
SUPREME COURT RULING:
Regina was validly terminated due to redundancy, an authorized cause for the
dismissal of an employee. The characterization of an employees services as
superfluous or no longer necessary and, therefore, properly terminable, is an
exercise of business judgment on the part of the employer. The wisdom and
soundness of such characterization or decision is not subject to discretionary review
provided, of course, that a violation of law or arbitrary or malicious action is not
shown.
An employer is not precluded from adopting a new policy conducive to a more
economical and effective management even if it is not experiencing economic
reverses. Neither does the law require that the employer should suffer financial
losses before he can terminate the services of the employee on the ground of
redundancy.
The organizational realignment introduced by SMART, which culminated in the
abolition of CSMG/FSD and termination of Reginas employment was an honest
effort to make SMARTs sales and marketing departments more efficient and
competitive.
It is the prerogative of the employer to adopt such measures as will promote
greater efficiency, reduce overhead costs and enhance prospects of economic

gains, albeit always within the framework of existing laws. Accordingly, we sustain
the reorganization and redundancy program undertaken by SMART.
However, SMART failed to comply with the one-month notice prior to termination.
The record is clear that Regina received the notice of termination only on March 16,
1998 or less than a month prior to its effectivity on April 3, 1998. Likewise, the
Department of Labor and Employment was notified of the redundancy program only
on March 6, 1998.
SMARTs assertion that Regina cannot complain of lack of notice because the
organizational realignment was made known to all the employees as early as
February 1998 fails to sway. Reginas actual knowledge of the reorganization cannot
replace the formal and written notice required by the law. Notwithstanding her
knowledge of the reorganization, she remained uncertain about the status of her
employment until SMART gave her formal notice of termination.
The SC also ruled that it is proper to increase the amount of the penalty on SMART
to P50,000.00. However, the award of backwages to Regina by the CA should be
deleted for lack of basis. Backwages is a relief given to an illegally dismissed
employee. Since her dismissal is for an authorized cause, Regina is not entitled to
backwages. The CAs award of backwages is totally inconsistent with its finding of
valid dismissal.
COMMENT:
Based on existing laws and prior decisions such as in DAP vs. CA and Jaka Food
Processing Corporation v. Pacot, the SC decided on yet another landmark decision
as regards the so-called management prerogative largely in favor of an employer.
In SMART Communications, Inc. vs. Regina M. Astorga, the employers
management prerogatives is reemphasized as another reason, or perhaps excuse,
for firing employees. Although, it is clear that, as provided for by Article 283 of the
Labor Code, closure of establishment and reduction of personnel is allowed to the
extent that the employer may terminate the employment of any employee due to
the installation of labor saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of the establishment or undertaking, by
serving a written notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date thereof, SMART cannot
automatically terminate employees after any means directed to satisfy its profit
motive. While such prerogatives must be exercised in good faith and in accordance
with law and jurisprudence, in effect, large companies, corporations and other
business establishments may have the tendency to terminate employment
contracts in direct disregard of the security of tenure clause of Art. XIII, Sec. 3 of the
Philippine Constitution by issuing memoranda and notices that do not serve as the
equivalent of formal notice of termination. The decision has shown that an

employee, such as Regina, may lawfully lose his employment even if he/she is not
at fault.
The SC ruling is another reflection of SCs tendency to back up government
schemes of establishing an investment-friendly climate in the Philippines. Despite
the fact that the SC categorically denies allegations that it bypasses the executive
and legislative branches of the government by instituting an investment-friendly
jurisprudence, it is somewhat clear that the Labor movement in the Philippines can
expect more and more SC decisions that incline towards investors and
businessmen. Although the high court is not considered institutionally as a policymaking body of the government, jurisprudence and matters arising from the
decisions of the Supreme Court translate to the creation of alternative, if not new,
economic policies. The SC seems to tread the economic road to the detriment of
workers rights

Grandteq vs Margallo
Facts: Grandteq is a domestic corporation engaged in the business of selling
welding electrodes, alloy steels, aluminum and copper alloys. [5] Gonzales is the
President/Owner of Grandteq.[6] Grandteq employed Margallo as Sales Engineer
beginning 3 August 1999.[7]
Margallo claimed that on an unstated date, she availed herself of the car loan
program offered to her by Grandteq as a reward for being Salesman of the Year. She
paid the down payment on a brand new Toyota Corolla, [8] amounting
to P201,000.00, out of her own pocket. The monthly amortization for the car
was P10,302.00, of which P5,302.00 was to be her share and P5,000.00 was to be
the share of Grandteq.
Issue: W/N Court of Appeals erred in declaring the car loan agreement between
Grandteq and Margallo, particularly the provision therein on the forfeiture of car
loan payments in favor of Grandteq should Margallo resign from the company, as
null and void.
Held: The Court, however, is in agreement with the Court of Appeals and the NLRC.
Generally speaking, contracts are respected as the law between the contracting
parties. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order or public policy. [29]
The questionable provision in the car loan agreement between Grandteq and
Margallo provides: In case of resignation, of the personnel from the company, all
payments made by the personnel shall be forfeited in favor of the company.
[30]
Connected thereto is the provision in the same car loan agreement, which reads:

1. The COMPANY shall have the right to regain the possession of the car before the
expiration of the term of the loan in the event of any of the following:
a. The PERSONNEL resigns from the COMPANY during the effectivity of this
agreement.[31]
Said provisions plainly are contrary to the fundamental principles of justice and
fairness. It must be remembered that Margallo herself paid for the down payment
and her share in the monthly amortization of the car. However, she did not get to
leave with the car when she resigned from Grandteq. In effect, Margallo parted with
her hard-earned money for nothing, being left, as she is, with an empty bag. The
inequitableness in the conduct of Grandteq and Gonzales is heightened by the fact
that after they regained possession of the car, they resold the same to another
employee under a similar contract bearing the same terms and conditions signed by
Margallo.

Counterclaim involving transfer of ownership of company car falls within

ambit of LAs jurisdiction
Domondon vs. NLRC, 471 SCRA 559 [2005]
FACTS:
Petitioner Roberto Domondon filed a complaint before the Regional Arbitration
Branch of the NLRC against private respondent Van MellePhils., Inc. (VMPI) and its
President and General Manager, private respondent Niels H.B. Have. He claimed
illegal dismissal and prayed for reinstatement, payment of full backwages inclusive
of allowances, 14th month pay, sick and vacation leaves, share in the profits, moral
and exemplary damages and attorneys fees.

Endaya was transferred to China and was replaced by private respondent Have.
According to petitioner, respondent Have immediately set a one-on-one meeting
with him and requested his courtesy resignation. Petitioner refused to resign and
life got difficult for him.
His decisions were always questioned by private
respondent Have. He was subjected to verbal abuse. His competence was
undermined by baseless and derogatory memos, which lay the bases for his
removal from the company. He also did not receive his 14th month pay.[7]

Private respondent Have informed petitioner that things would get more difficult for
him if he does not resign. Private respondent Have offered financial assistance if

petitioner would leave peacefully but the offer must be accepted immediately or it
would be withdrawn. Thus, petitioner signed a ready-made resignation letter
without deliberation and evaluation of the consequences.

Private respondents claimed that he voluntarily resigned.The initial agreement of

the parties was that petitioner would be extended a soft-landing financial
assistance in the amount of P300,000.00 on top of his accrued benefits at the time
of the effectivity of his resignation. However, petitioner later changed his mind. He
requested that he be allowed to keep the car assigned to him in lieu of the financial
assistance. However, company policy prohibits transfer of ownership of property
without valuable consideration. Thus, the parties agreed that petitioner shall still be
extended the P300,000.00 financial support, which he shall use to pay for the
subject car.

Private respondents made a counterclaim involving the transfer of ownership of a

company car to petitioner. They maintain that he failed to pay for the car in
accordance with their agreement.

ISSUE:WON Labor Arbiter has jurisdiction to hear and decide the question on the
transfer of ownership of the car assigned to petitioner.

HELD: YES. , the transfer of the ownership of the company car to petitioner is
connected with his resignation and arose out of the parties employer-employee
relations. Accordingly, private respondents claim for damages falls within the
jurisdiction of the Labor Arbiter.

3.6 Corporate Officer or Employee?

PRUDENTIAL BANK
REYES, Respondent.

and

TRUST

COMPANY, Petitioner,

v.

CLARITA

T.

Facts
-

The case stems a complaint for illegal suspension and illegal dismissal filed
by Clarita Tan Reyes against Prudential Bank and Trust Company before the
labor arbiter.
Prior to her dismissal, private respondent Reyes held the position of Assistant
Vice President in the foreign department of the Bank, tasked with the duties,

among others, to collect checks drawn against overseas banks payable in

foreign currency and to ensure the collection of foreign bills or checks
purchased, including the signing of transmittal letters covering the same.
The auditors of the Bank discovered that two checks, No. 011728-7232-146,
in the amount of US$109,650.00, and No. 011730-7232-146, in the amount of
US$115,000.00, received by the Bank on April 6, 1989, drawn by the Sanford
Trading against Hongkong and Shanghai Banking Corporation, Jurong Branch,
Singapore, in favor of Filipinas Tyrom, were not sent out for collection to
Hongkong Shanghai Banking Corporation on the alleged order of the
complainant until the said checks became stale.
The Bank created a committee to investigate the findings of the auditors
involving the two checks which were not collected and became stale.
After a review of the Committees findings, the Board of Directors of the Bank
resolved not to re-elect complainant any longer to the position of assistant
president pursuant to the Banks By-laws.
On July 19, 1991, complainant was informed of her termination of
employment from the Bank by Senior Vice President Benedicto L. Santos.
Labor Arbiter ruled in favor of PR. NLRC reversed the decision of the Labor
Arbiter. CA reversed the NLRC.
Hence, the Banks recourse to this Court contending it is the sec (now the
regional trial court) and not the NLRC which has original and exclusive
jurisdiction over cases involving the removal from office of corporate officers.

Issue
-

Whether PR is corporate officer

Held
It appears that private respondent was appointed Accounting Clerk by the Bank on
July 14, 1963. From that position she rose to become supervisor. Then in 1982, she
was appointed Assistant Vice-President which she occupied until her illegal dismissal
on July 19, 1991. The banks contention that she merely holds an elective position
and that in effect she is not a regular employee is belied by the nature of her work
and her length of service with the Bank. As earlier stated, she rose from the ranks
and has been employed with the Bank since 1963 until the termination of her
employment in 1991. As Assistant Vice President of the foreign department of the
Bank, she is tasked, among others, to collect checks drawn against overseas banks
payable in foreign currency and to ensure the collection of foreign bills or checks
purchased, including the signing of transmittal letters covering the same. It has
been stated that "the primary standard of determining regular employment is the
reasonable connection between the particular activity performed by the employee
in relation to the usual trade or business of the employer. 12 Additionally, "an
employee is regular because of the nature of work and the length of service, not
because of the mode or even the reason for hiring them." 13 As Assistant VicePresident of the Foreign Department of the Bank she performs tasks integral to the
operations of the bank and her length of service with the bank totaling 28 years
speaks volumes of her status as a regular employee of the bank. In fine, as a

regular employee, she is entitled to security of tenure; that is, her services may be
terminated only for a just or authorized cause. 14 This being in truth a case of illegal
dismissal, it is no wonder then that the Bank endeavored to the very end to
establish loss of trust and confidence and serious misconduct on the part of private
respondent but, as will be discussed later, to no avail.

Matling v. Coros
Facts:
1. Ricardo Coros was the Vice President of Finance and Administration of Matling
Industrial. On August 2000, he filed a complaint for illegal suspension and illegal
dismissal against Matling in the NLRC.
2. Matling filed a motion to dismiss on the ground that NLRC does not have
jurisdiction over the matter. Instead, the SEC has jurisdiction over the intracorporate dispute since Coros was a member of the Board of Directors, aside from
being VP of Finance and Administration.
3. The Labor Arbiter granted the motion to dismiss because Matling was a corporate
officer for being a member of the BOD and by virtue of his position. Thus, his
removal was a corporate act, subject to the SECs jurisdiction.
4. On appeal to the NLRC, the motion to dismiss was set aside and ruled that the
case is under the jurisdiction of the NLRC not the SEC since the position was not one
of those listed in Matlings By-laws.
5. In their motion for reconsideration, Matling presented amended articles of
incorporation which granted the President of Matling to create new offices and
appoint officers.
6. At the CA, on certiorari, the petition was likewise dismissed because coros was
considered as an employee not a corporate officer since a corporate officers
position must be listed in the by-laws and appointed by the BOD or stockholders.

Issue:
w/n Coros is a corporate officer?

Held:
No. Section 25 of the Corporation Code provides that a president, treasurer and
secretary are elected by the directors. Other officers my be provided for in the

bylaws. The position must be expressly mentioned in the By-laws in order to be

considered as a corporate office. Corporate office is determined not only be the
position or nature of services performed but on the manner of creation of the office.
In this case, Coros was not appointed to the position not because of being a
stockholder or director of Matling. Instead he was promoted to the position for being
employed for the past 33 years, first as a bookkeeper, accountant, treasurer until he
became vice president.

Furthermore, the subject matter must involve an intra-corporate dispute which

involve relationships of any of the following: 1) between corporation, partnership or
association and the public, and 2) between the corporation, partnership or
association and its stockholders, partners, members or officers, 3) between
corporation, partner, or association and the State and 4) among the stockholders,
partners or associates themselves.
Locsin vs Nissan
FACTS:
LOCSINWAS ELECTED CHAIRMAN OF NISSAN. HE WAS ALSO APPOINTED
EVP/TREASURER REPORTING EVERYDAY, RECEIVING SALARY AND BEING DEDUCTED
SSS CONTRIBUTION, WITHHOLDING TAX, ETC., JUST AS OTHER EMPLOYEES. DURING
A BOARD MEETING OF XYZ CORP., HE WAS NOT APPOINTED TO ANY OF THESE
POSITIONS. HE FILED A CASE FOR ILLEGAL DISMISSAL, REINSTATEMENT, DAMAGES
AND ATTORNEYS FEES AT NLRC. RESPONDENTS, INSTEAD OF FILING POSITION
PAPER FILED A MOTION TO DISMISS FOR LACK OF JURISDICTION. THE LABOR
ARBITER DENIED THE MOTION TO DISMISS AND RULED THAT HE HAS JURISDICTION
OVER THECASE. RESPONDENTS FILED PETITION FOR CERTIORARI AT C.A.. THE LATER
GRANTED THE PETITION AND REVERSED THE RULING OF THE LABOR ARBITER ON
THE GROUND THAT LOCSIN WAS A CORPORATE OFFICER AND THUS NLRC HAS NO
JURISDICTION. LOCSIN FILED PETITION FOR REVIEW AT S.C.
ISSUES:
WHETHER OR NOT LOCSIN WHO IS CHAIRMAN AND EVP/TREASURER IS A
CORPORATE OFFICER?
Held:
The petition lacks merit.

. The CA correctly ruled that no employer-employee relationship exists between

Locsin and Nissan. Locsin was undeniably Chairman and President, and was elected
to these positions by the Nissan board pursuant to its By-laws. As such, he was a
corporate officer, not an employee. The CA reached this conclusion by relying on
the submitted facts and on Presidential Decree 902-A, which defines corporate
officers as those officers of a corporation who are given that character either by
the Corporation Code or by the corporations by-laws. Likewise, Section 25 of Batas
PambansaBlg. 69, or the Corporation Code of the Philippines (Corporation Code)
provides that corporate officers are the president, secretary, treasurer and such
other officers as may be provided for in the by-laws. Even as Executive VicePresident/Treasurer, Locsin already acted as a corporate officer because the position
of Executive Vice-President/Treasurer is provided for in Nissans By-Laws. Article IV,
Section 4 of these By- Laws specifically provides for this position. Given Locsins
status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has
jurisdiction to hear the legality of the termination of his relationship with Nissan. We
have held that a corporate officers dismissal is always a corporate act, or an intracorporate controversy which arises between a stockholder and a corporation. So
that the RTC should exercise jurisdiction

Real vs. Sangu Phils. Inc., G.R. No. 168757, Jan. 19, 2011
FACTS:
Renato Real was the Manager of respondent corporation Sangu Philippines, Inc.
which is engaged in the business of providing manpower for general services. He
filed a complaint for illegal dismissal against the respondents stating that he was
neither notified of the Board meeting during which his removal was discussed nor
was he formally charged with any infraction.
Respondents, on the other hand, said that Real committed gross acts of misconduct
detrimental to the company since 2000. The LA declared petitioner as having been
illegally dismissed. Sangu appealed to NLRC and established petitioners status as a
stockholder and as a corporate officer and hence, his action against respondent
corporation is an intra-corporate controversy over which the Labor Arbiter has no
jurisdiction. NLRC modified the LAs decision. On appeal, the CA affirmed the
decision of NLRC.
Hence, this petition.
ISSUE:
WON petitioners complaint for illegal dismissal constitutes an intra-corporate
controversy.
RULING:

To determine whether a case involves an intra-corporate controversy, and is to be

heard and decided by the branches of the RTC specifically designated by the Court
to try and decide such cases, two elements must concur: (a) the status or
relationship of the parties, and (2) the nature of the question that is the subject of
their controversy.
The first element requires that the controversy must arise out of intra-corporate or
partnership relations between any or all of the parties and the corporation x x . The
second element requires that the dispute among the parties be intrinsically
connected with the regulation of the corporation. If the nature of the controversy
involves matters that are purely civil in character, necessarily, the case does not
involve an intra-corporate controversy.
Guided by this recent jurisprudence, we thus find no merit in respondents
contention that the fact alone that petitioner is a stockholder and director of
respondent corporation automatically classifies this case as an intra-corporate
controversy. To reiterate, not all conflicts between the stockholders and the
corporation are classified as intra-corporate. There are other factors to consider in
determining whether the dispute involves corporate matters as to consider them as
intra-corporate controversies.

3.7 Effect when no employer-employee relationship

Manliguez v. CA, 232 SCRA 427 (1994)

Facts: Employer was ordered in a final judgment to pay its employees. Writ of
execution was issued and enforced by levying on property. Manliguez filed a
complaint which sought the lifting of the levy over, and annulment of the sale of,
the property on the ground that Manliguez was the owner of such property and that
the employer was just leasing it from him.

Held: Where the civil case is to lift levy over and annulment of the sale of the
property on the ground that it was not owned by the respondent in the labor case,
the civil court has jurisdiction. Where the action attacked the regularity of the
issuance of the writ of execution in the labor case, the labor officials have
jurisdiction. If the action does not attack the issuance, but the manner of execution,
the civil courts have jurisdiction.

GROTJAHN GMBH vs. ISNANI

August 10, 1994; G.R. No. 109272
Topic: Effect when no employer-employee relationship exists/issue does not involve
employer-employee relationship
FACTS:
Petitioner is a multinational corporation (employer). Private respondent
Lanchinebre (employee) worked as its sales representative from 1983 to mid-1992.
Employee obtained loans and cash advances, a total of P12,170.37 remained
unpaid.
In July 1992, Employee filed an illegal suspension case with the NLRC (NLRC Case).
Employer, on the other hand, filed a case for collection of Sum of Money at the RTC
(Collection Case). Employee moved to dismiss the collection case on the ground
that the case was in the nature of a claim for employee compensation (Art 217 No.4
& 6) and was under the exclusive jurisdiction of the NLRC. The RTC under
respondent judge dismissed the case.
Hence this petition for review.
ISSUE:
Whether or not the RTC has jurisdiction over the Collection Case.
HELD:
YES. While the loans and cash advances were contracted between employee and
employer during the subsistence of their relationship, it does not follow that Article
217 of the Labor Code covers their relationship.
The SC writes:
Not every dispute between an employer and employee involves
matters that only labor arbiters and the NLRC can resolve in the
exercise of their adjudicatory or quasi-judicial powers. The jurisdiction
of labor arbiters and the NLRC under Article 217 of the Labor Code is
limited to disputes arising from an employer-employee relationship
which can only be resolved by reference to the Labor Code, other labor
statutes, or their collective bargaining agreement.
xxx
Civil Case No. 92-2486 is a simple collection of a sum of money
brought by petitioner, as creditor, against private respondent
RomanaLanchinebre, as debtor. The fact that they were employer and
employee at the time of the transaction does not negate the civil
jurisdiction of the trial court. The case does not involve adjudication of
a labor dispute but recovery of a sum of money based on our civil laws
on obligation and contract.
xxx

Whether or not the subject loan was incurred by private respondent as

an incident to her profession, occupation or business is a question of
fact. In the absence of relevant evidence, the issue cannot be resolved
in a motion to dismiss.
Thus the relevant test in this instance is the test of relevance. Specifically, whether
or not the Labor Code has any relevance to the reliefs being sought by the parties.
If none, the case may be considered as intrinsically a civil dispute.
The order of the RTC was reversed and the collection case was reinstated.
Eviota v CA
Facts:
Respondent Bank (Standard Chartered Bank) and Petitioner executed a Contract of
Employmentunder which the latter was employed by the former as Compensation
and Benefits Manager, VP
Petitioner came up withmany proposals which the Bank approved and made
preparations of
He was also given privileges like a car, renovation of the office, and even atrip to
Singapore at the companys expense
However, Petitioner abruptly resigned from the Bank barely a month after
hisemployment and rejoined his former employer
Respondent Bank filed a complaint against Petitioner with the Makati RTC for
damages brought about his abrupt resignation
Though Petitioner reimbursed part of the amount demanded by Respondent Bank,
he was not able to pay it in full
Respondent Bank alleged that assuming arguendo that Petitioner had the right to
terminate his employment with the Bank for no reason, the manner in
andcircumstances under which he exercised the same are clearly abusive and
contrary to the rules governing human relations, governed by theCivil Code
Further, Respondent Bank alleged that Petitioner also violated the Labor Code
when he terminated his employment without one month notice in advance
This stipulation was also provided in the employment contract, which would also
constitute breach of contract
Petitioner filed a Motion to Dismiss the complaint on the ground that the action for
damages of Respondent Bank was within the exclusive jurisdiction of the Labor
Arbiter under paragraph 4, Article 217 of the Labor Code
Petitioneraverred that Respondent Banks claim for damages arose out of or were
in connection with his employer-employee relationship with the latter or some
aspect or incident of such relationship
Respondent Bank opposed the motion, claiming that its action fordamages was
within the exclusive jurisdiction of the RTC as, although its claims for damages
incidentally involved an employer-employeerelationship, the said claims are
actually predicated on Petitioners acts and omissions which are separately,
specifically and distinctlygoverned by the New Civil Code
Issue:

W/N the RTC has jurisdiction

Held:
YES
Case law has it that the nature of an action and the subject matter thereof, as well
as which courthas jurisdiction over the same, are determined by the material
allegations of the complaint and the reliefs prayed for in relation to the law
involved
Not every controversy or money claim by an employee against the employer or
vice-versa is within the exclusive jurisdiction of the Labor Arbiter
A money claim by a worker against the employer or vice-versa is within the
exclusive jurisdiction of the Labor Arbiter only if there isa reasonable causal
connection between the claim asserted and employee-employer relation
Absent such a link, the complaint will becognizable by the regular courts
Actions between employees and employer where the employer-employee
relationship is merely incidental and the cause of action precedesfrom a
different source of obligation is within the exclusive jurisdiction of the
regular court
The jurisdiction of the Labor Arbiter under Article 217of the Labor Code is limited
to disputes arising from an employer-employee relationship which can only be
resolved by referenceto the Labor Code, other labor laws or their collective
bargaining agreements
Jurisprudence has evolved the rule that claims for damages under paragraph 4 of
Article 217, to be cognizable by the Labor Arbiter, must have reasonable causal
connection with any of the claims provided for in that article
Only if there is such a connection with the other claims canthe claim for damages
be considered as arising from employer-employee relations
In this case, the Respondent Banksfirst cause of action for damages is anchored
on the Petitioners employment of deceit and of making Respondent Bank believe
that he would fulfill his obligation under the employment contract with
assiduousness and earnestness
Petitioner did an about face when, without the requisite thirty-day notice under
the contract and the Labor Code, heabandoned his office and rejoined his former
employer; thus, forcing the Respondent Bank to hire a replacement
Respondent Bank wasleft in a lurch, and its corporate plans and program in
jeopardy and disarray
Moreover, the Petitioner took off with the Respondent Banks computer diskette,
papers and documents containing confidential information on employee
compensation and other bank matters
On Respondent Banks second cause of action, Petitioner simply walked away from
his employment without any written notice, to theprejudice of Respondent Bank,
its banking operations, and the conduct of its business
Anent its third cause of action, Petitioner madefalse and derogatory statements
that the Respondent Bank reneged on its obligations under their contract of
employment; thus, depicting Respondent Bank as unworthy of trust
The primary relief sought is for liquidated damages for breach of a
contractual obligation.
The other items demanded are not labor benefitsdemanded by workers
generally taken cognizance of in labor disputes, such as payment of
wages, overtime compensation or separation pay

 The items claimed are the natural consequences flowing from breach of
an obligation, intrinsically a civil dispute
It is evident that the causes of action of Respondent Bank against
Petitioner do not involve the provisions of the Labor Code and other
labor laws, but the New Civil Code. Thus, the said causes of action are
intrinsically civil
There is no causal relationshipbetween Respondent Banks causes of
action against Petitioner and their employer-employee relationship
Thefact that the Respondent Bank was the erstwhile employer of the
petitioner under an existing employment contract before the latter
abandonedhis employment is merely incidental

4.1 Management prerogative to contract out of services

ASIAN
ALCOHOL
CORPORATION
COMMISSION,
(Management Prerogative)

vs. NATIONAL

LABOR

RELATIONS

Facts:
To thwart further losses of Asian Alcohol, Prior Holdings implemented a
reorganizational plan and other cost-saving measures. 117 out of 360 employees
were separated. The private respondents (water pump tenders, machine shop
mechanic, briquetting plant operator, plant helper) are among those union
members whose positions were abolished due to redundancy. Private respondents
filed with the NLRC complaints for illegal dismissal alleging that Asian Alcohol used
the retrenchment program as a subterfuge for the union busting. They claimed that
they were singled out for separation by reason for their active participation in the
union. They also asseverated that Asian Alcohol was not bankrupt as it has engaged
in an aggressive scheme of contractual hiring.
Issue: Whether private respondents have been illegally dismissed
Held: No. While tilting the scales of justice in favor of workers, the fundamental law
also guarantees the right of the employer to reasonable returns from his
investments. The law allows an employer to downsize his business to meet clear
and continuing economic threats. The right of management to dismiss workers
during periods of business recession and to install labor saving devices to prevent
losses is governed by Art. 283 of the Labor Code, as amended.
Art. 283. Closure of establishment and reduction of personnel.--The employer may
also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of
labor saving devices or redundancy, the worker affected thereby shall be entitled to
a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in case of closures or cessation of operations of establishment or

undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.
The requirements for valid retrenchment which must be proved by clear and
convincing evidence are: (1) that the retrenchment is reasonably necessary and
likely to prevent business losses which, if already incurred, are not merely de
minimis, but substantial, serious, actual and real, or if only expected, are reasonably
imminent as perceived objectively and in good faith by the employer; (2) that the
employer served written notice both to the employees and to the Department of
Labor and Employment at least one month prior to the intended date of
retrenchment;[ (3) that the employer pays the retrenched employees separation pay
equivalent to one month pay or at least month pay for every year of service,
whichever is higher;[26] (4) that the employer exercises its prerogative to retrench
employees in good faith for the advancement of its interest and not to defeat or
circumvent the employees right to security of tenure; [27] and (5) that the employer
used fair and reasonable criteria [28] in ascertaining who would be dismissed and who
would be retained among the employees, such as status (i.e., whether they are
temporary, casual, regular or managerial employees), efficiency, seniority,
[29]
physical fitness, age, and financial hardship for certain workers. [30]
Prior Holdings took over the operations of Asian Alcohol in October 1991. They were
incurred under the management of the Parsons family and continued to be suffered
under the new management of Prior Holdings. Ultimately, it is Prior Holding that will
absorb all the losses, including those incurred under the former owners of the
company. The law gives the new management every right to undertake measures to
save the company from bankruptcy. We find that the reorganizational plan and
comprehensive cost-saving program to turn the business around were nor designed
to bust the union of the private respondent. Retrenched were 117 employees. 72 of
them including private respondent were separated because their positions had
become redundant. In this context, what may technically be considered as
redundancy may verily be considered as retrenchment measures. Their positions
had to be declared redundant to cut losses.
Redundancy program to be valid, the employer must comply with the following
requisites: (1) written notice served on both the employees and the Department of
Labor and Employment at least one moth prior to the intended date of
retrenchment; (2) payment of separation pay equivalent to at least one month pay
or at least one month pay for every year of service whichever is higher; (3) good
faith in abolishing the redundant positions; and (4) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and accordingly abolished.
Private respondent failed to proffer any proof that the management acted in a
malicious or arbitrary manner in engaging the services of an independent
contractor to operate the Laura wells. Absent such proof, the Court has no basis to
interfere with the bona fide decision of management to effect more economic and
efficient methods of production.
Meralco v. Quisimbing/ 22 February 2000

Facts:
MEWAis the duly recognized labor organization of the rank-and-file employees of
MERALCO. OnSeptember7, 1995, MEWA informed MERALCO of its intention to renegotiate the terms and conditions of their existing 1992-1997 Collective
BargainingAgreement (CBA) covering the remaining period of two years starting from
December 1, 1995 to November 30, 1997.
MERALCO signified its willingness to re-negotiate through its letter dated
October 17, 1995and formed a CBA negotiating panel for the purpose. On November 10,
1995, MEWA submitted its proposal to MERALCO, which, in turn, presented a
counter-proposal.
Thereafter, collective bargaining negotiations proceeded. However, despite the series
of meetings between the negotiating panels of MERALCO and MEWA, the parties failed to
arrive at terms and conditions acceptable to both of them.. On April 23, 1996, MEWAfiled a
Notice of Strike with the National Capital Region Branch of the National Conciliation and
Mediation Board (NCMB) of the Department of Labor andEmployment (DOLE) which was
docketed as NCMB-NCR-NS-04-152-96, on the grounds of bargaining deadlock and
unfair labor practices.
The NCMB then conducted a series of conciliation meetings but the parties failed to
reach an amicable settlement. MERALCO filed a petition to let the Secretary of DOLEto
assume jurisdiction over the case which was granted.
Issue:W/N it is a management prerogative to contract out services.
.
Held:Yes, this issue is limited to the validity of the requirement that the union be
consulted before the implementation of any contracting out that would last for 6
months or more. Proceeding from our ruling in San Miguel Employees UnionPTGWO vsBersamina,(where we recognized that contracting out of work is a
proprietary right of the employer in the exercise of an inherent management
prerogative) the issue we see is whether the Secretarys consultation requirement is
reasonable or unduly restrictive of the companys management prerogative. We note
that the Secretary himself has considered that management should not be
hampered in the operations of its business when he said that:
We feel that the limitations imposed by the union advocates are too specific and
may not be applicable to the situations that the company and the union may face in
the future. To our mind, the greater risk with this type of limitation is that it will tend
to curtail rather than allow the business growth that the company and the union
must aspire for. Hence, we are for the general limitations we have stated above
because they will allow a calibrated response to specific future situations the
company and the union may face.
Additionally, We recognize that contracting out is not unlimited; rather, it is a
prerogative that management enjoys subject to well-defined legal limitations. As we
have previously held, the company can determine in its best business judgment
whether it should contract out the performance of some of its work for as long as
the employer is motivated by good faith, and the contracting out must not have

been resorted to circumvent the law or must not have been the result of malicious
or arbitrary action. The Labor Code and its implementing rules also contain specific
rules governing contracting out (Department of Labor Order No. 10, May 30, 1997,
Sections. 1-25).
Given these realities, we recognize that a balance already exist in the parties
relationship with respect to contracting out; MERALCO has its legally defined and
protected management prerogatives while workers are guaranteed their own
protection through specific labor provisions and the recognition of limits to the
exercise of management prerogatives. From these premises, we can only conclude
that the Secretarys added requirement only introduces an imbalance in the parties
collective bargaining relationship on a matter that the law already sufficiently
regulates. Hence, we rule that the Secretarys added requirement, being
unreasonable, restrictive and potentially disruptive should be struck down.
Aliviado v. Proctor & Gamble, G.R. No. 160506
Facts:The petitioners were 80 people worked as merchandisers P&G. They all
individually signed employment contracts with Promm-Gemm or SAPS for periods of
more or less than 5 months. They were all assigned to different outlets of P&G, and
received 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 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.
Petitioners filed a complaint against P&G for regularization, service incentive, leave
pay and other benefit with damages, which was subsequently amended to include
the matter of their subsequent dismissal. Labor Arbiter, NLRC and CA all ruled that
the complaint lacks merit as there was no employer-employee relationship between
the petitioners and P&G. 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.
Issues:
1. 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, and consequently whether there was an employeremployee relationship between the petitioners and P&G.
2. Whether the petitioners were illegally dismissed.
Held:

1. The law and its implementing rules allow contracting arrangements for the
performance of specific jobs, works or services. Indeed, it is management
prerogative to farm out any of its activities, regardless of whether such
activity is peripheral or core in nature. However, in order for such outsourcing
to be valid, it must be made to an independent contractor because the
current labor rules expressly prohibit labor-only contracting. Labor-only
contracting exists when the contractor or sub-contractor merely recruits,
supplies or places workers to perform a job, work or service for a principal
and (1) the contractor does not have substantial capital or investment to the
job, work, or service to be performed and the employees recruited, supplied
or placed by the contractor are directly related to the main business of the
principal or (2) The contractor does not exercise the right of control over the
performance of the work contractual employee. In the case at bar, PrommGemms financial statements showed that it has 1 million Capital Stock, and
P500,000 as of 1990. It also has long term assets worth P432K, and it also
proved that Promm-Gemm proved that it maintained its own warehouse and
office space, and registered vehicles. Under the circumstances, PrommGemm has substantial investments which relates to the work performed.
Promm-Gemm also showed that it supplied relevant materials such as
markers, tapes liners and cuters, necessary for them to perform their work,
as well as their uniforms. This negates the element of bad faith and intent to
circumvent labor laws. Thus, Promm-Gemm is a legitimate independent
contractor. Thus, the petitioners working under Promm-Gemm are employees
of Promm-Gemm.
On the case of SAPS, it only has P31,250 paid-in capital, which evinces that it
is not even sufficient for one month payroll. Substantial capital refers o
capitalization used in the performance or completion of the job, work or
service contracted out. In the present case, SAPS has failed to show
substantial capital. 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, which is the principal business of P&G. Thus, SAPS is engaged in a
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.In this case, petitioners
working under SAPS are thus employees of P&G.
2. The employer shall not terminate the services of an employee except for a
just or authorized cause.
In the case of employees working under Promm-Gemm, the termination
letters provided that considering themselves as employees of P&G, and thus
assailing the legitimacy of the Company. This, for Promm-Gemm, constitutes
serious misconduct and breach of trust.
Misconduct has been defined as improper or wrong conduct; the
transgression of some established and definite rule of action, a forbidden act,

a dereliction of duty, unlawful in character implying wrongful intent and not

mere error of judgment. The misconduct to be serious must be of such grave
and aggravated character and not merely trivial and unimportant. To be a just
cause for dismissal, such misconduct (a) must be serious; (b) must relate to
the performance of the employees duties; and (c) must show that the
employee has become unfit to continue working for the employer. To
constitute serious misconduct, it is not sufficient that the act or conduct
complained violated some established rules or policies. It must show that the
act or conduct must have been performed with wrongful intent. In this case,
Promm-Gem may have committed an error of judgment in claiming to be
employees of P&G, but it cannot be said that they were motivated by any
wrongful intent in doing so. Thus, they are only liable for simple misconduct,
and cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for dismissal, must be
based on the willful breach of the trust reposed in the employee by his
employer. Loss of trust and confidence, as a cause for termination of
employment, is premised on the fact that the employee concerned holds a
position of responsibility or of trust and confidence. As such, he must be
invested with confidence on delicate matters, such as custody, handling or
care and protection of the property and assets of the employer. And, in order
to constitute a just cause for dismissal, the act complained of must be workrelated and must show that the employee is unfit to continue to work for the
employer. In this case, the petitioners have not been shown to be occupying
positions of responsibility or of trust and confidence. Neither is there any
evidence to show that they are unfit to continue to work as merchandisers for
Promm-Gem. Thus, the dismissal on the workers under Promm Gem is illegal.
In regard to the employees of SAPs, there was no written notice of dismissal.
Upon receipt by SAPS of P&Gs letter terminating their Merchandising Services
Contact effective March 11, 1993, they in turn verbally informed the
concerned petitioners not to report for work anymore.In termination cases,
the burden of proof rests upon the employer to show that the dismissal is for
just and valid cause.P&G failed to discharge the burden of proving the legality
and validity of the dismissals of those petitioners who are considered its
employees. Hence, the dismissals necessarily were not justified and are
therefore illegal.

G.R. No. 170054 : January 21, 2013

GOYA, INC. v. GOYA, INC. EMPLOYEES UNION-FFW
FACTS:
Petitioner Goya Inc. (Goya) hired contractual employees from PESO Resources
Development Corporation (PESO). This prompted Goya, Inc. Employees Union-FFW

(Union) to request for a grievance conference on the ground that the contractual
workers do not belong to the categories of employees stipulated in their CBA. The
Union also argued that hiring contractual employees is contrary to the union
security clause embodied in the CBA.
When the matter remained unresolved, the grievance was referred to the NCMB for
voluntary arbitration. The Union argued that Goya is guilty of ULP for gross violation
of the CBA. The voluntary arbitrator dismissed the Unions charge of ULP but Goya
was directed to observe and comply with the CBA. While the Union moved for partial
consideration of the VA decision, Goya immediately filed a petition for review before
the Court of Appeals to set aside the VAs directive to observe and comply with the
CBA commitment pertaining to the hiring of casual employees. Goya argued that
hiring contractual employees is a valid management prerogative. The Court of
Appeals dismissed the petition.
ISSUE: Whether the act of hiring contractual employees is a valid exercise of
management prerogative?
HELD: YES. The CA did not commit serious error when it sustained the ruling that
the hiring of contractual employees from PESO was not in keeping with the intent
and spirit of the CBA. In this case, a complete and final adjudication of the dispute
between the parties necessarily called for the resolution of the related and
incidental issue of whether the Company still violated the CBA but without being
guilty of ULP as, needless to state, ULP is committed only if there is gross violation
of the agreement.

Goya kept on harping that both the VA and the CA conceded that its engagement of
contractual workers from PESO was a valid exercise of management prerogative. It
is confused. To emphasize, declaring that a particular act falls within the concept of
management prerogative is significantly different from acknowledging that such act
is a valid exercise thereof. What the VA and the CA correctly ruled was that the
Companys act of contracting out/outsourcing is within the purview of management
prerogative. Both did not say, however, that such act is a valid exercise thereof.
Obviously, this is due to the recognition that the CBA provisions agreed upon by
Goya and the Union delimit the free exercise of management prerogative pertaining
to the hiring of contractual employees.
A collective bargaining agreement is the law between the parties. A collective
bargaining agreement or CBA refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work
and all other terms and conditions of employment in a bargaining unit. As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy. Thus, where the CBA is clear

and unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law.
As repeatedly held, the exercise of management prerogative is not unlimited; it is
subject to the limitations found in law, collective bargaining agreement or the
general principles of fair play and justice.
Petition is DENIED.

4.2 Independent
Contracting

Contractor/

Job

Contracting

vs

Labor

Only

SAN MIGUEL CORPORATION,

- versus VICENTE B. SEMILLANO, NELSON MONDEJAR, JOVITO REMADA, ALILGILAN
MULTI-PURPOSE COOP (AMPCO) AND MERLYN V. POLIDARIO,
FACTS:
AMPCO hired the services of Vicente et al. [Vicente Semillano, Nelson
Mondejar, Jovito Remada and Alex Hawod, respondents herein] on
different dates in December of 1991 and] 1994. All of them were
assigned to work in SMCs Bottling Plant situated at Brgy. Granada Sta.
Fe, Bacolod City, in order to perform the following tasks: segregating
bottles, removing dirt therefrom, filing them in designated places,
loading and unloading the bottles to and from the delivery trucks, and
performing other tasks as may be ordered by SMCs officers. They were
required to work inside the premises of SMC using SMCs equipment.
They rendered service with SMC for more than 6 months.
Subsequently, SMC entered into a Contract of Service with
AMPCO designating the latter as the employer of Vicente, et al. As a
result, Vicente et al. failed to claim the rights and benefits ordinarily
accorded a regular employee of SMC and were not paid their
13th month pay.
On June 6, 1995, they were not allowed to enter the premises of
SMC. The project manager of AMPCO, Merlyn Polidario, told them to
wait for further instructions from the SMCs supervisor. Vicente et al.
waited for one month, unfortunately, they never heard a word from
SMC.
Consequently, Vicente et al., as complainants, filed on July 17,
1995 a COMPLAINT FOR ILLEGAL DISMISSAL with the Labor Arbiter
against AMPCO, Merlyn V. Polidario, SMC and Rufino I. Yatar [SMC Plant
Manager], as respondents.

Respondents assert that they are regular employees of SMC and

that they were illegally dismissed by the latter.
On the other hand, respondent SMC raised the defense that it is
not the employer of the complainants. According to SMC, AMPCO is
their employer because the latter is an independent contractor and that
it was AMPCO that directly paid their salaries and remitted their
contributions to the SSS.
The labor arbiter ruled that respondents were regular employees
of SMC which was affirmed by the NLRC. However, the NLRC
subsequently reversed its decision, thereby ruling that AMPCO is an
independent contractor. On appeal, the CA favored respondents.
Issue: W/N AMPCO is a legitimate job contractor.
Held: No. The existence of an independent and permissible contractor
relationship is 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.
There are no pieces of evidence that AMPCO has substantial
capital or investment. Neither did petitioner prove that AMPCO had
substantial equipment, tools, machineries, and supplies actually and directly
used by it in the performance or completion of the segregation and piling job.
The evidence is clear that respondents performed activities which were
directly related to petitioners main line of business. Petitioner is primarily
engaged in manufacturing and marketing of beer products, and respondents
work of segregating and cleaning bottles is unarguably an important part of
its manufacturing and marketing process.

Babas, et. al vs. Lorenzo Shipping Corporation, G.R. No. 186091, 15

December 2010
-

Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation

engaged in the shipping industry. LSC entered into a General Equipment

Maintenance Repair and Management Services Agreement (Agreement) with

Best Manpower Services, Inc. (BMSI). Under the Agreement, BMSI undertook
to provide maintenance and repair services to LSCs container vans, heavy
equipment, trailer chassis, and generator sets. BMSI further undertook to
provide checkers to inspect all containers received for loading to and/or
unloading from its vessels.
-

Simultaneous with the execution of the Agreement, LSC leased its equipment,
tools, and tractors to BMSI. The period of lease was coterminous with the
Agreement.

BMSI then hired petitioners on various dates to work at LSC as checkers,

welders, utility men, clerks, forklift operators, motor pool and machine shop
workers, technicians, trailer drivers, and mechanics.

In September 2003, petitioners filed with the Labor Arbiter (LA) a complaint
for regularization against LSC and BMSI. On October 1, 2003, LSC terminated
the Agreement, effective October 31, 2003. Consequently, petitioners lost
their employment.

BMSI asserted that it is an independent contractor. It averred that it was

willing to regularize petitioners; however, some of them lacked the requisite
qualifications for the job. LSC averred that petitioners were employees of
BMSI and were assigned to LSC by virtue of the Agreement. BMSI is an
independent job contractor with substantial capital or investment in the form
of tools, equipment, and machinery necessary in the conduct of its business.
The Agreement between LSC and BMSI constituted legitimate job contracting.
Thus, petitioners were employees of BMSI and not of LSC.

The Labor Arbiter dismissed petitioners complaint on the ground that

petitioners were employees of BMSI. It was BMSI which hired petitioners,
paid their wages, and exercised control over them. The NLRC reversed the
Labor Arbiter

Issue: Whether or not LSC was engaged in labor-only contracting.

Held:Yes. In De Los Santos v. NLRC, the character of the business, i.e., whether as
labor-only contractor or as job contractor, should be measured in terms of, and
determined by, the criteria set by statute. The parties cannot dictate by the mere
expedience of a unilateral declaration in a contract the character of their business.

First, petitioners worked at LSCs premises, and nowhere else. Other than the
provisions of the Agreement, there was no showing that it was BMSI which

established petitioners working procedure and methods, which supervised

petitioners in their work, or which evaluated the same. There was absolute lack of
evidence that BMSI exercised control over them or their work.

Second, LSC was unable to present proof that BMSI had substantial capital. There
was no proof pertaining to the contractors capitalization, nor to its investment in
tools, equipment, or implements actually used in the performance or completion of
the job, work, or service that it was contracted to render. What is clear was that the
equipment used by BMSI were owned by, and merely rented from, LSC.

Third, petitioners performed activities which were directly related to the main
business of LSC. The work of petitioners as checkers, welders, utility men, drivers,
and mechanics could only be characterized as part of, or at least clearly related to,
and in the pursuit of, LSCs business.

Lastly, BMSI had no other client except for LSC, and neither BMSI nor LSC refuted
this finding, thereby bolstering the NLRC finding that BMSI is a labor-only contractor.

The CA erred in considering BMSIs Certificate of Registration as sufficient proof that

it is an independent contractor.
Jurisprudence states that a Certificate of
Registration issued by the Department of Labor and Employment is not conclusive
evidence of such status. The fact of registration simply prevents the legal
presumption of being a mere labor-only contractor from arising.

LSC is ordered to reinstate the petitioners to their former positions. Petitioners are
declared as regular employees of LSC.
Norkis Trading v. Buenaventura

FACTS:
The respondents were hired and worked by/for NorkisTradingas skilled
workers assigned in the operation of industrial and welding machines owned and
used by Norkis Trading for its business, they were not treated as regular employees
by Norkis Trading. Instead, they were regarded by Norkis Trading as members of
PASAKA, a cooperative, and which was deemed an independent contractor that
merely deployed the respondents to render services for Norkis Trading.The

respondents,believing that they were regular employees of Norkis Trading, filed on

June 9, 1999 with the DOLE a complaint against Norkis Trading and PASAKA for
labor-only contracting and non-payment of minimum wage and overtimepay. The
filing of the complaint for labor-only contractingallegedly led to the suspension of
the respondents membership with PASAKA.On October 13, 1999, the respondents
were to report back to work but they were informed by PASAKA that they would
betransferred to NorkisTradings sister company, PortaCoeli Industrial Corporation
(PortaCoeli). The respondents opposed the transfer as it would allegedly result in a
change of employers, from NorkisTrading to PortaCoeli. The respondents also
believed that the transfer would result in a demotion since from being skilled
workers in Norkis Trading, they would be reduced to being utility workers. These
circumstances made the respondents amend their complaint for illegal suspension,
to include the charges of unfair labor practice, illegal dismissal, damages and
attorneys fees.

ISSUE: Whether the respondents were illegally dismissed by Norkis Trading

HELD: YES.Where an entity is declared to be a labor-only contractor, the

employees supplied by said contractor to the principal employer become regular
employees of the latter.Having gained regular status, the employees are entitled to
security of tenure and can only be dismissed for just or authorized causes andafter
they had been afforded due process. Termination of employment without just or
authorized cause and without observing procedural due process is
illegal.Considering, that PortaCoeli is an entity separate and distinct from Norkis
Trading, the respondents employment withNorkis Trading was necessarily severed
by the change in work assignment.
4.3 Examples
Masiador and sentenciador in a cockpit; not employees
MARTICIO SEMBLANTE AND DUBRICK PILAR, Petitioner, v. COURT OF
APPEALS,
Respondent.

FACTS:
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they
were hired by respondents-spouses Vicente and Maria Luisa Loot, the owners of
Gallera de Mandaue(the cockpit), as the official masiadorand sentenciador,

respectively,

of

the

cockpit

sometime

in

1993.

As the masiador, Semblante calls and takes the bets from the gamecock owners
and other bettors and orders the start of the cockfight. He also distributes the
winnings after deducting the arriba, or the commission for the cockpit. Meanwhile,
as the sentenciador, Pilar oversees the proper gaffing of fighting cocks, determines
the fighting cocks physical condition and capabilities to continue the cockfight, and
eventually
declares
the
result
of
the
cockfight.
On November 14, 2003, however, petitioners were denied entry into the cockpit
upon the instructions of respondents, and were informed of the termination of their
services effective that date. This prompted petitioners to file a complaint for illegal
dismissal
against
respondents.
In answer, respondents denied that petitioners were their employees and alleged
that they were associates of respondents independent contractor, Tomas Vega.
Respondents claimed that petitioners have no regular working time or day and they
are free to decide for themselves whether to report for work or not on any
cockfighting day. In times when there are few cockfights inGallera de Mandaue,
petitioners go to other cockpits in the vicinity. Lastly, petitioners, so respondents
assert, were only issued identification cards to indicate that they were free from the
normal entrance fee and to differentiate them from the general public.
Labor Arbiter Julie C. Rendoque found petitioners to be regular employees of
respondents as they performed work that was necessary and indispensable to the
usual trade or business of respondents for a number of years. The Labor Arbiter also
ruled that petitioners were illegally dismissed, and so ordered respondents to pay
petitioners
their
backwages
and
separation
pay.
Respondents counsel received the Labor Arbiters Decision on September 14, 2004.
And within the 10-day appeal period, he filed the respondents appeal with the NLRC
on September 24, 2004, but without posting a cash or surety bond equivalent to the
monetary award granted by the Labor Arbiter. It was only on October 11, 2004 that
respondents filed an appeal bond dated October 6, 2004. Hence, in a Resolution
dated August 25, 2005, the NLRC denied the appeal for its non-perfection.
Subsequently, however, the NLRC, acting on respondents Motion for
Reconsideration, reversed its Resolution on the postulate that their appeal was
meritorious and the filing of an appeal bond, albeit belated, is a substantial
compliance with the rules. The NLRC held in its Resolution of October 18, 2006 that
there was no employer-employee relationship between petitioners and respondents,
respondents having no part in the selection and engagement of petitioners, and
that no separate individual contract with respondents was ever executed by
petitioners.

The appellate court found for respondents, noting that referees and bet-takers in a
cockfight need to have the kind of expertise that is characteristic of the game to
interpret messages conveyed by mere gestures. Hence, petitioners are akin to
independent contractors who possess unique skills, expertise, and talent to
distinguish
them
from
ordinary
employees.
The CA refused to reconsider its Decision. Hence, petitioners came to this Court,
arguing in the main that the CA committed a reversible error in entertaining an
appeal, which was not perfected in the first place.
ISSUE: Whether the CA erred in entertaining an appeal which was not perfected.
HELD:
Indeed, the posting of a bond is indispensable to the perfection of an appeal in
cases involving monetary awards from the Decision of the Labor Arbiter. Article 223
of the Labor Code provides:
Article 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both partieswithin ten (10)
calendar days from receipt of such decisions, awards, or orders.Such appeal may be
entertained only on any of the following grounds:
xxxx
In case of a judgment involving a monetary award,an appeal by the employer may
be perfected only upon the posting of a cash or surety bondissued by a reputable
bonding company duly accredited by the Commission in the amount equivalent to
the monetary award in the judgment appealed from.
Time and again, however, this Court, considering the substantial merits of the case,
has relaxed this rule on, and excused the late posting of, the appeal bond when
there are strong and compelling reasons for the liberality, such as the prevention of
miscarriage of justice extant in the case or the special circumstances in the case
combined with its legal merits or the amount and the issue involved. After all,
technical rules cannot prevent courts from exercising their duties to determine and
settle, equitably and completely, the rights and obligations of the parties. This is
one case where the exception to the general rule lies.
While respondents had failed to post their bond within the 10-day period provided
above, it is evident, on the other hand, that petitioners are NOT employees of
respondents, since their relationship fails to pass muster the four-fold test of
employment We have repeatedly mentioned in countless decisions:
(1) the selection and engagement of the employee;

(2) the payment of wages;

(3) the power of dismissal; and
(4) the power to control the employees conduct, which is the most important
element.
As found by both the NLRC and the CA, respondents had no part in petitioners
selection and management; petitioners compensation was paid out of the arriba
(which is a percentage deducted from the total bets), not by petitioners; and
petitioners performed their functions as masiador and sentenciador free from the
direction and control of respondents. In the conduct of their work, petitioners relied
mainly on their expertise that is characteristic of the cockfight gambling, and were
never given by respondents any tool needed for the performance of their work.
Respondents, not being petitioners employers, could never have dismissed, legally
or illegally, petitioners, since respondents were without power or prerogative to do
so in the first place. The rule on the posting of an appeal bond cannot defeat the
substantive rights of respondents to be free from an unwarranted burden of
answering for an illegal dismissal for which they were never responsible.
Strict implementation of the rules on appeals must give way to the factual and legal
reality that is evident from the records of this case. After all, the primary objective
of our laws is to dispense justice and equity, not the contrary.
DENIED.
Manufacturing company vs. forwarding agent
TEMIC AUTOMOTIVE VS TEMIC
FACTS: The petitioner is a corporation engaged in the manufacture of electronic
brake systems and comfort body electronics for automotive vehicles. Respondent
Temic Automotive Philippines, Inc. Employees Union-FFW (union) is the exclusive
bargaining agent of the petitioner's rank-and-file employees. On May 6, 2005, the
petitioner and the union executed a collective bargaining agreement (CBA) for the
period January 1, 2005 to December 31, 2009.
The petitioner is composed of several departments, one of which is the warehouse
department consisting of two warehouses - the electronic braking system and the
comfort body electronics. These warehouses are further divided into four sections receiving section, raw materials warehouse section, indirect warehouse section and
finished goods section.The union members are regular rank-and-file employees
working in these sections as clerks, material handlers, system encoders and general
clerks. Their functions are interrelated and include: receiving and recording of
incoming deliveries, raw materials and spare parts; checking and booking-in
deliveries, raw materials and spare parts with the use of the petitioner's system
application processing; generating bar codes and sticking these on boxes and

automotive parts; and issuing or releasing spare parts and materials as may be
needed at the production area, and piling them up by means of the company's
equipment (forklift or jacklift).
Issue: Whether or not the company validly contracted out or outsourced the
services involving forwarding, packing, loading and clerical activities related
thereto.
Ruling: As submitted by the parties, the first issue is whether or not the company
validly contracted out or outsourced the services involving forwarding, packing,
loading and clerical activities related thereto. However, the forwarders, with whom
the petitioner had written contracts for these services, were never made parties
(and could not have been parties to the voluntary arbitration except with their
consent) so that the various forwarders agreements could not have been validly
impugned through voluntary arbitration and declared invalid as against the
forwarders.
The second submitted issue is whether or not the functions of the forwarders
employees are functions being performed by regular rank-and-file employees
covered by the bargaining unit. While this submission is couched in general terms,
the issue as discussed by the parties is limited to the forwarders employees
undertaking services as clerks, material handlers, system encoders and general
clerks, which functions are allegedly the same functions undertaken by regular
rank-and-file company employees covered by the bargaining unit. Either way,
however, the issue poses jurisdictional problems as the forwarders employees are
not parties to the case and the union has no authority to speak for them.
From this perspective, the voluntary arbitration submission covers matters affecting
third parties who are not parties to the voluntary arbitration and over whom the
voluntary arbitrator has no jurisdiction; thus, the voluntary arbitration ruling cannot
bind them.[23] While they may voluntarily join the voluntary arbitration process as
parties, no such voluntary submission appears in the record and we cannot presume
that one exists. Thus, the voluntary arbitration process and ruling can only be
recognized as valid between its immediate parties as a case arising from their
collective bargaining agreement. This limited scope, of course, poses no problem as
the forwarders and their employees are not indispensable parties and the case is
not mooted by their absence. Our ruling will fully bind the immediate parties and
shall fully apply to, and clarify the terms of, their relationship, particularly the
interpretation and enforcement of the CBA provisions pertinent to the arbitrated
issues.

Television Company vs. Talent

Jose Sonza vs. ABS-CBN, G.R. No. 138051, 10 June 2004

Facts:

Mel and Jay Management and Development Corporation ("MJMDC"), with SONZA, as
President and General Manager, and Carmela Tiangco ("TIANGCO") entered into a
contract with ABS-CBN. Referred to in the Agreement as "AGENT," MJMDC agreed to
provide SONZA's services exclusively to ABS-CBN as talent for radio and television.
ABS-CBN agreed to pay for SONZA's services a monthly talent fee of P310,000 for
the first year and P317,000 for the second and third year of the Agreement. ABSCBN would pay the talent fees on the 10th and 25th days of the month.

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department
of Labor and Employment, National Capital Region in Quezon City. SONZA
complained that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and amounts due under
the Employees Stock Option Plan ("ESOP").

ABS filed for dismissal of the petition, contending that there was no employeremployee relationship between the company and SONZA. What exists is an AgentPrincipal relationship

Issue: Whether or not there exists an employer-employee relationship that will be

used as the basis for the present petition.

Ruling: Petition denied.

SONZA maintains that all essential elements of an employer-employee relationship
are present in this case. Case law has consistently held that the elements of an
employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee on the means and methods by which the
work is accomplished. The last element, the so-called "control test", is the most
important element.

A. Selection and Engagement of Employee

The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative,
but not conclusive, of an independent contractual relationship. If SONZA did not
possess such unique skills, talent and celebrity status, ABS-CBN would not have

entered into the Agreement with SONZA but would have hired him through its
personnel department just like any other employee.

B. Payment of Wages
All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBN's employee, there would be no need
for the parties to stipulate on benefits such as "SSS, Medicare, . . . and 13th month
pay" 20 which the law automatically incorporates into every employer-employee
contract. 21 Whatever benefits SONZA enjoyed arose from contract and not
because of an employer-employee relationship

C. Power of Dismissal -During the life of the Agreement, ABS-CBN agreed to pay
SONZA's talent fees as long as "AGENT and Jay Sonza shall faithfully and completely
perform each condition of this Agreement." Even if it suffered severe business
losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to
pay SONZA's talent fees during the life of the Agreement. This circumstance
indicates an independent contractual relationship between SONZA and ABS-CBN

D. Power of Control
First, SONZA contends that ABS-CBN exercised control over the means and methods
of his work

ABS-CBN engaged SONZA's services specifically to co-host the "Mel & Jay"
programs. ABS-CBN did not assign any other work to SONZA. To perform his work,
SONZA only needed his skills and talent. How SONZA delivered his lines, appeared
on television, and sounded on radio were outside ABS-CBN's control. SONZA did not
have to render eight hours of work per day. The Agreement required SONZA to
attend only rehearsals and tapings of the shows, as well as pre- and post-production
staff meetings. ABS-CBN could not dictate the contents of SONZA's script. We find
that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA's work. ABS-CBN did not instruct SONZA how to perform his job.
ABS-CBN merely reserved the right to modify the program format and airtime
schedule "for more effective programming." ABS-CBN's sole concern was the quality
of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of performance of SONZA's work.

Second, SONZA urges us to rule that he was ABS-CBN's employee because ABS-CBN
subjected him to its rules and standards of performance. The code of conduct
imposed on SONZA under the Agreement refers to the "Television and Radio Code of
the Kapisananngmga Broadcaster saPilipinas (KBP), which has been adopted by the
COMPANY (ABS-CBN) as its Code of Ethics." The KBP code applies to broadcasters,
not to employees of radio and television stations. Broadcasters are not necessarily
employees of radio and television stations. Clearly, the rules and standards of
performance referred to in the Agreement are those applicable to talents and not to
employees of ABS-CBN.

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most
extreme form of control which ABS-CBN exercised over him. This argument is futile.
Being an exclusive talent does not by itself mean that SONZA is an employee of
ABS-CBN. Even an independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay,
separation pay, service incentive leave, signing bonus, travel allowance, and
amounts due under the Employee Stock Option Plan. We agree with the findings of
the Labor Arbiter and the Court of Appeals that SONZA's claims are all based on the
May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the
present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZA's
cause of action is for breach of contract which is intrinsically a civil dispute
cognizable by the regular courts

ABS-CBN
BROADCASTINGCORPORATION,Petitioner,
NAZARENO,Respondents.

v.

MARLYN

Facts
-

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the

broadcasting business and owns a network of television and radio stations,
whose operations revolve around the broadcast, transmission, and relay of
telecommunication signals. It sells and deals in or otherwise utilizes the
airtime it generates from its radio and television operations. It has a franchise
as a broadcasting company, and was likewise issued a license and authority
to operate by the National Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan

as production assistants (PAs) on different dates. They were assigned at the
news and public affairs, for various radio programs in the Cebu Broadcasting
Station. On December 19, 1996, petitioner and the ABS-CBN Rank-and-File
Employees executed a Collective Bargaining Agreement (CBA) to be effective
during the period from December 11, 1996 to December 11, 1999. However,
since petitioner refused to recognize PAs as part of the bargaining unit,
respondents were not included to the CBA.
On October 12, 2000, respondents filed a Complaint for Recognition of
Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay,
Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with
Damages against the petitioner before the NLRC. The Labor Arbiter rendered
judgment in favor of the respondents, and declared that they were regular
employees of petitioner as such, they were awarded monetary benefits. NLRC
affirmed the decision of the Labor Arbiter. Petitioner filed a motion for
reconsideration but CA dismissed it.

Issue
-

Whether or not the respondents were considered regular employees of ABSCBN.

Held
-

The respondents are regular employees of ABS-CBN. It was held that where a
person has rendered at least one year of service, regardless of the nature of
the activity performed, or where the work is continuous or intermittent, the
employment is considered regular as long as the activity exists, the reason
being that a customary appointment is not indispensable before one may be
formally declared as having attained regular status.
In Universal Robina Corporation v. Catapang, the Court states that the
primary standard, therefore, of determining regular employment is the
reasonable connection between the particular activity performed by the
employee in relation to the usual trade or business of the employer. The test
is whether the former is usually necessary or desirable in the usual business
or trade of the employer. The connection can be determined by considering
the nature of work performed and its relation to the scheme of the particular
business or trade in its entirety. Also, if the employee has been performing
the job for at least a year, even if the performance is not continuous and
merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of
that activity to the business. Hence, the employment is considered regular,
but only with respect to such activity and while such activity exists.
Additionally, respondents cannot be considered as project or program
employees because no evidence was presented to show that the duration

and scope of the project were determined or specified at the time of their
engagement. In the case at bar, however, the employer-employee
relationship between petitioner and respondents has been proven. In the
selection and engagement of respondents, no peculiar or unique skill, talent
or celebrity status was required from them because they were merely hired
through petitioners personnel department just like any ordinary employee.
Respondents did not have the power to bargain for huge talent fees, a
circumstance negating independent contractual relationship. Respondents
are highly dependent on the petitioner for continued work. The degree of
control and supervision exercised by petitioner over respondents through its
supervisors negates the allegation that respondents are independent
contractors.
The presumption is that when the work done is an integral part of the regular
business of the employer and when the worker, relative to the employer,
does not furnish an independent business or professional service, such work
is a regular employment of such employee and not an independent
contractor. As regular employees, respondents are entitled to the benefits
granted to all other regular employees of petitioner under the CBA. Besides,
only talent-artists were excluded from the CBA and not production assistants
who are regular employees of the respondents. Moreover, under Article 1702
of the New Civil Code: In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living of the
laborer.
-

Fulache v. ABS-CBN
Facts:
1. Petitioners Fulache, et. all filed two separate complaints against ABS-CBN:
regularization and illegal dismissal. Fulache and Castillo were
drivers/cameramen; Atinen, Lagunzad and Jabonero were drivers, Ponce and
Almendras as cameramen/editors, Bigno was a PA/Teleprompter Operator-Editing
and Cabas, a VTR man/editor.
2.On December 17, 1999, petitioners executed a collective bargaining
agreement with ABS-CBN Rank-and-File Employees. They allege that ABS-CBN
excluded them from its coverage since they were only temporary not regular
employees.
3. ABS-CBN claimed that petitioners were independent contractors/off camera
talents and not entitled to regularization.
4. The Labor Arbiter held that the petitioners were regular employees not
independent contractors. Pending the regularization case, petitioners filed a
complaint for illegal dismissal. By April 2003, petitioners were dismissed due to

redundancy. The NLRC issued a joint decision on both cases. The NLRC ruled that
there was an employer-employee relationship between petitioners and ABS-CBN
as the company exercised control over the performance of their work, since they
were not paid for the result of the work but on a monthly basis. The NLRC also
ruled that the petitioners were illegally dismissed.
5. On motion for reconsideration, the NLRC affirmed the ruling that petitioners
were regular employees but held that they were not illegally dismissed since
redundancy was a valid cause. The CA sustained the ruling on illegal dismissal
but held that the petitioners failed to prove their claim to CBA benefits.

Issue:
w/n petitioners are regular employees or contractor?

Held:
Regular employees. The Court held that the petitioners regular employees and
consequently entitled to CBA benefits as a matter of law and contract. In the
CBA, the Court held that petitioners did not fall under the excluded categories
such as personnal classified as supervisor and confidential employees, personnel
who are on casual or probationary status, and personnel who are on
contract status.

Insurance Company vs. Commission agents

INSULAR LIFE v. NLRC
FACTS:
1. In 1968, Insular Life and Basiao entered into a contract by which Basiao was
authorized to solicit within the PHils. Applicants for insurance policies and
annuities in accordance with existing rules and regulations of the Company.
He would receive compensation in the form of commissions and the rules in
the Rate Book and its Agents Manual, as well as its circulars and those which
may from time to time be promulgated by it which were made part of the
contract.
2. The contract also contained provisions governing relations of the parties, the
duties of the Agent, the acts prohibited to him, and the modes of termination
of the agreement, viz

RELATION WITH THE COMPANY. The Agent shall be free to exercise his own
judgment as to time, place and means of soliciting insurance. Nothing herein
contained shall therefore be construed to create the relationship of employee
and employer between the Agent and the Company. However, the Agent
shall observe and conform to all rules and regulations which the Company
may from time to time prescribe.

3.

4.

5.

6.

7.

TERMINATION. The Company may terminate the contract at will, without

any previous notice to the Agent, for or on account of.(explicitly specified
causes)
In April, 1972, the parties entered into another contract an Agency
Managers Contract, while Basiao concurrently fulfilled his commitments
under the first contract with the Company.
In May, 19791, the Company terminated the Agency Managers Contract.
After vainly seeking a reconsideration, Basiao sued the Company in a civil
action and this (he claimed) prompted the latter toa terminate also his
engagement under the first contract and to stop payment of his commissions
starting April 1, 1980.
Basiao filed with Ministry of Labor a complaint against the Company and its
president. The complaint sought to recover commissions allegedly unpaid,
plus attorneys fees. The respondents claim: Ministry had no jurisdiction over
Basiaos claim, asserting that he was not the Companys employee, but an
independent contractor and that the Company had no obligation to him for
unpaid commissions under the terms and conditions of his contract.
The Labor Arbiter favoured Basiao. He ruled that the underwring agreement
had established an employer-employee relationship between him and the
Company, and this conferred jurisdiction on the Ministry of Labor to
adjudicate his claim. Said officials decision directed payment of his unpaid
commissions equivalent to the balance of the first years premium
remaining unpaid, at the time of his termination, of all the insurance policies
solicited by (him) in favour of the respondent company plus 10%
aattorneys fees.
The decision was, on appeal by the Company, affirmed by the NLRC.

ISSUE
WON Basiao had become the Companys employee by virtue of the contract
invoked by him, thereby placing is claim for unpaid commissions within the
original and exclusive jurisdiction of the Labor Arbiter under the provisions of the
Sec 217 of the Labor Code.
HELD
NO. Basiao was not an employee of the petitioner, but a commission agent, and
independent contractor whose claim for unpaid commissions should have been
litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance

of, and adjudicating, said claim, being without jurisdiction to do so, as did the
respondent NLRC in affirming the Arbiters decision. This conclusion renders it
unnecessary and premature to consider Basiaos claim for commissions on its
merits.

Tongko v. Manufacturer Life Insurance Co. (MANULIFE) Inc., et al., G.R. No

167622, January 25, 2011
Facts:
Tongko was, initially an insurance agent of Manulife who was promoted to the role of
a manager. The contractual relationship between Tongko and Manulife had two basic
phases. The initial phase began on July 1, 1977under a Career Agents Agreement
which regarded him as an independent contractor, not an employee. As an agent,
his tasks were to canvass for applications for insurance products and collect money
due to the Company. The second phase started in 1983 when Tongko was named
Unit Manager. In 1990, he became a Branch Manager. In 1996, Tongko became a
Regional Sales Manager, where he earned commissions, persistency income and
management overrides. Since the beginning, Tongko consistently declared himself
self-employed in his income tax returns.
However, in 2001, Manulife instituted manpower development programs which
directed the managers to increase the number of agents to at least 1,000 strong for
a start. It was found that Tongkos region was the lowest performer in terms of
recruiting in 2000. Subsequently, Tongko received another letter, dated December
18, 2001, terminating his services. Tongko then filed an illegal dismissal complaint
with the NLRC Arbitration Branch. He alleged the existence of an employment
relationship. In support of this he asserted that as Unit Manager, he was paid an
annual over-rider, a travel and entertainment allowance in addition to his overriding
commissions. He was tasked with numerous administrative functions and
supervisory authority over Manulifes employees. He was required to follow at least
three codes of conduct. On the other hand, Manulife contended that what existed
between them was a mere agency relationship.
Decisions of the Judicial Tribunals
LA:
No employer-employee relationship existed between the parties.
NLRC: It found the existence of an employer-employee relationship. There was
illegal dismissal.
CA:
It reverted to the labor arbiters decision that no employer-employee
relationship existed between them.
SC:
In reversing the CA ruling, it declared that an employment relationship
existed between them. First, there exists the possibility of an insurance agent
becoming an employee of an insurance company if evidence shows that the
company promulgated rules or regulations that effectively controlled or restricted
an insurance agents choice of methods or the methods themselves in selling
insurance.

Second, Manulife had the power of control over Tongko, sufficient to characterize
him as an employee, as shown by the fact that he complied with 3 different codes of
conduct and that he performed administrative duties. Also, Tongko was tasked to
recruit some agents in addition to his other administrative functions.
Hence, a Motion for Reconsideration was filed by Manulife and was granted by the
SC.
Issue:
Whether or not there exists an employer-employee relationship.
Ruling:
Rules regarding the desired results (e.g., the required volume to continue to qualify
as a company agent & legal/ ethical rules to be followed) are built-in elements of
control specific to an insurance agency and should not and cannot be read as
elements of control that attend an employment relationship governed by the Labor
Code.
Based on decided cases, a determination of the presence of the Labor Code element
of control was made on the basis of the stipulations of the subsequent contracts. In
this case, while Tongko was later on designated unit manager in 1983, Branch
Manager in 1990, and Regional Sales Manager in 1996, no formal contract regarding
these undertakings appears in the records of the case. Any such contract or
agreement, had there been any, could have at the very least provided the bases for
properly ascertaining the juridical relationship established between the parties.
For this reason, we can take judicial notice that as a matter of Insurance Codebased business practice, an agency relationship prevails in the insurance industry
for the purpose of selling insurance. Significantly, evidence shows that Tongkos role
as an insurance agent never changed during his relationship with Manulife. Tongko
essentially remained an agent, but moved up in this role through Manulifes
recognition that he could use other agents approved by Manulife but operating
under his guidance. For want of a better term, Tongko perhaps could be labeled as a
"lead agent" who guided under his wing other Manulife agents.
Evidence indicates that Tongko consistently clung to the view that he was an
independent agent since he invariably declared himself a business or self-employed
person in his income tax returns. The concept of estoppel a legal and equitable
concept necessarily must come into play. Tongkos previous admissions in several
years of tax returns as an independent agent, as against his belated claim that he
was all along an employee, are too diametrically opposed to be simply dismissed or
ignored.
There was, indeed, lack of evidence on record showing that Manulife ever exercised
means-and-manner control, even to a limited extent, over Tongko during his ascent
in Manulifes sales ladder. The reality is, prior to the directives sent by De Dios,
Manulife had practically left Tongko alone not only in doing the business of selling

insurance, but also in guiding the agents under his wing. In addition, the mere
presentation of codes or of rules and regulations is not per se indicative of labor law
control. The codes of conduct do not intrude into the insurance agents means and
manner of conducting their sales and only control them as to the desired results.
Guidelines indicative of labor law "control," based on the case of Insular Life, should
not merely relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means or methods to be
employed in attaining the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means.
Hence, the failure of Tongko to comply with the guidelines & directives of Manulife is
recruiting more agents, as a ground for termination of Tongkos agency, is a matter
that the labor tribunals cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the courts applying the laws of
insurance, agency and contracts.
SC:
Tongko is just an AGENT. In effect, the SC is telling us that, first, there must
be an evidence of a contract that shows that the relationship has been converted
from contract of agency to that of employment, which is absent in the case at bar.
Secondly, adherence to a code of conduct is not, per se, indicative of control when
it merely controls the desired results and not the means and the manner by which
agents are to conduct their sales. The directive of De Dios to Tongko (in increasing
the number of agents) was merely suggestive. Hence, not indicative of control.
Shoe store vs. Shoe shine boys
Besa v. Trajano
-

(G.R. No. 72409 December 29, 1986)

Facts:

January, 1985, private respondent Kaisahan ng Mangagawang Pilipino, a

legitimate labor union duly registered with the Ministry of Labor and
Employment, filed a Petition for Certification Election in the National Labor
Relations Division of the National Capital Region. Petitioner opposed it alleging
that 1. There is no employer-employee relationship between Besa's and the
petitioners-signatories to the petition; 2. The subject of the present petition had
previously been decided by the defunct Court of Industrial Relations, and is
therefore barred under the principle of res judicata; 3. The petition fails to
comply with the mandatory formal requirements under Sec. 2, Book V, of the

Omnibus Rules Implementing the Labor Code; and 4. This Hon. Commission has
no jurisdiction over the subject matter and parties to the petition.

Acting on the Petition, the Opposition thereto, and the Reply to the Opposition,
the Med-Arbiter on June 27, 1985, issued an order declaring that there was an
employer-employee relationship between the parties and directed that an
election be conducted. Petitioner appealed the order to the Director of BLR, but it
was dismissed. Thus the Petition of the Union (KAMPIL) before the Med-Arbiter for
the holding of the certification election was granted.

Issue:

Whether or not there is employer-employee relationship between Besa and the

petitioner-signatories to the petition.

Ruling:

No. The records of the case reveal that an employer-employee relationship does
not exist between the 17 shoeshiners and petitioner. The shoe shiner is distinct
from a piece worker because while the latter is paid for work accomplished, he
does not, however, contribute anything to the capital of the employer other than
his service. It is the employer of the piece worker who pays his wages, while the
shoe shiner in this instance is paid directly by his customer. The piece worker is
paid for work accomplished without regard or concern to the profit as derived by
his employer, but in the case of the shoe shiners, the proceeds derived from the
trade are always divided share and share alike with respondent BESA. The shoe
shiner can take his share of the proceeds everyday if he wanted to or weekly as
is the practice of Besas The employer of the piece worker supervises and
controls his work, but in the case of the shoe shiner, respondent BESA does not
exercise any degree of control or supervision over their person and their work.
All these are not obtaining in the case of a piece worker as he is in fact an
employee in contemplation of law, distinct from the shoe shiner.

Entitlement of the minimum requirements of the law particularly on wages and

allowances presupposes the existence of employer-employee relationship which
is determined by the concurrence of the following conditions: 1. right to hire; 2.

payment of wages; 3. right to fire; and 4. control and supervision. The most
important condition to be considered is the exercise of control and supervision
over the employees. these shoe shiners are not employees of the company, but
are partners instead. This is due to the fact that the owner/manager does not
exercise control and supervision over the shoe shiners. That the shiners have
their own customers from whom they charge the fee and divide the proceeds
equally with the owner, which make the owner categorized them as on purely
commission basis.
MANFINCO vs. OPLE
March 25, 1976; G.R. No. L-37790
Topic: Valid job contracting arrangements; examples.
FACTS:
MANFINCO was a distributor of Cosmos soft drinks in Manila. Private respondents
Repomata and Moralde executed a peddling contract where they agreed to buy
and sell Cosmos soft drinks. Manfinco sent private respondents a letter
terminating the contract before the end of its effectivity. Private respondents,
through their labor union filed an illegal dismissal case against Manfinco with the
NLRC.
Manfinco filed a motion to dismiss contending that private respondents were not
employees but were independent contractors, thus the NLRC did not have
jurisdiction over the case.Specifically, the arrangement between Manfinco and the
private respondents under the peddling contract may be described as:
the latter buy from the former at a special price, and sell in Manila, the
former's soft drink products. The distributor provides the peddler with a
delivery truck with the distributor answering for the cost of fuel and
maintenance. If a peddler buys a certain number of cases or more a
day, he is entitled to a fixed amount of peddler's discount.

The peddler himself drives the truck but if he engages a driver or

helpers, the latter are his employees and he assumes all the
responsibilities of an employer in relation to them. He also obtains at
his own expense all licenses and permits required by law of salesmen.

The peddler clears his accounts with the distributor at the end of each
day, and unpaid accounts are charged against the cash deposit or
bond which he gives the distributor upon the execution of the peddling

contract. He answers for damages caused by him or his employees to

third persons.

On appeal to the Secretary of Labor, the NLRC order was reversed. The public
respondent held that Repomata and Moralde were employees, specifically, driversalesmen.

ISSUES:
Whether or not the contract between Manfinco and private respondents is not an
employment contract.

HELD:
YES. It is not an employment contract. Private respondents Repomata and Moralde
are independent contractors. An independent contractor, as explained in the case
is:

An independent contractor is one who exercises independent employment and

contracts to do a piece of work according to his own methods and without being
subject to control of his employer except as to the resuIt of thework. A person who
has no capital or money of his own to pay his laborers or to comply with his
obligations to them, who files no bond to answer for the fulfillment of his contract
with his employer, falls short of the requisites or conditions necessary to classify
him as independent contractor.

Thus, Peddlers contract to sell and buy Cosmos products from Cosmos or Mafinco,
the latter furnishing the delivery truck, but the former sell Cosmos products
according to their own methods, subject to the pre-arranged routes, areas and
zones, and go back to the Company compound to return the delivery truck and to
make accounting of the day's sales collection at any time in the morning or in the
afternoon. Thus, control is only ever exercised in the following of traffic regulations
and in the liquidation of sales collection. All other details are left to the peddler.
Furthermore, the peddlers may hire their own peddlers within their prerogative and
it is they who pay for their wages. Peddlers are also responsible for their own acts
or omissions or those of their employees inflicted on third persons.

The peddlers also have to make a deposit on consignment which can be taken to
mean capital in this context.
Lastly, the peddlers are doing business for themselves since they took out licenses
in the City of Manila, and have paid their corresponding professional or occupation
tax to the Bureau of Internal Revenue.

Company vs Collecting Agents

Singer v Drilon
Facts:
Singer Machine Collectors Union-Baguio (SIMACUB) filed a petition for direct
certification as the sole and exclusive bargaining agent of all collectors of
Petitioner Company
The Company opposed the petition on the ground that theUnion Members are not
actually employees, but independent contractors of the company
The Med-Arbiter (Felix T. Chaguile) found that there exists an employee-employer
relationship between the Union Members and the Company, thus he granted the
petition for certification
On appeal, the Secretary of Labor (Drilon) affirmed the same
Respondents insist that the provisions of the Collective Agency Agreement
contradict the Company's position that the Union Members are independent
contractors
It was proved that the Union Members are performing the most desirable and
necessary activities for the continuous and effective operations of the Company
It was also pointed out that the Union Members do not qualify as independent
contractors because they are not free from the control of the alleged employer,
who have substantial capital or investment in the equipment, tools and other
necessities of the business
Petitioner relies on the following stipulation in the agreement:
- a collector is designated as a collecting agent who is to be considered at all
times as an independent contractor and not employee of the Company
Respondents rely on the existence of aMonthly Collection Quota required by the
Company which was deemed by Respondents as a control measure over the
means by which an agent is to perform his services
Issue (1):
W/N DOLE has jurisdiction over cases where there is employee-employer
relationship
Held:
YES
The assumption of DOLE over the case is considered rightful because it was
brought on appeal for the reversal of the Med-Arbiter. Hence, Petitioner submits
itself, as well as the issue of the existence of an employee-employer relationship,

to the jurisdiction of DOLE which was faced with a dispute concerning an

application for certification election
Issue (2):
W/N there is an employer-employee relationship
Held:
NO
The following elements are generally considered in the determination of the
employer-employee relationship
1. The selection and engagement of the employee
2. The payment of wages
3. The power of dismissal
4. The power to control the employee's conduct (the most important element)
The Agreement confirms the status of the collecting agent in this case as
an independent contractor not only because he is explicitly described as
such but also because the provisions permit him to perform collection
services for the company without being subject to the control of the
latter except only as to the result of his work
The contention that the alleged employees are performing activities that
are necessary and desirable for the business is not determinative in this
case because of the Agreement
The Monthly Collection Quota is a normal requirement, among others, in
contractual agreements
Since the Union Members are not employees of the Company, they are not
entitled to the constitutional right to join or form a labor organization for purposes
of collective bargaining
Accordingly, there is no constitutional and legal basis for their "union" to be
granted their petition for direct certification

Industrial Partner vs Employee

SY vs CA
Sometime in 1958, private respondent Jaime Sahot started working as a truck
helper for petitioners trucking business. In April 1994, Sahot inquired about his
medical and retirement benefits with the Social Security System (SSS) but
discovered that his premium payments had not been remitted by his employer.
Sahot had filed a week-long leave sometime in May 1994. He was medically
examined and treated for various illnesses. Management told him to file a formal
request for extension of his leave. At the end of his week-long absence, Sahot
applied for extension of his leave for the whole month of June, 1994. It was at this
time when petitioners allegedly threatened to terminate his employment should he
refuse to go back to work. Petitioners dismissed him from work, effective June 30,
1994.
Sahot filed with the NLRC a complaint for illegal dismissa. Petitioners contend that
private respondent was not illegally dismissed as a driver because he was in fact
petitioners industrial partner.

Issue: Whether or not respondent is petitioners industrial partner

Held: No. A computation of the age of complainant shows that he was only twentythree (23) years when he started working with respondent as truck helper. How can
we entertain in our mind that a twenty-three (23) year old man, working as a truck
helper, be considered an industrial partner. Hence we rule that complainant was
only an employee, not a partner of respondents from the time complainant started
working for Respondent. No written agreement exists to prove the partnership
between the parties. Private respondent did not contribute money, property or
industry for the purpose of engaging in the supposed business. There is no proof
that he was receiving a share in the profits as a matter of course, during the period
when the trucking business was under operation. Neither is there any proof that he
had actively participated in the management, administration and adoption of
policies of the business. Thus, the NLRC and the CA did not err in reversing the
finding of the Labor Arbiter that private respondent was an industrial partner from
1958 to 1994.

Medical residency vs Employee

Felix V. Buenaseda / G.R 109704 / Jan. 17, 1995
FACTS:
This is a petition assailing the petitioners dismissal as Medical Specialist I of the
National Center for Mental Health as illegal and violative of the constitutional
provision on security of tenure.
Petitioner joined the NCMH as a Resident Physician in June1979. Shortly, he was
promoted as Senior Resident Physician until the Ministry of Health reorganized the
NCMH pursuant to E.O. 119. Under the reorganization, he was appointed to the
position of Senior Resident Physician in a temporary capacity. On August 1988, he
was elevated to the position of Medical Specialist I (Temporary Status) which was
renewed the following year.
The Dept. of Health issued Department Order No. 347 which required board
certification as prerequisite for renewal of specialist positions in various medical
centers and it also extend appointments of Medical Specialist positions in cases
where the termination of medical specialist who failed to meet the requirements for
board certification.
On August 20, 1991, after reviewing petitioner's service record, non-renewal of
petitioners appointment as Medical Specialist I was recommended. He was,
however, allowed to continue inthe service, and receive his salary, allowances and
other benefits even after being informed of the termination of his appointment.
Soon, he was advised by the hospital authorities to vacate his cottage. The
petitioner filed a petition with the Merit System Protection Board alleging
harassment by respondents; however, it was later dismissed for lack of merit. Said
decision was appealed to the Civil Service Commission which dismissed the same
including the Motion for Reconsideration the petitioner has filed after which brought
this appeal.
ISSUE:

Whether or not the petitioner was illegally dismissed from his position and that it is
not a violative of his constitutional right of security of tenure.
RULING:
NO. The petitioner was not illegally dismissed. The Solicitor General is correct in
contending that the petitioners temporary appointment after the reorganization
were valid and did not violate his constitutional right of security of tenure. Petitioner
is guilty of estoppels or laches.
A residency or resident physician position in a medical specialty is never a
permanent one. Residency connotes training and temporary status. It is the step
taken by a physician right after post-graduate internship prior to his recognition as a
specialist or sub-specialist in a given field.The nature of the contracts of resident
physicians meets traditional tests for determining employer-employee relationships,
but because the focus of residency is training, they are neither here nor there.
Stringent standards and requirements for renewal of specialist-rank positions or for
promotion to the next post-graduate residency year are necessary because lives are
ultimately atstake. Petitioners insistence on being reverted back to the status quo
prior to the reorganizations would therefore be akin to a college student asking to
be sent to high school and staying there.
He is estopped from insisting upon a right or claim which he had plainly abandoned
when he, from all indications, enthusiastically accepted the promotion. It bears
emphasis thatat the time of petitioner's promotion to the position of Medical
Specialist I (temporary) in August of 1988, no objection was raised by him about the
change of position or the temporary nature of designation.
The failure to assert a claim or the voluntary acceptance of another position in
government, obviously without reservation, leads to a presumption that the civil
servant has either given up his claim of has already settled into the new position.
Finally, it is crystal clear, from the fa
cts of the case at bench, that the petitioner accepted a temporary appointment
(Medical Specialist I). As respondent Civil Service Commission has correctly pointed
out, the appointment was for a definite and renewable period which, when it was
not renewed, did not involve a dismissal but an expiration of the petitioner's term.
Petition is hereby DISMISSED

UERM Memorial Medical Center Resident Doctors Union v. Laguesma

Facts:
The existence of an employer-employee relationship between the resident
physicians of the University of the East Ramon Magsaysay Medical Center and the
hospital became the crux of the matter in its petition for certification.
The resident physicians formed a union called the UERMMC-Resident Doctors Union
and filed the petition for certification so that it will be recognized as the exclusive
bargaining agent of all the resident physicians in the hospital for purposes of
collective bargaining.

The petition for certification was dismissed by the Undersecretary, acting under the
authority of the Secretary of Labor, on the ground that there exist no employeremployee relationship between the resident doctors and the hospital.
Issue:
Whether resident doctors are employees of the hospital
Ruling:
The case reached the Supreme Court. Said the Court:
It is clear that physicians undergo residency training in order to hone their skills and
develop or improve their knowledge in a specialized medical field or discipline.
Hence, residency is basically and simply a continuation of their medical course.
However, they are not required or mandated under any law to further undergo a
residence training program. Having passed the medical board examinations, they
are already licensed physicians and could very well engage in the general practice
of medicine. It is for the practice of highly specialized medical disciplines which
necessitates further on-the-job training thereon.
Viewed from this perspective residency training clearly amount to a pursuit of
further education on a specific discipline. Thus, the relationship between the
teaching/training hospital and the resident doctor is not one of employer-employee.
The training/teaching hospital may simply be likened to a medical school/university,
but in this instance, the emphasis is on the practical application and training of its
students, the resident doctors."

4.5 Liability of Principal for Unpaid Wages of employees of job

contractor
G.R. NO. NOS. 82763-64: MARCH 19, 1990
DEVELOPMENT BANK OF THE PHILIPPINES, vs. NATIONAL LABOR
RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA, and
LABOR ALLIANCE FOR NATIONAL DEVELOPMENT

FACTS:

Lirag Textile Mills, Inc. (LIRAG) was a mortgage debtor of DBP. Private respondent
Labor Alliance for National Development (LAND) was the bargaining representative
of the more or less 800 former rank and file employees of LIRAG. LIRAG started
terminating the services of its employees on the ground of retrenchment. LIRAG has
since ceased operations presumably due to financial reverses.

JoselitoAlbay, one of the employees dismissed filed a complaint before the National
Labor Relations Commission (NLRC) against LIRAG for illegal dismissal, LAND, on
behalf of 180 dismissed members, also filed a Complaint against LIRAG.

In a Decision, Labor Arbiter Apolinar L. Sevilla ordered LIRAG to pay the individual
complainants. The NLRC affirmed. Judgment

Writ of Execution was issued. DBP extra-judicially foreclosed the mortgaged

properties for failure of LIRAG to pay its mortgage obligation. As the only bidder at
the foreclosure sale, DBP acquired said mortgaged properties. Since DBP was the
sole mortgagee, no actual payment was made, the amount of the bid having been
merely credited in partial satisfaction of LIRAG's indebtedness.

By reason of said foreclosure, the Writ of Execution issued in favor of the

complainants remained unsatisfied. A Notice of Levy on Execution on the properties
of LIRAG was then entered. library
LAND filed a "Motion for Writ of Execution and Garnishment" of the proceeds of the
foreclosure sale.
Labor Arbiter Sevilla granted the Writ of Garnishment and directed DBP to remit to
the NLRC the sum of P6,292,380.00 out of the proceeds of the foreclosed properties
of LIRAG sold at public auction in order to satisfy the judgment previously rendered.

DBP sought reconsideration. Public respondent, Labor Arbiter Isabel P. Ortiguerra

denied reconsideration. DBP appealed that denial to the NLRC. In the meantime, by
virtue of Proclamation Nos. 50 and 50-A, the Asset Privatization Trust (APT) became
the transferee of the DBP foreclosed assets of LIRAG.

A partial Compromise Agreement was entered into between APT and LAND (Litex
Chapter) whereby APT paid the complainants-employees, ex gratia, the sum of
P750,000.00 "in full settlement of their claims, past and present, with respect to all
assets of LITEX transferred by DBP to APT." That amount was received by LAND's
local President. LAND, through its national President, NLRC affirmed the appealed
Order and dismissed the DBP appeal.

ISSUE: WON the proceeds of LIRAG's properties foreclosed by DBP should first
satisfy the unpaid wages of the workers.

HELD: NO. Development Bank of the Philippines vs. Santos categorically stated:
It is quite clear from the provision that a declaration of bankruptcy or a judicial
liquidation must be present before the workers preference may be enforced. Thus,
Article 110 of the Labor Code and its implementing rule cannot be invoked by the
respondents in this case absent a formal declaration of bankruptcy or a liquidation
order.
Art. 110. Worker preference in case of bankruptcy. - In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims, any provision of law to the
contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in
full before the claims of the Government and other creditors may be paid.
Section 10, Rule III, Book III of the Omnibus Rules Implementing the Labor
Code:.Payment of wages and other monetary claims in case of bankruptcy. - In case
of bankruptcy or liquidation of the employer's business, the unpaid wages and other
monetary claims of the employees shall be given first preference and shall be paid
in full before the claims of government and other creditors may be paid.
In the event of insolvency, a principal objective should be to effect an equitable
distribution of the insolvent's property among his creditors. To accomplish this there
must first be some proceeding where notice to all of the insolvents creditors may
be given and where the claims of preferred creditors may be bindingly adjudicated
A preference of credit bestows upon the preferred creditor an advantage of having
his credit satisfied first ahead of other claims which may be established against the
debtor. The preferential right of credit attains significance only after the properties
of the debtor have been inventoried and liquidated, and the claims held by his
various creditors have been established.
A distinction should be made between a preference of credit and a lien. 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.

The right to preference given to workers under Article 110 of the Labor Code cannot
exist in any effective way prior to the time of its presentation in distribution
proceedings. It will find application when, in proceedings such as insolvency, such
unpaid wages shall be paid in full before the "claims of the Government and other
creditors" may be paid. But, for an orderly settlement of a debtor's assets, all
creditors must be convened, their claims ascertained and inventoried, and
thereafter the preferences determined in the course of judicial proceedings which
have for their object the subjection of the property of the debtor to the payment of
his debts or other lawful obligations. Thereby, an orderly determination of
preference of creditors' claims is assured

New Golden City Builders Corp. and Manuel Sy vs. CA

Facts:
On April 4, 1995, petitioner New Golden City Builders and Development
Corporation entered into a construction contract with Prince David Development
Corporation for the construction of a 17-storey office and residential condominium
building along Katipunan Road, Loyola Heights, Quezon City, Metro Manila.
Petitioner engaged the services of Nilo Layno Builders to do the specialized
concrete works, form works and steel rebars works, in consideration of the total
contract price of P5 Million. Pursuant to the contract, Nilo Layno Builders hired
private respondents to perform work at the project.
After the completion of the phase for which Nilo Layno Builders was contracted
sometime in 1996, private respondents filed a complaint case against petitioner and
its president, Manuel Sy, with the Arbitration Branch of the NLRC for unfair labor
practice, non-payment of 13th month pay, non-payment of 5 days service incentive
leave, illegal dismissal and severance pay in lieu of reinstatement.
LA ruled that private respondents were deemed employees of the petitioner.
NLRC affirmed with modification the Labor Arbiters decision.
CA denied petition for certiorari.
Issue: Whether Nilo Layno Builders was an independent contractor or a labor-only
contractor.
Held: Independent Contractor. Nilo Layno Builders is a duly licensed labor
contractor carrying on an independent business for a specialized work that involves
the use of some particular, unusual and peculiar skills and expertise, like concrete
works, form works and steel rebars works. As a licensed labor contractor, it

complied with the conditions set forth in Section 5, Rule VII-A, Book III, Rules to
Implement the Labor Code, among others, proof of financial capability and list of
equipment, tools, machineries and implements to be used in the business. Further,
it entered into a written contract with the petitioner, a requirement under Section 3,
Rule VII-A, Book III, Rules to Implement the Labor Code to assure the employees of
the minimum labor standards and benefits provided by existing laws.
The means and methods adopted by the private respondents were directed
by Nilo Layno Builders except that, from time to time, the engineers of the
petitioner visited the site to check whether the work was in accord with the plans
and specifications of the principal. As admitted by Nilo G. Layno, he undertook the
contract work on his own account and responsibility, free from interference from
any other persons, except as to the results; that he was the one paying the salaries
of private respondents; and that as employer of the private respondents, he had the
power to terminate or dismiss them for just and valid cause. Indubitably, the Court
finds that Nilo Layno Builders maintained effective supervision and control over the
private complainants.

Compare with: Liability of principal to labor-only contracting employees

solidary liability to all claims

PCI Automation Center vs. NLRC and Santelices, 252 SCRA 493 [1996]

Philippine Commercial International Bank (PCIB) commenced its 4th GL

Environment Conversion Project intended to link all existing computer
systems within PCIB and its various branches around the country.
It entered into a Computer Services Agreement with petitioner PCI
Automation Center, Inc. (PCI-AC), under which petitioner obligated itself to
direct, supervise and run the development of the software, computer
software applications and computer system of PCIB.
On the other hand, PCIB agreed to provide the petitioner with encoders and
computer attendants.
PCIB engaged the services of Prime Manpower Resources Development, Inc.
(Prime). PCIB and Prime entered into an External Job Contract.
Hector Santelices was hired by Prime and assigned to petitioner as a data
encoder to work on the 4th GL Environment Conversion Project of PCIB.
However, on March 18, 1991, Prime decided to terminate private
respondents services after it was informed by the petitioner that his services
were no longer needed in the project. Santelices filed a complaint for illegal
dismissal and payment of benefits against PCI and Prime before the Labor
Arbiter, the ruling of which was in his favor. Appeal before the NRLC was
denied.

Issue: Whether or not PCI-AC can be held solidarily liable with Prime for all the
monetary claims of private respondent.

Held:Yes.We hold that public respondent did not commit grave abuse of discretion
in affirming the ruling of the Labor Arbiter adjudging the petitioner solidarily liable
with Prime for the payment of all the monetary claims of private respondent. This is
in accord with Article 106 of the Labor Code, as amended.

The legitimate job contractor provides services while the labor-only contractor
provides only manpower. The legitimate job contractor undertakes to perform a
specific job for the principal employer while the labor-only contractor merely
provides the personnel to work for the principal employer.

As Prime is a labor-only contractor, the workers it supplied to the petitioner,

including private respondent, should be considered employees of the petitioner.
PCI-AC insists that it is not an employer of private respondent. It contends that
private respondent is an employee of Prime and he was merely assigned by Prime
to the petitioner to work on the 4th GL Environment Conversion Project of PCIB.

The petitioner, through PCIB, contracted Prime to provide it with qualified personnel
to work on the computer conversion project of PCIB. The External Job Contract
between Prime and PCIB must be read in conjunction with the Computer Services
Agreement between PCIB and the petitioner. Under the Computer Services
Agreement, the petitioner shall direct and supervise the computer
conversion project of PCIB while PCIB shall provide the petitioner with
data encoders and computer attendants to work on the project. Pursuant to
said Agreement, PCIB called on Prime to furnish the petitioner with the needed
personnel, one of whom was private respondent. Hence, although the parties in the
External Job Contract are only Prime and PCIB, the legal consequences of such
contract must also be made to apply to the petitioner. Under the circumstances,
PCIB merely acted as a conduit between the petitioner and Prime. The project
was under the management and supervision of the petitioner and it was
the petitioner which exercised control over the persons working on the
project

Under the law, any person (hereinafter referred to as the principal employer) who
enters into an agreement with a job contractor, either for the performance of a
specified work or for the supply of manpower, assumes responsibility over the
employees of the latter. However, for the purpose of determining the extent of the
principal employers liability, the law makes a distinction between legitimate job
contracting and labor-only contracting.

In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him.

In legitimate job contracting, no employer-employee relationship exists

between the employees of the job contractor and the principal employer.
Even then, the principal employer becomes jointly and severally liable
with the job contractor for the payment of the employees wages
whenever the contractor fails to pay the same. In such case, the law
creates an employer-employee relationship between the principal
employer and the job contractors employees for a limited purpose, that
is, to ensure that the employees are paid their wages. Other than the
payment of wages, the principal employer is not responsible for any claim
made by the employees.

On the other hand, in labor-only contracting, an employer-employee

relationship is created by law between the principal employer and the
employees of the labor-only contractor.
In this case, the labor-only
contractor is considered merely an agent of the principal employer. The
principal employer is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the
principal employer. The principal employer therefore becomes solidarily
liable with the labor-only contractor for all the rightful claims of the
employees.

Thus, in legitimate job contracting, the principal employer is considered

only an indirect employer, while in labor-only contracting, the principal
employer is considered the direct employer of the employees.

Tiu v. NLRC

FACTS:
On February 18, 1986, private respondent (Hermes De La Cruz), a bus
terminal dispatcher working for DRough Riders Transportation operated by William
Tiu, filed a complaint, for illegal dismissal, violation of the Minimum Wage Law and
non-payment of ECOLA, legal holiday pay, service incentive pay and separation pay,
against petitioner (William Tiu). Tiu denied that De La Cruz was his Employee. Labor
arbiter found that De La Cruz is an employee of Tiu and that he was illegally
dismissed by the latter. The LA ordered Tiu to pay Tiu the sum of P25,076.96, on the
basis of De La Cruzs claims. The LA decision was affirmed by the NLRC.

ISSUE: Whether or not Hermes De La Cruz is an employee of William Tiu

Held: YES. William Tiu denies that Hermes De La Cruz is his employee. He alleges
that he did not have the power of selection and dismissal nor the power of control
over De La Cruz. That the latter, together with so-called standbys, hung around his
bus terminals, assisting passengers with their baggages as dispatchers.

We agree with the finding that an employer-employee relationship existed

between petitioner and private respondent, such finding being supported by
substantial evidence. Petitioner has failed to refute the evidence presented by
private respondent. He points to his Chief Dispatcher, Reginodela Cruz, as the one
who exercised the powers of an employer over the dispatchers. Petitioner argues
that under an agreement with Regino de la Cruz, it is the latter who selects and
engages the dispatchers, dictates their time, supervises the performance of their
work, and pays their wages. He further argues that the disciplinary memorandum
issued by him was not addressed to private respondent but to Reginodela Cruz, as
employer of private respondent, to remind him regarding the discipline of the
dispatchers.
Petitioners contention is without merit. In determining whether there is an
employer-employee relationship between the parties the following questions must
be considered: (a) who has the power of selection and engagement of the
employee? (b) who pays the wages of employee? (c) who has the power of

dismissal? and; (d) who has the power to control the employees conduct? Of these
powers the power of control over the employees conduct is generally regarded as
determinative of the existence of the relationship. The control test, under which the
person for whom the services are rendered reserves the right to direct not only the
end to be achieved but also the means for reaching such end, is generally relied on
by the courts.Petitioner would have us believe that Chief Dispatcher Reginodela
Cruz exercised these powers on his own and independently of petitioner. This is
untenable. Petitioner admits that Reginodela Cruz was merely assigned to do
dispatch work. While Reginodela Cruz took charge of the hiring of men and paid
their wages, he did so as he was told by petitioner. The payment of salaries and
wages came from petitioner. Reginodela Cruz filled up and signed daily time records
for dispatchers and took disciplinary action against erring employees in accordance
with instructions given to him by petitioner. In sum, it cannot be said that
Reginodela Cruz was the employer of the dispatchers or that he was an independent
contractor. He was himself only an employee of petitioner.

Petitioner does not claim that Reginodela Cruz and his dispatchers were
independent contractors. Even if this be his contention, however, the argument
would still be without merit. Job contracting is permissible only if the following
conditions are met: (1) the contractor carries on an independent business and
undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work
except as to the results thereof; and (2) the contractor has substantial capital or
investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.8 In the absence of
these requisites, what exists is a labor-only contract under which the person acting
as contractor is considered merely an agent or intermediary of the employer who is
responsible to the workers in the same manner and to the same extent as if they
had been directly employed by him.

The labor-only contractor is a mere agent of the employer who is responsible

to the employees of the labor-only contractor as if such employees had been
employed by him directly. In such a case the statute establishes an employeremployee relationship between the employer and the employees of the labor-only
contractor to prevent any violation or circumvention of the provisions of the Labor
Code, by holding both the employer and the labor-only contractor responsible to the
employees.

SAN MIGUEL V MAERC INTEGRATED SERVICES

405 SCRA 579 BELLOSILLO; July 10, 2003
In deciding the question of control, the language of the contract is not
determinative of the parties' relationship; rather, it is the totality of the facts and
surrounding circumstances of each case. On the other hand, 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. The principal employer therefore
becomes solidarily liable with the labor-only contractor for all the rightful claims of
the employees.
FACTSTWO HUNDRED NINETY-ONE (291) workers filed their complaints (nine [9]
complaints
in
all)
against
San
Miguel
Corporation
(petitioner
herein) and Maerc Integrated Services, Inc. (respondent herein), for illegal dismissal,
underpayment of wages, non-payment of service incentive leave pays and other
labor
standards benefits,
and for separation
pays
from 25 June to 24 October 1991. The complainants alleged that they were hired
bySan Miguel Corporation (SMC) through itsagent or intermediary Maerc Integrated
Services, Inc. (MAERC) to work in two (2) designated workplaces in Mandaue City:
one,
inside the SMC premises at the Mandaue
Container Services, and another, in the Philphos Warehouse owned by MAERC. They
washed and segregated various kinds of empty bottles used by SMC to sell and
distribute its beer beverages to the consuming public. They were paid on a per
piece or pakiao basis except for a few who worked as checkers and were paid on
daily wage basis. Complainants alleged that long before SMC contracted the
services of MAERC a majority of them had already been working for SMC under the
guise of being employees of another contractor, Jopard Services, until the services
of the latter were terminated on31 January 1988. SMC informed MAERC of the
termination of their service contract by the end of June 1991. SMC cited its plans to
phase out its segregation activities starting 1 June1991 due to the installation of
labor
and
costsaving devices. When the service contractwas terminated, complainants claimed th
atSMC
stopped
them
from
performing
their
jobs;
that this was tantamount to their being illegally dismissed by SMC who was their
real employer as their activities were directly related, necessary and desirable to
the main business of SMC; and, that MAERC was merely made a tool or a shield by
SMC to avoid its liability under the Labor Code- MAERC for its part admitted that it
recruited
the complainants and placed them in thebottle segregation project of SMC butmaint
ained that it was only conveniently used by SMC as an intermediary in operating the
project or work directly related to the primary business concern of the latter with
the
end
I
in
view of avoiding its obligations andresponsibilities towards the complainingworkers.The Labor Arbiter rendered a decisionholding that MAERC was an independentcontr
actor. He dismissed the complaints for illegal dismissal but ordered MAERC to pay

complainants'
separation
benefits
in
the
total
amount of P2,334,150.00. MAERC and SMC were also ordered to jointly and
severally pay complainants their wage differentials in the amount of P845,117.00
and
to
pay
attorney's
fees
in
the
amount
of
P317,926.70.- The National Labor Relations Commission(NLRC)
ruled that MAERC was
a labor-only
contractor and that complainants were
employees
of
SMC.
The
NLRC
also
held
that
whether MAERC was a job contractor or a labor-only contractor, SMC was still
solidarilyliable with MAERC for the latter's unpaidobligations, citing Art. 109 4 of the
Labor Code. Thus, the NLRC modified the judgment of the Labor Arbiter and held
SMC
jointly
and
severally
liable
with
MAERC
for
complainants'
separation benefits. In addition, both respondents were ordered to pay jointly and
severally an indemnity fee of P2,000.00 to each complainant.
- SMC filed petition for certiorari
ISSUE
WON the complainants are employees of petitioner SMC or of respondent MAERC
HELD
Employees
of
SMC- In ascertaining an employer-employee
relationship, the following factors are considered: (a) the selection and engagement
of employee; (b) the payment of wages; (c)the power of dismissal; and, (d) the
power to control an employee's conduct, the last being the most important.
Application of therefore
said criteria clearly indicates an
employeremployee relationship between petitioner and the complainants.
- Evidence discloses that petitioner played a large and indispensable part in the
hiring of MAERC's workers. It also appears that

4.6 Effect of DOLE Certification as legitimate job contractor

GALLEGO VS BAYER
FACTS: RamyGallego (petitioner) was contracted in April 1992 by Bayer Philippines,
Inc. (BAYER) as crop protection technician to promote and market BAYER
products.]Under the supervision of Aristeo Filipino, BAYER sales representative for
Panay Island, petitioner made farm visits to different municipalities in Panay Island
to convince farmers to buy BAYER products.
In 1996, petitioners employment with BAYER came to a halt, prompting him to seek
employment with another company. BAYER eventually reemployed petitioner,
however, in 1997 through Product Image and Marketing Services, Inc. (PRODUCT
IMAGE) of which respondent Edgardo Bergonia (Bergonia) was the President and

General Manager, performing the same task as that of crop protection technician
promoting BAYER products to farmers and dealers in Panay Island solely for the
benefit of BAYER.
By petitioners claim, in October, 2001, he was directed by Pet Pascual, the newly
assigned BAYER sales representative, to submit a resignation letter, but he refused;
and that in January, 2002, he was summoned by his immediate supervisors
including respondent Danpin Guillermo (Guillermo), BAYER District Sales Manager
for Panay, and was ordered to quit his employment which called for him to return all
pieces of service equipment issued to him, but that again he refused.
ISSUE: Can the DOLE Certification be given weight.
HELD: The DOLE certificate having been issued by a public officer, it carries with it
the presumption that it was issued in the regular performance of official duty.
[31]
Petitioners bare assertions fail to rebut this presumption. Further, since the DOLE
is the agency primarily responsible for regulating the business of independent job
contractors, the Court can presume, in the absence of evidence to the contrary, that
it had thoroughly evaluated the requirements submitted by PRODUCT IMAGE before
issuing the Certificate of Registration.

Coca Cola Bottlers vs. Ricky dela Cruz, supra.

Facts:

Respondents filed two separate complaints for regularization with money claims
against Coca-Cola BottlersPhilippines, Inc. Before the Labor Arbiter, the respondents
alleged that they are route helpers assigned to work inthe petitioners trucks. They
go from the Coca-Cola sales offices or plants to customer outlets; they were hired
eitherdirectly by the petitioner or by its contractors, but they do not enjoy the full
remuneration, benefits and privilegesgranted to the petitioners regular sales force.
They argued that the services they render are necessary and desirablein the regular
business of the petitioner. In defense, the petitioner contended that it entered into
contracts ofservices with Peerless and Excellent Partners Cooperative, Inc.
(Excellent) to provide allied services; under thesecontracts, Peerless and Excellent
retained the right to select, hire, dismiss, supervise, control and discipline and pay
the salaries of all personnel they assign to the petitioner; in return for these
services, Peerless and Excellent were paid a stipulated fee. The petitioner posited
that there is no employer-employee relationship between the company and the
respondents and the complaints should be dismissed for lack of jurisdiction on the
part of the NLRC. In reply, the respondents countered that they worked under the
control and supervision of the companys supervisors who prepared their work
schedules and assignments. Peerless and Excellent, too, did not have sufficient
capital or investment to provide services to the petitioner. The respondents thus

argued that the petitioners contracts of services with Peerless and Excellent are in
the nature of "labor-only" contracts prohibited by law.

Issue:
Was there labor-only contracting?

Ruling:
Yes. The contract between the principal and the contractor is not the final word on
how the contracted workers relate to the principal and the purported contractor; the
relationships must be tested on the basis of how they actually operate. The
legitimate job contractor must have the capitalization and equipment to undertake
the sale and distribution of the manufacturers products, and must do it on its own
using its own means and selling methods.

Even before going into the realities of workplace operations, the Court of Appeals
found that the service contracts themselves provide ample leads into the
relationship between the company, on the one hand, and Peerless and Excellent, on
the other. The Court of Appeals noted that both the Peerless and the Excellent
contracts show that their obligation was solely to provide the company with the
services of contractual employees, and nothing more. These contracted services
were for the handling and delivery of the companys products and allied services.
Following D.O. 18-02 and the contracts that spoke purely of the supply of labor, the
Court of Appeals concluded that Peerless and Excellent were labor-only contractors
unless they could prove that they had the required capitalization and the right of
control over their contracted workers.

The contractors were not independently selling and distributing company products,
using their own equipment, means and methods of selling and distribution; they
only supplied the manpower that helped the company in the handing of products for
sale and distribution. In the context of D.O. 18-02, the contracting for sale and
distribution as an independent and self-contained operation is a legitimate contract,
but the pure supply of manpower with the task of assisting in sales and distribution
controlled by a principal falls within prohibited labor-only contracting. Consequently,
the contracted personnel, engaged in component functions in the main business of
the company under the latters supervision and control, cannot but be regular
company employees.

5.2 Excluded Employment

a. Government Employees
REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL PARKS
DEVELOPMENT COMMITTEE, Petitioner, v. THE HON. COURT OF APPEALS
and THE NATIONAL PARKS DEVELOPMENT SUPERVISORY ASSOCIATION &
THEIR MEMBERS, Respondents.
Facts
-

This issue came about because although the NPDC was originally created in
1963 under Executive Order No. 30, as the Executive Committee for the
development of the Quezon Memorial, Luneta and other national parks, and
later renamed as the National Parks Development Committee under
Executive Order No. 68, on September 21, 1967, it was registered in the
Securities and Exchange Commission (SEC) as a non-stock and non-profit
corporation, known as "The National Parks Development Committee, Inc."
By virtue of Executive Order No. 120 dated January 30, 1989, the NPDC was
attached to the Ministry (later Department) of Tourism and provided with a
separate budget subject to audit by the Commission on Audit.
Meanwhile, the Rizal Park Supervisory Employees Association, consisting of
employees holding supervisory positions in the different areas of the parks,
was organized and it affiliated with the Trade Union of the Philippines and
Allied Services (TUPAS) under Certificate No. 1206.
On June 15, 1987, two collective bargaining agreements were entered into
between NPDC and NPDCEA (TUPAS local Chapter No. 967) and NPDC and
NPDCSA (TUPAS Chapter No. 1206), for a period of two years or until June 30,
1989.
On March 20, 1988, these unions staged a strike at the Rizal Park, Fort
Santiago, Paco Park, and PookniMariangMakiling at Los Baos, Laguna,
alleging unfair labor practices by NPDC.
On March 21, 1988, NPDC filed in the Regional Trial Court in Manila, Branch
LII, a complaint against the union to declare the strike illegal and to restrain it
on the ground that the strikers, being government employees, have no right
to strike although they may form a union.
On March 24, 1988, the lower court dismissed the complaint and lifted the
restraining order for lack of jurisdiction. It held that the case "properly falls
under the jurisdiction of the Department of Labor," because "there exists an
employer-employee relationship" between NPDC and the strikers.
Petitioner appealed to CA. CA dismissed the appeal. Hence, this petition.

Issue
-

Whether NPDC employees are covered by the Civil Service Law

Held
-

The National Parks Development Committee was created originally as an

Executive Committee on January 14, 1963, for the development of the
Quezon Memorial, Luneta and other national parks (Executive Order No. 30).
It was later designated as the National Parks Development Committee (NPDC)
on February 7, 1974 (E.O. No. 69).0n January 9, 1966, Mrs. Imelda R. Marcos
and Teodoro F. Valencia were designated Chairman and Vice-Chairman
respectively (E.O. No. 3). Despite an attempt to transfer it to the Bureau of
Forest Development, Department of Natural Resources, on December 1, 1975
(Letter of Implementation No. 39, issued pursuant to PD No. 830, dated
November 27, 1975), the NPDC has remained under the Office of the
President (E.O. No. 709, dated July 27, 1981).
Since 1977 to 1981, the annual appropriations decrees listed NPDC as a
regular government agency under the Office of the President and allotments
for its maintenance and operating expenses were issued direct to NPD.
Since NPDC is a government agency, its employees are covered by civil
service rules and regulations (Sec. 2, Article IX, 1987 Constitution). Its
employees are civil service employees (Sec. 14, Executive Order No. 180).
While NPDC employees are allowed under the 1987 Constitution to organize
and join unions of their choice, there is as yet no law permitting them to
strike. In case of a labor dispute between the employees and the
government, Section 15 of Executive Order No. 180 dated June 1, 1987
provides that the Public Sector Labor-Management Council, not the
Department of Labor and Employment, shall hear the dispute. Clearly, the
Court of Appeals and the lower court erred in holding that the labor dispute
between the NPDC and the members of the NPDSA is cognizable by the
Department of Labor and Employment.

Manila Public School Teachers v. Laguio Jr.

Facts:
1. Public school teachers staged a mass protest to demand for immediate
payment of due chalk, clothing allowances, 13th month pay, the recall of
directing the oversizing of classes and overloading of teachrs and other concerns
against DECS.
2. The first rally was conducted on September 14, 1990 without disrupting
classes. Another protest was held on September 17 or three days later, which
was a school day (Monday). The Secretary of Education issued an order directing
all participants to return to work in 24 hours or face dismissal. The return to work
order was declined. The Secretary placed those who refused on a 90-day
preventive suspension.

3. On September 19, 1990, the petitioners also filed a petition for prohibition,
declaratory relief and preliminary mandatory injunction to restrain the
implementation of the said order. The RTC saw no compelling reason to do so but
allowed time for a hearing.

Issue:
w/n the teachers have right to strike?

Held:
No. Employees in the civil service do not have the right to strike unlike the
private sector, although public service employees have the right to organize. It
was within the Secretarys authority to issue a return to work order, file an
administrative charge and place them under preventive suspension.
Cario v. CHR, 204 SCRA 483 (1991)
FACTS: On September 17, 1990, a Monday and a class day, some 800 public school
teacher, among them the 8 herein private respondents who were members of the
Manila Public School Teachers Association (MPSTA) and Alliance of Concerned
Teachers (ACT) undertook mass concerted actions to dramatize and highlight
their plight resulting from the alleged failure of the public authorities to act upon
grievances that had time and again been brought to the latters attention.
The respondents were preventively suspended by the Secretary of Education. They
complained to CHR.
ISSUE: WON CHR has the power to adjudicate alleged human rights violations
RULING: No.
The Commission evidently intends to itself adjudicate, that is to say, determine with
the character of finality and definiteness, the same issues which have been passed
upon and decided by the Secretary of Education and subject to appeal to CSC, this
Court having in fact, as aforementioned, declared that the teachers affected may
take appeals to the CSC on said matter, if still timely.
The threshold question is whether or not the CHR has the power under the
constitution to do so; whether or not, like a court of justice or even a quasi-judicial
agency, it has jurisdiction or adjudicatory powers over, or the power to try and
decide, or dear and determine, certain specific type of cases, like alleged human
rights violations involving civil or political rights.

The Court declares that the CHR to have no such power, and it was not meant by
the fundamental law to be another court or quasi-judicial agency in this country, or
duplicate much less take over the functions of the latter.
The most that may be conceded to the Commission in the way of adjudicative
power is that it may investigate, i.e. receive evidence and make findings of fact as
regards claimed human rights violations involving civil and political rights. But factfinding is not adjudication, and cannot be likened to judicial function of a court of
justice, or even a quasi judicial agency or official. The function of receiving
evidence and ascertaining therefrom the facts of a controversy is not a judicial
function, properly speaking. To be considered such, the faculty of receiving evidence
and making factual conclusions in a controversy must be accompanied by the
authority of applying the law to those factual conclusions to the end that the
controversy be decided or determined authoritatively, finally and definitely, subject
to such appeals or modes of review as may be provided by law. This function, to
repeat, the Commission does not have.
Hence it is that the CHR having merely the power to investigate, cannot and not
try and resolve on the merits (adjudicate) the matters involved in Striking
Teachers HRC Case No. 90-775, as it has announced it means to do; and cannot do
so even if there be a claim that in the administrative disciplinary proceedings
against the teachers in question, initiated and conducted by the DECS, their human
rights, or civil or political rights had been transgressed.

Special Circumstances: Government employees with CBA

Abanilla vs. COA, 468 SCRA 87
Facts:
Metropolitan Cebu Water District (MCWD), a local water district was organized as a
government-owned corporation with original charter Pursuant to P D 198
(Provincial Water Utilities Act of 1973)
MCWD, through its Board of Directors, issued Resolutions giving benefits and
privileges (hospitalization privileges, allowing the monetization of leave
credits to its personnel, Christmas bonus and longevity allowance) one of
whom is Dulce M. Abanilla, MCWDs General Manager.
On January 1, 1989, MCWD and Metropolitan Cebu Water District Employees
Union, executed a collective bargaining agreement (CBA) providing for the
continuous grant to all its regular rank and file employees of existing benefits,
such as cash advances, thirteenth month pay, mid-year bonus, Christmas
bonus, vacation and sick leave credits, hospitalization, medicare, uniform
privileges, and water allowance.

On January 1, 1992, the parties renewed their CBA.

An audit team headed by Bernardita T. Jabines of the COA Regional Office No. VII
at Cebu City, one of the herein respondents, conducted an audit of the accounts
and transactions of MCWD.
The Regional Director of COA Regional Office No. VII, sent MCWD several notices
disallowing the amount of P12,221,120.86 representing hospitalization
benefits, mid-year bonus, 13th month pay, Christmas bonus and longevity
pay.
Petitioner appeal to respondent COA at Quezon City citing COA Memorandum
Circular No. 002-94 providing that all benefits provided under the duly
existing CBAs entered into prior to March 12, 1992, the date of official entry
of judgment of the Supreme Court ruling in Davao City Water District, et al. vs.
CSC and COA, shall continue up to the respective expiry dates of the
benefits or CBA whichever comes earlier.
COA denied petitioners appeal citing this SCs ruling in Davao City Water District
vs. Civil Service Commission that a water district is a corporation created
pursuant to a special law P.D. No. 198, as amended, and as such, its officers
and employees are covered by the Civil Service Law.
Respondent COA then held that:
There is no question that the CBA was concluded after the decision in the
Davao case was promulgated. As far as the CBA is concerned the critical
moment is the date of the promulgation itself. Any transaction (CBA)
concluded after this date in violation of existing laws and regulations
applicable to government entities is void and of no effect. It conferred no
demandable right, it created no enforceable obligation.
xxx
PREMISES CONSIDERED, the instant appeal has to be, as it is hereby,
denied. The disallowance in the total amount of P12,221,120.86 is hereby
AFFIRMED.
SO ORDERED.
Petitioner filed a motion for reconsideration but it was denied. COA ruled that the
compensation package of MCWD personnel may no longer be the subject of
a CBA. For the terms of employment of those personnel are covered, not by the
Labor Code, but by the Civil Service Law.
Issue:

Whether COA was correct in disallowing the hospitalization benefits, mid-year

bonus, 13th month pay, Christmas bonus and longevity pay?
Ruling:
Yes.
In light of this Courts ruling in Davao City Water District that the officers and
employees of a water district are covered by the Civil Service Law,
petitioners invocation of the CBA, in justifying the receipt by the MCWD personnel
of benefits and privileges, is utterly misplaced.

Employees of GOCCs
Lumanta vs NLRC

Facts:
-

Petitioner Luz Lumanta, joined by fifty-four (54) other retrenched employees,

filed a complaint for unpaid 'd retrenchment or separation pay and charges of
underpayment of wages and non-payment of emergency cost of living
allowances (ECOLA) against private respondent Food Terminal, Inc. ("FTI") with
the Department of Labor and Employment.

Respondent argues: Lack of jurisdiction - being a government-owned and

controlled corporation, its employees are governed by the Civil Service Law not
by the Labor Code, and that claims arising from employment fall within the
jurisdiction of the Civil Service Commission and not the Department of Labor and
Employment.

Petitioner contention: although FTI is a corporation owned and controlled by the

government, it has still the marks of a private corporation: it directly hires its
employees without seeking approval from the Civil Service Commission and its
personnel are covered by the Social Security System and not the Government
Service Insurance System. Petitioners also argued that being a governmentowned and controlled corporation without original charter, private respondent
FTl clearly falls outside the scope of the civil service as marked out in Section 2
(1), Article IX of the 1987 Constitution.

Issue: Whether or not a labor law claim against a government-owned and controlled
corporation, such as private respondent FTI, falls within the jurisdiction of the
Department of Labor and Employment.

Held:
-

Respondent relied on the case of NHA vs Juco wherein the Courts said that
employees of government-owned or controlled corporations are governed by
the civil service law and civil service rules and regulations.

However, that case was under the 1973 Constitution. What applies in this
present case is the 1987 Constitution which states that The civil service
embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with
original charter. complaint filed in March 20, 1987.

Instruction No. 1013, dated 19 April 1980, included Food Terminal, Inc. in the
category of "government-owned or controlled corporations."

Since then, FTI served as the marketing arm of the National Grains Authority
(now known as the National Food Authority). The pleadings show that FTI was
previously a privately owned enterprise, created and organized under the
general incorporation law, with the corporate name "Greater Manila Food
Terminal Market, Inc."

Because respondent FTI is government-owned and controlled corporation

without original charter, it is the Department of Labor and Employment, and
not the Civil Service Commission, which has jurisdiction over the dispute
arising from employment of the petitioners with private respondent FTI, and
that consequently, the terms and conditions of such employment are
governed by the Labor Code and not by the Civil Service Rules and
Regulations.

C. Management Prerogatives
SAN MIGUEL BREWERY SALES FORCE UNION vs. OPLE
February 8, 1989; G.R. No. L-53515
Topic:Management prerogatives
FACTS:
Private respondents, San Miguel Corporation (SMC) introduced a marketing scheme
known as Complementary Distribution System (CDS) whereby its beer products
were offered for sale directly to wholesalers through San Miguel Sales offices.
This scheme ran counter to the terms in a previous CBA which provided for
employees to be entitled to a basic monthly compensation and a commission based
on their respective sales, where sales were generated through marketing done by
route salesmen who were assigned to specific territories to sell their stocks of beer.
CDS would thus reduce the take home pay of San Miguel salesmen.
Petitioner sales force union thus filed a complaint against SMC alleging that the CDS
violates the CBA and is an indirect way of busting the union. The Minister of Labor
dismissed their notice to strike, hence this petition.

ISSUE:
Whether or not respondent corporations marketing scheme is an improper exercise
of management prerogative.
HELD:
NO. It is a valid exercise of management prerogative. The Supreme Court held:
Every business enterprise endeavors to increase its profits. In the
process, it may adopt or devise means designed towards that goal. In
Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled:

... Even as the law is solicitous of the welfare of the employees,

it must also protect the right of an employer to exercise what
are clearly management prerogatives. The free will of
management to conduct its own business affairs to achieve its
purpose cannot be denied.

So long as a company's management prerogatives are exercised in

good faith for the advancement of the employer's interest and not for
the purpose of defeating or circumventing the rights of the employees
under special laws or under valid agreements, this Court will uphold
them (LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil. American
Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634; Phil.
Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Corporation's offer to
compensate the members of its sales force who will be adversely
affected by the implementation of the CDS by paying them a so-called
"back adjustment commission" to make up for the commissions they
might lose as a result of the CDS proves the company's good faith and
lack of intention to bust their union.

Ministers decision was upheld

Bisig Manggagawa sa Tryco v NLRC
Facts:
Tryco Pharma Corp. is a manufacturer of veterinary medicines
Tryco and BMT (rank-and-file union)signed a separate MOA, providing for a
compressed workweek

 The MOA was entered into pursuant toDO No. 21, Series of 1990, Guidelines on
the Implementation of Compressed Workweek
As provided inthe MOA, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be
considered as the regular workinghours, and no overtime pay shall be due and
payable to the employee for work rendered duringthose hours
However, should an employee be permitted or required to work beyond 6:12 p.m.,
suchemployee shall be entitled to overtime pay
Tryco informed the Bureau of Working Conditions (BWC) of the DOLE of the
implementation of a compressed workweek in thecompany
Meantime, Tryco received a Letter from the Bureau of Animal Industry of the
Departmentof Agriculture reminding it that its production should be conducted at
its plant site in San Rafael, Bulacan, not in itsmain office in Caloocan City
The concerned employees were directed to report to the companysplant site
BMT opposed the transfer of its members to San Rafael, Bulacan, contending that
it constitutes unfair labor practice
In protest, BMT declared a strike, claiming that the transfer wasinconvenient and
amounts to ULP
Issue:
W/N Tryco is guilty of unfair labor practices
Held:
NO
Absent any evidence that the Bureau of Animal Industry conspired with Tryco, the
allegation is notonly highly irresponsible but is grossly unfair to the government
agency concerned
The transfer of its production activities to San Rafael, Bulacan,
regardless of whether it was madepursuant to the letter of the Bureau of
Animal Industry, was within the scope of its inherent right tocontrol and
manage its enterprise effectively
Managements prerogative of transferring and reassigning employees
from one area of operation toanother in order to meet the requirements
of the business is, therefore, generally not constitutive ofconstructive
dismissal
Indisputably, in the instant case, the transfer orders do not entail a demotionin
rank or diminution of salaries, benefits and other privileges of Petitioners
Mere incidental inconvenience is not sufficient to warrant a claim of constructive
dismissal
Personalinconvenience or hardship that will be caused to the employee by reason
of the transfer is not a valid reason to disobey an order of transfer
Moreover, the adoption of a compressed workweek scheme in the company will
help temper any inconvenience that will be caused to Petitioners by their
transferto a farther workplace.
The transfer orders do not amount to ULP
Contrary to BMTs claim, mere transfer of its memberswill not paralyze and render
the union ineffective
The union was not deprived of the membership of the Petitioners whose work
assignments were only transferred to another location
There was noshowing or any indication that the transfer orders were motivated by
an intention to interfere withthe petitioners right to organize

 The MOA is enforceable and binding against the petitioners (esp. waiver of
overtime)
Where it isshown that the person making the waiver did so voluntarily, with full
understanding of what he wasdoing, and the consideration for the quitclaim is
credible and reasonable, the transaction must berecognized as a valid and binding
undertaking
Notably, the MOA complied with the followingconditions set by the DOLE, under
D.O. No. 21
Royal Plant vs. Coca Cola
(Management Prerogative)
Facts: Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged
in the manufacture, sale and distribution of softdrink products. The bottling
operators work in two shifts. The first shift is from 8 a.m. to 5 p.m. and the second
shift is from 5 p.m. up to the time production operations is finished. In 1974, the
bottling operators of then Bottling Line 2 were provided with chairs upon their
request. In 1988, the bottling operators of then Bottling Line 1 followed suit and
asked to be provided also with chairs. Their request was likewise granted. Sometime
in September 2008, the chairs provided for the operators were removed pursuant to
a national directive of petitioner. This directive is in line with the "I Operate, I
Maintain, I Clean" program of petitioner for bottling operators. The operators
initiated the grievance machinery of the Collective Bargaining Agreement (CBA)
Issue: Whether the removal of the chairs from the manufacturing/production lines
by CCBPI is a valid exercise of management prerogatives
Held: Yes. In the present controversy, it cannot be denied that CCBPI removed the
operators chairs pursuant to a national directive and in line with its "I Operate, I
Maintain, I Clean" program, launched to enable the Union to perform their duties
and responsibilities more efficiently. The removal of the chairs was designed to
increase work efficiency. Hence, CCBPIs exercise of its management prerogative
was made in good faith without doing any harm to the workers rights.

Hiring of personnel and size of workers

Wiltshire V. .Nlrc /193 SCRA 665/
FACTS
Private respondent Vicente Ong was the Sales Manager of petitioner
from March 16, 1981 up to June 18, 1985. On 13 June 1985, upon private
respondent's return from a business and pleasure trip abroad, he was
informed by the President of petitioner that his services were being terminated up
on the ground of redundancy.
Private respondent filed a complaint before the Labor Arbiter for illegal
dismissal alleging that his position could not possibly be redundant because nobody
in the company was then performing the same duties.
In its answer, Petitioner Company alleged that the termination of
respondent's services was a cost-cutting measure. Labor Arbiter declared the

termination of private respondent's services illegal and ordered petitioner to pay

private respondent back wages, unpaid, accumulated sick and vacation leaves,
hospitalization benefit package, unpaid, moral damages and attorney's fees.
Petitioner appeal but NLRC affirmed Labor Arbiters decision.
Hence, this Petition for Certiorari.
ISSUE: Whether or not private respondent is validly terminated.
HELD:
The Court indeed found that petitioner had serious financial difficulties
before, during and after the termination of the services of private respondent. The
company showed a net loss of P4,431,321.00 in its audited financial statements.
Moreover, Wiltshire finally closed its doors and terminated all operations in the
Philippines on January 1987, barely 2 years after the termination of private
respondent. The Court considered that finally shutting down business operations
constitutes strong confirmatory evidence of petitioner's previous financial distress.
It is also to be noted that the letter informing private respondents of the
termination of his services used the word redundant, that letter also referred to
the company having incurred financial losses which in fact has compelled it to
resort to retrenchment to prevent further losses. Thus, what the letter was in
effect saying was that because of financial losses, retrenchment was necessary,
which in turn resulted in the redundancy of private respondent's position.
That no other person was holding the same position that private respondent
held prior to the termination of his services, does not show that his position had not
become redundant. Redundancy, for purposes of the Labor Code, exists where the
services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions maybe the outcome of a
number of factors such as over hiring of workers, decreased volume of business, or
dropping of a particular product line or service activity previously manufactured or
undertaken by the enterprise.
The determination of the continuing necessity of a particular officer or
position in a business corporation is management's prerogative, and the courts will
not interfere with the exercise of such so long as no abuse of discretion or merely
arbitrary or malicious action on the part of management is shown.
Court Resolved to GRANT due course to the Petition for Certiorari

Prohibition against elective office

Ymbong v. ABS-CBN
Facts: Ymbong work as a talent, co-anchoring Hoy Gising and TV Patrol. His stint
later extended as a radio talent in ABS-CBN Cebu. An HR Policy on Employees
Seeking Public Office, stating that Any employee who intends to run for any public
office position, must file his/her letter of resignation, at least thirty (30) days prior to
the official filing of the certificate of candidacy either for national or local election,
any employee who intends to join a political group/party or even with no political

affiliation but who intends to openly and aggressively campaign for a candidate or
group of candidates, must file a request for leave of absence subject to
managements approval. HR of the radio station issued a memorandum to this
effect. HR found out that Ymbong actually ran for public office. Ymbong claims that
he informed the HR in a letter that he will take a leave as he will ran for councillor.
On the other hand, Patalinhug submitted also his letter of resignation as he would
also run for elections. Unfortunately, both Ymbong and Patalinhug lost and tried to
come back to ABS-CBN Cebu. And according to HR, they cannot work there
anymore because of the company policy.
HR issued Ymbong a memorandum terminating him as a talent when he ran for
public office. Ymbong contended that after the expiration of his leave of absence, he
reported back to work as a regular talent and in fact continued to receive his salary.
Subsequently, he received a memorandum stating that his services are being
terminated immediately. Thus, he filed an illegal dismissal complaint against ABSCBN and the radio station. Patalinhug likewise filed an illegal dismissal against ABSCBN.
Issues:
Whether Ymbong and Patalinhug had been illegally dismissed
Held:
1. What is involved in this case is an unwritten company policy considering any
employee who files a certificate of candidacy for any elective or local office
as resigned from the company. Although 11(b) of R.A. No. 6646 does not
require mass media commentators and announcers such as private
respondent to resign from their radio or TV stations but only to go on leave
for the duration of the campaign period, we think that the company may
nevertheless validly require them to resign as a matter of policy. In this case,
the policy is justified on the following grounds: (a) Working for the
government and the company at the same time is clearly disadvantageous
and prejudicial to the rights and interest not only of the company but the
public as well. In the event an employee wins in an election, he cannot fully
serve, as he is expected to do, the interest of his employer. The employee
has to serve two (2) employers, obviously detrimental to the interest of both
the government and the private employer, (b) In the event the employee
loses in the election, the impartiality and cold neutrality of an employee as
broadcast personality is suspect, thus readily eroding and adversely affecting
the confidence and trust of the listening public to employers station.
It is worth noting that such exercise of management prerogative has earned a
stamp of approval from no less than our Congress itself when on February 12,
2001, it enacted Republic Act No. 9006, otherwise known as the "Fair Election
Act." Section 6.6 thereof reads:

6.6. Any mass media columnist, commentator, announcer, reporter, on-air

correspondent or personality who is a candidate for any elective public office
or is a campaign volunteer for or employed or retained in any capacity by any
candidate or political party shall be deemed resigned, if so required by their
employer.
Thus, ABS-CBN has a valid legal ground to dismiss Ymbong and Patalinhug.

Search of office computer to check misconduct

G.R. No. 181881 : October 18, 2011.
BRICCIO A. POLLO vs. CHAIRPERSON KARINA CONSTANTINO-DAVID.

FACTS:

CSC Chairperson Karina David received a document from an anonymous source,

making her aware that there is a corrupt official in the Commission. She then
formed personnel and directed them to back up all the files of the computers found
therein.

David found, in BricioPollo, petitioner, legal pleading or documents that are related
to administrative cases and were for on the behalf of parties who were facing
charges. David inferred that he was willfully aiding their adverse interests and it was
a practice that he pursued regularly.

Pollo argued that he was not even a lawyer to pursue such acts. He also asserted
that the CSC conducted a fishing expedition and his right to privacy was violated
and that the source of the complaint was anonymous. The CSC charged Pollo in
violation of RA 6713. After some motions filed to the CSC, he filed his motion to the
CA wherein he was ordered to be dismissed of his governmental duties. The CA
ruled that the search was legal because in their capacity as employers, the
government agencies could validly conduct search and seizure in the governmental
workplace without meeting the probable cause or warrant requirement for search
and seizure.

ISSUE: Whether there was illegal search.

HELD: YES. The SC ruled in favor of the CSC. Basing their decision on other cases,
the SC asked whether Pollo has a reasonable expectation of privacy in his office and
computer files and was the search reasonable in its inception and scope.

Regarding the first inquiry, the SC found that he had no actual expectation of
privacy on his work computer. He did not have a separate office space nor did he
use a password for his computer. He would have visitors which he let them use his
computer. The CSC also implemented a policy that its employees on notice that
they have no expectation of privacy in anything on their office computers, and that
the CSC may monitor their use. This implies that on-the-spot inspections may be
done to ensure that the computer resources were used only for such legitimate
business purposes.

On the second inquiry, the SC said that the search Pollo's files were conducted in
connection with investigation of work-related misconduct prompted by an
anonymous letter-complaint. A search by a government employer of an employees
office is justified at inception when there are reasonable grounds for suspecting that
it will turn up evidence that the employee is guilty of work-related misconduct.

TRANSFER OF EMPLOYEES
PHARMACIA and UPJOHN, INC. (now PFIZER PHILIPPINES, INC.), ASHLEY
MORRIS, ALEDA CHU, JANE MONTILLA & FELICITO GARCIA,
-versusRICARDO P. ALBAYDA, JR.,
Facts: Respondent Ricardo P. Albayda, Jr. was an employee of Upjohn, Inc. (Upjohn)
in 1978 and continued working there until 1996 when a merger between Pharmacia
and Upjohn was created. After the merger, respondent was designated by petitioner
Pharmacia and Upjohn (Pharmacia) as District Sales Manager assigned to District XI
in the Western Visayas area. During the period of his assignment, respondent
settled in Bacolod City.
In December 1999, respondent received a Memorandum of reassignment as District
Sales Manager to District XII in the Northern Mindanao area.
In response to the memorandum, respondent wrote a letter dated December
27,1999 to Felicito M. Garcia, Pharmacias Vice-President for Sales and Marketing,
questioning his transfer from District XI to District XII. Respondent said that he has

always been assigned to the Western Visayas area and that he felt that he could not
improve the sales of products if he was assigned to an unfamiliar
territory. Respondent concluded that his transfer might be a way for his managers to
dismiss him from employment. Respondent added that he could not possibly accept
his new assignment in Cagayan de Oro City because he will be dislocated from his
family; his wife runs an established business in Bacolod City; his eleven- year-old
daughter is studying in Bacolod City; and his two-year-old son is under his and his
wifes direct care.
On January 10, 2000, Garcia wrote a letter to respondent denying his request to be
reassigned to the Western Visayas area. Garcia explained that the factors used in
determining assignments of managers are to maximize business opportunities and
growth and development of personnel.
In several instances, respondent reiterated his request but all were denied.
Respondent, however, was given an option to be assigned in Metro Manila as a
position in the said territory had recently opened.
Another memorandum was sent to respondent dated June 6, 2000, stating that it is
in the best interest of the company for respondent to report to the Makati office to
assume his new area of assignment.
On July 13, 2000, Montilla sent respondent a memorandum notifying him of their
decision to terminate his services after he repeatedly refused to report for work
despite due notice.
On August 14, 2000, respondent filed a Complaint with the NLRC against Pharmacia,
Chu, Montilla and Garcia for constructive dismissal.
On July 12, 2002, the Labor Arbiter rendered a Decision dismissing the case.
Respondent appealed to the NLRC but was dismissed.
On appeal, the CA rendered a Decision ruling in favor of respondent.
Issue: W/N respondents reassignment was proper.
Held: Yes. Jurisprudence recognizes the exercise of management prerogative to
transfer or assign employees from one office or area of operation to another,
provided there is no demotion in rank or diminution of salary, benefits, and other
privileges, and the action is not motivated by discrimination, made in bad faith, or
effected as a form of punishment or demotion without sufficient cause.

To determine the validity of the transfer of employees, the employer must

show that the transfer is not unreasonable, inconvenient, or prejudicial to the

employee; nor does it involve a demotion in rank or a diminution of his salaries,

privileges and other benefits. Should the employer fail to overcome this burden of
proof, the employee's transfer shall be tantamount to constructive dismissal.
The transfer of respondent was a valid exercise of a legitimate management
prerogative to maximize business opportunities, growth and development of
personnel and that the expertise of respondent was needed to build the companys
business in Cagayan de Oro City which dismally performed in 1999.
The reassignment of respondent was not a demotion as he will also be
assigned as a District Sales Manager in Mindanao or in Metro Manila and that the
notice of his transfer did not indicate that his emoluments will be reduced.
Moreover, respondent was entitled to Relocation Benefits and Allowance in
accordance with petitioners Benefits Manual.
Lastly, in respondents contract of employment, he agreed to be assigned to any
work or workplace as may be determined by the company whenever the operations
require such assignment.
PRINCE TRANSPORT VS. GARCIA, G.R. NO. 167291, 12 JANUARY 2011.

Prince Transport, Inc. (PTI), is a company engaged in the business of

transporting passengers by land; respondents were hired either as drivers,
conductors, mechanics or inspectors, except for respondent Diosdado Garcia
(Garcia), who was assigned as Operations Manager.
Sometime in October 2007 the commissions received by the respondents
were reduced to 7 to 9% from 8 to 10%. This led respondents and other
employees of PTI to hold a series of meetings to discuss the protection of
their interests as employees.
Ranato Claros, president of PTI, made known to Garcia his objections to the
formation of a union and in order to block the continued formation of the
union, PTI caused the transfer of all union members and sympathizers to one
of its sub-companies, Lubas Transport (Lubas).
The business of Lubas deteriorated because of the refusal of PTI to maintain
and repair the units being used therein, which resulted in the virtual stoppage
of its operations and respondents' loss of employment.
Hence, the respondent-employees filed complaints against PTI for illegal
dismissal and unfair labor practice.
PTI contended that it has nothing to do with the management and operations
of Lubas as well as the control and supervision of the latter's employees.

ISSUE:Whether PTI is guilty of illegal dismissal considering that respondents have

been transferred to Lubas

HELD: Yes

the Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of PTI. A
settled formulation of the doctrine of piercing the corporate veil is that when two
business enterprises are owned, conducted and controlled by the same parties, both
law and equity will, when necessary to protect the rights of third parties, disregard
the legal fiction that these two entities are distinct and treat them as identical or as
one and the same.[26] In the present case, it may be true that Lubas is a single
proprietorship and not a corporation. However, petitioners attempt to isolate
themselves from and hide behind the supposed separate and distinct personality of
Lubas so as to evade their liabilities is precisely what the classical doctrine of
piercing the veil of corporate entity seeks to prevent and remedy.

Thus, the Court agrees with the observations of the CA, to wit:

As correctly pointed out by petitioners, if Lubas were truly a separate entity, how
come that it was Prince Transport who made the decision to transfer its employees
to the former? Besides, Prince Transport never regarded Lubas Transport as a
separate entity. In the aforesaid letter, it referred to said entity as Lubas operations.
Moreover, in said letter, it did not transfer the employees; it assigned them. Lastly,
the existing funds and 201 file of the employees were turned over not to a new
company but a new management.[27]

The Court also agrees with respondents that if Lubas is indeed an entity separate
and independent from PTI why is it that the latter decides which employees shall
work in the former?

What is telling is the fact that in a memorandum issued by PTI, dated January 22,
1998, petitioner company admitted that Lubas is one of its sub-companies.[28] In
addition, PTI, in its letters to its employees who were transferred to Lubas, referred
to the latter as its New City Operations Bus.[29]

Moreover, petitioners failed to refute the contention of respondents that despite the
latters transfer to Lubas of their daily time records, reports, daily income

remittances of conductors, schedule of drivers and conductors were all made,

performed, filed and kept at the office of PTI. In fact, respondents identification
cards bear the name of PTI.

May employees refuse transfer?

Manila Pavilion v. Henry Delada
Facts:Delada was the Union President of the Manila Pavilion Supervisors Association
at MPH originally assigned as Head Waiter of Rotisserie then reassigned him as
Head Waiter of Seasons Coffee Shop but respondent declined the inter-outlet
transfer and instead asked for a grievance meeting on the matter, pursuant to their
Collective Bargaining Agreement (CBA). He also requested his retention as Head
Waiter of Rotisserie while the grievance procedure was ongoing. The Mgt. denied
the request and he kept on reporting to Rotisserie.
MPH sent him several memoranda requiring him to explain in writing why he should
not be penalized for the following offenses gross insubordination etc. Delada
persistently rebuffed orders for him to report to his new assignment.
While respondents Complaint is pending MPH citing security and safety reasons,
placed respondent on a 30-day preventive suspension. Thereafter found Delada
guilty imposing the penalty of 90-day suspension.

Issue: Whether or not Manila Pavilion Hotel retained the authority to continue with
the administrative case against Delada for insubordination and willful disobedience
of the transfer order.

Held:YES. We rule that petitioner Manila Pavilion Hotel had the authority to
continue with the administrative proceedings for insubordination and willful
disobedience against Delada and to impose on him the penalty of suspension.
Consequently, petitioner is not liable to pay back wages and other benefits for the
period corresponding to the penalty of 90-day suspension.

First, it must be pointed out that the basis of the 30-day preventive
suspension imposed on Delada was different from that of the 90-day penalty of
suspension. The 30-day preventive suspension was imposed by MPH on the
assertion that Delada might sabotage hotel operations if preventive suspension

would not be imposed on him. On the other hand,the penalty of 90-day suspension
was imposed on respondent as a form of disciplinary action. It was the outcome of
the administrative proceedings conducted against him.

Preventive suspension is a disciplinary measure resorted to by the employer

pending investigation of an alleged malfeasance or misfeasance committed by an
employee. The employer temporarily bars the employee from working if his
continued employment poses a serious and imminent threat to the life or property
of the employer or of his co-workers. The penalty of suspension refers to the
disciplinary action imposed on the employee after an official investigation or
administrative hearing is conducted. The employer exercises its right to discipline
erring employees pursuant to company rules and regulations. Thus, a finding of
validity of the penalty of 90-day suspension will not embrace the issue of the
validity of the 30-day preventive suspension. In any event, petitioner no longer
assails the ruling of the CA on the illegality of the 30-day preventive suspension.

2.5 Terms and conditions upon hiring: Change in law

St. Lukes Medical Center Employees Association vs. NLRC [G.R. No.
162053. March 7, 2007]
Facts:
Maribel S. Santos was an X-Ray Technician in the Radiology department of St.
Lukes. Subsequently, Congress passed and enacted Republic Act No. 7431 known
as the Radiologic Technology Act of 1992, which required that a person must
obtain the proper certificate of registration from the Board of Radiologic Technology
for the practice or offer to practice as a radiology and/or x-ray technologist in the
morals, peace, education, order, safety, and the general welfare of the people.
Consequently, persons who desire to engage in the learned professions requiring
scientific or technical knowledge may be required to take an examination as a
prerequisite to engaging in their chosen careers. The most concrete example of this
would be in the field of medicine, the practice of which in all its branches has been
closely regulated by the State. It has long been recognized that the regulation of
this field is a reasonable method of protecting the health and safety of the public to
protect the public from the potentially deadly effects of incompetence and
ignorance among those who would practice medicine. The same rationale applies in
the regulation of the practice of radiologic and x-ray technology.
The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of the
States inherent police power. It should be noted that the police power embraces
the power to prescribe regulations to promote the health, morals, educations, good
order, safety or general welfare of the people. The state is justified in prescribing
the specific requirements for x-ray technicians and/or any other professions
connected with the health and safety of its citizens. St. Lukes being engaged in the
hospital and health care business, is a proper subject of the cited law; thus, having

in mind the legal requirements of these laws, the latter cannot close its eyes and
[let] complainant-appellants private interest override public interest.
Issue:
Was Santos validly dismissed for failure to secure a certificate of registration from
the Board of Radiologic Technology?
Held:
While the right of workers to security of tenure is guaranteed by the Constitution, its
exercise may be reasonably regulated pursuant to the police power of the State to
safeguard health, morals, peace, education, order, safety, and the general welfare
of the people. Consequently, persons who desire to engage in the learned
professions requiring scientific or technical knowledge may be required to take an
examination as a prerequisite to engaging in their chosen careers. The most
concrete example of this would be in the field of medicine, the practice of which in
all its branches has been closely regulated by the State. It has long been recognized
that the regulation of this field is a reasonable method of protecting the health and
safety of the public to protect the public from the potentially deadly effects of
incompetence and ignorance among those who would practice medicine. The same
rationale applies in the regulation of the practice of radiologic and x-ray technology.
The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of the
States inherent police power. It should be noted that the police power embraces
the power to prescribe regulations to promote the health, morals, educations, good
order, safety or general welfare of the people. The state is justified in prescribing
the specific requirements for x-ray technicians and/or any other professions
connected with the health and safety of its citizens. St. Lukes being engaged in the
hospital and health care business, is a proper subject of the cited law; thus, having
in mind the legal requirements of these laws, the latter cannot close its eyes and
[let] complainant-appellants private interest override public interest.
2.6 Terms and Conditions upon hiring: ban on spouses in same company
Star Paper Corporation vs. Simbol
487 SCRA 228
FACTS: Petitioner was the employer of the respondents. Under the policy of Star Paper the
employees are:
1. New applicants will not be allowed to be hired if in case he/she has a relative, up to the 3rd
degree of relationship, already employed by the company.
2. In case of two of our employees (singles, one male and another female) developed a friendly
relationship during the course of their employment and then decided to get married, one of them
should resign to preserve the policy stated above.
Respondents Comia and Simbol both got married to their fellow employees. Estrella on the other
hand had a relationship with a co-employee resulting to her pregnancy on the belief that such was
separated. The respondents allege that they were forced to resign as a result of the implementation
of the said assailed company policy.

The Labor Arbiter and the NLRC ruled in favor of petitioner. The decision was appealed to the Court
of Appeals which reversed the decision.
ISSUE: Whether the prohibition to marry in the contract of employment is valid
HELD: It is significant to note that in the case at bar, respondents were hired after they were found fit
for the job, but were asked to resign when they married a co-employee. Petitioners failed to show
how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of
the Repacking Section, could be detrimental to its business operations. Neither did petitioners
explain how this detriment will happen in the case of WilfredaComia, then a Production Helper in the
Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy
is premised on the mere fear that employees married to each other will be less efficient. If we uphold
the questioned rule without valid justification, the employer can create policies based on an
unproven presumption of a perceived danger at the expense of an employees right to security of
tenure.
Petitioners contend that their policy will apply only when one employee marries a co-employee, but
they are free to marry persons other than co-employees. The questioned policy may not facially
violate Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate
impact theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite
the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate
business concern in imposing the questioned policy cannot prejudice the employees right to be free
from arbitrary discrimination based upon stereotypes of married persons working together in one
company.
Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot
benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we
cannot prudently draw inferences from the legislatures silence that married persons are not
protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus,
for failure of petitioners to present undisputed proof of a reasonable business necessity, we rule that
the questioned policy is an invalid exercise of management prerogative. Corollary, the issue as to
whether respondents Simbol and Comia resigned voluntarily has become moot and academic.
In the case of Estrella, the petitioner failed to adduce proof to justify her dismissal. Hence, the Court
ruled that it was illegal.
Petition was denied.
DUNCAN ASSOCIATION OF DETAILMAN PGTWO AND TECSON VS. GLAXO
WELLCOME PHILS., G.R. NO. 164774, 12 April 2006; 438 SCRA 343 [2004].

Stipulation Against Marriage

FACTS:
Pedro Tecson was hired by Glaxo. Their contract of employment stipulates, among
others, that he must inform the management of any existing or future relationship
by consanguinity or affinity with co-employees or employees of competing drug
companies.

Should management find that such relationship poses a possible conflict of interest,
he must resign from the company.
According to the Employee Code of Conduct, on the other hand, the management
and employee will explore the possibility of a transfer to another department in a
non-counterchecking position. Otherwise, the employee will be prepared for
employment outside the company after 6 months.
While assigned in Camarines Sur to market Glaxos products, Pedro met and fell in
love with Bettsy, an employee of competitor Astra Pharmaceuticals.
Tecson received reminders from his district manager about the dangers of their
relationship.Tecson still ended up marrying Bettsy in September 1998.In January
1999, Tecsons superiors told him that the marriage gave rise to a conflict of
interest.Asked to choose which one of them would keep their jobs.Glaxo wanted to
keep Tecson because he was performing well.Tecson asked for more time. He
explained that Astra was going to merge with Zeneca (another pharma firm) and
that Bettsy might be able to take advantage of the redundancy package.
After 8 months, he asked for more time again. In September, he asked to be
transferred to the Milk Division, thinking that since Astra didnt have one, the
conflict of interest would be eliminated.Glaxo decided to transfer him to the Butuan
CitySurigao CityAgusan del Sur sales area. Tecson asked for reconsideration.He
defied the transfer order and continued working in Camarines Sur/Norte.Matter was
submitted for grievance proceedings. Meanwhile, Tecson could not sell products
which were competing with Astro products.
Matter was later submitted for voluntary arbitration.Offer of separation pay
denied.NCMB declared the policy on relationships VALID.CA denied Tecsons petition
for review. MR denied.Hence, this petition.

ISSUES:
1.

WoNGlaxos policy is valid; and

2.

WoNTecson was constructively dismissed.

RULING:
1. YES. The policy is valid.
Stipulation: You agree to disclose to management any existing or future
relationship you may have, either by consanguinity or affinity with co-employees or
employees of competing drug companies. Should it pose a possible conflict of

interest in management discretion, you agree to resign voluntarily from the

Company as a matter of Company policy.

2. Tecson likewise bound himself to study and abide by the company rules and
policies.Conflict of interest, under the employee handbook, includes: To avoid
having personal or family interest, financial or otherwise, in any competitor supplier
or other businesses which may consciously or unconsciously influence their actions
or decisions and thus deprive GlaxoWellcome of legitimate profit.

Court takes judicial notice of the competitiveness of the pharmaceutical industry.

Glaxo has the right to protect its trade secrets, manufacturing formulas, marketing
strategies, and other information.

The policy is not unreasonable. Glaxo only wants to protect its interests against the
possibility that a competitor might gain access to its secrets.

Const. guarantees that management has a right to reasonable returns to

investments and to expansion and growth. Not every labor dispute will be decided
in favor of labor.

The policy does not violate equal protection. That argument can only be invoked
against the State.Neither was Tecson deprived of due process. He was repeatedly
reminded of the repercussions of his relationship.

The prohibition is NOT ABSOLUTE.

Employee still free to marry anyone of his own choosing, what Glaxo merely seeks
to prevent is a conflict of interest.

The policy is not aimed at restricting a personal prerogative that belongs only to
the individual. However, an employees personal decision does not detract the
employer from exercising management prerogatives to ensure maximum profit

Tecson knew about the policy before he signed the contract. He is therefore
estopped from questioning such policy.

3. NO. He was not constructively dismissed.

Constructive dismissal quitting, an involuntary resignation resorted to when
continued employment becomes impossible, unreasonable, or unlikely; when there
is a demotion in rank or diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the employee.
N
ot present in this case, when Tecson was transferred from the Camarines area to
Butuan.
No demotion, no discrimination by reason of such transfer.
Power to transfer is a management prerogative.
Medical Representatives really travel. Its part of the job.

DISPOSITION: Petition denied for lack of merit.

Terms and conditions upon hiring: Non-compete clauses

WILLIAM OLLENDORFF, Plaintiff-Appellee, v. IRA ABRAHAMSON, DefendantAppellant.
Facts
Herein plaintiff Ollendorf and defendant Abrahamson made and entered into
Contract of Agreement.
The first part hereby agrees to employ the defendant and the party of the second
obliges himself to work for the plaintiff within the period of two years.
Defendant obligates and binds himself to devote his entire time, attention, energies
and industry on the promotion of the furtherance of the business and interest of the
party. Failure on the said duty shall entitle the plaintiff to discharge and dismiss the
defendant.

The second part of the contract further binds the party that he will not enter
whether directly or indirectly to engage in a similar or competitive business.
Under the term of this agreement, the plaintiff left the employment due to illness
and went to U.S. After his departure, the defendant returns to Manila as the
Manager of the Philippine Underwear Company.
Defendant admits that both firms turn out the same class of goods and those they
are exported to the same market. However, he alleged that the said contract with
the plaintiff was void for it violates the right for free trade.
Issue
Whether or not the contract is void due to the violation of the rights of trade.
Held
A contract by which an employee agrees to refrain for a given length of time after
the expiration of the term of his employment, from engaging in a business
competitive with that of his employer is not void as being in restraint of trade, if the
restraint imposed is no greater than that which is necessary to afford a reasonable
protection to the employer.
Red Line Transportation v. Bachrach Motor Company
Facts:
1. Rural Transit Company sold its business to Alfredo Zuraek and vice-versa in a
Mutual Deed of Sale. In the said deed of sale, Rural Transit paid P15,000 to
Zurake for all the rights and interests in the Certificates of Public Convenience
granted by the Public Service Commission to Interprovincial Transporation
Company covering all the routes from the Municipality of Iligan, to any other
point South of the said municpality.
2. Zuraek also bought all of Rural Transits rights and interests in its Certificates
of Public Convenice covering all routes from Ilagan to the North of the said
municipality.
3. Furthermore, Rural Transit agreed not to directly or indirectly operate nor file
an application to operate in any territory covered by the routes of Zuraek that
may be north of the municipality. Zuraek also agreed not to do the same for
routes that may be south of the municipality.
4. All the rights acquired by Zuraek were passed on to petitioner Red Line
Transportation. Rural Transit transferred all the assets and certificates to
Bachrach Motor Company (respondent). Among such properties was a certificate
of public convenience issued to CeferinoMedina which authorized a transporation

service from Solano, Nueva Vizcaya, to Tuguegarao and Cagayan (north of

Iligan). It was approved by the commission by September 8.

Issue:
w/n the Medina certificate is valid?

Held:
-

No. The test of validity is whether under the particular circumstances of the
case and considering the nature of the particular contract involved, public
interest and welfare are not involved and the restraint is not only reasonably
necessary for the protection of the contracting parties but will not affect
public interest or service. It should be observed that public service companies
are more strictly limited than others in entering into contracts in restraint of
the free flow of trade, commerce and communication because of their duty to
give equal service to the public. As a general proposition, all contracts and
agreements, of every kind and character, made and entered into by those
engaged in an employment or business impressed with a public character,
which tend to prevent competition between those engaged in like
employment, are opposed to the public policy and are therefore unlawful. All
agreements and contracts tending to create monopolies and prevent proper
competition are by the common law illegal and void.

[G.R. No. 169464

August 31, 2006]
ROQUE D.A. DATOR, Petitioner, vs. UNIVERSITY OF SANTO TOMAS, REV.
FR. TAMERLANE LANA and REV. FR. RODEL ALIGAN, Respondents.
FACTS
Petitioner Dator was hired by respondent UST in June 1983 as Instructor I of the
Institute of Religion with a maximum teaching load of 24 units. On December
15, 1995, petitioner was also hired as Graft Investigation Officer II with the Office
of the Ombudsman but he failed to disclose such other employment to
respondents, who discovered the same only during the first semester of School
Year 2000-2001. Thus, on June 16, 2000, petitioner was informed that his
teaching load would be reduced to 12 hours per week, pursuant to Section 5,
Article III of the UST Faculty Code which states that faculty members who have
a full time outside employment other than teaching may not be given a teaching
load in excess of 12 hours per week.
Petitioner asked for reconsideration of the reduction in his teaching load which
was granted. He was given an additional load of three teaching hours. On June

15, 2001, petitioner again requested for an additional load of three units but his
request was denied by respondent Rev. Fr. Aligan. Petitioner filed a ComplaintAffidavit to the Chairperson of the Grievance Committee, Dr. Gil Gamila,
President of the University of Sto. Tomas Faculty Union, but the complaint was
dismissed. Petitioner appealed to respondent Rev. Fr. Tamerlane Lana, Rector of
respondent UST but the appeal was denied.
Petitioner thus filed a complaint for Illegal Reduction of Teaching Load and Illegal
Change of Employment Status, Damages, Unpaid Benefits and Attorneys Fees
and illegal constructive dismissal before the Labor Arbiter on February 19, 2002.
Petitioner claimed that his arbitrary demotion from full-time to part-time faculty
member violated the provisions of the CBA, as well as his right to security of
tenure. Likewise, he argued that the UST Faculty Code which respondents relied
upon to reduce his teaching load has been superseded by the CBA.
Petitioner contends that he is a tenured faculty member thus he is entitled to the
same teaching load as he had in the previous semesters; that he was not
accorded due process when respondents unilaterally reduced his teaching load;
that Section 5, Article III of the Faculty Code has no application in this case; and
that respondents acted in bad faith.
On the other hand, respondents maintained that petitioners teaching load was
reduced in accordance with Sections 5 and 6 of Article III of the Faculty Code
which provide:
SEC. 5 Faculty members who have a full time outside employment
other than teaching may not be given a teaching load in excess of 12 hours per
week.
Respondents maintain that petitioners teaching load was reduced in accordance
with Section 5, Article III of the Faculty Code; that they did not violate
petitioners right to due process and that he was given an opportunity to be
heard; that petitioner falsified at least 13 written statements where he
deliberately failed to mention his full time employment with the Office of the
Ombudsman.
ISSUE
Whether or not the reduction of petitioners teaching load was justified.
HELD
The SC held that UST committed no illegality when it ordered the reduction of
Dators load from twenty-four (24) units to twelve (12) units per semester. While
the CBA provides grounds for reduction of teaching load, the question of whether
a faculty member is considered full-time or part-time is addressed by the Faculty
Code which provides that where the full-time faculty member is at the same time
working as a full-time employee elsewhere, the faculty member is considered
part-time and a 12-hour teaching load limitation is imposed.

There is no dispute that petitioner was holding a full-time position with the Office
of the Ombudsman while working as a faculty member in UST. Accordingly,
Section 5, Article III of the Faculty Code applies.
The UST Faculty Code continues to exist and to apply to UST faculty members,
but must give way if its terms are in conflict with what the CBA provides. The
standard in determining the applicable is whether a conflict exists between the
provisions the parties cited.
We see no conflict between the provisions the parties respectively cited as these
provisions apply to different situations. Article IV of the CBA are the rules on the
teaching loads that faculty members may normally expect to carry; it provides
as well the grounds or reasons for giving a tenured faculty member less than his
normal teaching load. These provisions do not address the question of when a
faculty member is to be considered a full-time or a part-time faculty member.
Whether a faculty member should only be on part-time basis is governed by
Section 5 Article III of the UST Faculty Code we have quoted above. Thus, the
provisions Dator cited regarding deloading and the authorized grounds therefore
do not apply because what is involved is a change of status from full-time faculty
member to a part-time one due to the faculty members full-time employment
elsewhere.
In contrast with the authorized causes for deloading under the CBA, the
change of status from full-time faculty member with a 24-unit load to a part-time
one with a 12-unit load in effect involves a disqualification to be a full-time
faculty member because of the very practical reason that he or she is already a
full-time employee elsewhere. In the present case, this disqualification is
compounded by Dators repeated misrepresentations about his employment
status outside UST. The present case therefore is closer to being a
disqualification situation coupled with a disciplinary cause, rather than one
involving a purely authorized deloading under the CBA.
Petitioner argues that he was under no obligation to disclose his employment
with the Office of the Ombudsman. He claims that the only information required
of him pertained to 1) other colleges where he is teaching, 2) teaching loads
outside the university, and 3) a business firm he is employed with. He argues
that the Office of the Ombudsman, being a government agency, does not fall
under any of the foregoing categories.
Section 6, Article III of the Faculty Code states that all faculty members must
submit each semester a statement of the number of teaching hours per week to
be rendered in other institutions and/or daily hours of work or employment,
inside or outside the University. The rationale behind the rule is unmistakable.
As pointed out by respondents, there is a need to maintain USTs quality of
education as well as to ensure that government service is not jeopardized.
Petitioner admitted in his letter-request dated July 15, 2001 that with the
implementation of a CHED Circular, the teaching load assignment of government
employees was limited to only 12 units per semester so as not to prejudice the

interests of both the government and the University and/or college concerned.
It is clear therefore that petitioner was aware of the limitation.
Moreover, we find that petitioner was not denied due process. It is settled that
due process is simply an opportunity to be heard. In this case, respondents
informed petitioner that his teaching load would be reduced as he was working
full-time with the Office of the Ombudsman. Petitioner asked for reconsideration
twice. His first request was granted and he was given an additional load of three
units for School Year 2000-2001. For School Year 2001-2002, petitioner again
requested an additional load of three units but was denied.
All told, petitioners complaint cannot be sustained. An employees bare
allegations of constructive dismissal, when uncorroborated by the evidence on
record, cannot be given credence. A constructive dismissal occurs when the law
deems that there is effectively a termination of employment or a quitting
because continued employment is rendered impossible, unreasonable or
unlikely, such as in an offer involving a demotion in rank and a diminution in
pay. Where, as in the present case, the employer was fully justified in giving a
faculty member a lesser load because the latter is disqualified under applicable
rules from handling a full load, and where the faculty member committed
repeated misrepresentations in his bid to maintain his full load, we cannot see
any legal or factual basis to conclude that the faculty member had been
constructively dismissed.
Petition is denied.
Moreno vs San Sebastian College, G.R. No. 175283, March 28, 2008
FACTS:
San Sebastian College (SSC-R) employed Jackqui R. Moreno as a teaching fellow.
Moreno was first appointed as a full-time college faculty member. Then, Moreno
became a member of the permanent college faculty. She was also offered the
chairmanship of the Business Finance and Accountancy Department of her college.
The SSC-R HR conducted a formal investigation regarding Morenos unauthorized
external teaching engagements and HR found out that Moreno indeed had
unauthorized teaching assignments at the Centro Escolar University and at the
College of the Holy Spirit, Manila.
Moreno received a MEMO from the Dean of her college, requiring her to explain the
reports regarding her unauthorized teaching engagements. The said activities
allegedly violated Section 2.2 of Article II of SSC-Rs Faculty Manual.
Moreno admitted her failure to secure any written permission before she taught in
other schools. Moreno further stated that it was never her intention to jeopardize

her work in SSC-R and that she merely wanted to improve her familys poor financial
conditions.
A Special Grievance Committee was then formed in order to investigate and make
recommendations regarding Morenos case. Moreno admitted she did not formally
disclose her teaching loads at the College of the Holy Spirit and at the Centro
Escolar University; that the Dean of her college was aware of her external teaching
loads; that she went beyond the maximum limit for an outside load; that she did not
deny teaching part-time in the aforementioned schools; and that she did not wish to
resign because she felt she deserved a second chance.
The grievance committee issued its resolution which unanimously found that she
violated the prohibition against a full-time faculty having an unauthorized external
teaching load. The majority of the grievance committee members recommended
Morenos dismissal from employment in accordance with the school manual, but
Dean Espejo dissented and called only for a suspension for one semester.
Moreno was terminated in her work. Moreno instituted with the NLRC a complaint for
illegal termination against SSC-R.
Labor Arbiter Veneranda C. Guerrero dismissed Morenos complaint.
NLRC reversed the rulings of the Labor Arbiter.
CA annulled the decision of the NLRC.
SSC-R contends that Morenos dismissal from employment was valid because she
knowingly violated the prohibition in the Section 2.2 of Art. II of the SSC-R Faculty
Manual and in employment contract. In so doing, Moreno allegedly committed
serious misconduct and willful disobedience against the school, and thereby
submitted herself to the corresponding penalty which is termination for cause.
ISSUE:
Whether or not the dismissal of Moreno was proper and legal
RULING:
No. The misconduct of Moreno falls below the required level of gravity that would
warrant dismissal as a penalty.
Under Art. 282(a) of the Labor Code, willful disobedience of the employers lawful
orders as a just cause for termination of employment envisages the concurrence of
at least two requisites: (1) the employees assailed conduct must have been willful
or intentional, the willfulness being characterized by a "wrongful and
perverse attitude"; and (2) the order violated must have been reasonable, lawful,

made known to the employee and must pertain to the duties which he has been
engaged to discharge.
SSC-R failed to adduce any concrete evidence to prove that Moreno indeed
harbored perverse or corrupt motivations in violating the school policy.
Even if dismissal for cause is the prescribed penalty for the misconduct committed,
it is disproportionate to the offense.
SSC-R clearly had the discretion to impose a lighter penalty of suspension according
to Morenos contract of employment.
However, the Court does not depreciate the misconduct committed by Moreno.
Indeed, SSC-R has adequate reasons to impose sanctions on her. But this should not
be dismissal from employment. Because of the serious implications of this penalty,
"our Labor Code decrees that an employee cannot be dismissed, except for the
most serious causes."
The Court deems it appropriate to impose the penalty of suspension of 1 year on
Moreno.
Petition is granted.

Misconduct is defined as improper or wrong conduct. It is the transgression of

some established and definite rule of action, a forbidden act, a dereliction of
duty, willful in character and implies wrongful intent and not mere error of
judgment. The misconduct to be serious within the meaning of the act must be of
such a grave and aggravated character and not merely trivial or unimportant.
Such misconduct, however serious, must nevertheless be in connection with the
work of the employee to constitute just cause from his separation.

Avon Cosmetics vs Luna

Facts:
-

Respondent was hired by Beautifont, Inc. in 1972

Petitioner, Avon, acquired and took over management and operations of
Beautifont.
Respondent continued to work as makeup artist of Avon

By virtue of the Supervisors Agreement entered between Avon and Luna, Luna
became part of the independent sales force of Avon.
Luna also became the Group Franchise Director of another company, Sandr
Philippines, Inc.
Luna sought the advice of a law firm on the validity of the agreement. The law
firm said it was contrary to law and public policy.
Later, Avon notified Luna of the termination of the Supervisors Agreement
because of Luna being involved with Sandre and selling their products to Avons
employees
Luna then filed for Damages against Avon with the RTC. RTC favored Luna
On appeal, CA affirmed RTC rendering the Supervisors agreement NULL AND
VOID for being contrary against public policy

Issue: W/N the Supervisors Agreement is void as ruled by CA

Held:
-

The statement in the Agreement that Luna objects is:

6) Either party may terminate this agreement at will, with or without cause,
at any time upon notice to the other.
In the case at bar, the termination clause of the Supervisors Agreement clearly
provides for two ways of terminating and/or canceling the contract. One mode
does not exclude the other. The contract provided that it can be terminated or
cancelled for cause, it also stated that it can be terminated without cause, both
at any time and after written notice. Thus, whether or not the termination or
cancellation of the Supervisors Agreement was "for cause," is immaterial. The
only requirement is that of notice to the other party. When petitioner Avon chose
to terminate the contract, for cause, respondent Luna was duly notified thereof.

Worth stressing is that the right to unilaterally terminate or cancel the

Supervisors Agreement with or without cause is equally available to respondent
Luna, subject to the same notice requirement. Obviously, no advantage is taken
against each other by the contracting parties.

Petition GRANTED

Permissible reduction of working hours

Phil Graphics v NLRC
Facts:
Petitioner Corporation was forced by economic circumstances to require its
workers to go on mandatory vacation leave
The workers were paid while on leave but the pay was charged against their
respective earned leaves

 As a result, Private Respondents filed complaints for unfair labor practice and
discrimination
The Labor Arbiter rendered a decision dismissing the complaint for ULP
Private Respondents filed a "partial appeal" with the NLRC questioning the Labor
Arbiter's dismissal of their complaint for ULP and the resultant forced vacation
leaves which were actually without pay
The NLRC affirmed the Labor Arbiter's decision with modification ordering
Petitioner to refund the amount equivalent to the earned leave of the employees
Issue:
W/N the forced vacation leave without pay is unfair labor practiceand if not an
unfair labor practice, whether or not it was tainted with arbitrariness
Held:
NO
As found by the NLRC, Private Respondents themselves never questioned the
existence of an economic crisis but, in fact, admitted its existence
There is also no showing that the imposition of forced leave was exercised for the
purpose of defeating or circumventing the rights of employees under special laws
or under valid agreements
Petitioner contends that before the implementation of the forced leave a
consensus on how to deal with deteriorating economic conditions was reached
between the employer and employees, and such in consonance with their
collective bargaining agreement
Thus the Court finds that the decision to resort to forced leaves was, under the
circumstances, amanagement prerogative
Linton Comml vs Herrera
(Permissible Reduction of Working Hours)
Facts: Linton issued a memorandum informing its employees decision to suspend
its operations from 18 December 1997 to 5 January 1998 due to the currency crisis
that affected its business operations. On 7 January 1997, Linton issued another
memorandum informing them that effective 12 January 1998, it would implement a
new compressed workweek of three (3) days on a rotation basis. On the same day,
Linton submitted an establishment termination report [9] concerning the rotation of
its workers. Linton proceeded with the implementation of the new policy without
waiting for its approval by DOLE. Aggrieved, sixty-eight (68) workers (workers) filed
a Complaint for illegal reduction of workdays. The workers pointed out that Linton
implemented the reduction of work hours without observing Article 283 of the Labor
Code, which required submission of notice thereof to DOLE one month prior to the
implementation of reduction of personnel, since Linton filed only the establishment
termination report enacting the compressed workweek on the very date of its
implementation.
Issue: Whether or not there was an illegal reduction of work when Linton
implemented a compressed workweek by reducing from six to three the number of
working days with the employees working on a rotation basis.
Held: Yes. The compressed workweek arrangement was unjustified and illegal.

A close examination of petitioners financial reports for 1997-1998 shows that it

retained a considerable amount of earnings and operating income. A year of
financial losses would not warrant the immolation of the welfare of the employees,
which in this case was done through a reduced workweek that resulted in an
unsettling diminution of the periodic pay for a protracted period. Permitting
reduction of work and pay at the slightest indication of losses would be contrary to
the States policy to afford protection to labor and provide full employment.
Management has the prerogative to come up with measures to ensure profitability
or loss minimization. However, such privilege is not absolute. Management
prerogative must be exercised in good faith and with due regard to the rights of
labor.

Reorganization as an exercise of management prerogatives

Morales v. Harbour Centre Port Terminal/ G.R 174208/ Jan. 25, 2011
FACTS:
Morales was regularized and promoted to Division Manager of the Accounting
Department. Subsequent to HCPTIs transfer to its new offices at Vitas, Tondo,
Manila, Morales received an inter-office memorandum, reassigning him to
Operations Cost Accounting, tasked with the duty of "monitoring and evaluating all
consumables requests, gears and equipment" related to the corporations operations
and of interacting with its sub-contractor, Bulk Fleet Marine Corporation.
Morales wrote Singson, protesting that his reassignment was a clear
demotion since the position to which he was transferred was not even included in
HCPTIs plantilla. Singson, the Administration Manager, answered by stating that the
transfer
was
a
management
prerogative.
For the whole of the ensuing month Morales was absent from work and/or
tardy. Singson issued to Morales a inter-office memorandum denominated as a First
Warning. In view of the absences Morales continued to incur, HCPTI issued a Second
Warning.
In the meantime, Morales filed a complaint against HCPTI, Filart and Singson,
for constructive dismissal, moral and exemplary damages as well as attorneys fees.
Labor Arbiter dismissed the complaint for lack of merit. It ruled that Morales
reassignment was a valid exercise of HCPTIs management prerogative which cannot
be construed as constructive dismissal absent showing that the same was done in
bad faith and resulted in the diminution of his salary and benefits. The NLRC
however, reversed the decision. Its subsequent denial of HCPTIs motion for
reconsideration prompted the latter to file a petition for certiorari before the CA. The
CA reversed the findings of the NLRC. Hence, this petition.
ISSUE:

Whether

or

not

petitioner

HELD: Yes. CA Decision reversed and set aside

was

constructively

dismissed

Constructive dismissal exists where there is cessation of work because

"continued employment is rendered impossible, unreasonable or unlikely, as an
offer involving a demotion in rank or a diminution in pay and other benefits.
In cases of a transfer of an employee, the rule is settled that the employer is
charged with the burden of proving that its conduct and action are for valid and
legitimate grounds such as genuine business necessity and that the transfer is not
unreasonable, inconvenient or prejudicial to the employee. If the employer cannot
overcome this burden of proof, the employees transfer shall be tantamount to
unlawful
constructive
dismissal.
Record shows that HCPTI miserably failed to discharge the foregoing onus.
While there was a lack of showing that the transfer or reassignment entailed a
diminution of salary and benefits, one fact that must not be lost sight of was that
Morales was already occupying the position of Division Manager at HCPTIs
Accounting Department as a consequence of his promotion to said position on 22
October
2002.
Concurrently appointed as member of HCPTIs Management Committee
(MANCOM) on 2 December 2002, Morales was subsequently reassigned by HCPTI
"from managerial accounting to Operations Cost Accounting" on 27 March 2003,
without any mention of the position to which he was actually being transferred. That
the reassignment was a demotion is, however, evident from Morales new duties
which, far from being managerial in nature, were very simply and vaguely described
as inclusive of "monitoring and evaluating all consumables requests, gears and
equipments related to HCPTIs operations" as well as "close interaction with its subcontractor
Bulk
Fleet
Marine
Corporation."
Admittedly, the right of employees to security of tenure does not give them
vested rights to their positions to the extent of depriving management of its
prerogative to change their assignments or to transfer them. By management
prerogative is meant the right of an employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of employees, supervision of
their work, lay-off and discipline, and dismissal and recall of workers.
Although jurisprudence recognizes said management prerogative, it has been
ruled that the exercise thereof, while ordinarily not interfered with, is not absolute
and is subject to limitations imposed by law, collective bargaining agreement, and
general principles of fair play and justice. Thus, an employer may transfer or assign
employees from one office or area of operation to another, provided there is no
demotion in rank or diminution of salary, benefits, and other privileges, and the
action is not motivated by discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause. Indeed, having the right should
not be confused with the manner in which that right is exercised.

PETITION GRANTED

YRASUEGUI vs. PHILIPPINE AIRLINES

G.R. No. 168081, October 17, 2008
Topic: Management Prerogatives; Imposition of weight requirement.
FACTS:
THIS case portrays the peculiar story of an international flight steward who was
dismissed because of his failure to adhere to the weight standards of the airline
company.
Petitioner, Armando Yrasuegui had problems with his weight. According to the PAL flight
manual, for a man his size, he needed to maintain an ideal weight of 166 pounds. PAL sent him
on an extended vacation so that he could deal with his weight problems but while he was
removed from flight duty and the company physician visited him at his residence, he weighed in
at 217 pounds, thus he agreed to regular weight checks. When he failed to comply with regular
weight checks the company charged him administratively. And ultimately, on June 15, 1993,
petitioner was formally informed by PAL that due to his inability to attain his ideal weight, and
considering the utmost leniency extended to him which spanned a period covering a total of
almost five (5) years, his services were considered terminated effective immediately.
Petitioner filed this case for illegal dismissal claiming that: (1) his dismissal does not fall under
282(e) of the Labor Code; (2) continuing adherence to the weight standards of the company is
not a bona fide occupational qualification; and (3) he was discriminated against because other
overweight employees were promoted instead of being disciplined.
The Labor Arbiter ruled in favor of petitioner, holding that while the weight requirement was
lawful, the dismissal was illegal. NLRC affirmed the Labor Arbiters decision. It held that
obesity is a disease and thus, petitioner was not intentionally violating the companys order to
lose weight.
The CA ruled in favor of PAL and dismissed the complaint for illegal dismissal. It held that the
weight standards of PAL are meant to be a continuing qualification for an employees position.
The failure to adhere to the weight standards is an analogous cause for the dismissal of an
employee under Article 282(e) of the Labor Code in relation to Article 282(a). The relevant
question to ask therefor is whether or not the weight standard is reasonable and whether or not
the employee qualifies or continues to qualify under this standard.
ISSUE:
Whether or not the weight standard is reasonable.
HELD:
YES, the standard is reasonable.

A reading of the weight standards of PAL would lead to no other conclusion than that they
constitute a continuing qualification of an employee in order to keep the job. The dismissal of the
employee would thus fall under Article 282(e) of the Labor Code.

In the case at bar, the evidence on record militates against petitioners claims that obesity is a
disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is possible
for him to lose weight given the proper attitude, determination, and self-discipline. Indeed,
during the clarificatory hearing on December 8, 1992, petitioner himself claimed that [t]he issue
is could I bring my weight down to ideal weight which is 172, then the answer is yes. I can do it
now.

Petitioner has only himself to blame. He could have easily availed the assistance of the company
physician.

The SC held that the obesity of petitioner, when placed in the context of his work as flight
attendant, becomes an analogous cause under Article 282(e) of the Labor Code that justifies his
dismissal from the service. His obesity may not be unintended, but is nonetheless voluntary. As
the CA correctly puts it, [v]oluntariness basically means that the just cause is solely attributable
to the employee without any external force influencing or controlling his actions. This element
runs through all just causes under Article 282, whether they be in the nature of a wrongful action
or omission. Gross and habitual neglect, a recognized just cause, is considered voluntary
although it lacks the element of intent found in Article 282(a), (c), and (d).

The dismissal of petitioner can be predicated on the bona fide occupational qualification
defense. Employment in particular jobs may not be limited to persons of a particular sex,
religion, or national origin unless the employer can show that sex, religion, or national origin is
an actual qualification for performing the job. The qualification is called a bona fide occupational
qualification (BFOQ). In short, the test of reasonableness of the company policy is used because
it is parallel to BFOQ. BFOQ is valid provided it reflects an inherent quality reasonably
necessary for satisfactory job performance.

The business of PAL is air transportation. As such, it has committed itself to safely transport its
passengers. In order to achieve this, it must necessarily rely on its employees, most particularly
the cabin flight deck crew who are on board the aircraft. The weight standards of PAL should be
viewed as imposing strict norms of discipline upon its employees.
The primary objective of PAL in the imposition of the weight standards for cabin crew is flight
safety.

Separation pay, however, should be awarded in favor of the employee as an act of social justice
or based on equity. This is so because his dismissal is not for serious misconduct. Neither is it
reflective of his moral character.

Escanias v. Shangri-Las Mactan

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-las 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) Regional Arbitration Branch
No. VII (NLRC-RAB No. VII) 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 whom it retained via Memorandum of Agreement (MOA) pursuant to Article 157
of the Labor Code, as amended. Respondent doctor for her part claimed that petitioners were already
working for the previous retained physicians of Shangri-la before she was retained by Shangri-la; and that
she maintained petitioners services upon their request.

Issue: Whether or not employer-employee relationship exists

Ruling: No, Employer-employee relationship does NOT exists.

The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis
Art. 280 and the provisions on permissible job contracting of the Labor Code, as amended. 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:
(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

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 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 latters 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 companys premises and to its employees, not the manner of
his engagement.

As to whether respondent doctor can be considered a legitimate independent contractor, the

pertinent sections of DOLE Department Order No. 10, series of 1997, illuminate:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the
following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work
on his own account under his own responsibility according to his own manner and

method, free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of
his business.
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
2) The workers recruited and placed by such persons are performing activities which are
directly related to the principal business or operations of the employer in which workers
are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary 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

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 do 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-las 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 employees 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-las 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-las
regular workers, governs how they perform their respective tasks and responsibilities. Contrary to
petitioners contention, the various office directives issued by Shangri-las officers do not imply

that it is Shangri-las management and not respondent doctor who exercises control over them or
that Shangri-la has control over how the doctor and the nurses perform their work. The letter
addressed to respondent doctor dated February 7, 2003 from a certain Tata L. Reyes giving
instructions regarding the replenishment of emergency kits is, at most, administrative in nature,
related as it is to safety matters; while the letter dated May 17, 2004 from Shangri-las Assistant
Financial Controller, Lotlot Dagat, forbidding the clinic from receiving cash payments from the
resorts guests is a matter of financial policy in order to ensure proper sharing of the proceeds,
considering that Shangri-la and respondent doctor share in the guests payments for medical
services rendered. In fine, as Shangri-la does not control how the work should be performed by
petitioners, it is not petitioners employer.

Norkis Trading v. Melvin Gnilo

Facts:
Gnilo was the Credit and Collection Manager of Norkis Trading and is in charge of the Albay and
Catanduanes branches of the company. In 2000, Gnilo was found to be submitting overstated reports
about his area of management which misled the management into believing that Gnilo was doing a good
job. He was subsequently transferred from his position to being the marketing assistant of the companys
senior VP Albos. Gnilo took the position under protest. He sued Norkis until the case reached the NLRC.
The NLRC ruled that the transfer is actually a constructive dismissal. Norkis assailed the decision of the
NLRC alleging that Gnilos previous and current position in the company is of equal rank.

Issue: Whether or not the transfer of Gnilo from being a Collections Manager to a Marketing Assistant
constitutes constructive dismissal.

Held: Yes, the transfer of Gnilo constitutes constructive dismissal.

Well-settled is the rule that it is the prerogative of the employer to transfer and reassign

employees for valid reasons and according to the requirement of its business. An owner of a
business enterprise is given considerable leeway in managing his business. Our law recognizes
certain rights, collectively called management prerogative as inherent in the management of
business enterprises. We have consistently recognized and upheld the prerogative of
management to transfer an employee from one office to another within the business
establishment, provided that there is no demotion in rank or diminution of his salary, benefits and
other privileges and the action is not motivated by discrimination, made in bad faith, or effected
as a form of punishment or demotion without sufficient cause. This privilege is inherent in the
right of employers to control and manage their enterprises effectively.
The right of employees to security of tenure does not give them vested rights to their positions to
the extent of depriving management of its prerogative to change their assignments or to transfer
them. Managerial prerogatives, however, are subject to limitations provided by law, collective
bargaining agreements, and general principles of fair play and justice.

The employer bears the burden of showing that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; and does not involve a demotion in rank or a diminution of his
salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof,
the employees transfer shall be tantamount to constructive dismissal. Constructive dismissal is
defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; when there is a demotion in rank or a diminution of pay. Likewise, constructive dismissal
exists when an act of clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee, leaving him with no option but to forego his continued employment.
There is constructive dismissal when an employees functions, which were originally supervisory
in nature, were reduced; and such reduction is not grounded on valid grounds such as genuine
business necessity.
While the transfer of respondent from Credit and Collection Manager to Marketing Assistant did
not result in the reduction of his salary, there was a reduction in his duties and responsibilities
which amounted to a demotion tantamount to a constructive dismissal as correctly held by the
NLRC. As Credit and Collection Manager, Gnilo was clothed with all the duties and
responsibilities of a managerial employee. On the other hand, the work of a Marketing Assistant
is clerical in nature, which does not involve the exercise of any discretion. Such job entails mere
data gathering on vital marketing informations relevant to Gnilos motorcycles and making reports
to his direct supervisor. He became a mere staff member in the office of the Senior VicePresident for Marketing.
While petitioners have the prerogative to transfer respondent to another position, such transfer
should be done without diminution of rank and benefits which has been shown to be present in
respondents case. He could have been transferred to a job of managerial position and not to that
of a Marketing Assistant. Moreover, petitioners failed to substantiate their claim that respondent
was weak in the financial aspect of operation, but he was good in marketing, as the performance
evaluation report relied upon by petitioners would not suffice.
United Special Watchman Agency v. CA

Facts:

On June 1, 1994 a Contract for Security Services was entered into by USWA and Banco Filipino
Savings and Mortgage Bank (BF) with a stipulation that the party terminating the contract shall give a 30day notice prior to the date of termination to the other party. However, on June 3, 1994, BF terminated
the contract and the termination letter was received by USWA on June 17, 1994 which advised them of
the termination that will take effect 30 days from receipt thereof.

USWAs contention:
Mr. Angel Baliwag, their Operations Manager, immediately notified all the affected employees and
advised them to report to the office for reassignment. Out of the 67 guards that were affected, only 30
guards reported in the office and were given reassignment.

Guards contention:
They were put on a floating status and USWA, thru Mr. Baliwag, did not notify them of the offer of
the agency to reassign them. Thus on Aug. 4, 1994, a complaint for illegal dismissal and payment of

money claims against USWA and BF were filed in the Regional Arbitration Branch of the NLRC by 21
guards and such complaint was amended on Aug. 29, 1994 to include the remaining 16 guards.

Decision of the Labor Arbiter:

During the course of the proceedings, 5 guards reported in the office and were given
reassignment. On Jan. 8, 1998, the Labor Arbiter ordered USWA to pay the employees separation pay,
and both USWA and BF to pay the salary differential and attorneys fees. However, the NLRC on appeal
remanded the case to the Labor Arbiter. A compromise settlement was then reached by BF and the
guards which was approved by the Labor Arbiter, the Labor Arbiter then dismissed the complaint for illegal
dismissal.

Decision of the NLRC:

The guards filed an appeal with the NLRC, the NLRC ordered USWA to pay the employees their
separation pay because there is no proof that the guards were notified to report for reassignment. USWA
appealed it to the CA, but it was later on dismissed.

Issue: Whether or not USWA is liable to pay separation pay to the guards.

Held: Yes, USWA is liable to pay separation pay to the guards.

It was established that the guards were put on a temporary off-detail, which exceeded the
allowable period of six (6) months, amounting to constructive dismissal.
Pursuant to a legitimate job contracting, USWA and BF are jointly and severally liable in the
payment of the wages of the employees, and for violation of any provision of the Labor
Code.
We note that a compromise agreement of the employees was executed between BF and the
employees.
However, the compromise agreement dealt only with salary differential. It did not include nor
does it preclude the award of separation pay.
In light of the illegal dismissal of the respondents, USWA is liable to pay the respondents
separation pay equivalent to one (1) month pay for every year of service.